Obamacare

Eventually the money runs out.  Much of America was shocked when the city of Detroit defaulted on a $39.7 million debt payment and announced that it was suspending payments on $2.5 billion of unsecured deb.  Anyone with half a brain and a calculator could see this coming from a mile away.  But people kept foolishly lending money to the city of Detroit, and now many of them are going to get hit really hard. But what Detroit is facing is not really that unique.  In fact, Detroit is a perfect example of what the future of America is going to look like.  We live in a nation that is rotting, decaying, drowning in debt and racing toward insolvency. Just like Detroit, a day is rapidly approaching when America will not be able to kick the can down the road anymore. Sadly, our politicians don't seem inclined to do anything about it and most of the population seems to think that our exploding national debt is not a significant problem. By the time it becomes clear how wrong they were, it will be far too late to do anything about it.

If Obamacare's stated goal was to broaden the health insurance market, give more options to consumers, and generally lower the cost of health insurance, courtesy of the IRS' flawless execution of yet another unprecedented government expansion, it may be in for a tough time. Because while on paper every statist plan of centrally-planned ambitions looks good, in reality things usually don't work out quite as expected. Case in point the news that Aetna will stop selling health insurance to individual consumers in California at the end of 2013, in advance of Obamacare's complete transformation of the insurance market: a transformation which just incidentally may see most private health insurance firms follow in Aetna's steps and the emergence of a single-payer system along the lines of the British National Health Service. A government-mandated and funded system which, needless to say, crushes private enterprise, and ends up costing far more for all involved than an efficient market based on individual wants, needs and capabilities constantly in flux. But that's ok - there is an administration which is smarter than the entire market, and a Federal Reserve which will monetize any deficit funding, and the only trade off is making the already ridiculous US federal debt ridiculouser.

With unprecedented government largesse in all major financial centers around the globe, the throughput to job growth has been abysmal. Also there have been consistently poor results in key emerging economies, as we highlight in this issue of Abraham Gulkowitz's The PunchLine chart extravaganza. Mixed signals from Asia, in particular, have caught world markets off guard. New Chinese trade, inflation and industrial production datasets all undershot general expectations. Disappointing export and import figures were a particular concern. Another major concern is the likely timing of a gradual change in the Fed’s easing posture. It is inevitable. What is worrisome is that there may have been a significant reliance – a dependency - on easy money that has built up in world financial markets. Any reversal in this historic experiment in government policy leads us into the unknown.

The days of reasonable economic forecasting are over. Today, an economic forecast is more like the analysis of a criminal mind than the evaluation of economic data. The dominating role of government overpowers markets intentionally. In the short-term that will continue. Reactions to Federal Reserve minutes referencing continuation, alteration or cessation of quantitative easing cause stock markets to move by over 100 points. Other markets are affected by government interventions, just not so noticeably. Long term, markets will overpower government. Welfare states can no longer maintain their level of spending, services and welfare. However, they dare not stop lest civil unrest and violence break out. The bind they are in has no solution. Governments around the world are doing whatever is necessary to survive. Lying, stealing and outright confiscation will begin in order to support their bankruptcies. Cyprus was a minor precursor of what is coming.

For the past five years of suppressed crisis, central states around the world have chosen to create an artificial sense of abundance by printing or borrowing trillions of dollars of fiat money and flooding their economies with this false abundance. This false abundance has led to a continuation of bad decision-making, as it has nurtured a magical-thinking faith that the era of abundance can be conjured up with monetary tricks. This is the essential feature of cargo cults, the magical-thinking belief in the return of abundance without having to chart a new path of authentic reforms. Creating the monetary illusion of abundance is not the same as authentic abundance. Fostering illusions of prosperity only further cripples our ability to make the necessary difficult decisions.

... Is that it is for temporary workers.

