Stocks To Watch *** Still More Stocks To Watch
FNM Reports Mixed Signals About Their Portfolio
NEW YORK, June 29 (Reuters) – Fannie Mae (FNM.N) (FNM.P) said its gross mortgage portfolio grew at a 35.1 percent annual rate in May, after a 19.2 percent drop in April, while the serious delinquency rate on loans it guarantees accelerated.
Mortgage holdings of the largest U.S. home funding company rose to $789.6 billion from $770.1 billion the prior month and from $787.3 billion at the end of last year, Fannie Mae said on Monday.
The capital-constrained company, which the government took over along with Freddie Mac (FRE.N) (FRE.P) in September 2008, can expand its portfolio to $900 billion before starting to reduce it next year.
The rate of serious delinquent payments on single-family mortgages that Fannie Mae guarantees jumped 27 basis points to 3.42 percent in April, the latest data available. A year earlier, the rate was 1.22 percent.
On the multifamily side of the business, the serious delinquency rate rose 2 basis points to 0.36 percent, four times the 0.09 rate a year earlier.
The company said its mortgage refinance volume rose to $57 billion in May and that it should stay above historical norms for the near term.
Fannie Mae started accepting refinance mortgages under the government’s Making Home Affordable Program in April. “We expect that the MHA Program will bolster refinance volumes over time as major lenders adopt necessary system changes and consumer awareness continues to build,” the company said in its monthly summary.
Fannie Mae provided $71.6 billion of liquidity to the market in May through $67.7 billion of mortgage-backed securities issuance, excluding whole loan securitizations held in the portfolio, and $3.9 billion in net retained commitments last month.
It securitized $61.4 billion of whole loans held for investment in its portfolio in May.
On Friday, Freddie Mac (FRE.N) (FRE.P) said it reduced its mortgage investments by an annual 9.9 percent rate in May to $823.4 billion. Single-family delinquencies rose to 2.62 percent, more than triple the 0.86 percent a year earlier.
AAPL Has Got Hot Cakes On Their Hands
ollowing the biggest iPhone launch ever, it seems Apple (AAPL) retail stores have begun to run out of stock.
CNN
points to the iPhone availability widget, which yesterday showed that selected iPhone 3GS models was sold out in over 44 states in the U.S.
The widget is is put up on the Apple website usually when there are shortages of the product. It appeared last year too, when the iPhone 3G was in short supply. But unlike last year, the application now is directly linked to Apple’s internal point-of-sale computers, which means the information is updated every hour, and hence more accurate.
The 16 gig, white iPhone seems to be the most popular, according to CNN:
The shortages are all over the lot, but Apple seems to be having a particularly hard time meeting demand for the entry-level white iPhone 3GS. In Texas, the 16GB model is sold out in all but three of the state’s 15 Apple Stores. It’s not clear whether demand for that model is unusually high or if Apple just isn’t making enough of them.
PALM PRE Owners Complain of Shoddy Workmanship
Palm Pre owners are complaining about cracked or wobbly screens and problems with the Pre’s sliding hinges, says GigaOm
. Another common complaint is the gap between the two sliding units of the phone.
GigaOm quotes owner complaints from a Palm Pre online forum called PreCentral:
I’m on my THIRD pre (yellow box). Over the last two weeks, I’ve noticed an increasing amount of play with the screen. I’ve also noticed that on the left side of the device the two sections are separated enough that i can almost see the innards.When I push them together, you can hear squeaking. On top of that, the device came with a loose power button that doesn’t click nearly as firmly as that of other devices.
I already exchanged my first one due to a faulty screen, and will likely also exchange my current one because of a wobbly/loose slider. Hopefully third time’s a charm.
We have also read about owners complaining about dust collecting behind the screen, battery contact issues, and poor speakerphone sound. Most users are concerned about the return/exchange policy. The Times points out that there is no information from Sprint (S) or Palm (PALM) about the return rate of the phones.
VIX Hits Levels From the LEH Days
By Jeff Kearns
June 29 (Bloomberg) — The benchmark index for U.S. stock options fell below its closing level from the day before Lehman Brothers Holdings Inc.’s September collapse as stocks rallied and investors paid less to hedge against equity losses.
The VIX, as the Chicago Board Options Exchange Volatility Index is known, lost 1.1 percent to 25.65 at 11:54 a.m. in New York. The index measures the cost of using options as insurance against declines in the Standard & Poor’s 500 Index, which added 0.9 percent.
