"The most positive economic development in 2009 was the stock market rally. Since the middle of March, the market cap of all U.S. stocks has soared more than $6 trillion. The “wealth effect” of rising stock prices has soothed the nerves and boosted the net worth of the half of Americans who own stock." Wow! And, this is based on what? Answer: Nothing more than "smoke and mirrors." This is one reason why I do believe that the market since March has been manipulated by the Fed and Treasury.
Keep-in-mind that the U.S. government has spent hundreds of billions of dollars to support the auto industry, the housing market, and the banks and brokers. Why not support the stock market as well? For 2009, the DJIA ended with an 18.8% gain. Still, it is down 26.4% from its all-time high set in October 2007.
Please take the time to read the entire article from the Zero Hedge.
It is hard to believe that 2009 is at its end, but it has. To all those that read this blog, I want to wish you a "Profitable and Happy New 2010!" May the market trend be with you.
Thursday, December 31, 2009
Wednesday, December 30, 2009
The New Price Tag for Fannie and Freddie
The Treasury Department, as reported by the WSJ, announced that it was removing the $400 billion cap from what it believed would be necessary to keep Fannie Mae and Freddie Mac solvent. The reason for the cap removal is that the Treasury has come to the conclusion that $400 billion is far "too" small. That is, think in terms of trillions of dollars, not hundreds of billions.
Let's look at some history of Fannie and Freddie. By the end of 2008, Fannie and Freddie held or guaranteed approximately 10 million subprime and Alt-A mortgages with a total principal balance of $1.6 trillion. These loans are now defaulting at unprecedented rates. Since 2008 (and we know what happen then), these two governmental agencies have continued to buy these lousy mortgages in order to stabilize housing prices. (Insanity. That is to continue to do the same thing and expected a different result. Another example of the ineptness and stupidity of our government at work.)
By the way, there is more to this Fannie and Freddie story. New research by Edward Pinto, a former chief credit officer for Fannie Mae and a housing expert, has found that from the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime or Alt-A. [Sidebar: In general, a subprime mortgage refers to the credit of the borrower. A FICO score of less than 660 is the dividing line between prime and subprime. An Alt-A mortgage is one in which the quality of the mortgage or the underwriting was deficient; it might lack adequate documentation, have a low or no down payment, or in some other way be more likely than a prime mortgage to default.] However, Fannie and Freddie were reporting these mortgages as prime, according to Mr. Pinto. Fannie has admitted this in a third-quarter 10-Q report in 2008. [Outright fraud! What has the government done about this fraud? Absolutely nothing!]
So, once again, the American taxpayer is going to be at risk for over a trillion dollars because of failed governmental policies on housing. I hope it is just a trillion, not a quadtrillion.
Let's look at some history of Fannie and Freddie. By the end of 2008, Fannie and Freddie held or guaranteed approximately 10 million subprime and Alt-A mortgages with a total principal balance of $1.6 trillion. These loans are now defaulting at unprecedented rates. Since 2008 (and we know what happen then), these two governmental agencies have continued to buy these lousy mortgages in order to stabilize housing prices. (Insanity. That is to continue to do the same thing and expected a different result. Another example of the ineptness and stupidity of our government at work.)
By the way, there is more to this Fannie and Freddie story. New research by Edward Pinto, a former chief credit officer for Fannie Mae and a housing expert, has found that from the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime or Alt-A. [Sidebar: In general, a subprime mortgage refers to the credit of the borrower. A FICO score of less than 660 is the dividing line between prime and subprime. An Alt-A mortgage is one in which the quality of the mortgage or the underwriting was deficient; it might lack adequate documentation, have a low or no down payment, or in some other way be more likely than a prime mortgage to default.] However, Fannie and Freddie were reporting these mortgages as prime, according to Mr. Pinto. Fannie has admitted this in a third-quarter 10-Q report in 2008. [Outright fraud! What has the government done about this fraud? Absolutely nothing!]
So, once again, the American taxpayer is going to be at risk for over a trillion dollars because of failed governmental policies on housing. I hope it is just a trillion, not a quadtrillion.
Monday, December 28, 2009
Why Are So Many Demonizing America?
Dorothy Rabinowitz, who is a Pulitzer Prize winning American conservative journalist, states it this way in an article in the Wall Street Journal on April 22, 2009, "Five decades of teaching in colleges and universities across the land, portraying the U.S. as a power mainly responsible for injustice and evil, whose military might was a danger to the world (a nation built on fruits of greed, rapacity, and racism) have had their effect. The graduates of this education find nothing strange to quickly condemn the moral failures of America."
