THofler

What the Senate Health Bill Will Really Cost

BioGuy,

Try this exercise. Use your favorite investor tools & add up the 1 year profits of Wellpoint, Cigna, Aetna, United Health & Humana. Then calculate the percentage those profits represent relative to total US health expenditures.

I get 8.6 $B in profits and 2.2 $T in total health expenditures. That means those terrible health insurers are responsible for gouging us consumers with a whopping 0.4% in extra costs.

Brazil's ETF and Economy Are Just Getting Started

Socrates may have info that I missed. I had heard that ADRs would be largely unaffected, but after studying this a bit I can see that newly created ADR shares are likely subject to some kind of tax.

Does Socrates have a reference? I read Mr. Lydon's piece on the Brazil tax but did not find it helpful.

I was considering an old favorite mutual fund PRLAX, as an option. While they will pay a tax too, the fund has a 2% back end load only if you sell within 90 days of the purchase. This would at least reduce the fund churn & hence the net tax effect.

Dividend Achievers: How Have They Performed?

A slightly off topic comment:

My wife & I were talking about the investing that we should have done long ago but didn't. So we picked the date when she first had some available money (1984) and asked what single "obvious" stock should have a person have bought then?

I like dividend achievers, so my list of obvious stocks was: XOM, KO, PEP, MCD, MO, & PG. Later I used the Yahoo "Historical" price tables with adjusments for dividends reinvested.

The top gain factors I got were: MO at 96X; PEP at 54X; KO at 46X; XOM at 38X; and MCD at 36X. I'm not confident of the MO number given the impact of all of the acquisitions and spinoffs. But I was mightly impressed by Pepsi's number, even though I don't expect it to be hitting on all 12 cylinders going forward.

PS: PEP, KO, and MCD all have had sizeable dividend increases in the last year. (I am long the three.)

Why GMAC Shouldn't Have a Government Ally

Why is the gov. supporting it? Obviously, it is yet another wealth transfer from taxpayers to the failed auto companies & indirectly, their labor unions. (Oh yeah, also a transfer to the Rescap mortgage holders.) Would it surprise anyone at this point, if the gov. knowingly wasted a billion of taxpayer money for each million increase in campaign funding?

The real question now is whether the UAW will intentionally wreck Ford Motor in order for those workers to partake in the goodies that flow from a GM style failure.

As a holder of a modest position in hybrid GMAC debt, I have been slowly selling into any unit price rallies. I fully expect the gov. to seize all debt holder assets at some point while denying them any access to a bankruptcy court. This is of course, exactly what a Hugo Chavez or Evo Morales would do. I don't believe that it is possible to be too cynical about what it going on here.

Memo to Senator Dodd: Financial Reform Need Not Be Complicated

Have any of you geniuses ever heard of hedging? In many, but definitely not all, cases this reduces the risk in a business like lending money. And if I'm not mistaken, nearly all hedging occurs by trading securities.

Clearly, the Basel II regs. were intended to connect capital reserves with a mathematical determination of a bank's risk level. And what a disaster that was! (Thanks Moody's et. al.) But that doesn't change that fact hedging DOES work, if your intent is to hedge and not gamble. We need regs. that allow the former and not the latter.

Right-To-Rent Becomes a Reality

Felix has finally made it to my "must not read" list. This & his article on "defaulting is good" are simply scurrilous.

Five European Oil Stock Bargains

Ticker alert! PZE is a little Argentine oil company called Petrobras Energia. The big Brazilian oil company is Petroleo Brasiliero (aka Petrobras) with ticker PBR.

I'm long BP and TOT.

The Evolving IPO Market

Sounds like you have some considerable experience here Paul. What's your opinion on the impact of SarbOx?

The Dodd Bill: Generally Very Good

I had to laugh about the "not stretching the SEC too far" part. This is the organization that couldn't be bothered to check with the DTC to see if Bernie Madoff had actually made any of his claimed trades. And this after numerous accusations of fraud had already been made.

My Visit to the U.S. Treasury

Wow. What state do you live in David? Maybe you could run for Chris Dodd's senate seat.

"Markets are inherently unstable, and that is a good thing."
I'll have to think about that some more, but I agree with the first and disagree wih the second part. There are lots of physical systems that operate around a stable equilibrium even when that equilibrium is very dynamic & changes rapidly. It would be nice if our markets were one of them. And this is very much better than when systems go unstable &/or deviate widely from equilibrium.

