Health 'Reform' That Burdens Our Young
“We have become a society that invests in its past and disfavors the future.”
I can’t believe that I am quoting a Newsweek article… But this one addresses my concern that the Government is stealing from our kids, instead of actually making sacrifices to current consumption. This article focuses on how the current “Healthcare Reform” legislation will dramatically raise healthcare premiums paid by the young to subsidize the premiums paid bt those over 55.
http://www.newsweek.com/id/224020/page/1
“In fiscal 2008—the last "normal" year before the economic crisis—Social Security, Medicare and Medicaid (programs wholly or primarily dedicated to the elderly) totaled $1.3 trillion, 43 percent of federal spending and more than twice military spending. Because workers, not retirees, are the primary taxpayers, this spending involves huge transfers to the old.”
$1.3 trillion is about what we will run as a Deficit in 2010. I have no doubt some smart, young politicians are looking at those numbers and saying “I can balance the Budget in one shot”…
“Now comes the House-passed health-care "reform" bill that, amazingly, would extract more subsidies from the young. It mandates that health insurance premiums for older Americans be no more than twice the level of that for younger Americans. That's much less than the actual health spending gap between young and old. Spending for those age 60 to 64 is four to five times greater than those 18 to 24. So, the young would overpay for insurance that—under the House bill—people must buy: Twenty-and thirtysomethings would subsidize premiums for fifty-and sixtysomethings.”
No wonder AARP is in favor of this bill.
“Whatever the added burden, it would darken the young's already poor economic prospects. Unemployment among 16- to 24-year-olds is 19 percent.”
19% unemployment is the stuff of revolutions. That is a staggering figure! At some point, some smart, young politician will let his fellow young people know that he can bring back a heck of a lot of middle class jobs if he lowers the value of the Dollar and increases Tariffs on China.
“Working Americans—the young and middle-aged—already pay a huge part of the health costs of the elderly through Medicare and Medicaid. These will grow with an aging population and surging health spending. Either taxes will rise or other public services will fall. Already, all governments spend 2.4 times as much per capita on the elderly as on children, reports Julia Isaacs of the Brookings Institution. Why increase the imbalance?”
At some point in the not-too-distant future, the young will flex their political muscle and start to cut the entitlements offered to those over 50.
Neil Howe (The Fourth Turning) commented on this article -
http://blog.lifecourse.com/2009/11/252/
“At last count the official unfunded liabilities for Social Security and all parts (A-D) of Medicare is roughly $100 trillion. So who’s even going to count the extra nickels and dimes we borrow to fill the Part D doughnut hole? And the fiscal stimulus keeps the economy moving and the Fed is handing out free (zero-interest) money. For me, this is certainly the most interesting and unanticipated fiscal, economic, and political environment I have ever seen in my life. For much of the country, there is tremendous unease that the vaunted “courage” of our national leaders always seems to result in borrowing from our kids, keeping our benefits up and our taxes low, and kicking most of the painful choices (”health care reform”) down the road. What happens when the music stops?”
The IMF tells us that if there is another bank bailout, then there will be revolutions –
http://business.timesonline.co.uk/tol/business/economics/article6928147.ece#cid=OTC-RSS&attr=1185799
So if the bankers only get one shot at a bailout, then they will print infinite amounts of money and hope that hyper-inflation will bail them out of their past lending mistakes.
Back to Neil Howe…
“Many informed Millennial (born 1982-200?) will want to ask why — after all their struggles to find jobs, the higher tuitions, the extra debt, and the open faucet on federal debt that they will have to pay back—they also need to pay a new hidden tax to benefit Boomer (born 1943-1960) nearing retirement. Millennials like to be regarded as more civic minded. But I don’t think they like to have a “kick me” sign attached to their backs. If this goes through, some national leader is going to discover this issue and push it in ways that could get ugly. One could, for example, see low-income, go-bare Millennials heavily featured in the Tenth Amendment challenges that will inevitably occur on the mandate. I’m not looking forward to any of this.”
All of this tells me that more money will be printed and taxes will continue to rise in order to pay enough entitlements to placate the unemployed masses for as long as possible.