Thursday, December 24, 2009
Financial Times Named Lloyd Blankfein Person of the Year
Yes, the title of this post is exactly correct. The "Financial Times of London" has chosen Lloyd C. Blankfein as its person of the year. For those of you that might not recognize the name, Mr. Blankfein is the CEO of Goldman Sachs. During the recent financial debacle, which has been the most testing period since the 1930s, he has become the public face of Wall Street.
This is the company that has faced public anger from American taxpayers during 2009, because not only of the bailouts that it has received but its record profits, making it a symbol of greed and excess. For example, Goldman Sachs will be paying up to $23 billion in bonuses to its 31,700 staff members. Now, according to my math, that is slightly more than $725,000 per individual. Now, don't get me wrong, I am not against making a buck. But, please, given the state of the economy, this was not the time to rub it in the American taxpayers' faces.
This is the company that has faced public anger from American taxpayers during 2009, because not only of the bailouts that it has received but its record profits, making it a symbol of greed and excess. For example, Goldman Sachs will be paying up to $23 billion in bonuses to its 31,700 staff members. Now, according to my math, that is slightly more than $725,000 per individual. Now, don't get me wrong, I am not against making a buck. But, please, given the state of the economy, this was not the time to rub it in the American taxpayers' faces.
Wednesday, December 23, 2009
Fannie, Freddie to Disclose Millions in Executive Pay
The Wall Street Journal is reporting that the top regulator for Fannie Mae and Freddie Mac is expected to announce millions of dollars in pay packages for top executives at the government-run mortgage finance giants.
"The Federal Housing Finance Agency approved a multi-million pay package for Fannie Mae chief executive Michael Williams, which is expected to be announced as part of the report. Mr. Williams' compensation is expected to be in a range of about $4 million to $6 million, people familiar with the matter said."
Way to go Pay Czar! I thought we were trying to curtail excessive compensation to those entities that received federal bailout money. Oh, I understand. Since these are government sponsored entities, they are exempt from such compensation oversight. I guess it is just like those "special bribes" certain Senators recently received for their votes.
"The Federal Housing Finance Agency approved a multi-million pay package for Fannie Mae chief executive Michael Williams, which is expected to be announced as part of the report. Mr. Williams' compensation is expected to be in a range of about $4 million to $6 million, people familiar with the matter said."
Way to go Pay Czar! I thought we were trying to curtail excessive compensation to those entities that received federal bailout money. Oh, I understand. Since these are government sponsored entities, they are exempt from such compensation oversight. I guess it is just like those "special bribes" certain Senators recently received for their votes.
Tuesday, December 22, 2009
GDP Revised Downward Once Again
On Tuesday, November 24, 2009, I said, "Real Gross Domestic Product (GDP) increased at an annual rate of 2.8 percent in the third quarter of 2009, which is down from 3.5% (first estimate), according to the "second" estimate released by the Bureau of Economic Analysis (BEA). We will have one more estimate by the BEA, which will be the final one. When everything is said and done, I am looking for the third quarter GDP to be closer to 2% than the original estimate of 3.5%."
The final GDP numbers have just been released by the BEA, which shows that GDP growth for the third quarter was 2.2%, which was not too far from my estimate of 2%. This new figure was below Wall Street forecasts. Economists surveyed by Dow Jones were expecting the GDP revision to show growth of 2.7%.
The final GDP numbers have just been released by the BEA, which shows that GDP growth for the third quarter was 2.2%, which was not too far from my estimate of 2%. This new figure was below Wall Street forecasts. Economists surveyed by Dow Jones were expecting the GDP revision to show growth of 2.7%.
Sunday, December 20, 2009
Saturday, December 19, 2009
Senator Nelson’s Thirty Pieces of Silver
The outright bribe provided by Senator Reid to Senator Nelson is despicable and an outright insult to the other 49 states. Where is the outrage? Where is the shame?
We will have now two Medicaid health care systems in this country; one for Nebraska and one for the other 49 states. In other words, the American taxpayer will be paying tens of millions of dollars a year "FOREVER" in Medicaid funds for Nebraska.
