another site
In the new normal, the following six charts (which simply track the transformation of a company from a
viable, if slower growing, cash flow generation model to the godfather
of the dot com 2.0 movement)…
… Are enough to generate the following stock reaction:
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/9RfTvDJnVhE/story01.htm Tyler Durden
Homebuilders have surged to the best performing sector off the debt-ceiling-debacle lows now (up a stunning 8.3%) despite a mixed bag of performance today with Trannies once again (10th of the last 11 days) surging to new all-time highs (as Oil prices slide further south). This is the best 11-day run (+9.9%) for the Dow Transports since June of last year. Treasury yields rose modestly once again (despite SocGen's threat of moar QE next week) but remain 3-6bps lower on the week. Gold and Silver had another solid day (+2.3% and 3.6% respectively on the week). The USD flatlined (-0.5% on the week) with EUR strength continuing (and CAD and AUD weakness continuing).
Homebuilders take over the top spot in the last 10 day's rally exuberance…
The Dow Transports just continue to soar…
Treasuries continue to limp higher in yield amid very low volumes…
Gold and Silver continues to rise – now at one-month highs…
Overall the USD was flat but JPY crosses seemed to be the mean-revrting asset of choice today (again…
Oil prices continue to collapse…
making us wonder – what changed in the summer of 2012? 😉
Credit remains far less sanguine (and this afternoon's Fed comments sparked further weakness)…
Charts: Bloomberg
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/DTlM_a8y2KI/story01.htm Tyler Durden
Submitted by Pater Tenebrarum of Acting-Man blog,
Many medical practitioners have apparently simply had enough. Instead of continuing their never-ending struggle with the welfare state's red tape, they have decided to revert to a free market model without insurance. At first glance that seems to represent a barrier to obtaining medical care for poorer strata of the population. However, a second glance reveals that this might actually not be the case. No doubt to the great dismay of the sick-care cartel and the bureaucracy administering it, the refreshing breeze of the free market suddenly intruding upon the system shows what prices actually would be if the State were not involved in health care. According to a recent report on the spreading 'cash only' medical care phenomenon:
“Fed up with declining payments and rising red tape, a small but growing number of doctors are opting out of the insurance system completely. They’re expecting patients to pony up with cash. Some doctors who have gone that route love it, saying they can spend more time with and provide higher-quality care to their patients. Health advocates are skeptical, worrying that only the wealthy will benefit from this system.
In Wichita, Kansas, 32-year old family physician Doug Nunamaker switched to a cash-only basis in 2010 after taking insurance for five years. (“Cash-only” is a loose description. Nunamaker accepts payment by debit or credit card too.)
[..]
Under the traditional health insurance system, a large staff was required just to navigate all the paperwork, he said. That resulted in high overhead, forcing doctors like Nunamaker to take on more patients to cover costs. Plus, the amount insurance companies were willing to pay for procedures was declining, leading to a vicious cycle. “The paperwork, the hassles, it just got to be overwhelming,” Nunamaker said. “We knew that we had to find a better way to practice.”
So Nunamaker and his partner set up a membership-based practice called Atlas M.D. — a nod to free-market champion Ayn Rand’s book Atlas Shrugged. Under the membership plan — also known as “concierge” medicine — each patient pays a flat monthly fee to have unlimited access to the doctors and any service they can provide in the office, such as EKGs or stitches.
The fee varies depending on age. For kids, it’s $10 a month. For adults up to age 44, it’s $50 a month. Senior citizens pay $100.
The office has negotiated deals for services outside the office. By cutting out the middleman, Nunamaker said he can get a cholesterol test done for $3, versus the $90 the lab company he works with once billed to insurance carriers. An MRI can be had for $400, compared to a typical billed rate of $2,000 or more.
[…]
Kevin Petersen, a Las Vegas-based general surgeon, stopped taking insurance in 2005. Petersen named the same reasons as Nunamaker: too much paperwork and overhead, declining payments from insurance companies, and a general loss of control. “The insurance industry took over my practice,” he said. “They were telling me what procedures I could do, who I could treat — I basically became their employee.”
Now Petersen does hernia operations for $5,000 a pop, which includes anesthesia, operating room time and follow-up visits. He negotiates special rates for the anesthesiologist and the operating room, and is able to provide the service for about a third of what a patient might pay otherwise.