Sunday, November 29, 2009
Tuesday, November 24, 2009
0.01% and Reality
Bill Gross (PIMCO) is musing about how bad it is to earn 0.01% on his Money Market accounts and suggests placing his riskless money into Utilities…
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2009/Dec+Gross+Anything+but+01.htm
He talks about how the designs of the Fed are to keep Interest Rates so low that they force you to move your money into risky assets.
“The Fed is trying to reflate the U.S. economy. The process of reflation involves lowering short-term rates to such a painful level that investors are forced or enticed to term out their short-term cash into higher-risk bonds or stocks. Once your cash has recapitalized and revitalized corporate America and homeowners, well, then the Fed will start to be concerned about inflation – not until.”
I think the key issue will be when your Purchasing Power is getting ravaged by Inflation, then you will have to do something to protect yourself. But, with Inflation at effectively Zero, there isn’t much cost to staying in Cash, if your overall goal is to keep your money SAFE.
One Month US Treasury Bill yields actually went negative last week and the Three Month Yields were even worse. So are people really buying US Treasuries, even as the Fed tries to force people to put their money into riskier assets?
You bet they are. FDIC Insured balances (Money Market Funds) actually increased about $400 billion last month.
Why? Because they don’t trust the number reported by the Government and Wall Street. They want to know that they still have money and will worry about Inflation after they actually see it.
Morgan Stanley is telling you that the Yield on the 10-Year US Treasury will pop 2.20% higher next year. I am guessing that there is not a chance in **** that Rates will rise that far, because if they do, then housing prices collapse again. If TBT breaks out, then I will change my opinions and change my allocations…
http://www.creditwritedowns.com/2009/11/morgan-stanley-expects-10-year-yields-to-rise-220-bps-in-2010.html
This weekend, two Fed officials talked about extending the Fed’s programs to buy mortgages beyond their current expiration date of March 2010. This is their vehicle for capping Interest Rates. Do you think they want Rates to go higher or lower?
If rates will be capped, then there are a lot of investors who would rather buy guaranteed safety and forgo the extra percent or two they could get by taking what may be substantial risk.
Money printing to keep Interest Rates down = good fundamentals for Gold…
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2009/Dec+Gross+Anything+but+01.htm
He talks about how the designs of the Fed are to keep Interest Rates so low that they force you to move your money into risky assets.
“The Fed is trying to reflate the U.S. economy. The process of reflation involves lowering short-term rates to such a painful level that investors are forced or enticed to term out their short-term cash into higher-risk bonds or stocks. Once your cash has recapitalized and revitalized corporate America and homeowners, well, then the Fed will start to be concerned about inflation – not until.”
I think the key issue will be when your Purchasing Power is getting ravaged by Inflation, then you will have to do something to protect yourself. But, with Inflation at effectively Zero, there isn’t much cost to staying in Cash, if your overall goal is to keep your money SAFE.
One Month US Treasury Bill yields actually went negative last week and the Three Month Yields were even worse. So are people really buying US Treasuries, even as the Fed tries to force people to put their money into riskier assets?
You bet they are. FDIC Insured balances (Money Market Funds) actually increased about $400 billion last month.
Why? Because they don’t trust the number reported by the Government and Wall Street. They want to know that they still have money and will worry about Inflation after they actually see it.
Morgan Stanley is telling you that the Yield on the 10-Year US Treasury will pop 2.20% higher next year. I am guessing that there is not a chance in **** that Rates will rise that far, because if they do, then housing prices collapse again. If TBT breaks out, then I will change my opinions and change my allocations…
http://www.creditwritedowns.com/2009/11/morgan-stanley-expects-10-year-yields-to-rise-220-bps-in-2010.html
This weekend, two Fed officials talked about extending the Fed’s programs to buy mortgages beyond their current expiration date of March 2010. This is their vehicle for capping Interest Rates. Do you think they want Rates to go higher or lower?
If rates will be capped, then there are a lot of investors who would rather buy guaranteed safety and forgo the extra percent or two they could get by taking what may be substantial risk.
