Points of View - October 31

Happy Halloween!

At a time of the year when scary is the norm, as one commentator said yesterday, "What could be scarier than Congress debating our nation's health care reform?" All kidding aside, on to today's points of view.

Health Care

CBO Underestimates Benefits of Malpractice Reform - By Lawrence J. McQuillan - The Wall Street Journal - "Earlier this month, the Congressional Budget Office (CBO) said medical-liability reforms could save about $11 billion annually. This assessment is a gross underestimate of the potential benefits of reform and was intended to give cover to congressional Democrats who say malpractice-liability costs are trifling. But a full accounting shows the benefits would be a hefty $242 billion a year, more than 10 percent of America's health expenditures."

Back From the Dead - The Economist - "Though you would be forgiven for thinking otherwise, around half of all Americans get their health care courtesy of the government. There is Medicare, which provides for the elderly; Medicaid, which looks after the poorest; and a big federal programme that covers children in most of the country’s worse-off families. To their numbers must be added tens of millions of government employees, from the president and the members of Congress down to teachers, firemen, soldiers and veterans. The actual provision of health services, in hospitals, diagnostic labs and doctors’ surgeries is, with a few exceptions (veterans have a NHS-like network of their own), carried out by the private sector. But the government pays the bills."

Notable & Quotable - By Robert Reich - The Wall Street Journal - "While health reform, if done right, can help American families stay afloat in the economy, most Americans will not see any appreciable decline in the cost of health insurance nor clear improvement in the efficiency or quality of the health care they receive, and those who will benefit from the bill won't see it for several years. That's partly a result of Obama's sharpest break from Clinton—whose ambitious plan drew immediate fire from Big Pharma, the American Medical Association, and health insurers: The Obama White House bought off the medical-industrial complex by promising it fatter profits, bolstered by tens of millions of new paying customers."

Financial Reform

Another Misstep on the Road to Reform - The New York Times - "Draft legislation to regulate too-big-to-fail financial firms hit a wall of well-deserved dissent at a hearing on Thursday in the House Financial Services Committee."

Privatization

Postal Services: Sort It Out - The Economist - "With technology undermining the old monopolies that postal services used to enjoy, the obvious answer is to privatise them and let them sink or swim. But the post is not just another business knocked sideways by the internet. Post offices unite communities and the postal service connects remote regions to the centre, so voters are uncomfortable with radical change."

Quick Notes and Articles for the Day - October 30

Chicago PMI Rises Above 50 - The Chicago purchasing managers index (PMI) rose to 54.2% from 46.1% in September according to a survey of corporate purchasing managers released Friday. Readings over 50% indicate overall business expansion. Both new orders and production moved sharply higher in October. The Chicago PMI is considered a leading indicator to the national Institute for Supply Management (ISM) manufacturers' survey for October to be released on Monday.

Consumer Sentiment Improves in Late October - According to reports on the Reuters/University of Michigan index, consumer sentiment improved in late October to 70.6 in late October from 69.4 earlier in the month. Sentiment in September was 73.5.

Consumer Spending Falls After Cash for Clunkers - The Commerce Department estimated that consumer spending fell in September 0.6% (inflation, seasonally adjusted) after the government's cash-for-clunkers program ended. Real disposable incomes fell a seasonally adjusted 0.1%. In current-dollar terms (not inflation-adjusted), spending fell 0.5% in September. Current-dollar incomes were flat. With spending falling faster than incomes, the personal savings rate rose to 3.3% of disposable income from 2.8% in August.

Articles

The WellPoint Revelation - The Wall Street Journal - "At the request of Congressional delegations worried about their constituents—call it a public service—WellPoint mined its own actuarial data to model ObamaCare in the 14 states where it runs Blue Cross plans. The study therefore takes into account market and demographic differences that other industry studies have not, such as the one from the trade group America's Health Insurance Plans, which looked at aggregate national trends. In all of the 14 states WellPoint scrutinized, ObamaCare would drive up premiums for the small businesses and individuals who are most of WellPoint's customers. (Other big insurers, like Aetna, focus on the market among large businesses.) Young and healthy consumers will see the largest increases—their premiums would more than triple in some states—though average middle-class buyers will pay more too."

