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Monday 08.01.2016

Are We Witnessing an Obamacare Exodus?

It's been more than two years since the Affordable Care Act, commonly known as "Obamacare," was fully implemented, but the controversy surrounding the health law hasn't died down one iota.

In one corner, supporters of Obamacare can rightly point to the lowest uninsured rates on record. The Centers for Disease Control and Prevention notes that the uninsured rate as of the end of 2015 was just 9.1%, down 16% from the end of 2013, the year immediately preceding the implementation of Obamacare. Gallup's Q1 2016 data shows an uninsured rate of 11%, down more than six percentage points from Q4 2013. Don't forget that on top of the 11.1 million paying Obamacare customers enrolled in the marketplace exchanges as of March 31, 2016, there are nearly as many people who've gained access to medical care through the expansion of Medicaid programs in 31 states.

In the other corner are those who can be rightly critical of the program. Despite being told by President Obama that "you'll be able to keep your doctor," millions of Americans lost their primary care physicians and health plans because of beefed-up minimum benefit requirements. Additionally, many consumers aren't too keen on the penalty associated with not purchasing health insurance.

However, premium inflation is arguably what's drawing the most debate and ire surrounding Obamacare. A recent analysis from the Kaiser Family Foundation of the lowest-cost silver plans in 14 major cities suggested that premium costs could rise by 11% in 2017. And who do we find in the middle of this battle? Consumers and insurers.

Facebook Numbers Show How Anemic The Economy Truly Is

Once again there was rejoicing to what was repeated as a “stellar” earnings report of top line, bottom line, user growth, user activity and more. It would appear at first glance there was something for everyone. Of course, that is if all you do is glance (which is all most do.) However, the closer you looked, then parsed it alongside of other reports, those “stellar” numbers painted a picture far less rosy than at first glance.

The picture painted by all is that Facebook™ (FB) is showing how it’s done when it comes to mobile. Words like “dominant,” “juggernaut,” and alike are used to describe both its user growth, as well as ad dominance in the mobile space. All fair points and the numbers back those claims. However, if FB was so “dominant” in sales – why aren’t the major retailers or dominant global brands the major source of ad buyers? It would appear the buyers that should be lining up to buy those mobile ads aren’t as impressed. Why?

I’ve stated ad nauseam if FB was delivering an ROI (return on investment) to advertisers that matched the “dominant” scale implied when we hear their metrics reported – the dominant advertisers for FB wouldn’t be ads for app installs. It would be major brands, and that’s not the case.

Here’s why this matters: App install ads are basically all those ads you hate getting even worse than what you think of as traditional retailer targeted ads. In other words, more ads to load an app that’s “free” so that app in-turn can supply you with more ads on their app. Welcome to “eyeballs for ads” 2.0

“Stock Markets Should be Down Massively,” but Investors “Hypnotized that Nothing Can Go Wrong”

Stock investors have entered a “world of uber complacency,” Jeffrey Gundlach, CEO of DoubleLine Capital in Los Angeles, explained – we assume with some bafflement.

On Friday, the S&P 500 hit another all-time high, after it was reported that the US economy grew at a painfully slow rate of 1.2% annualized in the second quarter, after a first quarter of 0.8% growth, which produced a first-half growth of 0.9% annualized, the worst in four years.

Even “adjusted” ex-bad-items earnings of S&P 500 companies have declined on a year-over-year basis for four quarters in a row. Total business sales in the US have declined since mid-2014. Defaults of companies rated by Standard & Poor’s have jumped to the highest level since the Financial Crisis. Overall business bankruptcies are soaring. Yet, stocks march higher.

So Gundlach told Reuters in a telephone interview: “The artist Christopher Wool has a word painting, ‘Sell the house, sell the car, sell the kids.’ That’s exactly how I feel – sell everything. Nothing here looks good.” “The stock markets should be down massively, but investors seem to have been hypnotized that nothing can go wrong,” he said.

The Fed Is The Great Counterfeiter

Helicopter money talk takes flight as Bank of Japan runs out of runway

The Bank of Japan's review of its monetary stimulus program promised for September has revived expectations it could adopt some form of "helicopter money", printing money for government spending to spur inflation.

The BOJ disappointed market hopes on Friday that it might increase its heavy buying of government debt or lower already negative interest rates, cementing the view that it is running out of options within its existing policy framework to lift prices and end two decades of deflationary pressure.