Senator Nelson had complained that the proposed expansion of Medicaid to those earning below 133% of the Federal Poverty Line (FPL) would burden his state. (For those of you that might not be familiar with Medicaid, it is a program whose costs are split between the federal and state governments.) Indeed, this expansion in eligibility does raise costs dramatically for states. Unless that state is Nebraska, because we (taxpayers) will now pay 100% of its Medicaid costs (BRIBE), forever. Other states will be forced to either raise taxes or cut other services to accommodate the forced increase in Medicaid spending. Not, of course, Nebraska. Outrages and shameful!!
We will have now two Medicaid health care systems in this country; one for Nebraska and one for the other 49 states. In other words, the American taxpayer will be paying tens of millions of dollars a year "FOREVER" in Medicaid funds for Nebraska.
Senator Nelson had complained that the proposed expansion of Medicaid to those earning below 133% of the Federal Poverty Line (FPL) would burden his state. (For those of you that might not be familiar with Medicaid, it is a program whose costs are split between the federal and state governments.) Indeed, this expansion in eligibility does raise costs dramatically for states. Unless that state is Nebraska, because we (taxpayers) will now pay 100% of its Medicaid costs (BRIBE), forever. Other states will be forced to either raise taxes or cut other services to accommodate the forced increase in Medicaid spending. Not, of course, Nebraska. Outrages and shameful!!
What Comes Next in This Series: Hundreds, Thousands, Millions, Billions, Trillions, ....?
Answer: Quadrillions.
Quadrillions will soon become part of your vocabulary, like trillions over the past year. While we are on the subject, I guess it would be a good idea to further your education by continuing the sequence: quintillions, sextillions, septillions, octillions, nonillions, and decillions. Who knows, the U.S. may become the next Zimbabwe. It's not that far fetched! Check out the following table:
Note: To enlarge the table, double-click inside of it.
Quadrillions will soon become part of your vocabulary, like trillions over the past year. While we are on the subject, I guess it would be a good idea to further your education by continuing the sequence: quintillions, sextillions, septillions, octillions, nonillions, and decillions. Who knows, the U.S. may become the next Zimbabwe. It's not that far fetched! Check out the following table:
Note: To enlarge the table, double-click inside of it.
Friday, December 18, 2009
Wednesday, December 16, 2009
Senator McCain Proposing to Reinstate Glass-Steagall
Bloomberg News just reported that "U.S. Senators John McCain and Maria Cantwell proposed reinstating the Depression-era Glass-Steagall Act that split commercial and investment banking to rein in Wall Street firms in response to the financial crisis."
"Under our proposal, too-big-to-fail banks would be forced to return to the business of conventional banking, leaving the task of risk taking or management to others,” McCain said at a Washington news conference." Amen!
However, Wall Street will fight this proposal tooth and nail, because speculating with other people's money and being able to force the American taxpayer to eat and take all the risks but take none of the gains is what they do best. For example, while CEO of Citigroup in 2007, Vikram S. Pandit earned an annualized compensation of $3,164,320, which included a base salary of $250,000, stocks granted of $2,914,320, and options granted of $0. In 2008, he earned a total compensation of $38,237,437, which included a base salary of $958,333, stocks granted of $28,830,000, and options granted of $8,432,911. On February 11, 2009, Pandit testified to Congress that he had declared to his board of directors, "my salary should be $1 per year with no bonus until we return to profitability," having received $10.82 million in 2008 (base compensation and incentives). [Source: Slope of Hope}
"Under our proposal, too-big-to-fail banks would be forced to return to the business of conventional banking, leaving the task of risk taking or management to others,” McCain said at a Washington news conference." Amen!
However, Wall Street will fight this proposal tooth and nail, because speculating with other people's money and being able to force the American taxpayer to eat and take all the risks but take none of the gains is what they do best. For example, while CEO of Citigroup in 2007, Vikram S. Pandit earned an annualized compensation of $3,164,320, which included a base salary of $250,000, stocks granted of $2,914,320, and options granted of $0. In 2008, he earned a total compensation of $38,237,437, which included a base salary of $958,333, stocks granted of $28,830,000, and options granted of $8,432,911. On February 11, 2009, Pandit testified to Congress that he had declared to his board of directors, "my salary should be $1 per year with no bonus until we return to profitability," having received $10.82 million in 2008 (base compensation and incentives). [Source: Slope of Hope}
Time's Person of the Year
In making the selection, Time Magazine states: "The story of the year was a weak economy that could have been much, much weaker. Thank the man who runs the Federal Reserve." Wait one MINUTE! He is the one that help create the debacle in the first place. Let's also remember what Bernanke said in November 2007:
"There will be no recession"
"Subprime is contained"
"The fundamentals of the economy are strong."