The House Health Reform Bill - The New York Times - "The Senate should pay attention to the health care reform bill unveiled on Thursday by House Democratic leaders. The bill would greatly expand coverage of the uninsured while reducing budget deficits over the next decade and probably beyond. It includes a public option that is weaker than we would like, but it still deserves to be approved by the House."

Quick Notes & Articles for the Day - October 28

Durable Goods Orders Rise 1.0% - The Commerce Department reported that orders for durable goods rose 1.0% in September on stronger demand for machinery, defense and capital goods. Excluding the 1.1% increase in transportation goods, orders rose 0.9%. It was the fourth increase in total orders in the past six months. Shipments rose 0.8% in September but were down 0.8% excluding transportation goods. Inventories fell 1.0%, the ninth consecutive monthly decline (a continued fall in inventories will eventually mean that output must rise to replace the inventory).

New Home Sales Fall - The Commerce Department estimated that new home sales fell 3.6% in September. The decline put new-home sales to a seasonally adjusted annual rate of 402,000. New-home sales in August were revised to a 417,000 level compared with the previous estimate of 429,000. This is the first decline in new home sales after five consecutive monthly gains. New-home sales are down 7.8% compared with a year ago. The supply of homes on the market fell to 251,000 in September which is the lowest level since November 1982.

Articles

U.S. Cracks Down on Promoters of Huge Tax Defiance - By Kim Dixon - Reuters - "U.S. authorities have filed lawsuits nationwide against promoters of schemes to help tax protesters collectively attempt to get fraudulent refunds of $562 million, the U.S. Justice Department said on Wednesday."

Home Tax Credit Audit Shows Abuses - By Jackie Calmes - The New York Times - "While government officials said many suspect claims could turn out to be simple errors, the report found examples of claimants who already owned homes or had not yet bought one. Some 582 taxpayers were under 18 years old — as young as 4. Of the 1.4 million people who have claimed nearly $10 billion in credits for 2008 and 2009, 60 percent had incomes below $50,000, raising questions about whether some could afford a home."

Quick Notes & Articles for the Day - October 27

Home Prices Rise in August - Standard & Poor's released information from the Case-Shiller home price index on Tuesday the showed the market value of homes in 20 major cities rose by 1.2% compared with July. This marks the fourth month in a row that home prices have increased. In August prices rose in 17 of 20 cities. In the past year, prices are down 11.3% in the 20 cities. Prices are down 29.3% from the peak. Prices in all 20 cities were lower in August 2009 than in August 2008.

Consumer Confidence Falls in October - The Conference Board reported that consumers became more cautious in October. The consumer confidence index fell to 47.7 in October from an upwardly revised 53.4 in September. The September confidence index was revised up from the initial estimate of 53.1. Consumers were more pessimistic about the labor market, with those claiming jobs are "hard to get" rising to 49.6% from 47.0% in the prior month.

IBM Approves $5 Billion Stock Buyback - IBM said Tuesday that its board of directors has authorized another $5 billion to use for stock repurchases.

The new funding is in addition to $4.2 billion remaining from an earlier stock-buyback authorization, giving IBM more than $9 billion to repurchase its shares. IBM said that it expects to request additional stock-repurchase funds at its board meeting next April.

Articles

Green Business News - Reuters - A few people have asked where they can find out information regarding "green news," so the link above is to Reuters's Green Business site. As we find more good sites, we will pass them along.

Vacation-day Allotment Varies Widely By Country - By Andrea Coombes - MarketWatch - Just one of those interesting stories that was forwarded to me this morning. I am not sure 8 weeks off is worth living in Lithuania though... - "How does eight weeks off per year sound to you? That's what workers in Brazil and Lithuania enjoy -- and Finland, France, Russia, Austria and Malta aren't far behind, according to a recent study comparing workers' holiday time in 41 countries."