“Fear of the doomsday scenario has definitely subsided,” Jeremy Wien, a VIX options trader at Societe Generale SA in New York, said before the index slipped below its Sept. 12 close of 25.66. “Given the steps the government has taken and the decrease in huge market swings, it’s entirely reasonable for the VIX to drop to these levels and possibly even lower.”
Bernie Madoff Might Get 150…& He Does…So C U Later
NEW YORK — Victims of convicted Ponzi-scheme operator Bernard Madoff, speaking at a sentencing hearing Monday, urged a federal judge to impose the maximum sentence possible for the multi-billion dollar fraud.
Dressed in a dark suit, instead of prison garb, Mr. Madoff is waiting to learn if he’ll spend the rest of his life behind bars. Madoff faces a maximum of 150 years in prison.
U.S. District Judge Denny Chin, presiding over the packed hearing in the largest courtroom in the federal courthouse in lower Manhattan, said the probation department recommends that Mr. Madoff, 71, receive a 50-year sentence.
State Street & UBS Face Regulatory Issues
NEW YORK (MarketWatch) — U.S. financial stocks were marginally higher in Monday morning trade, following the broader market up, despite focus on regulatory issues involving two prominent banking companies. The benchmark financial sector exchange-traded fund, Financial Select Sector SPDR Fund /quotes/comstock/13*!xlf/quotes/nls/xlf (XLF 11.88, -0.04, -0.34%) , was up 0.3% to 11.96. State Street Corp. /quotes/comstock/13*!stt/quotes/nls/stt (STT 47.40, -0.93, -1.92%) in a filing said it received a notice from the Securities and Exchange Commission informing the company it may face civil charges for possible violation of securities laws. Also, Switzerland’s UBS AG /quotes/comstock/13*!ubs/quotes/nls/ubs (UBS 12.24, -0.06, -0.49%) may be close to settling a civil suit with U.S. authorities that could cost the bank as much as $4.6 billion, according to a Swiss media report. State Street shares were off 2%, while UBS shares rose 0.5%.
British Financials Plan To Cut 13k Jobs Despite Recovery Sentiment
By Jon Menon
June 29 (Bloomberg) — U.K. financial services companies may cut 13,000 jobs in the third quarter even as they express rising optimism for the first time in two years, Britain’s biggest business lobby group said.
“Conditions still remain rough but there are signs of some improvement expected in the coming months,” according to Ian McCafferty, the Confederation of British Industry’s chief economic adviser at a press conference in London. Profits, employment and investment remain “on a downward trend,” he said.
The rate of job cuts is slowing, the group’s quarterly financial services survey showed. Financial services companies cut about 17,000 jobs in the first quarter and probably shed 15,000 in the second quarter, said the CBI.
The Bank of England last week said financial institutions remain vulnerable to further shocks. British banks told the survey that revenue declined in the second quarter at the fastest rate since March 1991.
“The banks are not seeing the demand out there for loans and household debt is not growing,” said Leigh Goodwin, an analyst at Fox-Pitt Kelton in London. “Demand is pretty subdued.”
IEA Cuts Global Oil Consumption
By Carola Hoyos
Published: June 29 2009 10:05 | Last updated: June 29 2009 11:48
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The global economic recession has rescued the world from an impending oil supply crunch, the consuming countries’ watchdog agency said as it slashed its medium-term demand forecasts.
The International Energy Agency now expects global oil demand to grow a paltry 0.6 per cent or 540,000 b/d in 2008-2014, pushing consumption from 85.8m b/d to 89m b/d. That is considerably less than 1m b/d average yearly increase the IEA had expected last year. If the lower-end GDP forecasts turn out to be correct, oil demand could actually contract over the period, with consumption at 84.9m b/d in 2014.
European Confidence Rises More Than Expected
By Jurjen van de Pol
June 29 (Bloomberg) — European confidence in the economic outlook rose more than economists forecast in June, adding to signs that record low interest rates and stimulus measures are helping to pull the region out of a recession.
An index of executive and consumer sentiment in the 16 nations that use the euro increased to 73.3, the highest since November, from a revised 70.2 in May, the European Commission in Brussels said today. Economists had forecast an increase to 71 from an initially reported 69.3 in May, according to the median of 24 estimates in a Bloomberg News survey.
