" Where economics isn't just a job, but an adventure" and remember..., "There's no crying in Economics"
Quote of the Week The hardest thing in the world to understand is the income tax. -Albert Einstein
PS The current tax code is 74,000 pages long; in Einsteins time (pre 1955) it was less than 10,000 pages
If you look at my July/June blogs, I outlined the demographics of those 48 million people who didn't have health insurance. Let's do a quick recap; 12 million are illegal aliens, 18 million make more than $50,000 dollars, and 9 million of those 18 million make more than $75,000, they just choose not to have health insurance (choice, a wonderful concept), 12 million are eligible for medicare but haven't applied, and there are 2.5 million who are marginally attached workers(not looking foe work). In other words, all of Obamacare is for 5-7 million people. But people really need insurance some of you are saying! Why then, have only 400,000 people signed up via the exchanges. At this time, according to CNBC, the administration was hoping for 3 million. I'm not surprised. If you look at some of the lower echelon ACA insurance plans, you have deductibles in excess of $5000. To me it's no wonder that many people without insurance are electing to stay without insurance.
The Dow finished the day down 130 points. This was a result of good news from Congress that a budget deal may be reached prior to Christmas and avert another government shutdown. As a result, many traders felt the FED would taper sooner rather than later and took some profits off of the table. I did some bottom feeding and bought Starbucks (sbux) and OPK.
With 2 hours left in the trading day the Dow is down 64 points, but it is off it's lows of more than 100 points. The big winner of the day is master card, up 30 points after announcing a 10 for 1 stock split. Watch for Visa next, and that's a better stock play.
The Vockler rule was approved by the 5 regulatory agencies today and goes into effect, well immediately, kind of. Why? Because this so called rule is 900 pages long (can't Congress do anything simple) and no one really know's all the requirements except that it centers around and prohibits banks trading derivatives and other instruments for their own profit, known as proprietary trading. The rule was named after Paul Vockler, the chairman of the FED prior to Allan Greenspan. It also prohibits "portfolio hedging" which is when a bank "hedges" it's losses of securities it owns; e.g., a bank owns stock in a certain company while at the same time it is buying puts on the stock. Paul Vockler himself stated that at 900 pages the "rule" is to complicated." "Ya think!"
In other financial news, the Dow was down 52 points on lukewarm trading. There was no market moving data releases and Pep Boys disappointed on profits. Tesla continues to trade sideways, finishing the day up 52 cents at 142. GM made history by announcing there new CEO is a woman. Marry Barro was unanimously approved by the board of directors; she is a former engineer and Human Resource director at GM; now there's something you don't see every day. GM management and Directors went to great lengths to state that her gender had notjing to do with the appointment. I saw her today being interviewed by CNBC and she speaks well and gave an overall favorable impression. GM stock was down 50 cents at $40.40. Time will tell and so much for the old boys club.
The Dow took a bit of a breather today after a near 200 point gain on Friday but still managed to eak out a small gain of $5 to finish at 16,025. The Us government sold its final stake in GM to a tune of a $10 billion dollar loss (they made $20 billion on the banks and $23 billion on AIG but the loss from GM came from the sweetheart deal the government gave the car companies because of the support the democratic party gets from the UAW unions (lets not forget the deal they get on Obamacare on their Cadillac health plans until 2018). The US Air and American Airlines merger was completed today to form the worlds largest airline. Their was some concern from consumer groups and the justice department, but the Supreme Court did not grant certiorari stating that there has not been a significant rise in airline prices since 2004. The FTC is having the airlines sell some of its routes in Reagan and JFK to maintain adequate competition. In the long run (more than a year) I expect airline prices to rise faster than inflations; this is generally the result of reduced competition.
It's 8:30 AM and stock traders are doing the happy dance; economists were expecting the economy to create 183,000 jobs and the number came in at 203,000, unemployment decreased to 7.0% and the labor force participation rate increased to 63% from 62.8%. More good news was in the form of average hourly earnings that went up 0.2%. Long term unemployed remained stubbornly high at 37.3% of those unemployed (see chart below) As a result, in pre-market trading the Dow is up 140 points Stay tuned for more news later today.
The Dow Broke its 5 day loosing streak today with Authority. It finished up 198 points finishing at 16,020. The rally was broad based with all sectors finishing in the green and many analysts today, both on CNBC and Bloomberg, felt that this rally had legs and would extend into next week.
