Tuesday, February 24, 2009

What the Data Says

I got some email from what I can only presume to be folks of the "doomer" persuasion finding fault with my belief that an S&P 650 and Dow 6000 will be close to the bottom for THIS round (when Oil imports become problematic, and they will, that might change things somewhat).  

The Conference Board's index of leading economic indicators has risen for two months in a row.
Producer prices have increased for two straight months.

Consumer prices rose in January -- the first monthly gain in six months.

The Baltic Dry Index, which measures the cost of shipping key raw materials like copper, steel and iron, has more than doubled from its recent lows.

Existing-home sales rose in December, and participants in our weekly survey think that another rise took place in January.

Pending home sales went up in December.

Builders' confidence inched up this month.

Thanks to lower interest rates, applications for both new mortgages and refinancings of existing mortgages are rising.

Real hourly earnings rose 4.5% in December following a 3.3% increase in November.

An index of consumer expectations rose in January.

Retail sales shot up by 1% in January -- the first monthly rise since June.

The decline in consumer credit moderated in the latest month.

New orders for consumer and nonmilitary capital goods went up in January.

The ISM index of manufacturing went up last month.

The ISM index of services rose last month for the second month in a row.

The money supply is soaring, a sign that there's plenty of liquidity in the economy.

The 3-month London interbank offered rate, a measure of banks' willingness to lend to each other, has dropped to 1.2% from close to 5% a number of weeks ago.

Other measures of the state of the financial markets, like the TED spread and the 2-year swap spread are down, as well.

Prices of credit default swaps for banks have fallen from their peaks.

The corporate-bond markets are thawing out, too; some $127 billion in dollar-denominated debt was issued in January, the most for any month since last May.

Some securities on banks' books are starting to recover in value.

I find that, when trading, ignoring the data can be hazardous to my health.  Now, if the data changes, I will change my mind as well.  And my money will be on certain energy and commodity plays - i wouldn't touch stuff like lodging, REIT's, luxury goods, financials, etc... with 10 foot pole with work gloves on.

In fact, to my readers of the doomer persuasion, there is PLENTY of doom and gloom to go around.  While equities may be close to a short term bottom, commercial real estate has not priced in its swan dive, and residential properties have further to go.  

A new government report on medical costs paints a stark picture for President Barack Obama, who is expected to call for a health care overhaul in a speech Tuesday night to a joint session of Congress.

Even before lawmakers start debating how care is delivered to the American people, the report shows the economy is making the job of reform harder.

Health care costs will top $8,000 per person this year, consuming an ever-bigger slice of a shrinking economic pie, says the report by the Department of Health and Human Services, due out Tuesday.

As the recession cuts into tax receipts, Medicare's giant hospital trust fund is running out of cash more rapidly, and could become insolvent as early as 2016, the report said. That's three years sooner than previously forecast.

At the same time, the government's already large share of the nation's health care bill will keep growing.

Programs such as Medicaid are expanding to take up some of the slack as more people lose job-based coverage. And baby boomers will soon start reaching 65 and signing up for Medicare. Those trends together mean that taxpayers will be responsible for more than half of the nation's health care bill by 2016 -- just seven years from now.

"The outlook for health spending during these difficult economic times is laden with formidable challenges," said the report by statisticians at HHS. It appears in the journal Health Affairs.

The health care cost forecast did not take into account recent legislation that expanded medical coverage for children of low income working parents, and added to the government's obligations.

The report "accelerates the day of reckoning," said economist John Palmer of the Maxwell School at Syracuse University.

"It is bringing home more immediately the problematic dimensions of what we face," added Palmer, who has served as a trustee overseeing Social Security and Medicare finances. "The picture was bad enough ten years from now, but the fact that everything is accelerating gives greater impetus to be concerned about health reform."

The report found health care costs will average $8,160 this year for every man, woman and child, an increase of $356 per person from last year.

Meanwhile, the number of uninsured has risen to about 48 million, according to a new estimate by the Kaiser Family Foundation.