Money printing to keep Interest Rates down = good fundamentals for Gold…
Sunday, November 22, 2009
Wells Fargo and FHA "Guarantees"
Over the last 18 months I complained a lot about how the decisions of policy makers we designed to move a lot of worthless debt from the balance sheets of the banks to the balance sheet of the US Taxpayer. Wells Fargo pretty much now embodies the consequences of what I was said would occur.
http://us1.institutionalriskanalytics.com/pub/IRAMain.asp
“Wells Fargo & Co. (NYSE:WFC), in its most recent 10-Q, discloses that it need not bring on balance sheet ANY of the $1.1 trillion in conforming residential OBS exposures that are the subject of the new FASB rule eliminating the "Qualified Special Purpose Entity" designation. Why? Because the loans inside these securitization vehicles are insured by FHA, so goes the thinking of WFC and its auditor, thus the bank has no liability to these entities or the securities they have issued to investors. Pretty neat trick, eh?”
You read that right, because Wells Fargo knows that the US Taxpayer will clean up their mess (via the FHA), they think it is okay to not even bother discussing $1.1 TRILLION in mortgages they originated and OWN! Why? Because they figure, how can you take losses on something that is guaranteed by the US Taxpayer?
How stupid are we? Why do we put up with this stuff? When is one of these SOBs going to go to jail?
As of last week, 17.71% of all FHA mortgages are in default. 8.52% are more than 90-days delinquent.
Do the math - Wells Fargo has $1.1 Trillion of Mortgages off the books and another $700 Billion of Mortgages on the books. At an 8.5% default rate, that means they should be reserving about $153 billion for future losses. That would make Wells Fargo bankrupt. They are telling all who will listen that $93.5 billion in losses are going directly to the US Taxpayer!
Bank of America (think Countrywide) also has tons of these toxic Mortgages on their books and they are carrying these loans at artificially high values too.
Think of all the other smaller banks that aren’t reserving for the real losses in these FHA mortgages…
When the FASB got rid of “marked to market” accounting, they bought the banks and the Central Banks of Asia and Europe enough time to unload Trillions of Dollars of worthless mortgages onto the balance sheet of the US Taxpayer – via Agencies (Fannie Mae, Freddie Mac, FHA) and the FRBNY.
Now the Fed is saying that buying $1.25 Trillion in Mortgages is not enough and that is would be a good idea to have the US Taxpayer buy still more of this toxic waste.
http://www.cnbc.com/id/34101180
But we can’t audit the Fed, because it needs to remain “independent”…
Do you wonder why I keep buying Gold?
http://us1.institutionalriskanalytics.com/pub/IRAMain.asp
“Wells Fargo & Co. (NYSE:WFC), in its most recent 10-Q, discloses that it need not bring on balance sheet ANY of the $1.1 trillion in conforming residential OBS exposures that are the subject of the new FASB rule eliminating the "Qualified Special Purpose Entity" designation. Why? Because the loans inside these securitization vehicles are insured by FHA, so goes the thinking of WFC and its auditor, thus the bank has no liability to these entities or the securities they have issued to investors. Pretty neat trick, eh?”
You read that right, because Wells Fargo knows that the US Taxpayer will clean up their mess (via the FHA), they think it is okay to not even bother discussing $1.1 TRILLION in mortgages they originated and OWN! Why? Because they figure, how can you take losses on something that is guaranteed by the US Taxpayer?
How stupid are we? Why do we put up with this stuff? When is one of these SOBs going to go to jail?
As of last week, 17.71% of all FHA mortgages are in default. 8.52% are more than 90-days delinquent.
Do the math - Wells Fargo has $1.1 Trillion of Mortgages off the books and another $700 Billion of Mortgages on the books. At an 8.5% default rate, that means they should be reserving about $153 billion for future losses. That would make Wells Fargo bankrupt. They are telling all who will listen that $93.5 billion in losses are going directly to the US Taxpayer!
Bank of America (think Countrywide) also has tons of these toxic Mortgages on their books and they are carrying these loans at artificially high values too.
Think of all the other smaller banks that aren’t reserving for the real losses in these FHA mortgages…
When the FASB got rid of “marked to market” accounting, they bought the banks and the Central Banks of Asia and Europe enough time to unload Trillions of Dollars of worthless mortgages onto the balance sheet of the US Taxpayer – via Agencies (Fannie Mae, Freddie Mac, FHA) and the FRBNY.
Now the Fed is saying that buying $1.25 Trillion in Mortgages is not enough and that is would be a good idea to have the US Taxpayer buy still more of this toxic waste.
http://www.cnbc.com/id/34101180
But we can’t audit the Fed, because it needs to remain “independent”…
Do you wonder why I keep buying Gold?