With little to show for three years of massive monetary easing, economists say BOJ governor Haruhiko Kuroda's "comprehensive assessment" of policy could push it into closer cooperation with Prime Minister Shinzo Abe, who announced a fiscal spending package worth more than 28 trillion yen ($275 billion) on Wednesday in a bid to kickstart growth.

"The comprehensive review might be the first step toward further collaboration with the government, hinting at helicopter money," said Daiju Aoki, economist at UBS Securities.

'Sell everything,' DoubleLine's Gundlach says

Jeffrey Gundlach, the chief executive of DoubleLine Capital, said on Friday that many asset classes look frothy and his firm continues to hold gold, a traditional safe-haven, along with gold miner stocks.

Noting the recent run-up in the benchmark Standard & Poor's 500 index while economic growth remains weak and corporate earnings are stagnant, Gundlach said stock investors have entered a “world of uber complacency.”

The S&P 500 on Friday touched an all-time high of 2,177.09, while the government reported that U.S. gross domestic product in the second quarter grew at a meager 1.2 percent rate.

“The artist Christopher Wool has a word painting, 'Sell the house, sell the car, sell the kids.' That’s exactly how I feel – sell everything. Nothing here looks good,” Gundlach said in a telephone interview. "The stock markets should be down massively but investors seem to have been hypnotized that nothing can go wrong." Gundlach, who oversees more than $100 billion at Los Angeles-based DoubleLine, said the firm went "maximum negative" on Treasuries on July 6 when the yield on the benchmark 10-year Treasury note hit 1.32 percent.

Detroit Sells Homes For $1,000

Detroit has maintained a small, and largely unsuccessful program called “Building Detroit” that allows people to buy homes for as little as $1,000 at auction just as the City of Detroit bulldozes thousands of homes. The low-priced home purchases come with a long list of provisions, which likely plays a role in why the plan has been so unsuccessful. The demolition program has, on the other hand, been successful.

The city even keeps a website to track Detroit demolitions. As a sign of how dire Detroit’s situation is, the city has lost half its population since the 1960s and has less than 700,000 residents today.

According to the site, called Detroit Demolition Program, the city as taken down 10,268 houses. One of the stated purposes of the site is to "Search the new Detroit Demolition Tracker to find the status of upcoming demolitions around your house."

It also trumpets the program’s benefits: More than $90 million in demolition contracts have been awarded to Detroit-based and Detroit-headquartered businesses, more than $25 million of which has been awarded to minority-owned businesses. And more federal funding is on the way.

Only Way Out is Stop Lawlessness Top to Bottom

It's time to get worried about the US economy — according to the people who know best

UPS was just the icing on the cake. Capping off a week of gloomy commentary from American companies, the package-delivery giant — which arguably has a unique view into the global economy — said it too sees "head winds" in the second half of the year.

Like others that warned about a slowdown, UPS reported on-target earnings and kept its forecasts unchanged. But that's because of " technology and productivity investments" that are helping it manage through.

Its shares fell a little. Ford on the other hand lost 10% of its market value after it cautioned that carmakers were getting aggressive with incentives to lure in buyers — a sure sign that one big economic engine, auto sales, are peaking. Shares of other carmakers fell too.

That wasn't all. American Airlines said it expects ticket prices to fall. Why? Because "if there is a business confidence problem, the first thing businesses do is cut entertainment and travel budgets," President Scott Kirby said during the company's earnings call. Even some of the good news isn't such great news.

Silver — Once and Future Money

Before the Renaissance, world money existed as precious metal coins or bullion. Caesars and kings hoarded gold and silver, dispensed it to their troops, fought over it, and stole it from each other. Land has been another form of wealth since antiquity. Still, land is not money because, unlike gold and silver, it cannot easily be exchanged, and has no uniform grade.

In the fourteenth century, Florentine bankers (called that because they worked on a bench or banco in the piazzas of Florence and other city states), accepted deposits of gold and silver in exchange for notes which were a promise to return the gold and silver on demand. The notes were a more convenient form of exchange than physical metal. They could be transported long distances and redeemed for gold and silver at branches of a Florentine family bank in London or Paris.