Karina McClain is a 22 year old minimum wage, fast food worker who was the heart of a CNN article today online. She was quoted as saying that she can't make ends meet from her minimum wage job. The article further goes on to say that she took a day out of work to go on strike and when she does work, she only works 20 hours/week. I'm confused, how many people out there can live by working only 20 hours/week. When I was a full time police officer, I always worked overtime and I had a second job teaching at college as an adjunct faculty member. I have some other questions for Ms. McClain, does she live with her parents, is she married, if not, is she getting child support from her baby's father, and if not, why. As I said in yesterday's advisory, if you're looking for higher pay, have the drive and motivation to make yourself more valuable. What politicians must realize, "you cannot legislate equality".
In other economic news, the years end is at hand and there are a number of mini fiscal cliffs approaching. Once again, if Congress doesn't pass a new farm bill, milk prices will revert back to a 1949 law that will price a gallon of milk at $7(this represents a doubling of price). Also, extended unemployment benefits could expire, and they should. Currently, if you lose your job, you go on state unemployment benefits (usually 13-26 weeks depending on your state) and the the US government extends those benefits up to 72 weeks. WHAT is the incentive to work if you're living off the taxpayer's dime as is evidenced by the chart below of the long term unemployed (greater than 26 weeks)? As long as we have extended benefits, the unemployment rate will remain above 6.0-6.5%.
The cornerstone of Obamacare was "If you like your current health insurance, you can keep it." Not true. The following was from an investigation by the Associated Press: Dean Griffen and his 64 year old wife have a healthcare policy that costs $770/month with a $2500 deductible. Under Obamacare, this plan will be terminated. They turned to the exchange and the cheapest plan they found was $1275/month with deductibles of over $12,000. Essentially, they are buying insurance that they will not use unless they suffer a catastrophic event.The Griffins are among millions of people nationwide who buy individual insurance policies and are receiving notices that those policies are being discontinued because they don't meet the higher benefit requirements of the new law. However, 64 year old Mrs. Griffen can sleep soundly at night knowing that she has full maternity coverage.
The Dow was up 23 points and Tesla soared 14 points on anticipation of continued earnings and good news. Earnings will be released after the market close. If they disappoint I expect a blood bath.
When Obamacare was 1st released, The Congressional Budget Office predicted that it would cost $900 billion over 3 years. At the time, I made a prediction to my students that I estimate the final cost would be closer to $3 trillion. Three years later, the CBO has raised it's estimate to $1.6 billion. At this rate, we are on pace to reach the $3 trillion mark. www.healthcare.gov, the official website to sign up for Obamacare had an original cost of $100 million. That cost is now up to $292 million dollars and rising. If the government can't manage the costs on a web site, and these costs have trippled since it opened on October 1, how can it possible manage a 2700 page, 4500 provision bill. The words of Nancy Pelosi (see above) are acting as a harbinger of doom: "We have to pass the bill, so we can find out what's in it."
Please excuse my John McEnroe moment; but "You can't be serious!" Go to www.healthcare.gov. the website for the Affordable Care Act (Obamacare). Now scroll down and look at the number, get out your phone and look at the alphanumeric pad. the number is 1-800-3182596 What's that spell. f-uckyo Has anyone else noticed this?
The United States has amongst the lowest savings rate for all technological nations. The iOMe challenge is a nationwide competition between Colleges where teams submit a 10,000 page essay on how Americans can improve their savings rates. In addition, teams must produce an approximate 60 second video which complements the essay. If you click on the iOMe logo above, it will take you to Bentley University's 2012 video submission. The faculty adviser for the challenge is John Tommasi and is offered during his Fall EC 351 course, Contemporary Issues in Economics. I'm pleased to announce that on February 15, Bentley was declared the winner of the iOMe video portion of the contest. Congrats to the team members and great job!
EC 3900 Energy Economics
EC 3900, Energy Economics and International Markets, is a 3 credit, Short Term Program, that is offered during Spring semester. After 7 weeks of lecture, the class takes a 10 day educational/cultural tour to France where 80% of their electricity is produced by nuclear power. During the 10 day trip, students travel to, and tour various nuclear facilities Last year's class visited; Marsailles, Aix en Provance, Lyons, Brest and 4 days in Paris.
If there were ever words that can strike fear into the hearts of any man women or child, it's: "I'm from the Government and I'm here to help". On a monthly basis my blog, from an economic standpoint, will explore government laws, decisions and actions, which while well intentioned, had inadvertent results that were either disastrous, or made a bad situation worse. It wouldn't surprise me if you reached the conclusion that congress does two things well, nothing and overreact; and you may ask yourself, do Congressional members vote for what is best for the economy, or what will get them re-elected.