Friday, November 20, 2009
Fed "Independence"
A quick note on this topic -
The only thing the Fed is independent of is oversight from those who fund it.
If you think that the Fed is independent from the banks who use it to fund their speculation and clean up their messes, then you are either not paying attention or are bought and paid for by these same banks (Barney Frank, Chris Dodd or a CNBC anchor).
The only thing the Fed is independent of is oversight from those who fund it.
If you think that the Fed is independent from the banks who use it to fund their speculation and clean up their messes, then you are either not paying attention or are bought and paid for by these same banks (Barney Frank, Chris Dodd or a CNBC anchor).
Why Is The T-Bill Yield Negative?
The yield on the 1-month T-Bill went negative yesterday.
The yield of the 3-month T-Bill slipped below that of the 1-month - an invested yield curve. Yikes…
There is a lot of speculation as to why this occurred. Here are my two cents –
Bearish
Ukrainian Railway defaulted on a bond payment on non-government guaranteed debt. There is speculation that it will now default on a note guaranteed by the Ukrainian Government.
The Bearish camp would say that there is a new panic forming and investors are willing to pay the Fed to find safety in Treasuries.
If things are so bearish and a new panic is setting in, then why was LIBOR actually DOWN yesterday?
Bullish
The Dollar Carry Trade is in full force. The trade is that you buy US Treasuries and leverage the hell out of them. Your cost to borrow is the yield on the security you are leveraging. With a negative yield, you are now actually GETTING PAID to borrow Treasuries and hold them to maturity.
The Bullish camp would say that Treasury yields are now negative because so many people want to borrow them that they are driving the yield negative. Bond Price Up = Bond Yield Down
I tend to be more in the Bullish camp and think that people are loading up on leverage for one last speculative push into Year End 2009.
The fact that the Carry trade may be so crowded that T-Bill Yields are now negative may be a good indicator that prices will reverse soon (the law of large numbers and all), so be on your toes. Everything still needs to be a trade.
We’ll see how things shake out, but I am looking to buy stuff with the money I raise by selling SLV and HL earlier this week, not sell more stuff to raise more cash.
I will be posting a lot of charts this weekend.
The yield of the 3-month T-Bill slipped below that of the 1-month - an invested yield curve. Yikes…
There is a lot of speculation as to why this occurred. Here are my two cents –
Bearish
Ukrainian Railway defaulted on a bond payment on non-government guaranteed debt. There is speculation that it will now default on a note guaranteed by the Ukrainian Government.
The Bearish camp would say that there is a new panic forming and investors are willing to pay the Fed to find safety in Treasuries.
If things are so bearish and a new panic is setting in, then why was LIBOR actually DOWN yesterday?
Bullish
The Dollar Carry Trade is in full force. The trade is that you buy US Treasuries and leverage the hell out of them. Your cost to borrow is the yield on the security you are leveraging. With a negative yield, you are now actually GETTING PAID to borrow Treasuries and hold them to maturity.
The Bullish camp would say that Treasury yields are now negative because so many people want to borrow them that they are driving the yield negative. Bond Price Up = Bond Yield Down
I tend to be more in the Bullish camp and think that people are loading up on leverage for one last speculative push into Year End 2009.
The fact that the Carry trade may be so crowded that T-Bill Yields are now negative may be a good indicator that prices will reverse soon (the law of large numbers and all), so be on your toes. Everything still needs to be a trade.
We’ll see how things shake out, but I am looking to buy stuff with the money I raise by selling SLV and HL earlier this week, not sell more stuff to raise more cash.
I will be posting a lot of charts this weekend.
Do You Really Think These Students Will Put Your Social Security Above Their Cost Of Living Expenses?
UC Regents voted to raise fees by 32% yesterday.
They cast the vote at UCLA.
A lot of students showed up to protest.
“We weren’t allowed to leave,” said Student Regent Jesse Bernal. “(The situation) just became a little too intense for the police officers.”
They took over a building.
http://www.dailybruin.com/articles/2009/11/20/uc-students-take-over-campbell-hall-defiance/
They held signs like -
Bailout Education
First (crossed out) Last Gen College Student
There is no way that the kids hit college today will pay for the Retirement (Social Security and Public Pensions) or Health Care (Medicare). They will have to figure out how to pay for their own lives on incomes that will not match what their parents made.
