Central Perk: 7 oct. 2013

luni, 7 octombrie 2013

Mish's Global Economic Trend Analysis

Mainstream Media Finally Catches on to Disabity Fraud: 60 Minutes Reports on "Disability USA"
Throw the Bums Out (Your Bums, Not Mine)
French Taxi Unions Seek Minimum 15-Minute Delay Between Minicab Booking and Its Arrival
Surge in Home Equity Loans Coming?

Mainstream Media Finally Catches on to Disabity Fraud: 60 Minutes Reports on "Disability USA"

Posted: 07 Oct 2013 11:19 PM PDT

At long last, mainstream media is giving play to widespread disability fraud running rampant in the US.

Steve Kroft on 60 Minutes reports on the alarming state of the federal disability program, which has exploded in size in the last six years and could become the first federal benefits program to run out of money.

Link if video does not play: "Disability USA"

The video is about 14 minutes long. Kroft interviews senator Tom Coburn of Oklahoma. Kroft also attempts to interview a couple of law firms that make the most off of putting people on disability for a fee.

One firm has a perfect track record, where every disability case was approved.

Coburn selected cases at random and found 25% of the cases were fraudulent and another 20% were "highly questionable".

The "system is being gamed pretty big right now", said Coburn. "You need look no further than disability lawyers trolling for new clients."

The 60 Minute report names the firms, and they are under investigation. None of them would talk to 60 Minutes, citing legal advice.

Earlier this year, a senior member of Coburn's staff asked where I got the data for a chart I posted. I had an easy answer: "FRED - the St. Louis Fed website".

A Senate hearing on disability is scheduled this week. Interestingly, with the government shutdown, there may be no government stenographer to record the event.

I am a fan of Senator Coburn. He is one of the few level-headed pragmatists in D.C.

Disability Fraud Recap

I have been discussing disability fraud for at least four years. The subject has finally made prime time. Please play the video and read the first couple links. They are a real eye opener.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Throw the Bums Out (Your Bums, Not Mine)

Posted: 07 Oct 2013 06:51 PM PDT

It's no secret that congressional approval ratings are at near record lows. But what do people think of their own representatives?

Please consider Congress' Job Approval Falls to 11% Amid Gov't Shutdown

As Congress' inability to agree on compromises that would reopen the partially shut-down government and raise the looming debt ceiling continues, Americans give Congress an 11% job approval rating, down eight percentage points from last month and one point above the worst rating in Gallup history.

Question: Do you approve or disapprove the way Congress is handling its job?

The drop in Congress' approval rating is fueled in large part by Democrats' declining approval of Congress -- from 20% in September to 5% in October. Approval ratings among Republicans and independents have also fallen, but by much smaller margins. The big drop in Democrats' approval of Congress most certainly reflects Democrats' negative views of the Republican-controlled House, in which leadership has publicly demanded that the president and Democrats in Congress agree to changes in the Affordable Care Act as a condition for passing a continuing resolution or a budget. Overall, however, approval of Congress is very low across all partisan groups.

Question: Do you approve or disapprove the way the representative from your congressional district is handling his or her job?

Bums? What Bums?

People are clearly fed up with the "bums" in Congress but they keep reelecting them anyway.

Why? Because Congress has hoodwinked voters in their own district into believing everyone "else" is to blame.

Even still, support for voter's own representatives is at a record low.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

French Taxi Unions Seek Minimum 15-Minute Delay Between Minicab Booking and Its Arrival

Posted: 07 Oct 2013 12:13 PM PDT

No matter how crazy or inefficient things are in France, socialists and their union sponsors always seek ways to make things worse. Thus, it's not at all surprising to discover economic lunacy has spread from bookstores to taxis.

Please consider Taxi Wars Erupt in Paris

Parisian taxi drivers get a bad press for being rude, playing loud music, almost never accepting credit cards and turning up for a booked ride with €10 already on the meter. They are also notoriously hard to find.

With just 18,000 vehicles, Paris' taxi fleet has remained virtually unchanged since the 1950s, while London's has swelled to around 23,000 black cabs and 40,000 minicabs.

Charles de Gaulle threw in the towel in 1958 after a two-day strike. Right-wing president Nicolas Sarkozy capitulated in 2008 after a drivers staged a three-day "operation escargot".

Now, however, the undisputed reign of "le taxi parisien" is under threat due to a recent change to the law liberalising so-called "tourist vehicles with chauffeurs", or VTCs - the French equivalent of minicabs.

Yan Hascoët, the 29-year old CEO of Chauffeur-Prive, started with 20 cars 18 months ago and business is booming. He now has a fleet of 320 vehicles, a client base of 15,000 and is seeing 15 per cent week on week growth.

"Our drivers are dressed in a suit and red tie, they open the door, make you feel at home in the car, doesn't blast their own music and don't talk unless talked to – just basic service which is hard to find in France," he told the Daily Telegraph.

VTCs work on reservations and cannot be hailed in the street. But the advent of smart phone applications using global positioning means cars can turn up almost at once, enraging taxi unions which accuse them of bending the rules.

To stop this, taxi unions are calling for on the government to impose a 15-minute delay between when a customer books a minicab and its arrival.

With a decision expected in the coming weeks, experts said the taxi lobby will pull out all the stops to get its way.

Also consider France Vows to "Save the Bookstores", Fixes Price of Books, Bans Free Shipping by Amazon

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Surge in Home Equity Loans Coming?

Posted: 07 Oct 2013 10:06 AM PDT

With mortgage refinancing activity down 30% between May and September, will homeowners turn to home equity lines for cash?

That is a possibility suggested by the LPS Mortgage Monitor. Via email ...

"We have seen prepayments decline by more than 30 percent since May, when mortgage interest rates began climbing approximately 100 basis points to where we are today," LPS Senior Vice President Herb Blecher said. "As a result, the percentage of borrowers currently in loans with interest rates high enough for refinancing to make fiscal sense has decreased significantly. Over half of borrowers are now 'out of the money' with respect to refinancing. In December 2012, the population of potentially refinance-eligible borrowers stood at roughly 10 million. However, refinance activity during that time, along with rising interest rates, have shrunk that pool to just 5.7 million borrowers as of August.

"While higher interest rates may certainly have the effect of tamping down refinance activity, they may actually wind up contributing to a new appetite for home equity loans among homeowners," Blecher continued. "After bottoming out at the beginning of 2012, home prices are now at their highest levels since 2009, and borrowers who bought or refinanced within the last few years are quite likely to have accumulated additional equity in their homes. Based upon LPS' analysis of historical borrowing patterns and home value trends, it is possible that we could see an increase in second-lien borrowing among those who have locked in their first mortgages at very low rates and who wish to tap their equity without refinancing into a higher rate."

Refinancing and Home Equity Activity

Charts from the September LPS Mortgage Monitor

Prepayments Down 30%

50% Ineligible for Refinancing

Loans with Refinancible Characteristics

Mortgages with Second Liens

Historical Trends in HEs

Surge in HE Loans Coming?

A surge in home equity loans depends on three things

Home prices continue to rise
Willingness of borrowers to take out loans
Willingness of lenders to offer loans at low rates

None of the above is a given.

If home prices stagnate or decline, no surge in home equity loans will follow.

Even "if" home prices continue to rise, projections as to what "may" happen if recent vintages follow the 2003 pattern are invalid because attitudes towards borrowing and lending are not the same now as in 2003.

Once attitudes on debt and housing reach a peak and reverse, it takes decades before they peak again.

If home prices continue to rise (a very big if), there will be some increase in home equity loans, but not at a pace we have seen before.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com