If the constitutional scholar was hoping he would quietly avoid a major showdown over the constitutionality of the biggest spying scandal since Nixon (whether legal or not remains to be determined) and which would likely have led to an early POTUS retirement if current president was republican, the ACLU just slammed the door shut on the possibility. Moments ago, the American Civil Liberties Union filed a lawsuit against the Obama administration over its "dragnet" collection of logs of domestic phone calls, contending that the once-secret program is illegal and asking a judge to both stop it and order the records purged. And, as the NYT reports, "the lawsuit, filed in New York, could set up an eventual Supreme Court test." Only once that happens it will be too bad that InTrade is no longer available, to take the other side of a trade that believes the SCOTUS will for once do the right thing and preserve the constitution when everyone knows the decision to formally enact a Big Brother state will pass along political party lines and America will officially become the country that for 5 decades, at least superficially, it was waging "cold war" against.

As with pretty much everything in the current Schrodinger world in which we live, ObamaCare seems to both save and cost us more at the same time. We are sure Obama's address will explain the fair-and-balanced perspective on it, add some sugar on the payrolls report spin, and the Q&A (which surely our press will ask a little on NSA-related issues) and this should be fun...

If we take out this trendline, stocks could easily go to 1,450. And if things get really ugly we could even see a Crash (though that would likely come later in the Autumn based on historic patterns).

Last week, the state of California claimed that its version of Obamacare’s health insurance exchange would actually reduce premiums. But, as Forbes reports, the data that the executive director of California's 'exchange' released tells a different story: Obamacare, in fact, will increase individual-market premiums in California by as much as 146 percent. The exuberance that Peter Lee exclaimed over the 'savings' is a misleading comparison. He was comparing apples - the plans that Californians buy today for themselves in a robust individual market-and oranges - the highly regulated plans that small employers purchase for their workers as a group. If you're a 25 year old male non-smoker, buying insurance for yourself, the cheapest plan on Obamacare’s exchanges is the catastrophic plan, which costs an average of $184 a month; but in 2013, on eHealthInsurance.com, Forbes explains, the median cost of the five cheapest plans was only $92. In other words, for the typical 25-year-old male non-smoking Californian, Obamacare will drive premiums up by between 100 and 123 percent. The desperate spin of the PR disaster is incredible as talk of a 'rate shock' is now very prescient, "these extraordinary increases are up to 15 times faster than inflation and threaten to make health care unaffordable for hundreds of thousands of Californians."

Ronald Reagan would be turning in his grave, wouldn’t he? In what became known as the most anti-communist speech of all time given by Reagan in 1987 on the 70th anniversary of the Bolshevik Revolution (1917), the former President of the United States of America said that the Soviet Union was the ‘evil empire’.

When you step back and look at the long-term trends, it is undeniable what is happening to us.  We are in the midst of a horrifying economic decline that is the result of decades of very bad decisions.  30 years ago, the U.S. national debt was about one trillion dollars.  Today, it is almost 17 trillion dollars.  40 years ago, the total amount of debt in the United States was about 2 trillion dollars.  Today, it is more than 56 trillion dollars.  At the same time that we have been running up all of this debt, our economic infrastructure and our ability to produce wealth has been absolutely gutted.  Since 2001, the United States has lost more than 56,000 manufacturing facilities and millions of good jobs have been shipped overseas.  Our share of global GDP declined from 31.8 percent in 2001 to 21.6 percent in 2011.  The percentage of Americans that are self-employed is at a record low, and the percentage of Americans that are dependent on the government is at a record high.  The U.S. economy is a complete and total mess, and it is time that we faced the truth.

The foundation of the Soviet model of trade and investment was centralization under the guise of "universal public ownership". The entire goal of communism in general was not to give more social and political power to the people, but to extinguish alternative options and focus power into the hands of a select few. The process used to reach this end result can vary, but the goal always remains the same. In most cases, such centralization begins with economic hegemony, and it is in our fiscal structure that we have the means to see the future. Sovietization in our financial life will inevitably lead to sovietization in our political life. Does the U.S. economy’s path resemble the Soviet template exactly? No. And we're sure the very suggestion will make the average unaware free market evangelical froth at the mouth. However, as we show, the parallels in our fundamentals are disturbing; the reality is that true free markets in America died a long time ago.

My guess is that in 2-3 years most folks in the country are going to hate Obamacare, but it it will be impossible to get rid of by then.

We’d like to say that the following is unbelievable, but it’s not.  Unfortunately, it is all too believable.