I submit that President Obama and all the democrat politicians that voted for Obamacare never even read the proposed law. Nancy Pelosi admitted it. So, now, when chaos reigns, they act surprised that things aren't working.
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BLOG Topics 2013
January Do Protected Seals lead to Depleted Fish Stocks February Prohibition: Profits to Cartels & Increased Violence for Americans March Increased Minimum Wage & Extended benefits lead to Higher Unemployment April Ethanol from corn & Agflation May Cash for Clunkers lead to Higher Used Car Prices & Wasted Tax Dollars June The Affordable Care Act; Anything but Affordable Part 1 July The Affordable Care Act; The poster Child for False Advertising August Detroit: Higher Taxes + Liberal Benefits = Bankruptcy September No Keystone Pipeline leads to more pollution October Global Warming! Or is it Global Cooling! November Poverty & Benefits December Does Affirmative Action lead to Reverse Discrimination?
Blog Topics 2014
January Will Lake Meade become another Aral Sea February Does Taxing the rich hurt the economy March The Cause of the Great Depression April Temporary Agricultural Subsidies lead to wealthy Farmers and Higher Prices May The Presidents Stance on Gun Control leads to Increased Gun Ownership June Is there really a Gender Pay Gap July Did the Supreme Court decision in Roe v. Wade lower the crime rate August The Department of Education and wasted Money October The Financial Follies of the EPA November Social Security and Portfolio Diversification December The White House and Terrorism
After dropping 2.5% in 4 days (438 points), the DOW was up 34 points on Friday to finish the week at 17,713. The markets got a weaker than expected third estimate on fourth quarter GDP on today, March 27. This is old data, but a revision that said growth was only the 2.2% of the last estimate, instead of the hoped for 2.4%, added to fears that the US economy isn’t as strong as hoped. To anyone betting on lower interest rates and higher bond prices, that might be good news, but I think we’re at a point where bad news for the economy actually means bad news for US stocks. In the last month, company guidance on revenue and earnings has been weighted to the downside. According to Factset, as of March 20, 83 companies had issued negative guidance for the first quarter against just 16 companies releasing positive guidance. That’s enough to make markets jumpy according to Jim Juback (former VP CNBC). The up day was on comments of FED Chairwoman Janet Yellen stating that interest rates would be raised gradually. At the same time, she said that while the Fed doesn't need inflation to pick up before raising its benchmark rate, a further significant weakening of inflation or wage growth would make her "uncomfortable" with a rate hike. Oil jumped 4 points on Thursday because of tensions in the mideast (Saudi Arabia bombed Shite muslim target in Yemen) but gave it all back on Friday to finish the week at $48/barrel. Gas remained stable at $2.43/gallon.
5 DAY CHART FOR DOW
After loosing 105 points on Tuesday, the Dow plunged 292 points today finishing at 17,719. The culprit, according to a number of analysts, was the dollar weakening. Seriously? The dollar/euro exchange rate went from $1.09 to $1.10 to the euro. To me this makes no sense since a weak dollar makes American goods cheaper relative to foreign goods, and is good for profits and therefore businesses/Wall st. The U.S. dollar fell about half a percent lower against major world currencies but still held onto gains of more than 7 percent year-to-date. The continued strength in the dollar have resulted in very low to slightly negative expectations for first-quarter results in April. Last earnings season, many companies already blamed the strong dollar for weaker performance. Barring anything unforeseen, I think you will see a bounce back tomorrow once fear has left the market. What else contributed to the fall in the Dow was Durable goods orders for February which posted a decline rather than the modest expected increase. Durable goods are those goods that last longer than 3 years and are a leading economic indicator. Gold futures settled up $5.60 at $1,197.00 an ounce on the New York Mercantile Exchange. Crude oil inventories showed a gain of 8.17 million barrels last week, more than expected. Crude oil futures settled up $1.70, or 3.58 percent at $49.21 a barrel. Firming oil prices boosted energy stocks, which led gains in the S&P 500 and the Dow Jones industrial average. A number of analysts, including long time bear, Dennis Gartman, are starting to turn bullish on oil. Legendary oil tycoon, Boone Pickens also stated that he felt oil will be back up to $100 in 2016.
After being up for most of the day (60 plus points), the DOW corrected in the last 1/2 hour of the day to finish at 18,116, down 12 points. The recent rally was sparked by news that even though the Fed dropped the word patient when it comes to raising rates from its most recent statement, the central bank will not be "impatient" and move too fast to raise rates too soon and the last minutes of the day appeared to be profit taking. Oil still lingers in the $50 range and closed at over $47/barrel, gold closed at $1186/oz and the average price of a gallon of regular gas is down slightly to $2.42/gallon.
MORE on Obamacare Some simple straight forward facts: Since 2007: the average deductible has double from 1000 to 2000 The co-pay on doctors visits have doubled (including specialists) Prescription drugs have increased by 50% (inflation by 15%) Premiums have increased an average of 8%/year and the estimated cost for 10 years has increased from $859 billion to over $3 trillion
The weather was great in Florida, but all good things... And speaking of all good things coming to an end, the FED eliminated the word "patient" from its FOMC statement in relation to raising interest rates. Previous sessions (prior to Wed, March 18) had triple digit losses in anticipation of this and when they did it on Wednesday, the DOW went from negative 150 to positive 150 in a matter of minutes. It finished the day up over 160, down by triple digits on Thursday (profit taking and fear) and up triple digits on Friday. Why the positive moves? It eliminated uncertainty. It appears that the first rate hike in more than 6 years will occur this June, however, the Fed would not be raising rates until there is a "further improvement in the labor market" and they are "confident" that inflation will move back to toward their 2 percent objective. In other words: the barrier to raising rates is still pretty high. The downside to this is that the Fed has downgraded their expectations for the economy. GDP is lower, but you wouldn't be able to tell by the markets performance.
