“Health insurers are privately warning brokers that premiums for many individuals and small businesses could increase sharply next year because of the health-care overhaul law, with the nation’s biggest firm projecting that rates could more than double for some consumers buying their own plans.

The projections, made in sessions with brokers and agents, provide some of the most concrete evidence yet of how much insurance companies might increase prices when major provisions of the law kick in next year—a subject of rigorous debate.

The projected increases are at odds with what the Obama Administration says consumers should be expecting overall in terms of cost. The Department of Health and Human Services says that the law will “make health-care coverage more affordable and accessible,” pointing to a 2009 analysis by the Congressional Budget Office that says average individual premiums, on an apples-to-apples basis, would be lower.

The gulf between the pricing talk from some insurers and the government projections suggests how complicated the law’s effects will be. Carriers will be filing proposed prices with regulators over the next few months.

Part of the murkiness stems from the role of government subsidies. Federal subsidies under the health law will help lower-income consumers defray costs, but they are generally not included in insurers’ premium projections. Many consumers will be getting more generous plans because of new requirements in the law. The effects of the law will vary widely, and insurers and other analysts agree that some consumers and small businesses will likely see premiums go down….”

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“People usually say they go into government to perform public service. If they came from Wall Street, however, their former employers often provide another service.

Banks, including JPMorgan Chase,Goldman Sachs and Morgan Stanley, all have provisions that allow acceleration of payments owed to senior executives if they take government jobs, a new study finds.

Such a benefit was highlighted recently during the confirmation hearing for Jacob J. Lew as Treasury secretary. His previous employer, Citigroup, had guaranteed him preferential financial treatment if he were to leave to take a job in the government. When Mr. Lew left Citigroup he held stock that he could not immediately cash worth as much as $500,000, according to a government filing.

“These companies seem to be giving a special deal to executives who become government officials,” says the study, to be released Thursday by the Project on Government Oversight. “In exchange, the companies may end up with friends in high places who understand their business, sympathize with it, and can craft policies in its favor.”

The study looked at the compensation policies of several financial institutions….”

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“From Citi‘s Steven Englander, some big-picture thoughts about what this crazy Cyprus weak meant.

Basically, the real fallout comes next time.

In any future crisis depositors have an incentive to shift their assets at an early stage of the crisis and any investor with exposure has an incentive to liquidate any exposure as soon as possible. This may speed up the time in which such crises occur and also force policymakers to make their move earlier in a crisis. The power of the state in being able to impose a levy literally overnight makes it harder for them to convince residents and investors that they won’t do so if push comes to shove….”

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“Representative Paul Ryan, chairman of the House Budget Committee, declared this month that the U.S. national debt “is hurting our economy today.” It’s an idea embraced by almost every Republican and even some Democrats.

Economic data — on jobs, housing and investment — don’t support that claim. And economists across the political spectrum dispute the best-known study of the subject, by Carmen Reinhartand Kenneth Rogoff, which found that nations with debt loads greater than 90 percent of their economies grow more slowly.

Three years after a government spending surge in response to the recession drove the U.S. past that red line — the nation’s $16.7 trillion total debt is now 106 percent of the $15.8 trillion economy — key indicators reflect gathering strength. Businesses have increased spending by 27 percent since the end of 2009. The annual rate of new home construction jumped about 60 percent. Employers have created almost 6 million jobs.

And with borrowing costs near record lows, the cost of paying off the debt is lower now than in the year Ronald Reagan left the White House, as a percentage of the economy.

“The argument that heavy debt loads slow economic growth doesn’t hold a lot of water,” says Guy LeBas, chief fixed- income strategist at Janney Montgomery Scott LLC in Philadelphia who oversees $12 billion. “It suffers from a mix-up of cause and effect: When weak economic conditions arise, it tends to encourage deficit spending, which is what has led to more U.S. debt being issued, and not the other way around.”

Tipping Point…”

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German lawmakers from Chancellor Angela Merkel’s coalition criticized the handling of Cyprus bailout proposals before the parliament in Nicosia began to debate them, deepening a standoff days before the deadline for a cut in ECB funding.