Many of his patients are early retirees who are not yet eligible for Medicare but can’t afford a full-fledged health insurance plan, he said, and business is booming. “My practice at this point is the best it’s been in my 26-year career,” he said. “By far.”
While the cash-only model may please doctors, some question whether it’s good for middle- and low-income people. Kathleen Stoll, director of health policy at the consumer advocacy group Families U.S.A., didn’t want to speak directly to either Petersen’s or Nunamaker’s practice, as she didn’t know the specifics of each.
But in general, she fears that doctors who switch to a cash-only model will drive away the patients who can’t afford a monthly membership fee or thousands of dollars for an operation. “They cherry-pick among their patient population to serve only the wealthier ones,” Stoll said. “It certainly creates a barrier to care.”
(emphasis added)
Obviously, both the named and unnamed 'health advocates' and worriers have it completely wrong. People who don't have to pay thousands of dollars
for health insurance actually can afford 'thousands of dollars for an operation' that costs only one third of what it would otherwise cost. It is not only the wealthy who can afford this free market care (besides, people who don't want it have the option to continue with the existing system).
Look at those prices! A cholesterol test for “$3 instead of $90” – that is more than 96% less! An MRI for $400 instead of “$2,000 or more” (usually will be 'or more')? Not to mention the fact that these doctors now have more time to actually care for their patients properly. What's not to like?
Imagine for a moment what might happen if the government were to get out of healthcare altogether and there would be free competition between all health care service providers. What would happen to prices in that case? It is probably fair to assume that they would come down precipitously even from the low prices free market doctors are already able to obtain for their patients nowadays.
It is actually a good bet that the onerous red tape and the likely explosion in costs due to Obamacare will accelerate the move toward a free market in health care – unless the government explicitly forbids it, that is (unfortunately we cannot rule out completely that such tyrannical steps will eventually be taken – the government generally doesn't like it when its 'help' is refused).
If so, the Obamacare Act could turn out to become a win-win by mistake so to speak, as more and more people decide to opt out of the system. It seems clear that the free market solution is preferable to the cartelized health care system imposed by government and the lobbyists that have co-written the laws. The doctors portrayed in the article above are leading by example, and we expect their ranks to swell in coming years.
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/d122e29xbQ8/story01.htm Tyler Durden
When Jeremy Stein warned in February of "froth" in the credit markets, it was much discussed but little action'ed. However, today we start to see some actions:
With cov-lite issuance at all-time record highs (as we explained here most recently and Moody's tried to ignore), Stein's bubble is even bigger and whether or not the Fed 'tapers' it is clear now by this signal that their concerns over bubbles are growing day by day.
Of course, as we warned here, this is Carl iCahn's worst nightmare…
…But we have seen this "credit cycle end, equities ramp" before – in 2007 – where leverage (both firm-wise (debt/EBITDA) and instrument-wise (CDOs)) provided the extra oomph to send stocks higher on the back of credit fueled extrapolation of earnings trends.
(charts: Barclays)
In the end we know this is unsustainable – the question is when (in 2007 it last 10 months or so…).
We already see 30Y Apple bonds trading at 5% yields – admittedly low still but notably higher than when they issued previously. The Verizon deal recently now trades at around 5.7% yield and is considerably worse financially pro forma. Of course, just as in 2007, things change very quickly once collateral chains start to shrink.
Perhaps this is why Carl iCahn said the Apple CFO/CEO shunned him – iCahn's worst nightmare is simply the inability to proxy-LBO each and every firm…
Given these charts – which market do you think is in a bubble – equity or credit? Bear in mind that the Fed's Jeremy Stein has already made his case that the latter is a bubble for sure… and the fragility that reaching for yield creates…
and here is Stein's most recent warning…
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/PU3lsWMoTAA/story01.htm Tyler Durden
When Jeremy Stein warned in February of "froth" in the credit markets, it was much discussed but little action'ed. However, today we start to see some actions:
With cov-lite issuance at all-time record highs (as we explained here most recently and Moody's tried to ignore), Stein's bubble is even bigger and whether or not the Fed 'tapers' it is clear now by this signal that their concerns over bubbles are growing day by day.
Of course, as we warned here, this is Carl iCahn's worst nightmare…
…But we have seen this "credit cycle end, equities ramp" before – in 2007 – where leverage (both firm-wise (debt/EBITDA) and instrument-wise (CDOs)) provided the extra oomph to send stocks higher on the back of credit fueled extrapolation of earnings trends.