This is one reason why I don't subscribe to Time.
Tuesday, December 15, 2009
Citi, Wells Fargo to Repay TARP Bailout Funds
The Wall Street Reports that "Citigroup ($20 billion) and Wells Fargo ($25 billion) are the last major lenders to return their TARP money. With the deals announced Monday by Citigroup and Wells Fargo, banks will have repaid $161 billion of the $245 billion in financial capital that was pumped into about 700 institutions as part of the Troubled Asset Relief Program (TARP). J.P. Morgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley paid the government back in June 2009. Last week, Bank of America paid its $45 billion to the Treasury."
What I find very interesting is that all of these major banks that have repaid TARP funds have done so by diluting their shareholders big time. Yet on a fully diluted basis, their stocks are trading at or near where they were before the financial crisis started, with the exception of Citigroup. That is the reason why common stockholders, even though their ownership interest has been diluted significantly, are not crying bloody murder.
Now that everything has been repaid by the big boys. What is the encore? First, these financial institutions will be able to pay those lucrative $bonuses unimpeded. Second, look to see if the insiders (officers and directors) are selling their stock in a larger percentage than normal, since the stocks are back to near pre-panic levels. Third, FASB changes are forcing all off-balance sheet items back on the balance sheet, which will be reflected in next quarter's 2010 earnings (good for transparency but bad for stock prices because of the unexpected -- reason why these items were kept off-balance sheet!)
I don't know about you, but I am not going to be purchasing any bank stock anytime soon! That time has come and gone IMHO.
What I find very interesting is that all of these major banks that have repaid TARP funds have done so by diluting their shareholders big time. Yet on a fully diluted basis, their stocks are trading at or near where they were before the financial crisis started, with the exception of Citigroup. That is the reason why common stockholders, even though their ownership interest has been diluted significantly, are not crying bloody murder.
Now that everything has been repaid by the big boys. What is the encore? First, these financial institutions will be able to pay those lucrative $bonuses unimpeded. Second, look to see if the insiders (officers and directors) are selling their stock in a larger percentage than normal, since the stocks are back to near pre-panic levels. Third, FASB changes are forcing all off-balance sheet items back on the balance sheet, which will be reflected in next quarter's 2010 earnings (good for transparency but bad for stock prices because of the unexpected -- reason why these items were kept off-balance sheet!)
I don't know about you, but I am not going to be purchasing any bank stock anytime soon! That time has come and gone IMHO.
Sunday, December 13, 2009
Communism: A Reminder
As the lure of government involvement in our lives in troubled times grows stronger and stronger, let's remember what more government, more taxes, more regulation, and anti-business is all about! Does anyone remember the Soviet Union? What about China and North Korea? I know what many of you are saying: "It just can not happen here! All what I can say to that is, be careful what you wish for!"
"A single death is a tragedy. A million deaths is a statistic." (Joseph Stalin.)
"A single death is a tragedy. A million deaths is a statistic." (Joseph Stalin.)
Update on GDX and SLV: Looking Attractive!
Note: To enlarge the chart, double-click inside of it.
Note: To enlarge the chart, double-click inside of it.
Saturday, December 12, 2009
Lies, More Damn Lies, and Government Statistics
Yesterday's post focused on the change in sampling methodology utilized by the Census Bureau in gathering data for its "Advance Monthly Retail Trade Survey." If you haven't read that post, please do so; because it will inform you how the mainstream media and our government use data to mislead the end user of such information (IMHO).
Today, I want to focus on unemployment data. This week the Bureau of Labor Statistics (BLS) stated that the continuing, initial unemployment claims were up slightly to 474,000 on a seasonally adjusted basis, which is down 78,000 from the same week last year. Bear in mind, that is on a seasonally adjusted basis. Everyone, that is mainstream media, celebrated the good news. And, that's presumably months after we've emerged from the recession. [Sidebar: I don't like seasonally adjusted data, because those seasonal factors can be very misleading and, of course, manipulated. When I use data for comparative purposes, I use unadjusted, year-over-year data that does not need a seasonal adjustment. It's the real thing!] By the way, the non-seasonally adjusted number (NSA) of continuing claims for unemployment is 665,000, down approximately 95,000 from last year, which is definitely good, but still a very large number.
