The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

“You’re selling something that you know has no value” !

Margin Call Trailer:

Peter Boockvar

Managing Director

Equity Strategist

Miller Tabak + Co.

Office: 212-370-0346

Contract signings of existing homes surprisingly rose by 2.4% in June vs an expected drop of 2% and follows an 8.2% rise in May. The jump was led by the high foreclosure regions of the West and South as the Northeast and Midwest saw declines. Bottom line, while there was an unexpected jump in pending sales, there has been a major issue of turning these contracts into closings because of tight lending standards and appraisals coming in below the agreed upon purchase price so today’s figure only tells one part of the story. Also of issue will be whether higher end homes will close as the government moves closer to having FNM and FRE lower the maximum amount of a mortgage they will participate in and lenders avoid these loans as a result. A jumbo will then be that buyers alternative where a 30 yr mortgage rate is priced 50 bps above a conventional.

Source: Daily Mail, The Milky Way
July 15, 2011

How did a bunch of unelected corporate suits get the power to wreck the global economy?

>

Yesterday, I taped an interview with Canadian TV, where the question of the rating agencies came up.

I stated my long held views about them: That they were a prime enabler of the credit crisis; that they were one of the most corrupt institutions in the United States, and had sold their ratings to the highest bidder. That their senior executives were criminally liable and deserved jail time. That S&P, Moody’s and Fitch themselves deserved to be executed — the same corporate death penalty that Arthur Anderson received. I stated I was perplexed as to why they were not put down like rabid dogs.

So with that modest position, you can imagine how pleased I was to see Zachary Karabell’s piece this morning in the Daily Beast:

“As the debt-ceiling storm intensifies, some reports indicate that the White House, and perhaps the global financial markets, are less concerned with paying bills after Aug. 2 than with credit-rating agencies imposing their first-ever U.S. government downgrade, from AAA to AA+.

How did it come to this—that a trio of private-sector companies could wield such enormous influence? More specifically, a trio that has proven chronically behind the curve, analytically compromised, and complicit in the financial crisis of 2008–09 as well as the more recent euro-zone debt dilemmas? Somehow, these inept groups again find themselves destabilizing the global system in the name of preserving it . . .

Yet here they are again, threatening to downgrade the debt of the United States—potentially costing taxpayers hundreds of billions, again, in the form of higher interest payments—because they don’t like the messiness of the political process and they don’t approve of the level of debt relative to GDP, so said David Beers of S&P.

But, really—and I mean this in the most respectful way—who the hell is David Beers and who elected him to be the arbiter of the American financial system?”

This issue here is not the debt ceiling or the ongoing deficits — but rather, yet another corporate criminal allowed to roam free.

The entire piece is well worth your time to read.

>

Note: You can read my previously run ins with S&P’s parent company McGraw Hill here.

>

Source:
Debt Police Go Rogue
Daily Beast Jul 27, 2011 11:40 PM EDT
http://www.thedailybeast.com/articles/2011/07/27/debt-ceiling-unaccountable-credit-ratings-agencies-go-rogue.html

See also:
U.S. Default: Robert Reich Calls S&P Warning About U.S. Credit ‘Height of Hubris’ (ABC)

