With the Senate already having launched the process of repealing Obamacare when, as reported yesterday, Senate Budget Committee Chairman Mike Enzi released a 2017 budget resolution setting up the process to partially repeal Obamacare early in Donald Trump’s administration, on Wednesday vice president-elect Mike Pence met with Republican congressional leaders to plot the strategy of how to repeal Obama’s signature healthcare law.

Speaking to House republicans, Pence said Trump plans to take executive actions to start unwinding ObamaCare on day one: “Our first order of business will be to repeal and replace ObamaCare,” Pence told reporters, adding the process would begin “day one.”

“The speaker of the house used the word ‘stable,’ and we will do that,” Pence said at a news conference after a private meeting Wednesday with House Republicans. There’s a “broad range of idea on how to do this,” he said, without giving details of what a replacement might look like.

The VP-elect added that “it will be an orderly transition to something better…using executive authority to ensure it’s an orderly transition. We’re working now on a series of executive orders that will enable that orderly transition to take place even as Congress appropriately debates alternatives to and replacements for ObamaCare.”

Rep. Chris Collins added that, “The president in his first day in office is going to do some level of executive orders related to ObamaCare,” however he added that there were “no details whatsoever” on the orders discussed in the meeting. Rep. Mark Amodei of Nevada said Pence had told Republican lawmakers that “we are mindful of disrupting the markets.”

Incoming White House press secretary Sean Spicer told reporters Tuesday that Trump considers Inauguration Day as “Day One” of his presidency: “He is prepared and ready to go. As he’s said before, he wants to enact real change on day one. That will mean within hours of being sworn in,” Spicer said. “He put his team on notice that he expects nothing less than everyone getting right to work for the American people.”

Pence’s call for an “orderly” transition comes as healthcare experts warn that the Republican strategy of repealing ObamaCare on a delay without an immediate replacement would cause chaos, leading to insurers dropping out of the market and people having few or no options for coverage.

At the same time, in a series of posts on Twitter, Trump urged fellow Republicans to assign blame to Obama’s Democrats: “Republicans must be careful in that the Dems own the failed ObamaCare disaster, with its poor coverage and massive premium increases,” Trump tweeted. “Don’t let the Schumer clowns out of this web.”

“Massive increases of ObamaCare will take place this year and Dems are to blame for the mess,” he added. ”It will fall of its own weight — be careful!”

Despite Trump’s eagerness to unwind Obamacare, Republicans will have obstacles to overcome. For one, they have not decided how long to delay the repeal of ObamaCare. Options floated range from two years to four years. Some Senate Republicans, meanwhile, are uneasy with the idea of repealing ObamaCare without a replacement immediately available. Roughly twenty million people stand to lose coverage if ObamaCare is repealed and no replacement materializes.

As The Hill notes, Senator Rand Paul this week became the latest Republican to call for simultaneous repeal and replace.

And while Republicans from Pence on down are clearly eager to get rid of ObamaCare, there is much more cautious enthusiasm among the GOP about crafting a healthcare policy to replace it. Lawmakers close to the pending overhaul described it as a lengthy and deliberative process, aimed to minimizing disruptions for Americans as the nation’s healthcare system changes.

“We have to make sure there’s a very effective transition going forward,” said Rep. Kevin Brady (R-Texas), who chairs the House Ways and Means Committee. “I’m hopeful that we can continue to lay out those pieces on a step-by-step basis through this year.”

“The devil is always in the details. What does repeal include, and what is the pace of replacement so that we can do it responsibly,” said Rep. Patrick Meehan (R-Pa.). “It’s not going to be any kind of one-and-done process. It’ll be work that will go on for a period of time.”

GOP lawmakers emerging from the meeting with Trump’s inner circle said no details for a replacement were discussed. Rep. Walter Jones equated the powwow to a “pep rally” aimed at boosting enthusiasm among Republicans for the job ahead.

Still, GOP conservatives in the caucus are clearly eager to get moving on repeal, even as a replacement continues to remain unclear. “Healthcare will be better and less expensive when ObamaCare is repealed,” said Rep. Jim Jordan (R-Ohio), head of the conservative Freedom Caucus. “I believe that.”

* * *

Meanwhile, in a bid to salvage a major piece of his political legacy, Obama is meeting on Wednesday with congressional Democrats, including U.S. Senate Democratic Leader Chuck Schumer, to discuss ways to counter Republican-led efforts to repeal the Affordable Care Act.