Ok, back to the mission at had. Everywhere the headlines this week said continuing claims for unemployment are plunging. Once again, let's look at the facts and reality of what is really happening. The drop was not from people getting jobs but from people rolling over to the extended benefits programs, Emergency Unemployment Compensation (EUC), which are not counted in the continuing claims statistic. Isn't that just great? By the way, states pay for the first 26 weeks, and that is where we get the continuing claims number for unemployment. In regard to EUC, states reported 4.2 million persons claiming compensation benefits for the week ending November 21, 2009. Now get this statistic, which should blow your mind. There were 729,256 claimants in the comparable week in 2008. That's right. We have gone from slightly more than 700,000 claimants to 4.2 million. What is happening is that we are simply moving claimants from one pile to another pile and celebrating because the first pile is smaller than the second pile. Can anyone say "Dummy-Down of Americans?"
Here is another statistic that you will not hear or read from the mainstream media. Currently, we have 5.2 million individuals on the continuing claims for unemployment rolls. But, when you add in the EUC numbers, it increases to almost 10 million individuals.
Finally, we all know that the unemployment rate dropped to 10% from 10.2%. To get to 10%, the number of people looking for work had to decline by 98,000. (Basically, if you have not looked for work in the last four weeks, you are said to be "discouraged" and are taken out of the unemployment statistics.) If you add back in the discouraged workers, the rate goes up to 10.5%. And it is worse than that. If you have not looked for a job in 12 months, you are taken off the rolls completely. I finally figured what the government is up to in regard to managing the unemployment rate. (Its that proverbial light bulb going on.) That is, lower the unemployment rate by moving everyone into the "Emergency Unemployment Compensation Program," and then after 12 months these individuals are completely off the employment rolls. Brilliant! Except these individuals are still unemployed, but the government can report that the unemployment rate is zero! You have to love all this statistical creativity by our government.
Today, I want to focus on unemployment data. This week the Bureau of Labor Statistics (BLS) stated that the continuing, initial unemployment claims were up slightly to 474,000 on a seasonally adjusted basis, which is down 78,000 from the same week last year. Bear in mind, that is on a seasonally adjusted basis. Everyone, that is mainstream media, celebrated the good news. And, that's presumably months after we've emerged from the recession. [Sidebar: I don't like seasonally adjusted data, because those seasonal factors can be very misleading and, of course, manipulated. When I use data for comparative purposes, I use unadjusted, year-over-year data that does not need a seasonal adjustment. It's the real thing!] By the way, the non-seasonally adjusted number (NSA) of continuing claims for unemployment is 665,000, down approximately 95,000 from last year, which is definitely good, but still a very large number.
Ok, back to the mission at had. Everywhere the headlines this week said continuing claims for unemployment are plunging. Once again, let's look at the facts and reality of what is really happening. The drop was not from people getting jobs but from people rolling over to the extended benefits programs, Emergency Unemployment Compensation (EUC), which are not counted in the continuing claims statistic. Isn't that just great? By the way, states pay for the first 26 weeks, and that is where we get the continuing claims number for unemployment. In regard to EUC, states reported 4.2 million persons claiming compensation benefits for the week ending November 21, 2009. Now get this statistic, which should blow your mind. There were 729,256 claimants in the comparable week in 2008. That's right. We have gone from slightly more than 700,000 claimants to 4.2 million. What is happening is that we are simply moving claimants from one pile to another pile and celebrating because the first pile is smaller than the second pile. Can anyone say "Dummy-Down of Americans?"
Here is another statistic that you will not hear or read from the mainstream media. Currently, we have 5.2 million individuals on the continuing claims for unemployment rolls. But, when you add in the EUC numbers, it increases to almost 10 million individuals.
Finally, we all know that the unemployment rate dropped to 10% from 10.2%. To get to 10%, the number of people looking for work had to decline by 98,000. (Basically, if you have not looked for work in the last four weeks, you are said to be "discouraged" and are taken out of the unemployment statistics.) If you add back in the discouraged workers, the rate goes up to 10.5%. And it is worse than that. If you have not looked for a job in 12 months, you are taken off the rolls completely. I finally figured what the government is up to in regard to managing the unemployment rate. (Its that proverbial light bulb going on.) That is, lower the unemployment rate by moving everyone into the "Emergency Unemployment Compensation Program," and then after 12 months these individuals are completely off the employment rolls. Brilliant! Except these individuals are still unemployed, but the government can report that the unemployment rate is zero! You have to love all this statistical creativity by our government.
