Berkshire, Buffet, Sokol sued

WILMINGTON, Delaware (Reuters) – Warren Buffett, former top lieutenant David Sokol, and the rest of Berkshire Hathaway Inc’s (NYSE:BRK-A – News; NYSE:BRK-B – News) board of directors were sued on Tuesday by a shareholder over a trading scandal that cost Sokol his job.

Bloomberg’s Kathleen M. Howley suggests that the allure of homeownership has been tarnished as the cheap home markets continues to fail to attract buyers.

WASHINGTON (Reuters) – Housing starts and permits for future home construction rose more than expected in March, snapping back from the prior month’s winter weather depressed levels, government data showed on Tuesday.

The Commerce Department said housing starts rose 7.2 percent to a seasonally adjusted annual rate of 549,000 units. February’s starts were revised up to a 512,000-unit pace from the previously reported rate of 479,000 units.

As if the droughts weren’t enough, they apparently coincide with a contraction of 8.33 million hectares of farmland over the last decade.

China’s farmland per capita is less than half the world average, and one-sixth that of the U.S., according to China Comment, a Communist Party magazine. Actual land loss may be greater than the government’s numbers suggest, as local officials fudge figures and illegal use proliferates.

The basic gist of the story is that China has far too little land set aside for farming, and in conjunction with growing world populations, global food supplies are going to be hard pressed.

Archer Daniels Midland Co., Bunge Ltd. and Cargill Inc. were among U.S. food companies that in January won $6.68 billion of deals to supply China with soybeans, the U.S. Soybean Export Council said.

He’s demanding consitutional changes to enforce a balanced budget.

Fat chance this holds up.

House Budget Chairman Paul Ryan’s 2012 budget resolution turned the floodlights on Medicare, the health care program for seniors that is projected to take increasingly bigger bites out of the federal budget in the coming decades.

Ryan’s proposals for overhauling the program are dramatic. Democrats claim they will dismantle it. Ryan claims they will save it.

Love or hate his ideas, though, they are sparking a necessary debate. The ugly math suggests Medicare is unsustainable in its current form.

Medicare is financed through a combination of payroll taxes, premiums and general revenue. The problem is that spending has been growing faster than the economy and is projected to do so indefinitely.

The reasons for that are simple: The number of people expected to enroll in the program will surge as the population ages and health care costs continue to grow far faster than inflation.

In just the next decade, the Congressional Budget Office estimates, enrollment in Medicare will grow by a third and spending per enrollee will jump by 50%.

Between 1975 and 2010, the number of enrollees doubled to 47 million, and the real cost per enrollee quadrupled, according to data from the Centers for Medicare and Medicaid Services, the agency that runs the program.

By 2040, Medicare will cover 88 million people and the cost will be nearly three times higher than in 2010.

Not surprisingly, payroll tax revenue and premiums aren’t keeping pace with the program’s increasing costs. And that means the draw on federal coffers will grow larger barring any policy changes.

To wit, in 1975, the program’s income from revenue and premiums covered 69% of total Medicare disbursements. In 2010, they covered 40%. By 2040, they’ll only cover 30%.

So how to fix it?

Figuring out how to make the program’s finances sustainable over time while continuing to provide seniors with adequate coverage and quality care is difficult.

The House Republican budget resolution proposes converting Medicare from a fee-for-service program into a “premium-support” system for everyone under 55 today. When they become seniors, they would choose from a Medicare-approved list of private insurance plans and the cost of their chosen plan would be subsidized in part by the federal government.

The plan would also gradually raise the Medicare eligibility age from 65 to 67 by the 2030s.

The changes would reduce federal health spending commitments and make them more predictable, according to the CBO.

But the agency also said “most elderly people would pay more for their health care than they would under the current Medicare system.” And they would assume greater financial risk if their health care needs turn out to be greater than expected.

Robert Reischauer, president of the nonpartisan Urban Institute and a trustee of the Social Security and Medicare Trust Funds, commends Ryan for coming up with an overall debt-reduction plan that he characterized as “significant” and “serious.”