JPM, GS, & MS Take A 50% Increase in World Equity Sales
By Elizabeth Hester and Elisa Martinuzzi
June 29 (Bloomberg) — JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley are extending their dominance in underwriting equity offerings — helped by the sale of shares of financial firms, including their own.
The three New York-based banks together control 42 percent of the global market so far this year, according to data compiled by Bloomberg. That’s up from 30.7 percent for the three top underwriters in the first six months of 2008 and the highest concentration for any first half in at least a decade.
“Those three firms have weathered the crisis better than anyone,” said Charles Geisst, a finance professor at Manhattan College in New York and author of a history of Wall Street. “In this market, companies will go looking for an underwriter whose financial position is better than others.”
Accurate Dollar Forecaster Expects $ To Rise 17% This Year
By Lukanyo Mnyanda and Anchalee Worrachate
June 29 (Bloomberg) — Strategists who came closest to predicting the dollar’s value against the euro so far this year see it strengthening as much as 17 percent in the second half as the U.S. recovers from the recession faster than Europe.
CIBC World Markets Plc, Deutsche Bank AG, Bank of America Corp. and Wells Fargo & Co. estimate the U.S. currency will rise more than 4 percent by Dec. 31 after May ended with its sharpest three-month fall since 2002. At the start of the year, all had second-quarter forecasts within a penny or two of the $1.4056- per-euro close on June 26, Bloomberg’s currency survey shows.
“I’m reasonably bullish on the dollar,” said Henrik Gullberg, a currency strategist in London at Frankfurt-based Deutsche Bank, which Euromoney Institutional Investor Plc ranks as the world’s biggest foreign-exchange trader. “If you look at the data over the past few weeks, it has been consistent with the situation where the U.S. is a quarter or two ahead” of the 16-country euro region in rebounding, he said.
At the start of the year, after 2008 closed with the euro worth $1.3971, Deutsche Bank said it would weaken to $1.40 by June 30, just shy of where it was two trading days before the quarter’s end. Now the bank predicts a 17.1 percent gain to $1.20 per euro by year’s end, which would be the greenback’s best two-quarter performance against the euro or a basket of predecessor currencies since 1981.
Emerging from Turmoil…
Unemployment Expected To Rise @ Slower Pace
By Shobhana Chandra
June 28 (Bloomberg) — Unemployment in the U.S. probably rose at a slower pace and the manufacturing slump eased this month as evidence mounted that the end of recession is in view, economists said before reports this week.
The jobless rate rose 0.2 percentage point to 9.6 percent, the highest level in 26 years, according to the median of 58 estimates in a Bloomberg News survey. The gain would be the smallest since November 2008. A survey of purchasing managers may show manufacturing shrank at the mildest pace in 10 months.
Government efforts to stabilize housing and consumer spending are only now starting to pay off, indicating it will take months before a recovery develops. The job market will remain one of the biggest threats to the emerging rebound as companies from General Motors Corp. to Kimberly-Clark Corp. focus on cutting costs by trimming payrolls.
BA Has Introduced The Nightmare Liner
By PETER SANDERS and DANIEL MICHAELS
The latest delay to hit Boeing Co.’s 787 Dreamliner has complicated an intricate set of negotiations, giving airlines a chance to wrangle concessions from the plane maker on delivery dates, installment payments and even the final purchase price.
Already nearly two years behind schedule, the Dreamliner was the fastest selling commercial airplane in Boeing history — at one point over 900 orders were on the books. After a spate of cancellations that number is now closer to 850. Last Tuesday, Chicago-based Boeing said a structural flaw detected during ground tests required additional reinforcement on the Dreamliner, a problem that will delay the plane’s first test flight, possibly for months.
Bond Dealers Say The Worst Is Over
By Daniel Kruger
June 29 (Bloomberg) — Wall Street’s largest bond-trading firms say the worst may be over for investors in Treasuries after government securities posted their biggest first-half losses in at least three decades.
The 16 primary dealers, which trade directly with the Federal Reserve and are obligated to bid at Treasury auctions, forecast the benchmark 10-year note yield will finish the year little changed at 3.58 percent, after rising from 2.21 percent at the end of 2008, according to a survey by Bloomberg News.
The dealers, which include JPMorgan Chase & Co. and Goldman Sachs Group Inc., say the sell-off will slow after signs emerged this month that foreign buyers are scooping up record amounts of debt being sold by the Obama administration. Plus, yields at the highest since November are luring investors speculating that the economy’s recovery may be slow.