Friday, December 11, 2009
Retail Sales Post Broad Increase?
The "Wall Street Journal" reports in its headline that U.S. retail sales rose 1.3% in November, making a broad-based increase that suggested consumers were buying aggressively and supporting the economy. Wow! This is great news. But once again, is it completely factual? Actual Point-of-Sale (POS) data says otherwise, at least with regard to Black Friday. See the following table.
Note: To enlarge the chart, double-click inside of it.
Also, the U.S Census Bureau states that these advance retail numbers are the first estimates from a new sample. The Census Bureau goes on to say that the new sample for the "Advance Monthly Retail Trade Survey" is selected about once every two and a half years. (Isn't it interesting that the government decided to change the sampling methodology right now during the critical Christmas buying period. Anyone for cooking the books? Therefore, any type of comparison to previous data is completely suspect and wrong, because we are not comparing "apples-to-apples."
To say the least, I am suspect of those advanced numbers, which will undoubtedly be adjusted downward, especially when you look at the point-of-sale data for electronics during Black Friday. Like I have been saying for months that the spin being put out there is all about instilling confidence in the consumer. As always, check out the facts.
Note: To enlarge the chart, double-click inside of it.Also, the U.S Census Bureau states that these advance retail numbers are the first estimates from a new sample. The Census Bureau goes on to say that the new sample for the "Advance Monthly Retail Trade Survey" is selected about once every two and a half years. (Isn't it interesting that the government decided to change the sampling methodology right now during the critical Christmas buying period. Anyone for cooking the books? Therefore, any type of comparison to previous data is completely suspect and wrong, because we are not comparing "apples-to-apples."
To say the least, I am suspect of those advanced numbers, which will undoubtedly be adjusted downward, especially when you look at the point-of-sale data for electronics during Black Friday. Like I have been saying for months that the spin being put out there is all about instilling confidence in the consumer. As always, check out the facts.
Thursday, December 10, 2009
Health Care: Sticker Shock
No, I am not going to blog about the proposed cost of nearly $1 trillion over 10 years to provide coverage to most of the uninsured, nor the more than $400 billion in new taxes and a half-trillion dollars in Medicare cuts to pay for this new entitlement program that is certain to increase the cost of insurance and reduce the quality of our medical care. (Sidebar: Most of the uninsured will be covered, but not all. As many as 24 million people would remain uninsured in 2019, many of them eligible but still can't afford the premiums. Put that in your pipe and smoke it. Wait a minute, I thought the objective was to make sure that everyone gets health insurance. What the heck is going on when this entitlement is going to break the bank - fisc - and people still are without health insurance? Stupidity reins on! It's all about the control and power over our lives.)
I want to discuss the tax impact on the middle-class family. The Senate version (cloak in secrecy) has the middle-class family of four making $66,000 would have to pay about 10 percent of its income in premiums, not counting co-payments and deductibles. What happen to the, then, Presidential Candidate Obama espousing that the middle-class family would not be paying higher taxes under his administration? Good question! Your taxes are going up, either directly or indirectly through higher insurance premiums. (Get used to it, Gary, it is going to happen.)
The Congressional Budget Office says the bill wouldn't have a major effect on premiums under employer plans, now about $13,000 a year. But wait a minute, the Senate version slaps a 40 percent tax on insurance plans with premiums above $8,500 for individual coverage and $23,000 for family plans, among other levies. So, if I am paying $13,000, as an individual, for my health coverage, I am going to have to pay a tax of $1,800 [$13,000 - $8,500 x (.40] in addition to my insurance premiums. You gotta be kidding me! I wish I was, but I am not. Also, let's say that I am a small business person, incorporated as a LLC or Sub-Chapter S, the House version imposes a 5.4% income tax surcharge on individuals making more than $500,000 and families earning more than $1 million. That, of course, is in addition to one's health insurance premiums. The rest of the financing for this monstrosity would come mainly from cuts in federal payments to insurers, hospitals, home health care agencie, and other medical providers serving Medicare. And, our elected officials have the nerve to say that quality of health care will not suffer.
The Senate version would make plans certified by the federal employee system available nationwide to individuals, bringing competition to states in which one or two large insurers now control the market. That is not a bad idea. However, why don't they make such competition available to all such plans? The downside to this component part is that those individuals currently covered under this plan are looking at hefty premium increases next year. Individual coverage under the federal employee system is estimated to be going up 15% next year, and that is not the increase for family coverage, which is yet to be determined. Can anyone say "screwed" to those federal employees currently under this system? I thought you could!