Merkel told a closed-door meeting of legislators in Berlin today that she’s annoyed the Cypriot government hasn’t been in touch with the so-called troika of international creditors for days, according to a party official who spoke on condition of anonymity because the briefing was private. Cyprus’s decision to test Europe is unacceptable, she told them.

“We’re not ready to accept solutions that are full of wind,” Michael Fuchs, deputy parliamentary leader of Merkel’s Christian Democratic Union, said after the meeting. “I don’t think it’s appropriate to play poker in this matter, especially when you think that there’s a risk that two banks will become insolvent next Monday.”

European patience with Cyprus is running out as Cypriot lawmakers consider proposals to unlock bailout funds and prevent a financial collapse. They rejected a proposal to tax bank deposits hammered out last weekend by the 17 euro-area finance ministers. The European Central Bank, which makes up the troika along with the International Monetary Fund and the European Commission, issued an end-March 25 deadline for a deal before it cuts off emergency funding to the nation’s lenders.

‘Slipping Away’…”

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“March 22 (Bloomberg) — Bank of Japan (8301) Governor Haruhiko Kuroda said he’s confident in achieving a 2 percent inflation target, rebutting doubters who predict his efforts will fail as he prepares to strengthen monetary stimulus.

“We will do whatever we can to achieve the 2 percent price target at the earliest time possible,” Kuroda said yesterday in his inaugural press conference after taking the helm of the BOJ this week. Kikuo Iwata, one of two new deputies, told reporters the bank should commit to achieving the goal for consumer-price increases within two years….”

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“There is an interesting paradox at work as central banks suppress interest rates.

Correspondent Mark H. recently asked: “What is your take on what the outcome will be if/when interest rates start rising?” Let’s break this excellent question into two parts: 1) what might cause rates to rise, and
2) what consequences will likely result from rising rates/yields?

There are two articles of faith in the central-bank religion:

1) We can keep interest rates near-zero for as long as we deem necessary, and

2) We can suppress inflation at will, too.

The question is: can they do both at the same time for as long as they wish?

If either interest rates or inflation (and they are correlated) start rising, the central banks’ claims of control evaporate.

There is an interesting paradox at work here:

The only way central banks can keep interest rates low is to buy the bonds issued by their respective governments, i.e. monetize the sovereign debt. They do this by creating money out of thin air, i.e. expanding their balance sheet with government bonds and other debt instruments such as home mortgages.

Theoretically, the Federal Reserve could continue to artificially suppress rates by expanding its $3 trillion balance sheet to $30 trillion.

Since there is an unlimited buyer for low-yield bonds (the central banks), there is no market pressure for higher rates. Why raise yields when you can sell trillions of dollars of low-yield bonds to the Federal Reserve, Bank of Japan, etc.?

By buying the new debt with newly created money, the central banks have marginalized the market’s ability to transparently price risk and credit: the bond market has in effect been captured by the central banks, who can counter any reduction in demand with newly created money.

But the central banks don’t control where all this newly issued money goes. If it goes into the real economy, it triggers inflation; if it goes into assets, it inflates asset bubbles.

Inflation and bubbles have consequences. Inflation eats away at the purchasing power of wages, and since interest rates are already near-zero, the central banks’ game of enabling lower payments by lowering interest rates has run out of room. Once inflation kicks up, the central banks will not be able to fight it except by raising rates, which will quickly choke off consumer spending and the auto and housing markets.

If the central banks keep pumping money into asset bubbles, they are playing with a ticking time bomb, as every asset bubble in history eventually pops: the bigger the bubble, the more spectacular the implosion. The more the central banks inflate assets, the deeper the eventual crash.

Inflation and asset crashes share one characteristic: they undermine the credibility of the central state and central bank. The Federal Reserve and other central banks have claimed monetary omnipotence for years, and they have staked their credibility on keeping inflation and interest rates low and boosting the prices of assets such as stocks and bonds.