Bank notes were not unsecured liabilities, rather warehouse receipts on precious metals. Renaissance bankers realized they could put the precious metals in their custody to other uses, including loans to princes. This left more notes issued than physical metal in custody. Bankers relied on the fact that the notes would not all be redeemed at once, and they could recoup the gold and silver from princes and other parties in time to meet redemptions. Thus was born “fractional reserve banking” in which physical metal held is a fraction of paper promises made.

Despite the advent of banking, notes, and fractional reserves, gold and silver retained their core role as world money. Princes and merchants still held gold and silver coins in purses and stored precious metals in vaults. Bullion and paper promises stood side-by-side. Still, the system was bullion-based.

Central Banks Are In A Lose-Lose Situation: Low-Rate-Policy "Has Rendered The System Profoundly Fragile"

Ronald-Peter Stoeferle is a managing partner and investment manager of Incrementum AG. Together with Mark Valek, he manages a global macro fund, which is based on the principles of the Austrian School of Economics. He previously worked for Vienna-based Erste Group Bank where he wrote extensive reports on gold and oil. His benchmark reports titled ‘In Gold we Trust’ have drawn international coverage, inter alia by CNBC, Bloomberg, the Wall Street Journal and the Financial Times. Aside from his work at Incrementum, he is a lecturing member of the Institute of Value based Economics and a lecturer at the Academy of the Vienna Stock Exchange.

Claudio Grass, Global Gold: Ronald, it is a pleasure to have the opportunity to speak with you. We’ve known each other for a very long time, both on a personal and professional level. Because of our central banks, we find our economies today operating on artificial stimulus and negative interest rates. How would you summarize the consequences of this policy?

Mr. Stoeferle: I have always considered it impossible to create a “self-sustaining” economic expansion by means of the printing press. By so doing, central bankers only succeeded in suppressing symptoms, but the underlying structural problems that created the 2008 financial crisis in the first place, have only gotten worse.

The primary goal, namely to stimulate the economy, has not been achieved. Low interest rates have provided artificial life support for unproductive and highly indebted companies, as well as for states. According to Standard & Poor’s, budget deficits in the euro area would on average be 1-2% of GDP higher, if the average level of interest rates between 2001 – 2008 were applicable today. Under normal market conditions, stock prices rise as a result of a fundamental strength in the economy, but in today’s reality, the rally in asset prices has only deceived market participants about the fundamental weakness of the economy.

IMF to Recognize Yuan as Reserve Currency Despite Concerns

As the Chinese yuan inches closer to becoming officially recognized as a reserve currency, the International Monetary Fund (IMF) said that the currency unit is well within its laid out policies.

The IMF made the assurance amid concerns that the yuan might not have the stability needed for it to be traded as a reserve currency, the Global Times reported. In its 2016 External Sector Performance Report, the organization said that despite it underperforming during the first half of the year does not diminish its assessment of the currency's viability.

The yuan dropped by 6 percent from its 2015 average value in June, which is a significant departure from its positive performance last year, where it appreciated by around 10 percent from 2014.

However, Luis Cubeddu, deputy director of the IMF Western Hemisphere Department' Regional Research Studies, said that China's current account position is stronger than expected, allowing it to maintain its foreign exchange reserves at a manageable level.

Under Barack Obama, National Debt Increases $100 Million Every Hour of Every Day

What took other presidents more than 200 years to do, Barack Obama has done in one year, and he continues doing it year in, year out.

During the Barack Obama administration, $1.1 trillion dollars has been added every year to the national debt. This is not exactly the legacy one would expect from a man who, as a senator in 2006 said that “increasing America’s debt weakens us domestically and internationally. Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren.”

Ironcially, as president, Barack Obama has laid upon the backs of those very children and grandchildren a debt that increases by about $100 million every hour, every day. It isn’t surprising to learn, then, that Barack Obama is the first president in the history of the United States to not have a single year of three percent growth in gross domestic product (GDP).

According to economist Louis Woodhill, if the U.S. economy continues along its present rate of growth, then Barack Obama will end his term of office with the unimpressive distinction of having the fourth worst economic record in the history of this country. "Assuming 2.67% RGDP growth for 2016, Obama will leave office having produced an average of 1.55% growth. This would place his presidency fourth from the bottom of the list of 39*, above only those of Herbert Hoover (-5.65%), Andrew Johnson (-0.70%) and Theodore Roosevelt (1.41%),” Woodhill writes. (Emphasis in original.)