The government statisticians estimated that health costs will reach $13,100 per person in 2018, accounting for $1 out of every $5 spent in the economy.
In 1909 the U.S. did not have a healthcare crisis.  The reason?  People with chronic, age related disease died.  

"The dead cost nothing".

This is not a problem to "solved".  This is a "condition" of life that life WILL force us to accept.  The pitch form the Left is that all we need to do is get rid of the insurance companies and nationalize healthcare... the pitch from the Right is the "Free Market".  Both groups are pathological liars, spinning and spinning their way to disaster.

The crash of these programs is well underway, and the outcome is immutable.  That won't prevent politicians and lawyers and lobbyists and "true believer" political groupees from extending the debate for their own purposes.

Good Luck!

Mentatt (at) yahoo (d0t) com


bureaucrat said...

Universal/National healthcare, practiced in every developed country of the world, is coming, whether by Obama's hand or not. I will continue to remain optimistic that getting to people early (and cheaply) with comprehensive preventive care will reduce health care costs in the long run. Perhaps too much optimism. :) Also, all the "good news" you mention above has its counterarguments. And while I know you are talking short-term trade stuff, the longer view/fundamental/generational arguments still are working against a recovery anytime soon. This deflationary mini-depression could go on a long time (sideways). And .. oh damn! I just lost $5,000 on my BPT! (Prudhoe Bay oil). Good thing I look only at the long term. :)

Anonymous said...

Hi Bureaucrat!

Just remember, Government health care is rationed. Some bureaucrat does a cost/benefit analysis on your sorry butt, and decides whether you should live or die. In the single payer systems, you can't buy treatment even if you can afford it. When you no longer serve the purposes of the State, Bye Bye!

That's why, at this very moment there are Canadian men in Cleveland, Buffalo and Detroit who are waiting to have a heart attack. This allows them to get bypass surgery in the U.S. as an emergency treatment. Healthcare Canada will then pay 75% of the cost for emergency treatment outside of Canada. In country, Healthcare Canada gives them a couple bottles of pills, and sends them home to die.

You are getting to that age... Be careful what you wish for. It might come true.


Coal Guy

Stephen said...

Long time reader, first time posting!

Coal Guy, speaking as someone who actually lives in Canada, "health care is rationed" is a misleading statement, as well as "when you no longer serve the purposes of the state, bye bye!" and "sends them home to die". Health care in Canada is not perfect, and I'm pretty sure there isn't any country that has perfect health care, but there is no bureaucrat literally or figuratively sitting there saying "this person no longer serves the purposes of the state, DELETE".

One area in which America kicks the crap out of us in terms of health care is having many very well funded hospitals with very advanced equipment and large pockets. One area in which Canada kicks the crap out of America in terms of health care is it's universally available insurance, so there's no excuse for far-lefties like M. Moore to go ranting about how people are being impoverished for life in order to continue living their miserable lives. Sure, maybe someone who is really old and has a bad heart has to go to the States for "immediate" treatment as oppose to a 6 month waiting list in Canada (for the record, my grandfather was one of those old people with a bad heart and he lived into his eighties, in spite of the waiting lists. he had a new valve installed for his heart and all of that fun stuff), but that is the exception, not the norm. We have our advantages, you have yours.

Your point actually comes back to one of Greg's nicely; How much money should be pumped into keeping people who are suffering from age-related disease alive?

Back in the days of multiple generations under the same roof, the elderly were able to provide a kind of "free" child care, watching the kids while the two parents did what they needed to keep the household going. Now we sequester old people into retirement homes, where they live out their days separate from us so that we don't have to remember that one day we too will die, while they continue to drain medical resources for better or for worse.

How much money should be pumped into that is a question worth considering.

Greg T. Jeffers said...


I am speaking short term. But even in the short term, I am going to use this bear market rally to sell into.

The 1 to 3 year view is disheartening.

Greg T. Jeffers said...

In the end, we will end up performing "Triage". One way or the other, and we are not going to like it one bit.

sharon said...

thanks for the information....

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