Obama met with House and Senate Democrats at the Capitol in the morning to talk about ways that Democrats can keep in place at least some parts of the divisive health-care law, the signature legislative accomplishment of Democrats during Mr. Obama’s eight years in office. Obama told Democrats that he takes responsibility for not having fully communicated the potential benefits of the health-care law, according to a Democratic aide.

“Despite the negativity you have a big chunk of the country that wants this thing to succeed,” the president said, according to the aide. “There are real lives at stake in this thing.”

Representative Louise Slaughter, a New York Democrat, told reporters Obama’s speech was “nostalgic” and that he spoke of the 20 million people who rely on Obamacare. He spoke of letters received from people who said they would have died without it, she said. She scoffed at the GOP’s repeal strategy, saying, “You wouldn’t think of tearing down a house before you have a new one.” Asked whether she intends to work with Republicans on a replacement, she said no. 

“We don’t even think of repealing the law. Our job is to save the one we’ve got,” Slaughter said.

Democratic Representative Tim Ryan of Ohio said the ball is in Republicans’ court on a replacement. “They’ve got to come up with a lot of answers if they repeal it,” he said.

* * *

Obama might have some success in preserving at least parts of Obamacare: Trump has vowed to protect some popular parts of the Obamacare law, such as barring insurance companies from denying coverage to people with pre-existing medical conditions. But he wants to replace it with a system that is “much better and much less expensive,” as he told Reuters on Oct. 25 after premium increases emerged in some healthcare markets.

A House Republican leadership aide said there are lots of Republican “ideas” but it was too early to know what will end up in replacement legislation.

Cited by Reuters, the American Medical Association doctors’ group urged caution in making changes to Obamacare, which the organization supported. “In considering opportunities to make coverage more affordable and accessible to all Americans, it is essential that gains in the number of Americans with health insurance coverage be maintained,” the AMA said in a letter to congressional leaders.

The AMA said before any action is taken on Obamacare policymakers should lay out for the American people “in reasonable detail what will replace current policies.”

That, however, does not appear realistic if, indeed, Trump plans to issue an executive order in just 16 days beginning the process of undoing Obamacare.

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Memo to Larry Summers: It’s Secular Saturation (Not Stagnation)

Written by Peter Diekmeyer (CLICK HERE FOR ORIGINAL)

 

 

 

Donald Trump’s first challenge when he faces off with a new Congress later this month will be addressing what former Treasury Secretary Larry Summers calls “secular stagnation.”

Key will be finding ways of injecting life into a US economy, which continues to experience sub-par growth despite eight years of near-zero interest rates and deficit spending which, during the Obama Administration, has doubled the national debt. Solutions floated include increased government spending on defence and infrastructure and new tax cuts.

Equities markets seem convinced those initiatives will work. At the time of this writing, the DJIA, S&P 500 and S&P/TSX were all trading at near-record highs.

But individual investors need to careful. As we shall see, there is considerable evidence that what America is suffering from is not “secular stagnation,” but “secular saturation,” caused by decades of over-consumption.

That distinction may seem subtle. But it has significant implications as to how investors may want to structure their portfolios.

Alvin Hansen’s 1930’s style secular stagnation

The term “secular stagnation,” coined by economist Alvin Hansen in the 1930s, refers to a situation in which central banks have cut interest rates so low that they are no longer able to boost demand
[i].

Summers, currently a professor at Harvard University, resurrected the term and to his credit, it has stuck.

Politicians, economists and academics love the “secular stagnation” idea, which they have adopted en masse, because it enables them – as the Economist Magazine recently did – to ascribe current challenges to “market failure.”

Capitalism doesn’t work, this line of thinking goes. What is needed to “cure” its faults is more enlightened policy by central planners.

Solutions floated range from those cited above, to the latest: “helicopter money” – which is government programs paid for using printed money
[ii]. This enables politicians to get credit for the programs that are enacted, while kicking the inflation costs down the road.

Predatory central bank enticements

Yet while Summers’ “secular stagnation” thesis advances the interests of the “big government community,” individual investors need to consider another scenario.

There is a strong possibility that America is not suffering from a market failure, but rather from an inevitable reaction to a multi-decade binge in system-wide spending, borrowing and progressively easier money.

