Temp Rule on Short Selling
The Securities and Exchange Comission has announced a temporary rule on short selling of investment bank stocks as well as the stock of Fannie Mae and Freddie Mac. The rule will require brokers to actually pre-borrow the shares before shorting a stock. Currently many short sellers could short a single stock based on the same shares; the new rule will require a broker to cover shorts, share for share by removing shares from the market once a stock has been shorted. The SEC will consider extending this rule to the broader market. To me this is kind of a “duh,” or, self evident principle that should have led to reform years ago.
Payrolls Shrink Again!
Payrolls shrank again in June for the sixth consecutive month, this time, by about another 62000 jobs. Couple that with the market now entering official “Bear” territory and looks like we’re in for some real dog days this summer. Is it all doom and gloom? That depends on who’s talking. In the short term it most certainly is though the Fed is expected to be more bullish about prospects going into the new year (not to mention a new presidency).
In a recent Duke University survey of CFO’s the highest priority worries were 1) consumer demand; 2) cost of labor; 3) cost of fuel; 4) interest rates; 5) cost of health care. Interestingly, European and Asian business leaders were much more optimistic.
Do We Need More Rate Cuts?
A CNN Money article states that Federal funds futures on the Chicago Board of Trade show that investors are betting 100% on the likelihood of a half point rate cut on March 18th and, 88% on a three quarter point rate cut. They then, on the basis of the growing opinion among some economists that we don’t, ask “do we really need another rate cut?”
“The problems the markets are facing are not due to interest rates being too high. It’s a lack of confidence,” said Barry Ritholtz, the CEO and director of equity research for Fusion IQ. Ritholtz and others argue that the rate cuts are only worsening the pain through devaluation of the dollar and amped up demand for commodities such as gold and oil. If additional rate cuts are not going to increase either consumer confidence or trust among lenders, do we really need one?
Top Ten Most Expensive Medical Conditions
The top 10 most expensive medical conditions in US as determined by the Agency for Healthcare Research and Quality
| Condition | Cost ($ billion) |
| Heart conditions | 76 |
| Trauma disorders | 72 |
| Cancer | 70 |
| Mental disorders including depression | 56 |
| Asthma and chronic obstructive pulmonary disease | 54 |
| Hypertension | 42 |
| Diabetes | 34 |
| Osteoarthritis and other joint diseases | 34 |
| Back problems | 32 |
| Normal childbirth | 32 |
Boston Globe: The Black Box Economy
Stephen Mihm, an assistant professor of American history at the University of Georgia has a feature article in the current issue of the Boston Globe called “The Black Box Economy.” Focusing on the shadowy world of ever more sophisticated derivatives, he speculates on the doomsday potential of these instruments that are valued at over ten times the world’s total GDP and that are often based on no underlying asset at all. Some hope is held out by way of the FASB.
The Stimulus Package that America Needs
What do current proposals for an economic stimulus package propose? I’ve heard estimates of $600 - $800 for average American families. This “windfall,” in theory, will revitalize our consumer-based economy by filling malls with customers who are eager to spend, spend, spend. Perhaps the hope is that this “priming of the pump,” will once again get the streams of cash flow, flowing, and keep them flowing. This kind of stimulus measure however, clearly cannot keep consumers spending for long and it is reasonable to question how many will start spending at all. $800.00 after all, at least makes a dent in whatever astronomical figure the average American has for an outstanding credit card balance.
To really really get the economy going, how about not only a larger windfall to families, but an incentive for actually spending the money on new consumer goods. What if the government say, offered a matching tax credit to consumers of $1.00 for every $1.00 spent on soft goods and perhaps double that amount for durable goods? Wouldn’t that be sweet?
My gosh, why stop even there, why not actually pay people to go shopping? Can you imagine the amount of consumer spending that could be stimulated if the government would just pay us all to shop! They of course could not keep this up forever, maybe just for a year or two until we get over the hump and the bear goes back into hibernation.
Seriously though, what about something really radical like ending the drain on the economy by ending the war that has so far created over $40,000 in debt for every American family? What about some real leadership from our elected leaders to help transform this nation into a nation of savers instead of spenders, a nation of thoughtful investors rather than reckless consumers, and a nation of well-rounded, productive people rather than amusement junkies? A one-shot, injection of liquidity may have psychological value but it won’t change the fundamentals, a long term plan and real leadership is needed for that.
Angry Bear phrased it well, “we must think further than just giving the junkie one more–maybe his last–shot in the arm. In short, merely priming the consumer for one more run at the punch bowl is a bit short-sighted.”
Alcoa up 75%
Alocoa’s net is up 75% and that sounds wonderful but most of the reason is on account of the pending sale of its packaging and consumer business. The WSJ points out that 4th quarter results were also due to a favorable restructuring adjustment and tax benefit. The reality is that its quarterly revenues fell rather steeply and its “flat rolled” sales were down due to general market weakness. The packaging and consumer business sale to a New Zealand company was worth $2.7 b and includes the brand, “Reynold’s Wrap.”