(charts: Barclays)
In the end we know this is unsustainable – the question is when (in 2007 it last 10 months or so…).
We already see 30Y Apple bonds trading at 5% yields – admittedly low still but notably higher than when they issued previously. The Verizon deal recently now trades at around 5.7% yield and is considerably worse financially pro forma. Of course, just as in 2007, things change very quickly once collateral chains start to shrink.
Perhaps this is why Carl iCahn said the Apple CFO/CEO shunned him – iCahn's worst nightmare is simply the inability to proxy-LBO each and every firm…
Given these charts – which market do you think is in a bubble – equity or credit? Bear in mind that the Fed's Jeremy Stein has already made his case that the latter is a bubble for sure… and the fragility that reaching for yield creates…
and here is Stein's most recent warning…
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/PU3lsWMoTAA/story01.htm Tyler Durden
With the Dow Transports leading the way (now up for the 10th of the last 11 days and 9.7% off its debt-ceiling-debacle lows), US equity markets are engorged on the euphoria of this “can’t lose” scenario that offers free lunches (and ponies) for everyone. On the heels of SocGen’s call (eerily reminiscent of Schiff’s and Faber’s prophecy of rising QE no matter what), it’s 315pm, have you greatly rotated your money on the sidelines to BTFATH yet?
Nope nothing ridiculous about this at all…
Sure why wouldn’t you be BTFATHing… After-all earnings are ‘great’ right?… right?
(h/t @Not_Jim_Cramer )
Charts: Bloomberg
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/2C69lX2Tbnk/story01.htm Tyler Durden
With the Dow Transports leading the way (now up for the 10th of the last 11 days and 9.7% off its debt-ceiling-debacle lows), US equity markets are engorged on the euphoria of this “can’t lose” scenario that offers free lunches (and ponies) for everyone. On the heels of SocGen’s call (eerily reminiscent of Schiff’s and Faber’s prophecy of rising QE no matter what), it’s 315pm, have you greatly rotated your money on the sidelines to BTFATH yet?
Nope nothing ridiculous about this at all…
Sure why wouldn’t you be BTFATHing… After-all earnings are ‘great’ right?… right?
(h/t @Not_Jim_Cramer )
Charts: Bloomberg
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/2C69lX2Tbnk/story01.htm Tyler Durden
And so, one by one, the crazy pills theories start rolling out. Yesterday, as we first pointed out, Deutsche Bank made waves when it became the first “serious” organization to suggest that the Fed has now missed its tapering window, and will plough on thorough until the next downturn without ever lowering the pace of Flow (of course the reflexive paradox that the economy would be in an out of control depression without QE in the first place somehow does not figure in that calculation).
And while this has not been a novel idea (we first predicted that once perpetual QE starts it will never taper, long before QE 3, aka QEternity was even publicly announced last summer) today, all the penguin “pundit” copycats have jumped aboard this theory. Well, not all. SocGen has decided to make waves of its own with an even crazier pills idea: instead of no taper… ever… the Fed, that glorious redistributor of wealth from the middle class to the 1%, while happy to adhere to that old saying: “a funded welfare program a day, keeps the guillotines away” will not only not announce a Taper in next week’s FOMC meeting but will in fact hike QE!
From SocGen:
Although we assign a very low probability to a decision by the FOMC to increase asset purchases at its October meeting, it is not a possibility we can ignore. Assuming the Fed does not increase asset purchases this year, we consider the bottom of the range on the 10yT to be 2.40%. The market impact of an increase in Treasury and/or MBS purchases would be to rally the long-end of the curve back towards 2.00%, destroy volatility (again), possibly tighten the mortgage basis, and supporting equity, credit and emerging markets.
The potential downsides to increasing asset purchases would be that (1) the market would assume the FOMC was focusing on a very grim economic picture; (2) the perceived risk of inflating asset bubbles in various market segments would rise; and (3) the FOMC may run into a credibility problem (again) by whipsawing the market.
…
The question now may very well be whether or not the FOMC will choose to increase asset purchases at the next meeting, or whether it will include language in the FOMC statement that indicates they are strongly considering the option. A simple interim solution would be to reinsert the language that appeared in the May through July FOMC statements that “the Committee is prepared to increase or reduce the pace of its purchases to maintain appropriatepolicy accommodation as the outlook for the labor market or inflation changes.”