Predatory central banking enticements, particularly low interest rates, have led governments, businesses and individuals to hire people, buy stuff and invest in things that they don’t need or can’t afford. The economy is thus saturated, the argument goes.

If that is true, it is possible that the US economy has reached a state for which it needs a multi-year (and possibly a multi-decade) period to digest the excesses, put money aside and pay down some of the debts incurred.

 Consider:

• Combined American government, business and personal debt as a percentage of GDP is now the highest it’s been in history.
  
• Even if they wanted to buy more stuff, most Americans who could afford it, simply don’t need it. According to IHS, there are nearly 253 million cars and trucks on the road. That amounts to nearly one per person over 18 who can pass a vision test. If you and your partner are already making payments on two cars, you are unlikely to need a third.
  
• While US home ownership rates are at multi-decade lows, predatory incentives dangled by the Fed, through its low interest rate policies, enticed many Americans to buy places they simply couldn’t afford. These families are now “house poor” and have little room to borrow more to finance new spending.
  
• US over-consumption is graphically depicted in its overweight/obesity rate, which now exceeds two thirds of the country’s population.
  
• On the infrastructure front, governments at all levels have been looking for good “shovel ready” projects for years. By now, whatever hasn’t been done is likely a bad deal, or there are strong interests lined up against it.
  
• 
  

In short, for more than three decades, policymakers have been advocating solutions that, rather than create new demand, instead pulled it forward from future years. There is a strong case to be made that there isn’t much left to pull.

Implications for investors

The most important implication for investors is that if we are in an era of secular saturation (instead of secular stagnation), then the policy proposals currently being put forward in Washington will not work.

By channelling more taxpayer dollars to special interest groups that generate little or no spinoffs to the rest of the economy, politicians will merely make a bad situation worse.

Individual investors who believe in the “secular saturation” thesis will thus want to increase their savings to prepare for tough times ahead.

They will also want to be particularly careful about equities markets, which right now appear convinced that politicians are on the right track.

---

[i] A broader description of how Summers regards the issue can be found in the March/April 2016 issues of Foreign Affairs:
http://ift.tt/2iAL3oX…

[ii] The process by which this money is printed is long on complicated, and would depend on how each deal is structured. But it would basically consist of the Federal Reserve buying up debt that the government issued to fund certain projects.

 

Looked at that
way, with the Fed’s balance sheet above $4 trillion, there is a good argument to be made that the US economy is already snowed under with helicopter money.

 

Please email with any questions about this article or precious metals HERE

 

 

 

 

Memo to Larry Summers: It’s Secular Saturation (Not Stagnation)

Written by Peter Diekmeyer (CLICK HERE FOR ORIGINAL)

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By EconMatters

We discuss the final catalyst for the global asset market crash in this video, it starts and ends with Mario Draghi and the ECB, take away this 80 Billion Euros from hitting developed financial markets each month, and the entire system collapses, the quintessential Ponzi Scheme if ever there was one. The FTSE is overvalued by a substantial margin, and is a long-term short!

Central Bankers have been more irresponsible than any malfeasances that occurred in the Financial Crisis of 2007, they have set the stage with unsound, extreme monetary policies that barely helped the real economy, and succeeded in inflating the biggest bubble in Financial Markets History, that is going to cause The Biggest Global Recession in Modern History. The amount of Capital getting destroyed from such ridiculous levels is going to make the financial crisis look like a speed bump in comparison when this Ponzi Scheme Can Kicking Extreme Monetary Policy Experiment Implodes! 

 

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Submitted by Ryan McMaken via The Mises Institute,

Colorado was among the four states where voters approved a minimum wage hike in November. Among the specific provisions for the new wage hike was the stipulation that tipped workers — such as waiters who receive tips and are paid below the standard minimum wage — will receive a mandated wage hike of 99 cents.

Naturally, this will lead to an increase in costs for restaurant owners who will then seek to raise prices and/or reduce costs. KDVR in Denver reports: 

Kanatzer owns The Airplane Restaurant in Colorado Springs and said he has already increased his kids menu prices. …

 

"I increased it a dollar — my kids menu prices went from $4.99 to $5.99," Kanatzer said.