Colorado State University MBA
I have 2 courses left to complete and thought that it was time for an update. In balancing work, family and school, I opted for Colorado State’s 4 year, 1 course at a time program. I’ve enjoyed the DVD lectures that arrive at my door about 4 - 5 days after the evening class in Fort Collins and I’ve benefitted hugely from working on team projects with both onsite and distance students. My only misgiving with the 4 year program is that I soon lost a number of classmates to graduation whom I’d enjoyed working with.
Here’s some updated info from a recent CSU news release…
FORT COLLINS - U.S. News and World Report ranked Colorado State University among the best colleges in the nation in the 2008 “America’s Best Colleges” edition released today.
U.S. News and World Report listed Colorado State in the top tier of public and private doctoral universities and 62nd among public universities, closely ranked with institutions such as Florida State University, University of Oregon, University at Buffalo-SUNY and Kansas State University. For a complete list of rankings and methodologies, visit the Web at www.usnews.com. …
The College of Business ranked 59th among all public research universities. In March, Business Week ranked Colorado State’s College of Business as one of the top undergraduate business programs in the country. Last fall, Princeton Review ranked it No. 1 nationally in “Best Administered” MBA graduate programs.
Who’s Making Money From Medical Debt?
An article by Brian Grow and Robert Berner in Business Week profiles the revolution in the world of medical debt.
The new reality for a growing proportion of the 50 million or so uninsured Americans is that treating that diabetes, acute gallbladder, or even a child’s late-night earache, means more consumer debt. Current interest rates begin at about 13.5% and increase to 27% for overdue accounts.
According to Grow and Berner, “Collecting from “self-pay” patients … has long been the bane of medical administrators. When they don’t get paid immediately, hospitals typically recover around 10¢ on the dollar owed, even when they hire collection specialists. So hospitals and clinics are bringing in more sophisticated help. They are transferring patient accounts wholesale to finance experts, banks, credit-card companies, and even private equity firms. Many of these third parties use credit scores and risk-analysis software to price the debt and impose interest rates as high as 27% on past-due bills.”
Who are these companies? Many small companies have sprung up in regional markets such as Complete Care of Little Rock Arkansas, but bigger, more familiar companies are entering the field. Some of these include, General Electric (Care Credit), Citi Group, and Capital One. Wachovia is also considering entry into the lucrative market which for GE will amount to $5 billion this year.
“Hospitals can’t just be an interest-free finance vehicle,” says Todd Cole, director of patient accounting at TriHealth, a $2 billion pair of nonprofit hospitals in Cincinnati. “The world of $5 sent to the hospital and they will never send me to collections, never sue me — that world has gone away,” he adds. TriHealth sells patient accounts at a steep discount to firms that specialize in collecting delinquent consumer debt. “Hospitals need their cash,” Cole says. “It is the lifeblood that supports the doctors, the nurses.”
Illness is inevitable and treatment is costly, isn’t that a reasonable argument for the world’s most powerful nation to revisit the creation of a nationalized health care plan?
The complete article (Fresh Pain for the Uninsured) may be read here
Go here to visit “Physicians for a National Health Care Program
Near-panic atmosphere as US Federal Reserve chairman testifies before Congress
Read the Intelligence Daily, article here
Executive Summary:
Bernanke, in his testimony before congress today, admits that the economy has worsened since August in the wake of sub-prime loan defaults which would increase over coming months. He also hinted that the present credit crisis could become a fully blown recession.
Internationally, China has suggested it may react by diversifying its $1.43 trillion in foreign exchange reserves into stronger currencies, and French President Sarkozy said that America’s ”monetary disorder risked turning into economic war” as American exports cheapened and European exports were becoming more expensive.
Bernanke’s appearance before congress was opened with a statement from New York Senator Charles Schumer, the chairman of the Joint Economic Committee.
He said that in the aftermath of the “seizing up of the credit markets” in the summer, “there is now a lack of confidence in credit-worthiness throughout the market… However, while we did weather that summer storm, I’m very concerned that there may be a bigger storm on the horizon. Quite frankly, I think we are at a moment of economic crisis stemming from four key areas: falling housing prices, lack of confidence in credit-worthiness, the weak dollar and high oil prices. Each of these problems alone would be enough of a threat to our economic well-being. But taken together, they are essentially the four horsemen of economic crisis…
“Even our bedrock assumptions are being put into doubt. As housing prices decline, there are real fears that we won’t be able to depend on consumers, the engine of our economy over the past few years, to keep spending. And now we hear that foreign investors may no longer be confident in the dollar as the global currency of choice. I’m not surprised to hear experts, such as your predecessor Alan Greenspan, warn about the threat of recession. I’ve begun to worry about worse.
“In particular, as I watch bank after bank write down bad investments tied to baroque financial instruments that even sophisticated investors don’t understand, I fear for the stability of our financial system.”