In retrospect, this suggestion as ludicrous as it is, makes sense. After all, the Fed has lost so much credibility, it will never make up for it with a taper in October, December, March or June. In fact, the longer the Fed delays tapering (which it now will never do), the greater the confidence loss. So since there is no downside to going full retard and never tapering again, the Fed may as well go the other way: after all, it is not as if anyone on the FOMC understands what a collateral shortage is, or how dire its implications are, despite the TBAC’s best efforts to educate the clueless academics in America’s Politburo.
And the other upside from the Fed announcing a $15-20 billion, or moar, increase in October or shortly thereafter, is that it will merely bring the grand reset that much closer. Which, considering the centrally-planned, crazy pills New Normal world we live in, is easily the best possible outcome.
So do your worst: Janet.
We, who are about to drown in your liquidity, salute you.
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/emRlkn9P0K4/story01.htm Tyler Durden
And so, one by one, the crazy pills theories start rolling out. Yesterday, as we first pointed out, Deutsche Bank made waves when it became the first “serious” organization to suggest that the Fed has now missed its tapering window, and will plough on thorough until the next downturn without ever lowering the pace of Flow (of course the reflexive paradox that the economy would be in an out of control depression without QE in the first place somehow does not figure in that calculation).
And while this has not been a novel idea (we first predicted that once perpetual QE starts it will never taper, long before QE 3, aka QEternity was even publicly announced last summer) today, all the penguin “pundit” copycats have jumped aboard this theory. Well, not all. SocGen has decided to make waves of its own with an even crazier pills idea: instead of no taper… ever… the Fed, that glorious redistributor of wealth from the middle class to the 1%, while happy to adhere to that old saying: “a funded welfare program a day, keeps the guillotines away” will not only not announce a Taper in next week’s FOMC meeting but will in fact hike QE!
From SocGen:
Although we assign a very low probability to a decision by the FOMC to increase asset purchases at its October meeting, it is not a possibility we can ignore. Assuming the Fed does not increase asset purchases this year, we consider the bottom of the range on the 10yT to be 2.40%. The market impact of an increase in Treasury and/or MBS purchases would be to rally the long-end of the curve back towards 2.00%, destroy volatility (again), possibly tighten the mortgage basis, and supporting equity, credit and emerging markets.
The potential downsides to increasing asset purchases would be that (1) the market would assume the FOMC was focusing on a very grim economic picture; (2) the perceived risk of inflating asset bubbles in various market segments would rise; and (3) the FOMC may run into a credibility problem (again) by whipsawing the market.
…
The question now may very well be whether or not the FOMC will choose to increase asset purchases at the next meeting, or whether it will include language in the FOMC statement that indicates they are strongly considering the option. A simple interim solution would be to reinsert the language that appeared in the May through July FOMC statements that “the Committee is prepared to increase or reduce the pace of its purchases to maintain appropriatepolicy accommodation as the outlook for the labor market or inflation changes.”
In retrospect, this suggestion as ludicrous as it is, makes sense. After all, the Fed has lost so much credibility, it will never make up for it with a taper in October, December, March or June. In fact, the longer the Fed delays tapering (which it now will never do), the greater the confidence loss. So since there is no downside to going full retard and never tapering again, the Fed may as well go the other way: after all, it is not as if anyone on the FOMC understands what a collateral shortage is, or how dire its implications are, despite the TBAC’s best efforts to educate the clueless academics in America’s Politburo.
And the other upside from the Fed announcing a $15-20 billion, or moar, increase in October or shortly thereafter, is that it will merely bring the grand reset that much closer. Which, considering the centrally-planned, crazy pills New Normal world we live in, is easily the best possible outcome.
So do your worst: Janet.
We, who are about to drown in your liquidity, salute you.
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/emRlkn9P0K4/story01.htm Tyler Durden
Originally posted at The World Complex blog,
Then the rumour circulated that at night the Fed Governors neglected their sacrifices and prayers. A great depression seized everyone. One day the President said to the Fed Chief, "When will we celebrate the return of normal unemployment rates? I would like to make a journey and return in time for the feast. How long is it until the day of the feast?" The Fed Chief was embarrassed. It had been several days since she had looked at the moon and the stars. She had learned nothing more about their courses. The Fed Chief said, "Wait one more day and I will tell you." The President said, "Thank you. Tomorrow I will come to see you again."
The Fed Chief gathered the Fed Governors together and asked, "Which of you lately has observed the course of the stars?" None of Fed Governors answered, because they had all stayed to listen to the stories of Fiat-do-lar. The Fed Chief asked again, "Hasn't even one of you observed the course of the stars and the position of the moon?"