Having a female leader didn't improve women's lives in Pakistan or India

Closing the Bank of Mom and Dad

The phone rings and you cringe. Your adult child probably isn’t calling just to say hello. He or she needs money again.

If this sounds familiar, you may be in the same situation as more than 1 in 3 American families who give financial support to adult children, according to the nonprofit group American Consumer Credit Counseling. Typical reports describe children as spoiled members of the “me” generation who failed to launch, while parents are portrayed as helicopter moms and dads who are letting these “boomerang kids” return home, derailing their retirement.

In reality, of course, nothing is that simple — especially as student loans and stagnating wages may place a large burden on millennial grads.

Whatever the case, if the financial support has a negative effect on the relationship between parent and child, it’s time to make a change. It isn’t easy, and most parents simply ignore the issue, hoping it will go away, or they may offer a painful ultimatum, kicking their kids out or cutting them off.

Big Miss on US GDP; What to Watch If Things Are Heading South

The second quarter estimate for US GDP released Friday came in at 1.2%, about half of what most economists expected.

So far this year, the economy is growing at about a 1% annual rate, the worst first-half performance since 2011. GDP growth was revised down to a 0.8% pace in the first quarter from 1.1%. Growth also was revised down for the fourth quarter of 2015 to 0.9% from 1.4%.

“The growth trend of the American economy seems on a path of dropping off significantly from its assumed 2% growth trend,” said Conference Board economist Brian Schaitkin.

Consumer spending is really what's holding up the US economy at this point with private investment, net exports, and government outlays all coming in flat to negative. Though we may see a pick-up in the other areas, two major pillars of consumer spending—wages and salaries—came in at the weakest level in three years. This begs the question: how much longer can consumers carry the US economy, especially if business investment continues to decline?

Keiser Report: Taxation and Comedy

Kmart Realizes Maybe It Should Try Communicating With Its Own Employees

Last weekend, a story hit the Internet about the current fears of Kmart employees that they’re being asked to move all stock to the sales floor because the company is in slow-motion liquidation. The communications staff at Kmart’s parent company, Sears Holdings, realized that they had to do something when news outlets began sending them questons about the employees’ accounts. Maybe they also needed to communicate a little better with store employees.

In the initial report, employees explained that they had been told to move merchandise to the sales floor, and that each store in the chain had a mysterious “phase” designation that some employees connected to being on track to be closed.

Business Insider had compiled e-mails from employees and chatter on message boards online, and speculated that Kmart might be preparing to shut the entire chain down. After the story went online, news outlets asked Kmart for a response, and they posted one on a company blog denying the reports.

The company’s VP of media relations and corporate communications, whose job is to deal with the media and with communicating with the company’s employees, told PRWeek that the misunderstanding happened “at the store level” and has apparently now been cleared up.

Veterans Affairs Drops $20 million on Art Collection

The federal Department of Veterans Affairs blew through at least $20 million during a decade when the veterans seeking care, including aging veterans of World War II and military personnel returning from Iraq and Afghanistan, were shunted aside and performance audits were altered and forged, so that VA employees qualified for performance bonuses.

“Included in the expenditures is a 27-foot artificial Christmas tree for $21,500 delivered to Chillicothe, Ohio and two sculptures costing $670,000 for a VA facility in California that serves blind veterans,” according to the report produced by the government spending watchdog Open the Books. Open the Books was established as a legacy of Dr. Tom Coburn’s vigilance over government spending during his Senate career.

Other examples of the VA’s art spending spree include $6.3 million in taxpayer funds expended at the Veterans Affairs Palo Alto Health Care System. There, $483,000 went for a large decorative rock and $807,000 was for the site preparation for the rock outside the building. Inside the center, the VA built a $330,000 half arc in the lobby of the mental health clinic, spent $365,000 for a sculpture at the entrance to the pool, and $305,000 for a sculpture in the center’s main lobby. Maybe, the most ambitious of the health center’s art programs was the $285,000 spent for the wall of dozens of rocks that light up to spell out quotes by President Abraham Lincoln and First Lady Eleanor Roosevelt–in Morse Code.

At a facility in nearby San Francisco, Veterans Affairs spent $32,000 on 62 framed photographs from the local area, roughly $500 per photo. A VA facility in Puerto Rico spent $610,000 on artwork and one in Alaska spent $100,000 on a sculpture.

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