But the burden Ryan’s Medicare proposals would shift to enrollees in the program concern him.

For one thing, Reischauer said, Medicare today “is not a particularly generous program. Most seniors buy or get supplemental coverage.”

Currently, Medicare covers half of seniors’ health costs, said Tricia Newman, director of the Medicare Policy Project at the nonpartisan Kaiser Family Foundation.

She and Reischauer worry that proposals like Ryan’s presume that seniors should “have more skin in the game.”

“People in Medicare already have plenty of skin in the game,” Newman said. “They won’t have a great capacity to absorb higher costs.”

They contribute to the program first as workers through their payroll taxes, then as seniors through premiums. Newman noted, too, that out-of-pocket spending on health expenses is already rising for people on Medicare, with one in four now spending at least 30% of their incomes on health expenses.

Newman and Reischauer both note that making Medicare sustainable will require more than curbing federal payments to seniors and increasing cost-sharing. It will require figuring how to bring health care costs down generally.

Ryan’s plan, however, calls for the repeal of the entire new health reform law, which includes a number of delivery system changes that potentially may reduce Medicare costs and improve care, such as reducing reimbursements for hospitals with high infection rates.

“These seeds haven’t really been planted yet,” Newman said.

The deficit watchdog group Concord Coalition in a statement commended Ryan for putting out an overall plan that “fits the magnitude of the fiscal challenge we face.”

But it, too, noted concern that his efforts to control Medicare costs are not paired with efforts to control health costs. Without both, seniors’ ability to afford health care will go down over time.

“While setting spending targets for federal health care programs provides an incentive for efficiency, and increasing out-of-pocket costs for retirees provides an incentive for economizing, we will still need cost controls, delivery system reforms, and research on best practices to have any chance of reaching those targets,” said Josh Gordon, Concord’s policy director.

He addresses the “too big to fail” issue and the impact it could have on the economy, discussing moral hazzard and the stifling of competition and innovation.

S&P Corrects Rating On Montgomery Township Board of Education, NJ’s Series 2001 School Bonds 06-Apr-2011
09:16 EST

CITIC Pacific Ltd.’s Medium-Term Notes Program And Proposed Senior Unsecured Notes Rated ‘BBB-‘ 06-Apr-2011
00:43 EST

They managed to stave off the leak with a polymer.

NEW YORK (TheStreet) — The economic consequences of a government shutdown can’t be calibrated on a spreadsheet with an economic model. It all depends on who wins public opinion — congressional Republicans or the president and Democrats.

Federal spending is out of control. From 2007, the last full year before the financial crisis, to 2011, the second full year of economic recovery, spending has jumped $1.1 trillion, or 40%, when a $200 billion increase would have satisfied inflation.

For any other country, a deficit exceeding 10% of GDP would force austerity by sending interest rates on government bonds through the roof. Alas, the U.S. prints the world’s currency — the dollar — so it can inflate its way to solvency, and the bond market is starting to take that bet.

Enter the Tea Party, that troublesome bunch of youngsters pushing elder Republicans to stand up for fiscal solvency, end the madness or halt funding for the government.

Closing federal offices for a few days won’t have a great, lasting impact. When they reopen, checks will go out. What counts, though, is whether the newly elected conservative majority in the House of Representatives keeps its mandate as measured by the polls.

Through 2012, the projected cumulative deficit is $11 trillion, and House Republicans are crafting a plan to cut that figure by $4 or $6 trillion — reports vary on the amount. The means are hardly attractive — vouchers for poor folks to purchase health care and block grants to the states to replace and reduce much of federal Medicare spending. That would morph President Obama’s vision of universal coverage into a victimization plan for the poor and even bigger budget crises for the states.

Americans pay too much for health care, spending 18% of GDP for less effective service than the Germans and Dutch receive spending only 12 percent. Instead of taking on higher U.S. drug prices, bloated health insurance and hospital administrative costs, and malpractice abuse, Republicans will tell the poor and the states to bargain with the big guys directly. Good luck with those ideas.