Raising prices can only go so far, however. Contrary to what many non-economists seem to believe, it is not possible to simply "pass on the extra cost to customers." As any economics-major undergraduate knows, it is only possible to pass on a portion of the increased cost to the customer because higher prices and competition from other firms will lead to fewer sales if the owner simply attempts to "pass on the cost." And even if all restaurants are subject to the same wage hike, there are always substitutes in the form of take-out and other types of dining.

Specifically, in response to the forced wage hike we can expect to see more food-service business go the way of so-called "fast casual dining" which include brands such as Chipotle and Noodles and Company. These are restaurants where patrons order food at the counter, and then take their food to their tables themselves. These places often offer alcoholic beverages and higher-quality food than "fast food" places such as McDonalds, and somewhat approximate the "casual dining" experience at lower cost thanks to the elimination of servers. 

Thus, in order to control costs, restaurants that have in past hired wait staff will become more like fast casual restaurants. The KDVR report suggests exactly this, in fact:

Kanatzer estimates most restaurants will adjust prices and change staffing levels as a result, which could mean fewer servers and longer waits.

 

"I've got a friend who has a restaurant and he's going to do counter service from 2-4 (p.m.) so he's not going to have a server at all," Kanatzer said.

 

…Kanatzer suspects more restaurants will install kiosks at tables in the hopes technology might eliminate the need for most servers.

So, we should expect restaurants to hire fewer servers and move toward more counter service and use of technology to replace servers. 

Some waiters have become concerned that the new wage hike is endangering their jobs. They should be concerned:

Even some servers who are recipients of the pay raise fear possible impacts.

 

"I'm more worried about [the restaurant owner] and how it might affect him — not how it impacts me," said Lisa Bowen, a server at The Airplane Restaurant.

The effect on workers will be that many of them will need to move to lower-wage jobs due to there being fewer waiter opportunities. Many people who are now waiters and potential waiters will have to take jobs as cashiers and other workers at fast food and fast casual restaurants instead of waiting tables. As anyone who has worked in food service knows, these sorts of jobs often pay far less per hour than traditional waiter jobs. So, the minimum wage hike will mean an actual pay cut for many people who could have made more as waiters, were it not for the minimum wage hike. 

Moreover, it means that in the future, waiter positions that might have existed in the absence of the minimum wage hike will never exist. More restaurants that rely on a large wait staff will change their model, close down, or never be opened at all, further cutting the job opportunities for workers who would benefit from working as waiters. 

However, these unseen positions that never came into existence will not show up in any unemployment data, and thus the proponents of minimum wage hikes will claim that higher wages to not lead to less employment. The media will interview the lucky waiters who managed to keep their jobs and wait tables in an environment of higher prices — and higher tips. Competition for these remaining jobs will become more fierce meaning lower-skill waiters will find themselves locked out of waiter jobs. In the end, proponents of minimum wage hikes will declare victory and ignore all the unseen consequences imposed on the most vulnerable, unskilled, and marginal members of the workforce. 

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It’s official. As previewed earlier this morning, when we reported that according to media reports, Sullivan & Cromwell lawyer Jay Clayton, a long-time favorite of Wall Street and especially Goldman Sachs (Sullivan is a key outside legal adviser for Goldman and is more closely associated with Wall Street than perhaps any other law firm per the WSJ) has been nominated to lead the Securities and Exchange Commission. Donald Trump spokesman Sean Spicer told reporters in a daily conference call.

Who is the relatively unknown Clayton, who incidentally is an M&A and not a securities layer? Here is a brief bio from earlier this morning:

Clayton’s clients have included Goldman Sachs and Barclays Capital; he would succeed SEC Chairman Mary Jo White, another lawyer with a history of representing Wall Street banks before becoming a regulator. Clayton has spent his career working on the kinds of securities deals that the SEC has a hand in regulating.

 

Clayton represented Goldman when it received a $5 billion investment from billionaire Warren Buffett’s company during the peak of the credit crisis in September 2008. He’s also represented Goldman in connection with other investments and acquisitions, according to the law firm. Sullivan is a key outside legal adviser for Goldman and is more closely associated with Wall Street than perhaps any other law firm.

 

Clayton has a wide-ranging corporate practice spanning mergers and acquisitions, IPOs, corporate governance, and investment advice for high-net-worth families. Other matters that Mr. Clayton has worked on include advising Morgan Stanley on the sale of its physical oil-trading division and Bear Stearns on its sale to J.P. Morgan Chase & Co.—two deals shaped heavily by the financial crisis and its aftermath—and the 2014 IPO of Moelis & Co., a boutique advisory firm. He’s also represented an ownership group for the Atlanta Hawks and British Airways in its 2010 merger with Iberia.