“We have seen an incredible amount of demand,” said Richard Tang, head of fixed-income sales at primary dealer RBS Securities Inc. in Stamford, Connecticut. “A lot of it is asset reallocation, out of risk assets and commodities. It’s been significant.”
China Says They Will Not Change Dollar Policy Yet
By Stephanie Phang
June 29 (Bloomberg) — People’s Bank of China Governor Zhou Xiaochuan said the nation won’t change its currency reserve policy suddenly, helping the dollar to snap a two-day decline.
“Our foreign-exchange reserve policy is always quite stable,” Zhou told reporters at a central bankers’ meeting yesterday in Basel, Switzerland. “There are not any sudden changes.”
The dollar slumped on June 26 after the central bank renewed its call for a new global currency, fueling speculation it will diversify its reserves, the world’s largest at more than $1.95 trillion. U.S. President Barack Obama needs the support of China as his government tries to spend its way out of a recession.
“I don’t see any practical alternative as a key reserve currency when I look around,” said David Woo, London-based global head of foreign-exchange strategy at Barclays Capital. China’s proposal to expand the use of special drawing rights, the unit of account used by the International Monetary Fund, isn’t a “practical solution” because they aren’t liquid, he said.
The following is an excerpt from John Mauldin’s weekly e-letter. You can sign up to get the whole thing here >
I walked into the office yesterday evening and there was someone on CNBC talking about how the 50-day moving average of the S&P 500 rising above the 200-day moving average was telling us the market was getting ready to rise and the recovery had started. I listened to his babbling for another 2-3 minutes and couldn’t take it anymore (and no, it was not my friend Larry Kudlow, who is a lot more balanced than whoever was on.)
We keep getting told that the market is telling us “something,” usually that the recession is going to end. For some reason, people keep repeating the bromide that the market looks out about 6 months. To that I politely say, rubbish.
Riddle me this, Batman. Did the market see the recession in October of 2007? We were already in recession and the S&P 500 (see below) was making new highs! Where was the market prescience? Did it see the 25%+ drop in January of this year? And I could go back and cite scores of examples where the market “missed” the future turning points over the past ten decades.
What about the shibboleth that the market turns up 6 months before the end of a recession? Sometimes that is true. But does it mean anything? The same people who said it meant something last December and January are saying it means something now. But now it’s June and the recovery is not here, so maybe the market wasn’t telling us something in January after all.
Gentle reader, there will be a recovery. We will talk about what kind in a few pages, if we have the time. And it is (statistically speaking) likely that the markets will have turned up before the actual recovery. But does that mean anything today?
Go back to the chart above. Notice that in 2003, when the market finally turned up, we were already well out of recession. And the market had a very quick 12% or so drop while we were in recovery, while later we went on to a 90% run-up! Was the drop telling us anything, or do we explain it away?
“In the short run,” St. Graham said, “the market is a voting machine. In the long run it is a weighing machine.” The voting is based on current sentiment, but what the market weighs in the long run is earnings. The market tries to forecast future income streams. And it gets it wrong as often as it gets it right.
Let’s look at this yet another way. This is an important concept, and it should be a component of your economic BS detector. The CNBC host talked in breathless terms about the importance of the 50-day average moving above the 200-day average. It means nothing until it means something, and we won’t know what that something is for some time.
Earlier this week (Monday, I think) the 50-day average moved BELOW the 200-day average. The analysts at Bespoke Investment Group noted:
“Going back to 1928, this is the 25th time that the S&P 500 has declined through both of these levels on the same day. On page two we have provided a table showing each of these occurrences as well as the index’s returns going forward. Based on those prior instances, the S&P 500’s returns going forward have been notably negative. While the S&P 500 has averaged positive returns over the next week, average returns have been negative over the next month, three months, and six months.” (emphasis mine)
But 33% of the time, the markets were up six months later, often by quite a bit. And sometimes down quite a bit, but on average only slightly. Which means that as a forward-looking indicator it is interesting but not anything I would put my money (or client money) on!
(I saw some reports that differed, selecting fewer such data points and suggesting that market returns were up after such an event. Logically, that can’t be. Let’s be generous and just assume sloppy research.)
Before major market moves down, the 50-day average will always move below the 200 average. And the reverse is also true. It is not a sign. It is just what statistically MUST happen. And sometimes they reverse themselves, and sometimes they don’t. We have no way on God’s green earth of knowing whether the two moves (both up and down) this week will be bullish or bearish six months from now, based simply on the moving averages crossing. You can make the data say anything you want, but you are still just guessing.