As for Social Security — hush, Republicans have a secret plan! The GOP will save money, but so far it not revealed how. Private investment accounts, the favorite among free marketeers, would leave brokers smiling but the old poorer, judging by how most IRAs have faired since 2000.
If the President comes out of the government shutdown politically stronger, then its business as usual, but can it be?

Thanks to huge deficits, inflation expectations are rising, and bond investors are becoming wary that the secular trend on 20- and 30-year U.S. Treasury rates is up and up. Not just a cyclical adjustment this summer, as unemployment falls and the Federal Reserve ends quantitative easing, but up and up over the next several years because the size of deficits President Obama’s budgets project are on the low side. He assumes too much cost savings and additional revenue from health care reforms and a 4% percent growth rate for the next four years — something few economists would endorse.

As the long rate on Treasuries rises, interest payments will absorb more and more federal revenue, and austerity will be forced on the U.S. government in the manner of Greece or Portugal. At that point, slashing will prevail over reason. Thoughtful reforms of health care and Social Security will become even more difficult.

It’s tough to forecast the consequences of a fiscal train wreck, but if the Democrats win the day in a government shutdown, it only postpones the inevitable reckoning to an ultimate day of calamity.

The choices is clear. We can make responsible reforms to health care that harness drug, administrative and tort costs now, and ensure solvency for Social Security by raising the retirement age to 70, or the bond vigilantes will ultimately end the party. If it’s the latter, moer draconian changes will be forced on the American people, who simply refuse to live within their means.

No agreement could be reached after the meeting, which arguably was only being held to set up the groundwork for a massive blame campaign that is about to kick off.

There’s another $300 million deficit for the state of Michigan.

Wouldn’t be a problem if the retirement benefits weren’t all but guaranteed. The argument is basically that because some defer the benefits, it’s unconsitutional (not much different than the national argument against Obamacare).

But, of course, the teacher’s unions still want the benefits they aren’t paying for.

David Hecker, president of the American Federation of Teachers Michigan, said if the new law is struck down, the state should not reduce funding for retired teachers’ health care.

“Retiree health care needs to be provided, and the state needs to step up and provide it,” Hecker said.

Basically just putting the ball in the Senate and Executive Branch’s courts, respectively.

These people are stuck in the 90’s.

The crux of his argument is that the Federal Reserve takes cash out of circulation all the while it has been releasing liquidity to the market, so much of the total magnitude of what they’ve done is being counteracted.

Unfortunately, he attempts to downplay the amount of money that has been made by comparing the number of notes in circulation today to the number in circulation in 2009.

A better reflection would be to compare the number of notes in circulation before the crisis started to today, but then that would absolutely destroy his argument. Needless to say, the commodity markets haven’t been interested in hearing his remarks.

The U.S. government is refuting claims that it is about to let the primary owner of the Macondo well start drilling again in the gulf of Mexico.

The billionaire investor was discovered stealing his cable today, after unusual request activity from his home prompted the company to investigate.

Comcast showed up to Mr. Paulson’s home around 1pm, where they found a multitude of wires crudely tapped into their fiber optic lines, and running back to Paulson’s mansion.

When confronted, Mr. Paulson refused to go into detail, saying only “with rates that high, they deserve to be robbed.”

“We’ll leave it up to the courts,” he added, before escaping the reporter.

Revenue surpassed $2.5 billion.

Government reports show 388,000 initial claims.

This is down from 394,000. However, those numbers were revised up from 382,000 the week before.

So initial unemployement benefits are up 6,000 inside of two weeks…

Which is a very weak way of telling the chinese to stop manipulating their currency for advantageous trade positioning.

The G-20 meeting was organized by France, which is holding presidency of the group for this year.

France and China both pushed for the renminbi to be added to the Special Drawing Right account.

Japan quake not likely to result in wholesale rating changes for Japanese auto sector.

However, the disaster’s aftermath will weaken issuers’ operations and financial performance and could have rating implications for certain companies, including Toyota and Yamaha. Nissan and Honda were in better shape prior to the disaster and now face less risk.