The other new idea under the Senate version is to allow individuals between the age 55 to 64, one of the groups now most at risk for losing coverage during our current economic debacle, to buy into Medicare. That sounds great, right? However, how many in this group would be able to afford to pay $7,600 a year for this type of coverage, not counting out-of-pocket expenditures for deductibles and co-payments?
I don't know about you, but I am sick and tired of this egalitarian movement. Do we need health reform? You bet! But, not to the point that it bankrupts the federal fisc.
I want to discuss the tax impact on the middle-class family. The Senate version (cloak in secrecy) has the middle-class family of four making $66,000 would have to pay about 10 percent of its income in premiums, not counting co-payments and deductibles. What happen to the, then, Presidential Candidate Obama espousing that the middle-class family would not be paying higher taxes under his administration? Good question! Your taxes are going up, either directly or indirectly through higher insurance premiums. (Get used to it, Gary, it is going to happen.)
The Congressional Budget Office says the bill wouldn't have a major effect on premiums under employer plans, now about $13,000 a year. But wait a minute, the Senate version slaps a 40 percent tax on insurance plans with premiums above $8,500 for individual coverage and $23,000 for family plans, among other levies. So, if I am paying $13,000, as an individual, for my health coverage, I am going to have to pay a tax of $1,800 [$13,000 - $8,500 x (.40] in addition to my insurance premiums. You gotta be kidding me! I wish I was, but I am not. Also, let's say that I am a small business person, incorporated as a LLC or Sub-Chapter S, the House version imposes a 5.4% income tax surcharge on individuals making more than $500,000 and families earning more than $1 million. That, of course, is in addition to one's health insurance premiums. The rest of the financing for this monstrosity would come mainly from cuts in federal payments to insurers, hospitals, home health care agencie, and other medical providers serving Medicare. And, our elected officials have the nerve to say that quality of health care will not suffer.
The Senate version would make plans certified by the federal employee system available nationwide to individuals, bringing competition to states in which one or two large insurers now control the market. That is not a bad idea. However, why don't they make such competition available to all such plans? The downside to this component part is that those individuals currently covered under this plan are looking at hefty premium increases next year. Individual coverage under the federal employee system is estimated to be going up 15% next year, and that is not the increase for family coverage, which is yet to be determined. Can anyone say "screwed" to those federal employees currently under this system? I thought you could!
The other new idea under the Senate version is to allow individuals between the age 55 to 64, one of the groups now most at risk for losing coverage during our current economic debacle, to buy into Medicare. That sounds great, right? However, how many in this group would be able to afford to pay $7,600 a year for this type of coverage, not counting out-of-pocket expenditures for deductibles and co-payments?
I don't know about you, but I am sick and tired of this egalitarian movement. Do we need health reform? You bet! But, not to the point that it bankrupts the federal fisc.
Tuesday, December 08, 2009
Return of Glass-Steagall?
Five House Democrats will call this week for a return of the Glass-Steagall Act, which is a Depression-era law that separated Wall Street investment banking from Main Street commercial banking.
If adopted, the measure would give banks one year to choose between being commercial banks or investment banks. The nation's biggest, which are those now commonly referred to as "too big to fail," would be broken up. The Obama Administration opposes the measure. (Of course, what else is new.)
The amendment's five co-sponsors, all Democrats, are Maurice Hinchey of New York, John Conyers of Michigan, Peter DeFazio of Oregon, Jay Inslee of Washington, and John Tierney of Massachusetts. They want to restore the Glass-Steagall Act of 1933, which prohibited commercial banks from underwriting stocks and bonds. The act was repealed in 1999 at the urging of Larry Summers, now President Obama's chief economic adviser. (Of course, what else is new.) The five congressman all voted against the repeal in 1999.
Why is the return of this act important? Answer: Lending would shift primarily to productive investment. I believe the Glass-Steagall Act was one of the primary reasons for the growth of our economy after World War II. Lending went to finance productive assets (e.g. factories, machines, tractors, combines, etc), instead of financial speculation as it had in the 1920s.
It was that financial speculation that led to the asset bubbles in the 1920s, which resulted in the malinvestment that was responsible for the Depression. It was that very same financial speculation in the 1990s and 2000s that led to the real estate (bubble) malinvestment.