MORE on OBAMACARE As a preview to this month's blog, millionaires are not only using Obamacare as their personal insurance, they are getting subsidies in excess of $500/month. Here's the scenario. A number of wealthy people are retiring before age 65 (the age of medicare eligibility), and they are showing no income (they are living by withdrawing money from various savings accounts). When you apply for insurance under the affordable care act, the application asks what your yearly income is and there are no questions concerning your wealth (assets minus debt). If you are withdrawing money from savings, this is not income. I personally know of two millionaires on Obamacare who are receiving more than $500 in subsidies/month and they are in line with the law. Here's another fact about Obamacare. If you are truly in need, and receive subsidies from the ACA, you have to pay income tax on those subsidies. This is what happens when Congress passes an act along party lines and no one reads the act. As Nancy Pelosi said "We have to pass the act so we can see what's in it", http://blog.heritage.org/2010/03/10/video-of-the-week-we-have-to-pass-the-bill-so-you-can-find-out-what-is-in-it/, and as Congresswoman Maxine Waters (also from California) said, "I don't have to read the contract, if he wants it, it must be good."
HISTORICAL EURO/$ EXCHANGE RATE
February Jobs Report 3-6-2015
The unemployment rate in February dropped to 5.5% (the lowest in 7 years) as the economy created 295,000 jobs. The labor force participation rate remained virtually unchanged at 62.8% and the number of long term unemployed dropped to 31.1% of the total unemployed. In the past year, the number of long term unemployed dropped by more than a million persons which is a function of an improving economy and the cessation of long term unemployment benefits. The teenage unemployment rate continued to drop and came in at 17.1%. Part time/temporary workers numbered 6.6 million and there were 2.2 million marginally attached; of the marginally attached, there were 732,00 discouraged workers
Obamacare Revised Costs
More on Obamacare In a recent survey by the New York FED on businesses, the median increase in healthcare premiums is expected to be 10%. More than a quarter of the manufacturing and service firms surveyed said they either have or will boost prices for goods and services "because of the effects that the ACA is having on your business." About 20 percent of respondents said they were reducing their number of workers and/or raising the share of part-time workers as a result of the ACA. His is in stark contrast to the presidents remarks earlier this year that healthcare costs are decreasing. Maybe CEO's were right when they said the president "Just doesn't get it".
Commentary on Minimum Wage
There is currently a debate in the state of NH on whether to increase the minimum wage to 8.25 from 7.25. The main argument is that it will help to alleviate poverty. That is clearly not the case. As you can see from the chart at the left, the poverty rate dropped dramatically in the 1960's. This was a function of great society legislation; specifically, increase in Social Security benefits in addition to the inception and implementation of Medicare and Medicaid. Since then, the poverty rate has fluctuated between 9-15% and is highly correlated with the unemployment rate. The vertical grey area's in the graph represent periods of recessions in the US. As can be expected, unemployment rises during recessions and peaks at the end (unemployment is said to be a lagging indicator). As you can also see from the chart, so too does the poverty rate. There is no indication whatsoever that the poverty rate is affected by increases in the minimum wage. Generally, this is quite the contrary. As can be evidenced from the below left chart, increases in minimum wage can contribute to unemployment and as we can infer from the above chart, as unemployment increases so to does poverty. If you look at NH, they have the lowest state poverty rate in the nation and it generally parallels the national unemployment rate. By raising the minimum wage, you increase business costs. As a result; businesses either pass these costs onto the consumer (in which case inflation nullifies any wage increase), substitute capital for labor, or simply go out of business. If you look at the chart below right, UAW (United Auto Workers) membership has decreased in the late 1970's from 1.5 million to 350,000 in 2009. The reason for this is simple. Detroit isn't making fewer cars, they are making more, but they have made their assembly lines more robotic and have substituted capital for labor, which became cheaper in the long run. This can also happen to those fast food workers who want a $15 minimum wage. There is currently a machine on the market that can make 300 burgers/hour. In other words, capital can be substituted for labor. Someone please e-mail me and explain how someone is better off unemployed at $8.25/hour as opposed to being gainfully employed at $7.25/hour
You cannot legislate equality. If you want to decrease poverty, implement policies to insure that higher levels of education is available to all.
The Congressional Budget Office predicted this week that more than 2 million people will leave the labor force because of Obamacare. Specifically, more people will leave the labor force or reduce their hours, to stay under the cap for federal subsidies. If you are a family of 4, and household income is under, WAIT FOR IT, $94,000, you are eligible for a federal subsidy. The number of part time/temporary workers has already increased by 35% since Obamacare was passed in 2010; and yes it will get worse, wait until 2015 when it becomes mandatory for businesses.
For a good laugh on Obamacare, go to this web site and watch this video; http://www.youtube.com/watch?v=qpa-5JdCnmo. It shows the president on 36 different occasions stating that if you like your healthcare plan you can keep it. Obviously there are 1 of two explanations for this misunderstanding. He was ill advised on the 2700 page, 4500 provision Affordable Care Act, or he knew about it and lied. According to a study by Forbes magazine, the ACA will increase premiums to men under 27 by 77%, 40 year olds, 37% and 64 year olds by 37%.
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 trillion. 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."
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.