Visit msnbc.com for breaking news, world news, and news about the economy

“What gets us into trouble is not what we don’t know, it’s what we know for sure that just ain’t so.”
-Mark Twain

~~~

“If you are among those who believe that the U.S. has the best healthcare system in the world — despite overwhelming evidence to the contrary — it’s because my fellow spinmeisters and I succeeded brilliantly at what we were paid very well to do with your premium dollars.”
Wendell Potter a former Vice President of Corporate Communications (aka Public Relations) at a major Healthcare Company

I have always despised the morning buffoons as a waste of time.  So even back in 1998, driving to a Control Systems Engineering job in Houston I popped lecture Number Five of Thirty-six of Professor Timothy Taylor’s “Contemporary Economic Issues” and began to listen to his “Financing Healthcare” lecture. He was going on about how garbled the Hillary-care plan was. No surprise there. But then he switched to international comparisons saying the American cost per person was almost double the U.K.’s cost per person.  And that they had some harsh rules but still generally the same quality as we had in America. What – we pay almost double WTF is this guy talking about – that can’t be right. And everyone knows we are the best… I shook it off as he went on that Germany’ health-care plan was a bit more expensive than the U.K. but was a better fit for America and would still give us a 40% savings if we cloned their healthcare system. I pulled into work
confused and more than a bit skeptical. I was determined to get book of notes and references out and discredit this nonsense as soon as I got home that evening.

That was thirteen years ago. I never discredited Professor Taylor’s insights. Rather I have watched the situation deteriorate further while Michael Moore’s mostly correct “Sicko” was easily discredited by his over stating and glorification of Castro’s Cuban Healthcare plan. If Moore wanted to rub America’s face in its Healthcare mess couldn’t he have picked France where they really do have a well run healthcare plan? And to watch smooth Femme fatale Karen Ignagni, CEO of America’s leading healthcare lobbyist, America’s Health Insurance Plans (AHIP), play Obama for the fool while she receives a $1,800,000 salary out of our premiums was a disgusting spectacle. (See the Potter book below for fact checking and discrediting “Sicko” and a grudgingly admiring portrait of Ignagani whom he worked closely with.)

During the great healthcare debate I had business in Europe and could not resist staying extra for some rest and relaxation. According to friends in the U.K. they have improved the system since those days back in 1998, kept the cost down and are dabbling with adding incentives. While we have a food fight, the Netherlands (where doctor’s make house calls) was completely revamping its top shelf healthcare system. Rather than crow about their excellent system they still are dissatisfied and trying to improve. In Germany, where I was a customer inspecting some complex equipment for a client, I tried to ask about healthcare. On my final day there after some wine at lunch and some prodding and assurances I wouldn’t bite their heads off they told me in so many words they considered our debate unintelligible. I then retreated to Rome where I forgot work and healthcare in a haze of “Dolce far niente” the sweetness of doing nothing.

So here we are with a Deficit and Debt Pissing Contest going on in Washington. Let’s show these fools how America’s money problem could essentially be solved with healthcare alone by copying – pick your country’s plan.

It has been documented (references below) many times that America spends about $3,500 more per person per year more than the UK, Germany, Italy, France, Spain, Japan, Sweden, Norway, Australia etc.  And all of these countries have greater longevity, all have less infant mortality, all have universal coverage and all except Japan have immigration problems.

So we have the amount we would save $3,500 per person per year. Now we need the population of America which is over 330,000,000 people.

OK let’s see multiply our savings, the extra we pay per person per year by the total number of people to get our total savings for the nation.

330,000,000 [people in USA]
x $3,500 [savings per person per year]
————————————————————-
$1,115,000,000,000 [Total Savings for USA per year]

That is over $1.1 Trillion Dollars per year in extra spending that could be saved!

Wow. We just solved the Nation’s Debt Crisis. Congratulations!

(Of course we would crash the healthcare and related stocks. Lets see a handfull of stocks versus America – obviously the stocks win. I can probably continue to hold on to my tiny long ETF positions in IBB and PSCH for a while. What are the odds?)

- – - – - – - – - – - – - – - – - – - – - – - -
REFERENCES
“Deadly Spin: An Insurance Company Insider Speaks Out on How Corporate PR Is Killing Health Care and Deceiving Americans” by Wendell Potter
www.amazon.com/Deadly-Spin-Insurance-Corporate-Deceiving/dp/1608192814/ref=sr_1_1?ie=UTF8&qid=1307922223&sr=8-1<http://www.amazon.com/Deadly-Spin-Insurance-Corporate-Deceiving/dp/1608192814/ref=sr_1_1?ie=UTF8&qid=1307922223&sr=8-1>

Kleiner Perkins Caufield & Byers / Business Week Study Americ-Inc 2/2011
www.kpcb.com/usainc/<http://www.kpcb.com/usainc/>
www.kpcb.com/usainc/USA_Inc.pdf<http://www.kpcb.com/usainc/USA_Inc.pdf>
Check out the fun charts on pdf pages 107(72) to 111(74)

For a different independent comparison featured in Barry Ritholtz’ “The Big Picture” blog see the fun charts from the Medicalbillingandcoding.org
at