— modified from The Ruin of Kasch
Economics isn't a science. It is a mistake to think it would be so. Science does not have schools. Only philosophies have schools.
The difference between a science and a philosophy is the difference between seeking truth while honestly admitting you don't know it and declaring that truth is something you define.
Ideally science is described by working hypotheses, which are constantly tested, and if falsified, replaced (unless pride is involved or money). In philosophy, you begin with axioms, which are untestable statements that are defined as being true. Each school of economics has its own set of axioms. From axioms, you apply rules of inference (logic) in order to generate new statements, which are also true. These generated statements are called theorems. Thus all theorems are true (within the school of philosophy) but not necessarily applicable to the real world!
In the early days of geology, there were competing schools: the Neptunists and the Plutonists being two that come to mind immediately. The Neptunists believed that all rocks formed in the sea, either as sediments, or by crystallization as salts (this was their central axiom). The Plutonists believed that all rocks formed from magma (as their central axiom). Debates between adherents of the two schools were rowdy, fruitless affairs, because the nature of philosophy is that it cannot be overturned by mere observations.
The distinction between science and philosophy with respect to economics is important because economists have an annoying ability to set policy–policy that affects the quality of your lives. It probably doesn't matter much to you whether some geologists can't decide among themselves whether a particular rock formed in the sea or on a volcano (or even on a volcano in the sea). But it does make a difference if some Fed official acts on her belief that bankrupting the elderly eliminating interest on savings is a cure for unemployment.
Application of economic policy follows the axiomatic approach. Some high priest of an obscure caste
Recently, The World Complex presented the inverse correlation between the unemployment rate in the UK and its "confidence ratio" (dollar value of public debt divided by the dollar value of gold holdings). The idea was that a high ratio could only be supported if bondholders had high confidence that the debt would be properly serviced (forget about repayment). The flip side is that a high ratio could be interpreted as a measure of a country's ruin.
In the article I had suggested that government economists might cheer a decline in the price of gold.
So today, we look at the same relationship for the United States.
Once again we see a strong inverse relationship between confidence ratio and unemployment.
One of the goals set out for the Federal Reserve is to manage the unemployment rate. Looking at this chart, the answer is clear–to reduce unemployment, increase the confidence. Confidence (as defined above) can be increased in three ways: 1) raise debt, 2) sell gold, 3) lower the gold price.
Of course we all know that correlation does not imply causation. But it doesn't have to in order to impact on Fed policy. That's the beauty of politics–reality and truth don't really matter when there are elections to be won.
There was a comment that perhaps I have too much time on my hands. I'm not sure if the intent was to say that only someone with a lot of time on his hands would notice this relationship. The economists at the Fed have far more PhD's and time on their hands than does this corner of webspace. So I'm sure they have already seen this.
So the question becomes–even if no causation can be established, can it be used to set policy? And what policies will be followed?
Raising debt is the old standby–but as we see in the clarified chart below, it doesn't seem to be working anymore.
Since the 2001 peak (on September 10, perhaps?), the increasing debt has been more than compensated by the rising price of gold. Don't be fooled into thinking the US is sinking into solvency–it is creating debt faster than any time in history. But the price of gold has been rising faster still (although we shall see about 2013).
It appears that policy #2, the sale of gold, is politically untenable. Officially at least. Selling gold is for lesser countries.
So that leaves option #3 — hope the price of gold falls.
Perhaps they do more than hope.
. . . at first the story of Fiat-do-lar was like hashish when it makes wakefulness happy. Then the story was like hashish when it makes dreams delirious. Toward morning, Fiat-do-lar raised his voice. As the Nile rises in the hearts of men, so his words swelled. To some, his words brought serenity; to others,
they were as terrifying as the appearance of Azrael, the angel of death. Happiness filled the spirits of some, horror the hearts of others. The closer morning came, the mightier that voice grew and the more it resounded within the people. The hearts of men rose up against one another like clouds in the sky on a stormy night. Flashes of wrath met thunderbolts of fury. When the sun rose, the tale of Fiat-do-lar reached its end. Ineffable wonder filled the confused minds of the people. For when the living looked around, their gaze fell upon the Fed Chief and Governors. They were stretched out on the ground, dead.
— modified from The Ruin of Kasch
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/9b22vF1glsg/story01.htm Tyler Durden