Quick Notes for the Day - October 26

National Index Rises Above Recession Level - The Chicago Federal Reserve reported that the national activity index (includes 85 separate indices) rose to -0.63 over the past three months from -0.96 in the three months ending in August. This marks the first time the index's three-month average has been above the -0.70 level since early in the recession. For September, the index slipped to negative 0.81 from negative 0.65 in August. In September, production and income indicators were positive for the third straight month, but the other three main categories (employment, sales and consumption) remained negative.

Dollar Trades Higher, Oil Falls on Dollar's Strength - The dollar has traded higher Monday by about 0.6% reversing a trend against the Euro. On the news, oil traded below $80 (stronger dollar equals lower crude oil prices). Also adding to pressure on oil was an announcement over the weekend that Nigeria's main militant group declared an indefinite ceasefire which had put some possible supply pressure into the price.

Gold, Copper Fall on Stronger Dollar - Gold and other metals futures turned lower midday Monday as the U.S. dollar rose off earlier lows. Gold for December delivery was down about $10.10 (0.9%) at $1046 an ounce. Gold, seen as a safe place to park cash in uncertain times, often trades in the opposite direction of US stocks. But lately, both have been rising together as a drop in the dollar makes hard assets like gold and oil more valuable, and at the same time, supports profits at US companies with international earnings.

Romer: Health Care Reform Is Key to Deficit - Council of Economic Advisers Chair Christina Romer in prepared remarks said Monday morning that health care reform is "the most significant act" the U.S. can take to tackle its long-term budget deficit problem. "Done correctly, health care reform can genuinely slow the growth rate of health care costs and thus put us on a path to greatly reduced budget deficits in the long run."

Points of View - October 25

China & America - The Odd Couple - The Economist - "The heart of the problem is a profound uncertainty in both countries about where the relationship may lead. In many respects the two countries are in the same bed. Their economies have become interlocked, especially in the past decade. America is the world’s biggest debtor and China its biggest creditor. From climate change to the economic recovery, the world faces problems that demand China and America work in concert."

Financial Reform

Washington's Plans May Result in Even Higher Executive Pay - By Jonathan Macey - The Wall Street Journal - "Executive pay has emerged, once again, as a major issue in Washington. This week Treasury and the Federal Reserve announced new regulations designed to oversee and limit executive pay at thousands of financial institutions. This is deeply ironic, because today's pay woes are the direct result of prior government intervention. In 1992, Congress decided it would use the tax code to 'improve' (i.e., reduce) executive compensation in publicly traded companies."

The State of Financial Reform - The New York Times - "It sounded good when the Treasury’s pay czar, Kenneth Feinberg, announced that top executives at Citigroup, Bank of America and the other five institutions surviving at taxpayers’ expense would see their compensation packages cut in half this year and their cash salaries reduced by 90 percent."

Debt

Credit Card Chicanery - The New York Times - "The Credit Card Accountability, Responsibility and Disclosure Act would end a great many odious practices. The companies, for example, could no longer deluge broke and unemployed teenagers with credit cards, driving them deeply into debt that they have no way of paying off. Credit card companies will have to verify the young person’s ability to pay or get a signature from a responsible adult before credit is issued."

The Bad Debt Dance - By Jan Boucek - The Wall Street Journal - "It takes two to tango. For most bad loans, there's an irresponsible lender and an irresponsible borrower. But two years since the start of the credit crunch, and lenders are suffering all the opprobrium. That's easy to do: Bankers are slick, cocky and rich. Of course, this was overlooked before the crunch as bankers greased the over-reaching ambitions of governments, companies and consumers. Now that all have been caught out, those indentured to the banks are crying foul: 'The devil made me do it!'"

Why Congress Must Now Abolish Its Debt Limit - By Bruce Bartlett - Financial Times - "Any day now there is going to be a uniquely American political crisis when Congress must raise the limit on how much the federal government may borrow. If it fails to do so, the Treasury department loses the legal authority to issue new bonds."

Health Care

Public Opinion and Health Reform - By David Brady & Daniel Kessler - The Wall Street Journal - "Earlier this month, President Barack Obama said that an "unprecedented consensus has come together behind" health-care reform. As recently as June, public opinion polls supported such a proposition. That month a CBS News/New York Times poll found that 64% of Americans agreed that the federal government should guarantee health insurance for all."