www.medicalbillingandcoding.org/medical-costs-1/<http://www.medicalbillingandcoding.org/medical-costs-1/>
and
www.medicalbillingandcoding.org/medicals-costs-2/<http://www.medicalbillingandcoding.org/medicals-costs-2/>

The American organization that has done the most work on international comparative Health Care is The Commonwealth Fund
www.commonwealthfund.org/Topics/International-Health-Policy.aspx<http://www.commonwealthfund.org/Topics/International-Health-Policy.aspx>
You can get lost in that web site for days on end reviewing statistics from the US and other countries.

Also important is The Kaiser Family Foundation www.kff.org/<http://www.kff.org/> They keep incredibly detailed library of a wide variety of American health statistics including state by state analysis.

Economics Professor Timothy Taylor’s 1998 “Contemporary Economic Issues”
was retired years ago other courses are available at www.thegreatcourses.com but to my knowledge none contain international healthcare comparisons.

While us pontificators, strategists, market players, and crystal ball readers can give our 2 cents on what will happen next with the politics of DC and what will follow, the truth is, we really have no precedent to know. While I think the odds are close to zero that the debt ceiling doesn’t get raised with a spending cut plan of some sort, I can’t say with any confidence, how the markets will respond to a downgrade of the US credit rating, the credit rating of the largest economy in the world with its currency as the world’s biggest medium of exchange and its level of interest rates being considered the risk free rate. But I digress because its now exhausting to talk about. Italian and Spanish debt are trading poorly again with yields approaching the recent highs as are CDS and its dragging the euro lower. Italy sold debt with differing maturities, the 3 yr in particular priced at a yield 110 bps above one sold last month. Euro zone Economic Confidence in July fell to the lowest since Aug and Germany wasn’t immune as confidence there dropped to the lowest since Oct. German unemployment did fall in July but a touch less than expected.

July 27, 2011, 4:19 pm Video

Hat tip Brainpicker

Speakers in order of appearance:

1. Lawrence Krauss, World-Renowned Physicist
2. Robert Coleman Richardson, Nobel Laureate in Physics
3. Richard Feynman, World-Renowned Physicist, Nobel Laureate in Physics
4. Simon Blackburn, Cambridge Professor of Philosophy
5. Colin Blakemore, World-Renowned Oxford Professor of Neuroscience
6. Steven Pinker, World-Renowned Harvard Professor of Psychology
7. Alan Guth, World-Renowned MIT Professor of Physics
8. Noam Chomsky, World-Renowned MIT Professor of Linguistics
9. Nicolaas Bloembergen, Nobel Laureate in Physics
10. Peter Atkins, World-Renowned Oxford Professor of Chemistry
11. Oliver Sacks, World-Renowned Neurologist, Columbia University
12. Lord Martin Rees, Astronomer Royal
13. Sir John Gurdon, Pioneering Developmental Biologist, Cambridge
14. Sir Bertrand Russell, World-Renowned Philosopher, Nobel Laureate
15. Stephen Hawking, World-Renowned Cambridge Theoretical Physicist
16. Riccardo Giacconi, Nobel Laureate in Physics
17. Ned Block, NYU Professor of Philosophy
18. Gerard ‘t Hooft, Nobel Laureate in Physics
19. Marcus du Sautoy, Oxford Professor of Mathematics
20. James Watson, Co-discoverer of DNA, Nobel Laureate
21. Colin McGinn, Professor of Philosophy, Miami University
22. Sir Patrick Bateson, Cambridge Professor of Ethology
23. Sir David Attenborough, World-Renowned Broadcaster and Naturalist
24. Martinus Veltman, Nobel Laureate in Physics
25. Pascal Boyer, Professor of Anthropology
26. Partha Dasgupta, Cambridge Professor of Economics
27. AC Grayling, Birkbeck Professor of Philosophy
28. Ivar Giaever, Nobel Laureate in Physics
29. John Searle, Berkeley Professor of Philosophy
30. Brian Cox, Particle Physicist (Large Hadron Collider, CERN)
31. Herbert Kroemer, Nobel Laureate in Physics
32. Rebecca Goldstein, Professor of Philosophy
33. Michael Tooley, Professor of Philosophy, Colorado
34. Sir Harold Kroto, Nobel Laureate in Chemistry
35. Leonard Susskind, Stanford Professor of Theoretical Physics
36. Quentin Skinner, Professor of History (Cambridge)
37. Theodor W. Hänsch, Nobel Laureate in Physics
38. Mark Balaguer, CSU Professor of Philosophy
39. Richard Ernst, Nobel Laureate in Chemistry
40. Alan Macfarlane, Cambridge Professor of Anthropology
41. Professor Neil deGrasse Tyson, Princeton Research Scientist
42. Douglas Osheroff, Nobel Laureate in Physics
43. Hubert Dreyfus, Berkeley Professor of Philosophy
44. Lord Colin Renfrew, World-Renowned Archaeologist, Cambridge
45. Carl Sagan, World-Renowned Astronomer
46. Peter Singer, World-Renowned Bioethicist, Princeton
47. Rudolph Marcus, Nobel Laureate in Chemistry
48. Robert Foley, Cambridge Professor of Human Evolution
49. Daniel Dennett, Tufts Professor of Philosophy
50. Steven Weinberg, Nobel Laureate in Physics

Ian Shepherdson of High Frequency Economics essentially saying you can blame the Tea Party if market collapses:

“The Speaker is in office, but not in power, because the Tea Partiers do not respect party discipline. They argue that they are standing up for principle, but the principle they have chosen to defend is the idea that the only thing that matters is rapidly and substantially shrinking the government. This, we respectfully submit, is nuts. According to polls, it’s not even what most Republican voters want, never mind the country as a whole. Moreover, the first thing you learn from studying the aftermath of financial crises is that premature fiscal tightening is extremely dangerous.”

Discuss . . .