Sidebar note: Trend Following 101. I spend a lot of time analyzing trend-following money managers of one kind or another. Basically, they look at data and try to spot trends and then invest in them. A trader who is right 70% of the time is amazing and very rare. 50% is more like it for successful traders. But they have sharp risk controls that cut their losing trades and let their winning trades “ride.” Being right 50% of the time can be profitable over time. (Being right 50% of the time is harder than it looks!)
But in the media you get these “analysts” who talk a good game, acting as if a 50-70% probability is something meaningful. “The market has turned. The recession is over.” And they say that when we have the first balance-sheet recession in 70 years, yet they want to compare garden-variety recessions to what we have now. Again, we can only know which of the moves (above and below the 200-day moving average) will be the real “indicator” in six months. It is only an indicator today to the extent that we can drive our cars forward looking in the rear-view mirror.
The New Normal Is Still In Our Future
Now let’s take that principle a little further. Last week I detailed how air, trucking, and rail shipping is down 20% year-over-year. Global trade is down about 30% in the major exporting countries (see below).
World trade shrinks : Chart 1: Year-over-year change in total exports from 15 major exporting countries (1991-02/2009) / Chart 2: Year-over-year change in exports from 15 major exporters between February 2008 and February 2009 (size of circles reflects volume of exports in 2008)
End of the world? Do we just keep falling? No. At some point, six months or a year from now, the year-over-year comparisons become easier. If you are at 100 and fall to 80, then a year later you are at 88 and voila! you have a 10% increase! And the perma-bulls will be talking it up. The fact that you are still down 12% from the peak is ignored.
The point is that we have fallen quite a bit in a lot of major categories. There is really only so much you can fall. And then when you reach that new lower level of the New Normal, you begin to rise. At some point, we will be on the path to “recovery.” That does not mean that we will be back to the halcyon days of mid-2007 within a year. It just means that we have stopped falling and now have to adjust to the levels of the New Normal.
The Hidden Problem Within Unemployment Data
This is going to be most evident and painful in the unemployment numbers. Last month saw the number of unemployed rise by 345,000. What was not in the headline data was that 217,000 of those jobs were estimated from the “birth-death” ratio. The US economy creates new businesses that do not get counted in the data, so the BLS estimates what that number is, using previous data patterns. When the economy turns, it overestimates new jobs in recessions and underestimates them in recoveries. No conspiracy, it is just the best methodology we currently have.
But does anyone really think 200,000 jobs were created last month? The real number of lost jobs is worse than the headline. And next month the birth-death number will likely be over 200,000 again. Add another 100,000 or so to the headline number to get closer to reality,
Again, analysts talked about a turnaround because job losses were “just” 345,000. That is a higher number than any month in the 2001-02 recession, and larger than the month after 9/11. That is a green shoot? Yes, we will see the monthly unemployment numbers fall, but they are falling from historic highs. And based on some research by the San Francisco Federal Reserve, it is likely that we will see still higher unemployment that will persist for a while longer.
Let me quote and summarize through the research at http://www.frbsf.org/publications/economics/letter/2009/el2009-18.html. (It is not long, and worth reading.)
“Our analysis generally supports projections that labor market weakness will persist, but our findings offer a basis for even greater pessimism about the outlook for the labor market. Specifically, we suggest that the relatively low level of temporary layoffs and high level of involuntary part-time workers make a jobless recovery similar to the one experienced in 1992 a plausible scenario.”
Essentially, there are always workers moving into and out of employment. What they note is that the patterns seem to be changing. In the ’70s and ’80s, job losses were quick and deep, but the recovery was also quick. In the last two recessions, job recovery was noticeably slower, giving rise to the term “jobless recovery.” It was the lack of hiring, and not firing, that was responsible for the slow employment recovery. MY thought is that before 1990 many of the job losses in recessions were from manufacturing. Businesses were quick to lay off and quick to rehire. We now have fewer manufacturing jobs, so the rehiring process has been much slower in recent recessions.
“The long and gradual return to pre-recession unemployment levels implied by the Blue Chip consensus forecast is consistent with a labor market recovery that is slightly weaker than that experienced in 1983 and slightly stronger than that experienced in 1992. However, should labor market conditions instead proceed along the path taken in the 1992 recovery, the unemployment rate could peak close to 11% in mid-2010 and remain above 9% through the end of 2011.”