Higher rates undermine both stocks and bonds. Every existing bond loses market value as rates climb, and the reason to own a stock paying a 2% dividend fades rather quickly when bonds start paying 5+%. Needless to say, rising rates that choke off consumption won’t be positive for corporate profits, either.

In other words, the central banks can’t have it both ways. If they keep printing money (expanding their balance sheets), the new money will go somewhere. If it goes into the real economy (no sign of that yet), the flood of new cash will spark inflation in at least those resources and goods where labor costs are not the primary factor (oil and agricultural commodities, for example).

Since labor is in over-supply (see How I Became a Trillionaire (and Some Thoughts on Inflation), this will not be the sort of inflation where wages will rise along with the cost of goods and services: wages will continue to stagnate as costs of essentials rise. That is a recipe for stagflation and recession.

If the flood of central-bank money continues flooding into assets, eventually it chases essential commodities such as oil and grain, sparking inflation via the back door, not from supply-demand issues but from money-printing-driven speculation.

All the central-bank inflated asset bubbles will pop, impoverishing those who gambled with debt (margin) and triggering yet another financial crisis….”

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“What’s Ben Bernanke thinking? With this series of charts, we’ll help to explain why the Fed left interest rates at near-zero levels and kept intact its $85 billion a month bond-purchase program….”

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“Japan stands on a path toward for victory in the global currency war, with the yen set to fall a long way, says Axel Merk, president of Merk Investments and a Moneynews contributor.

“The market will take the yen to [zero],” he tells the Financial Braintrust Alliance in an exclusive interview.

“That means the yen is going to be worthless. We published a piece last November whether the yen is doomed, with a question mark, and we’ve since removed the question mark.”

The dollar hit 96.71 yen March 12, its highest level since August 2009.

It pays to look at Japan’s political history to understand the yen, Merk says. “In the past, the yen was strongest the more dysfunctional the government was,” he explains.

“A dysfunctional government is a government that can’t spend money, a government that cannot exert pressure on the central bank [to ease].”

Editor’s Note: Put the World’s Top Financial Minds to Work for You

But now the government of Prime Minister Shinzo Abe is strong, with a two-thirds majority.
It wants fiscal stimulus. “So more spending,” Merk says.

Abe also seeks plenty of monetary stimulus, and he has a new Bank of Japan Governor, Haruhiko Kuroda, to implement it. “So there’s going to be more fireworks,” Merk says.

The country can no longer finance its massive debt – more than 200 percent of GDP – internally, he says. So, “Japan is going to be at the mercy of the markets,” he states.

“The policymakers don’t get that. They don’t understand it. So they’ll do their saber rattling, they’ll print a great deal of money.”

Put that all together, and “the dynamics for the yen have changed,” Merk says. “That’s why we think this [yen weakness] isn’t just a trend. Sure, there will be rallies. There might be violent rallies. But, in our view, there’s no way that the yen can survive this.”

Looking at the global currency war, governments should realize, “it’s not a path to prosperity when you debase your currency,” Merk says…..”

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“Fundamentals — corporate earnings, profit margins and gross domestic product (GDP) growth — are supposed to be the ultimate guide for judging stock values and predicting the stock market’s direction.

But those fundamentals are useless when it comes to forecasting stock market trends, a Vanguard study concludes.

“We’re not saying fundamental factors don’t matter,” Roger Aliaga-Diaz, a study co-author and Vanguard senior economist, told CNNMoney.

The problem is that there are many other factors influencing stocks.

Vanguard economists examined the stock market going back to 1926 to reach their conclusion. Even the recent past shows the disconnection. Stocks jumped 16 percent last year, while corporate profits were up just 3 percent. European stocks surged 20 percent, while Europe was stuck a deep recession.

Earnings forecasts aren’t much help either, CNNMoney noted. Analysts are generally too optimistic, and their predictions are already priced into stocks anyway. Plus, they exhibit herd-like behavior, not wanting to be different from their forecasting peers.

Vanguard determined that the Shiller price-earnings (P/E) ratio, which uses average earnings over 10 years, is the best fundamental yardstick for predicting stocks, according to CNNMoney. That measurement currently predicts modest returns.