If adopted, the measure would give banks one year to choose between being commercial banks or investment banks. The nation's biggest, which are those now commonly referred to as "too big to fail," would be broken up. The Obama Administration opposes the measure. (Of course, what else is new.)
The amendment's five co-sponsors, all Democrats, are Maurice Hinchey of New York, John Conyers of Michigan, Peter DeFazio of Oregon, Jay Inslee of Washington, and John Tierney of Massachusetts. They want to restore the Glass-Steagall Act of 1933, which prohibited commercial banks from underwriting stocks and bonds. The act was repealed in 1999 at the urging of Larry Summers, now President Obama's chief economic adviser. (Of course, what else is new.) The five congressman all voted against the repeal in 1999.
Why is the return of this act important? Answer: Lending would shift primarily to productive investment. I believe the Glass-Steagall Act was one of the primary reasons for the growth of our economy after World War II. Lending went to finance productive assets (e.g. factories, machines, tractors, combines, etc), instead of financial speculation as it had in the 1920s.
It was that financial speculation that led to the asset bubbles in the 1920s, which resulted in the malinvestment that was responsible for the Depression. It was that very same financial speculation in the 1990s and 2000s that led to the real estate (bubble) malinvestment.
Friday, December 04, 2009
November Unemployment Rate Falls to 10% from 10.2%
On the surface the decline in the unemployment rate is definitely good news, which I will gladly take. Saying that, let’s look at the data, or facts. Where did we add jobs? Jobs were added in the temporary help service by 58,000 (Christmas anyone! These jobs are part time and will be gone after Christmas, if not before.) and health care (21,000 jobs). However, those additions were offset in construction (jobs declined by 21,000), manufacturing (jobs declined by 41,000), and information.
Part time jobs will not propel the economy forward. That is the problem. We have seen no job creation in the construction and manufacturing sectors. By the way, since the start of the recession in December 2007, the number of unemployed has increased by almost eight million.
If you want to grow jobs, give tax credits to employers who create jobs. It really is that simple. There is an old principle called KISS (Keep IT Simple, Stupid). Since stupidity is rampant in Washington, D.C., you would think that our Representatives and Senators would be able to grasp the KISS principle. But no such luck!
Part time jobs will not propel the economy forward. That is the problem. We have seen no job creation in the construction and manufacturing sectors. By the way, since the start of the recession in December 2007, the number of unemployed has increased by almost eight million.
If you want to grow jobs, give tax credits to employers who create jobs. It really is that simple. There is an old principle called KISS (Keep IT Simple, Stupid). Since stupidity is rampant in Washington, D.C., you would think that our Representatives and Senators would be able to grasp the KISS principle. But no such luck!
Wednesday, December 02, 2009
Tiger Woods Official Sponsors
What you do with the list of Tiger's "Official Sponsors" is completely up to you. Enough said.
Strong Dollar Policy: Revisited
On November 11, 2009, I quoted Treasury Secretary Geither as saying, "I believe deeply that it's very important for the U.S. and the economic health of the U.S. that we maintain a strong dollar." I went on to say the following: "I would consider that statement to be a bold face "LIE." Geithner and Bernanke have created policies that have destroyed the value of the dollar, driving it lower since March 2009 from 89.6 to 74.8, a decline of almost 16.5%, which on an annualized basis is approximately 25%. Those are the facts!"
Let's look at some additional facts since March 2009. The Australian Dollar has appreciated 51% against the U.S. Dollar, Euro has appreciated 21%, British Pound has appreciated 22%, and the Canadian Dollar has appreciated 25%. I have saved the best for last. The Mexican Peso has appreciated 26% in value against the dollar. If the trend continues for the peso, it will soon be on parity with the U.S. Dollar within eight months. Can you say, Banana Republic! I never thought that I would ever make a comment about the potential for the peso trading at parity to the dollar. Oh, how the mighty has fallen. This time, I am not making reference to Dubai.
Let's look at some additional facts since March 2009. The Australian Dollar has appreciated 51% against the U.S. Dollar, Euro has appreciated 21%, British Pound has appreciated 22%, and the Canadian Dollar has appreciated 25%. I have saved the best for last. The Mexican Peso has appreciated 26% in value against the dollar. If the trend continues for the peso, it will soon be on parity with the U.S. Dollar within eight months. Can you say, Banana Republic! I never thought that I would ever make a comment about the potential for the peso trading at parity to the dollar. Oh, how the mighty has fallen. This time, I am not making reference to Dubai.
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