That is not in any Congressional budget forecast. Want to run an election campaign at 10% unemployment levels?
“… What does all this mean for the course of the labor market? We combine data on involuntary part-time workers with the standard unemployment rate to arrive at an alternative measure of labor underutilization. We plot this measure in Figure 3, which shows that the labor market has considerably more slack than the official unemployment rate indicates. The figure extends this labor underutilization measure using the Blue Chip consensus forecast for the unemployment rate as a benchmark and then adding a share of involuntary part-time workers based on the proportion of workers in that category to the unemployed during the current recession. This projection indicates that the level of labor market slack would be higher by the end of 2009 than experienced at any other time in the post-World War II period, implying a longer and slower recovery path for the unemployment rate. This suggests that, more than in previous recessions, when the economy rebounds, employers will tap into their existing workforces rather than hire new workers. This could substantially slow the recovery of the outflow rate and put upward pressure on future unemployment rates.” (emphasis mine)
Was Income Really Up?
Now, let’s turn our attention to today’s headline. Income is surprisingly up. That has to be a green shoot, right? Well, not if you look at the underlying data.
Personal income from wages and salaries was down $12 billion in May. So how did income go up? A large increase in “government social benefits” and a decline in personal taxes accounted for all the gain, and then some. The increase was the effect from the recent stimulus package, which is (for now) temporary, and not the result of a recovering economy. Hardly green shoots. It is just borrowed money from another (government) source. In principle, it is not much different than home equity withdrawal, except that taxpayers are on the hook.
And those government subsidies are going to increase. Look at the graph below. What it shows is that the average duration of unemployment is at a 60-year high, and rising. It is now at 22.5 weeks. Unemployment benefits stop at 39 weeks, temporarily up from 26 weeks. More and more people each week are thrown into very dire circumstances when they fail to find jobs and lose the benefits. Care to wager whether, when Congress comes back from vacation, the time people are allowed to be on unemployment will be increased?
And speaking of the increase in government payments to individuals, what did they do with them? In aggregate, what is happening to this stimulus? The data came out today, and I must admit I was surprised. I have been writing for years that American consumers would start to save in this recession, but I (and nearly every credible observer I read) thought that we would see a more gradual rate of increase in the savings rate. The increase in savings has been nothing short of remarkable. (See graph below.)
From a negative 3% in late 2005 (the result of massive borrowing, primarily mortgage equity withdrawal and credit cards), we have risen to a positive 6.9%. That is the highest rate since 1993. The savings rate was less than 1% last August. And totals savings (on an annualized basis) was $608 billion in April, rising to $768 billion in May. That is a 30% month-over-month increase! Maybe the American consumer has found a new religion!
But, there is more than just a new savings fervor at work. Spending rose more than disposable income, so without that increased level of government transfer payments, it is unlikely that savings would have risen as much. Before we get too giddy about savings going through the roof, we need to wait a few months to see if this was the result of new savings religion or government transfer payments (stimulus), which will soon wind down
That being said, given the sharp increase in savings, it’s no wonder shipping is down 20% and global trade in the exporting economies by 30%. No wonder retail sales are down, except for Wal-Mart and other lower-price venues.
Final thought for today. The Congressional Budget Office released another report this week, saying that the current deficit levels are unsustainable. They suggest that either taxes must increase by $440 billion or spending must be cut by a like amount, or some combination. If you assume some of the new health-care and other programs are enacted, the number comes closer to $700 billion.
This is not a Congress that wants to cut other parts of the budget by $700 billion. Raising taxes by $700 billion (over 4% of GDP) will dip us back into recession. Not raising taxes will result in debt that cannot be funded at anywhere close to today’s rates. A recent IMF study is very sobering about the worldwide problem of growing country debt. Finding a trillion dollars in the market every year, when every other country is also trying to raise debt is simply not going to happen. It will destroy the dollar. There are few good choices in front of us, and fewer still good choices that are likely.
OK. One final suggestion for your weekend reading. Atul Gawande, writing in The New Yorker, weaves a very sobering picture of the problem of reining in health-care costs. He contrasts two Texas border cities with similar demographics, yet one spends twice as much on health care. One town has doctors who order every possible test and the other doesn’t. There is no real difference in outcomes. And then compare it to other areas, and the problem facing any health-care policy becomes all too evident. Reportedly, Obama has had everyone read this, and you should too. It provides a very different angle on the problem.
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