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“Over the weekend the European Union agreed to a 10 Billion euro bailout of member country Cyprus’ banking sector, but imposed as a condition of the bailout a 9.9% tax on all bank deposits above 100K Euros.[1]

On its face and in the abstract, this proposal is a horrible way to bail out a bank and an ailing economy, as it violates rule #1 of financial bailouts, namely “avoid bank runs.”

Not only does the proposal guarantee every Cypriot bank will suffer a run by all its depositors as soon as they open on Thursday, but every bank in Southern/peripheral/wobbly Europe – Spain, Portugal, Greece – has to wonder whether their depositors will do the same in anticipation of future similar bailout terms imposed by the European Union, and Germany in particular.

The fastest way to achieve a run on banks in weak countries is to suddenly punish depositors for leaving their money in the bank.  Even to threaten to do so can create a self-fulfilling fear, one that leads quickly to bank runs.

The proposal also violates rule #1 of dealing with distressed banks, which is that depositors get treated better than bondholders. The European Union’s proposal to punish depositors – while bondholders suffer no losses – upends the traditional order of payment priority of bank liabilities.

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“The crisis in Cyprus is a good opportunity to take a step back and remind ourselves how incredibly broken the Eurozone remains.

For one thing, the whole reason the Eurozone has these sovereign debt crises is because while the countries share a common currency, they don’t share a common Treasury. So it is literally possible for a country to just run out of cash. That can’t happen in a country like the U.S. or the U.K., which are capable of creating their own money.

And then even beyond that, the single monetary policy isn’t helpful. The periphery needs much more stimulus, whereas Germany is worried (perhaps fairly) about bubbles, as everyone rushes cash into its borders. Plus, Germany has virtually no unemployment, so it sees no need for stimulative measures.

Economist and professor David Beckworth looked at the big picture on Monday, pointing out how the system needs some serious structural reforms to function properly.

One reform is to alter ECB policy so that it actually tries to stabilize nominal spending for the entire Eurozone, not just Germany. Since it inception, ECB monetary policy has been biased toward Germany at the cost of destabilizing the Eurozone periphery. This could be fixed by having the ECB abandoned its flexible inflation target and adopt a NGDP level target. Another complementary reform, would be to create meaningful fiscal transfers in the Eurozone similar in scale and scope to the United States. Both of these options, however, would face stiff opposition from Germany. For the former would require temporarily higher inflation than Germany desires and the former would require large fiscal commitments for the Eurozone from Germany. Neither is likely to happen.

The Eurozone made its first step towards a true structural reform last summer, when the ECB announced its “OMT” program, which begins to establish the central bank as a lender of last resort, backstopping governments that get into trouble.

That’s cooled the crisis a lot (reducing government borrowing costs) but the catch is that to be eligible, countries have to put on handcuffs (reforms, austerity, etc.) and that’s sent the economies of various countries right into the toilet.

Here, for example, is the unemployment rate in Italy.

 

 

That’s hardly an unusual looking chart.

Outside of Germany, pretty much every economic indicator in the Eurozone just gets worse and worse….”

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The Russian finance minster is already in multi day talks with Cypress counterpart, but a recent statement implying negative outcomes has rattled the markets this morning and helped gold to rally.

Story developing…..

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SOURCE
NYSE

NASDAQ

AMEX

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“….Grillo is pushing ahead with his campaign promise to wrest political power from established parties and re-evaluate positions, like euro membership, that previously enjoyed near universal support in parliament. Today’s meeting gave Napolitano a chance to ask Grillo, a 64-year-old ex-comic who won a blocking minority in the Senate, to lower his resistance to compromise and agree to support a rival for the premiership…..”

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While we did not go red markets did take an opportunity to sell into strength given all the folly in the banking system of Europe.

Europe would not be an issue if there was no domino effect to worry about.

At any rate, the bulls do get a win today and investors are giddy over the fact that the Fed is pumping for now.