But for a far better glimpse into his deal acumen, here is the breakdown of Clayton’s Wall Street deal list taken from his bio page. Considering that the Sullivan & Cromwell website is currently down, we can only imagine that most Wall Street participants are quite unfamiliar with the M&A and IPO banker.

* * *

Jay Clayton’s practice involves public and private mergers and acquisitions transactions, capital markets offerings, regulatory and enforcement proceedings, and other matters where multidisciplinary advice and experience is valued. Mr. Clayton also advises several high-net-worth families regarding their public and private investments.

M&A/Private Equity

• Castleton Commodities in its acquisition of Morgan Stanley’s global oil merchants business; and a consortium of investors in connection with the acquisition of Castleton from Louis Dreyfus and Highbridge
• An ownership group for the Atlanta Hawks NBA franchise in connection with the purchase and later sale of the franchise
• Ally Financial Inc. in the $4.2 billion sale of its operations in Europe and Latin America to General Motors (GM), as well as in the $4.1 billion sale of its Canadian auto finance business to the Royal Bank of Canada (RBC) and in the sale of its Mexican insurance business (ABA Seguros) to ACE Group
• TeliaSonera in connection with various transactions involving Turkcell and Megafon, including arrangements with Altimo and various other acquisitions and dispositions of telecom-related assets
• British Airways in its merger with Iberia and the formation of International Airlines Group and various other transactions
• Barclays Capital in connection with its purchase of assets of Lehman Brothers out of bankruptcy
• Goldman Sachs in connection with the investment of $5 billion by Berkshire Hathaway and the U.S. Treasury’s TARP Investment
• Bear Stearns in connection with the sale of Bear Stearns to JPMorgan Chase and related matters
• Goldman Sachs and affiliated funds in connection with various acquisitions and investments in companies involved in financial services, banking, telecom and other industries
• Capital Maritime in connection with the combination of Crude Carriers Corporation and Capital Product Partners L.P. and the formation of a container carrier joint venture with a private equity firm
• Michael Krasny (founder) in the $7.2 billion sale of CDW
• Altor Equity Partners in connection with various acquisitions and financing transactions

Capital Markets/Leveraged Finance

• Initial public offering of $25 billion by Alibaba Group Holding Limited
• Initial public offering of $190 million by Moelis & Company
• Initial public offering of $2.375 billion by Ally Financial and private placements of $3 billion and $1.3 billion of common stock in Ally Financial
• Initial public offering of $230 million by Blackhawk Network Holdings
• Initial public offering and multiple public and private offerings of equity, preferred and debt securities of Capital Product Partners L.P.
• Initial public offering of $380 million by Oaktree Capital Group
• Initial public offering of $150 million by Higher One
• Initial public offering of $260 million by Crude Carriers Corporation
• Initial public offering of $1.2 billion by Och-Ziff and follow-on offerings and refinancing
• $1 billion 144A equity offering by Oaktree Capital (the first issuer to use the GSTrUE/Portal Alliance trading procedures)
• Public offering of $6.0 billion of common stock and mandatory convertible preferred stock by Lehman Brothers
• Public and private offerings of $1.5 billion in equity and equity-linked securities of AMBAC

Corporate Governance, Regulatory and Contested Matters

• A large financial institution in connection with the settlement of mortgage related securities claims with the FHFA
• A large financial institution in connection with the settlement of mortgage related claims with the DOJ, HUD and FHFA
• A large financial institution in connection with a regulatory review of transactions in government securities
• A hedge fund in connection with a regulatory review of various credit market transactions
• A group of financial institutions in connection with their challenge to MBIA’s restructuring
• Ally Financial in connection with the $25 billion mortgage origination and servicing settlement with the DOJ, HUD and state attorneys general
• Eni and subsidiaries in connection with an FCPA investigation by the SEC and DOJ
• A financial institution in connection with a civil investigation of its ECN currency facility by the Federal Reserve Bank of New York
• The group of 100 general counsels of leading UK companies in connection with establishing audit protocols with the PCAOB
• A financial institution in connection with various issues arising from its employees’ membership on the boards of public and private companies

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