You better be planning on how to self-finance your retirement years, because those checks you were expecting from the Government will be a lot smaller than you thought, if they show up at all.
They cast the vote at UCLA.
A lot of students showed up to protest.
“We weren’t allowed to leave,” said Student Regent Jesse Bernal. “(The situation) just became a little too intense for the police officers.”
They took over a building.
http://www.dailybruin.com/articles/2009/11/20/uc-students-take-over-campbell-hall-defiance/
They held signs like -
Bailout Education
First (crossed out) Last Gen College Student
There is no way that the kids hit college today will pay for the Retirement (Social Security and Public Pensions) or Health Care (Medicare). They will have to figure out how to pay for their own lives on incomes that will not match what their parents made.
You better be planning on how to self-finance your retirement years, because those checks you were expecting from the Government will be a lot smaller than you thought, if they show up at all.
Monday, November 16, 2009
Nice Day Today
Today was a great day. It felt like NASDAQ 1999 – “heyidiot.com 2.0”... This is a glorious Commodity Bull Market.
I’ve been working since 5 am. I knew this would be a busy week and I wanted to make sure that I was ready for it. Most of my preparation for this week was done last week, when I bought gold stocks (NEM, ABX, RGLD), Silver (SLV) and Natural Gas (UNG).
The Dollar keeps imploding and virtually anything else with potential risk goes higher. So my logic is that if prices are moving up because the Dollar is going down, then why not own the pure plays that benefit most from a falling US Dollar.
Silver (SLV) pulled back into the 50-day and then exploded higher today.
Natural Gas (UNG) has been THE lagging Commodity. I have been watching it for months, waiting for a potential entry point. It looks like UNG is trying to put in a Double Bottom at $9. There is a big divergence between Price and Momentum (Green Line). UNG had a nice pop today.
Hecla Mining (HL) is a riskier Gold stock. It has been leading and broke out last week. I have tracked it for some time and got paid off huge today. Again, very 1999 tech-like.
Singapore (EWS) has been holding up like a champ, simply building new bases each time the markets pull back. Another nice move today.
Industrials have been in a multi-week base and finally started to break out today.
There were lots of breakouts and now I go to work looking for the next round of potential breakouts. Again, I want to only buy when I have an exit strategy. Look at what is again showing up –
Metals and Mining (XME). Does this remind you of the chart of XLI? It should.
Russia (RSX)
I refuse to chase price higher and buy when the markets are extended. I prefer to do more homework and find other setups that can be bought with reasonable risk.
If you have not participated in this leg, don’t get antsy and do something risky. Do you homework and look for the newly emerging potential setups.
I’ve been working since 5 am. I knew this would be a busy week and I wanted to make sure that I was ready for it. Most of my preparation for this week was done last week, when I bought gold stocks (NEM, ABX, RGLD), Silver (SLV) and Natural Gas (UNG).
The Dollar keeps imploding and virtually anything else with potential risk goes higher. So my logic is that if prices are moving up because the Dollar is going down, then why not own the pure plays that benefit most from a falling US Dollar.
Silver (SLV) pulled back into the 50-day and then exploded higher today.
Natural Gas (UNG) has been THE lagging Commodity. I have been watching it for months, waiting for a potential entry point. It looks like UNG is trying to put in a Double Bottom at $9. There is a big divergence between Price and Momentum (Green Line). UNG had a nice pop today.
Hecla Mining (HL) is a riskier Gold stock. It has been leading and broke out last week. I have tracked it for some time and got paid off huge today. Again, very 1999 tech-like.
Singapore (EWS) has been holding up like a champ, simply building new bases each time the markets pull back. Another nice move today.
Industrials have been in a multi-week base and finally started to break out today.
There were lots of breakouts and now I go to work looking for the next round of potential breakouts. Again, I want to only buy when I have an exit strategy. Look at what is again showing up –
Metals and Mining (XME). Does this remind you of the chart of XLI? It should.
Russia (RSX)
I refuse to chase price higher and buy when the markets are extended. I prefer to do more homework and find other setups that can be bought with reasonable risk.
If you have not participated in this leg, don’t get antsy and do something risky. Do you homework and look for the newly emerging potential setups.
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