DOW up 55

S&P up 11

NASDAQ up 25

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[youtube://http://www.youtube.com/watch?v=FJt7gNi3Nr4 450 300]

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[youtube://http://www.youtube.com/watch?v=5Hfmaar81jc 450 300]

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“People have learned their lesson.

We’ve been told that so many times since the near-death experiences of the financial crisis. Bankers and regulators have flipped roles: now it’s the bankers who are cautious and their overseers who are aggressive.

Details of JPMorgan Chase’s multibillion-dollar trading loss — brought to light by a riveting and devastating report from the Senate Permanent Subcommittee on Investigations — demonstrate what a sham that is. Bankers aren’t acting cautious and chastened. Risk managers aren’t in the ascendance on Wall Street. Regulators remain their duped and docile selves.

What we now know about the incident is that, as the cliché has it, the cover-up was worse than the crime. The losses out of the London office weren’t enough to take down the bank. But as they were building, JPMorgan traders fiddled with risk measures and valuations. The bank’s risk managers defended the traders and pooh-poohed the flashing red signals. The bank gave incorrect information to its regulator. Top executives then made misleading statements to shareholders and the public. All the while, the regulator served its typical role of house pet.

As JPMorgan got into trouble, traders and the responsible executives treated the valuation of trading positions, made up of derivatives, as a puppet made to do what they wanted. The traders pulled on this calculation or that to change the way they were valuing the position to reduce the losses.

Ina Drew, the head of the bank’s chief investment office, referring to how the positions were calculated, asked an underling if he could “start getting a little bit of that mark back.” She then asked if he could “tweak at whatever it is I’m trying to show.” She might believe it is exculpatory that she prefaced the comment by saying to do it “if appropriate” and that the tweak should come with “demonstrable data,” but any idiot working for her would know exactly what she meant: create some rationale to manipulate the valuations to make things look better than they really are.

This discussion did not make it into the bank’s internal report on the incident from January. Imagine that.

Yes, Ms. Drew was ousted. But her actions show that what financial executives do postcrisis when faced with trouble is no different than what they did precrisis. In testimony on Friday, in a quiet voice, she deflected blame up to Mr. Dimon and down to her traders, claiming she was kept in the dark.

The Senate report makes it clear that JPMorgan misled shareholders and the public, particularly on its April 13, 2012, conference call.

That call, which makes up a particularly damning portion of the Senate report, featured a haughty Jamie Dimon famously dismissing the problem as a “tempest in a teapot.”

Of course, it was no such squall. In the call, the chief financial officer at the time, Douglas L. Braunstein, made a number of what appear to be misleading statements about the trades. Mr. Braunstein said the trading decisions were made on a very long-term basis, when in fact the traders were shuffling positions almost daily to make profits and then to disastrously “defend” their positions from further losses. Mr. Braunstein reassured investors and analysts in the call that the trades were vetted by the firm’s top risk managers, when they were not (though top officials, including Mr. Dimon, knew about repeated risk-measure breaches).

This means “there was risk oversight” for the office that made the trades, and the trading “positions needed to comply with limits,” a JPMorgan spokesman, Joseph Evangelisti, said. “We were not aware at the time of all the deficiencies in the risk organization” of the trading group….”

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“Following the Cypriot parliament’s total rejection of the controversial bank bailout deal reached by EU finance ministers over the weekend, the ECB released a statement saying that it would provide liquidity to Cyprus “within the existing rules.”

Emergency Liquidity Assistance is the ECB’s last recourse for euro zone banks that find themselves unable to raise funding in the open market through bond issuance.

However, as several pointed out following the statement, Cypriot banks probably don’t even qualify for ELA, which means the ECB may have really been saying something more along the lines of “don’t count on it.”

Deutsche Bank economist Gilles Moec explains in a note to clients.

“The provision of ELA funding is normally conditional on the receiving banks remaining intrinsically solvent,” says Moec. “With the prospect of a bank run starting immediately after the expiry of the bank holiday, this condition hardly holds.”

In fact, Moec writes that the ECB is probably even incentivized NOT to step in and provide assistance for the Cypriot banking system: …”

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