While I'm sure there are many nolinear forces at work in our markets & that some of them are powerful, I think most of the crisis can be described by a linear feedback system. There are a great many positive (unstable) feedback elements in our markets and economy, and the only powerful negative (stablizing) feedback element is the Fed's monetary policy. I see the Fed as being like the little Dutch boy putting his fingers in the dike as more and more positive feedback elements bring the whole system down.

I can't give you the detail you seek regarding "... what is the cost to taxpayers?" But at what point will we be forced to see all this varied activity as a giant power grab to redistribute wealth?

Isn't the Community Reinvestment Act a redistribution from investors to lower income home buyers?

Isn't the GSE conservatorship a redistribution from taxpayers to deadbeat home borrowers?

Isn't the auto corp. bailouts (& TARPing of GMAC) a redistribution from bond investors and taxpayers to the UAW?

Isn't Obamacare a redistribution from above median taxpayers to below median taxpayers (or nontaxpayers) and to favored provider groups?

Isn't cap and tax a redistribution from taxpayers to favored energy and green jobs providers?

And oh yeah, isn't the AIG bailout a redistribution from taxpayers to Wall Street fat cats and their investors? Ooops! The Fed was responsibe for that gaffe. Let's fix them. Let's dismantle half of the Fed's authority to regulate banks. Heck maybe we can threaten to set monetary policy in congress.

Advocates to Repeal Sarbanes-Oxley Forget Its Origins

John Thain misrepresented the health of Merrill to BofA. That's a crime under SarbOx. Has he been prosecuted? No. Will he be prosecuted? No. Can anyone point to a bunch book cookers that have been caught & prosecuted?

This stupid law has probably subtracted at least a half a trillion in lost economic activity in this nation, and we have no benefit to show for it.

Sure the accountants love it, & it is a nice platform speech if you are a criminal trying to rehab your reputation. I wouldn't mind keeping the law if companies with less than a $2B market cap were exampted. Otherwise it should be scrapped.

A Sit Down with Treasury Officials (Part I)

Nice, keep up the good work. I complete disagree with your blind faith in the value of mark-to-market accounting though. I also think some the more talkative short sellers like Einhorn are selling a particularly devious brand of dishonesty.

You really should carefully read Buffett's March 09 Berkshire letter to shareholders. Summary: He loves MTM because it causes stupid sell-offs in share price. He thinks MTM should NEVER be connected to regulatory requirements.

Financial Regulation: How Would You Have It Work?

Larry Summers was a big supporter of the repeal of Glass Steagall act when he was in the Clinton White House, as am I. I do think the size of the investment book for a depository bank should be capped with some hard limit.

Worse, was the commodities and futures (CFMA?) bill that Gramm helped push through. This led to the excesses in the CDS market.

Why There Can't Be a Cap on Bank Capital Ratios

Wow, calculus of several variables! Aren't they teaching that in prep schools now?

Felix's example of the two banks assumes way more than Mr. Taleb's analysis states. The Taleb analysis basically just says that the 1st and 2nd derivatives are positive. There is nothing to suggest that the first derivative equals 1. The $500B bank may have 10% more risk than the $400B bank, if Taleb is correct. Even the standard exponential exp(x) does NOT increase rapidly if x is small.

The key take away from the credit crisis is that leverage kills, and very high leverage kills indiscriminately. The important thing is not to have unlimited higher levels on the capital ratios, but to put a rock solid FLOOR on capital ratios; or an absolute upper cap on leverage.

The insanity came about when Basel II said that leverage could be applied in a manner appropriate for the risk. Sounds reasonable, except that all risk metric science is flawed, and i-banks will game the system in ways that expand the leverage. (40 to 1 leverage is OK 'cause my risk model says its OK.)

Yes, The TARP Is Leaking

According to the Huffington Post???

Wasn't Ariana & her ex-hubby scions of the conservative movement before she realized that there was more butter on the flip-side of the bread?

I do agree with most of the article. Isn't it ironic that the big bankers are getting beat up the most when all of those guys are producing big returns for TARP (well Citi could be a trouble spot). And while AIG IS getting plenty of deserved flak, there is little said about the auto companies their hideous labor unions that will blow a giant hole in TARP.

Why is nobody complaining about the UAW's decision to keep damaging Ford until they end up owning 50% of a worthless company.