Mish's Global Economic Trend Analysis |
- State Bank Nonsense from Ellen Brown Revisited
- Italian Banks Need Extra $57 Billion for Loan Loss Reserves, 18% of Loans Non-Performing
- False Thesis of the Day: Huge Cash Pile Puts Recovery in Hands of Corporations; Cash Cow Revisited
- Target Drops Healthcare Coverage for Part-Time Workers, Claims No Reduction in Hours; Thank Your Employer?
| State Bank Nonsense from Ellen Brown Revisited Posted: 22 Jan 2014 08:11 PM PST I have been thinking a bit more on the George Mason University paper on State Fiscal Conditions. Before I tie this back to Ellen Brown's state bank thesis, here are the pertinent charts once again. PolicyMic Produced this Chart of State Fiscal Conditions.  Highlights and Lowlights Let's return to the original working paper for some highlights and lowlights. At the bottom of the rankings are New Jersey and Illinois. New Jersey faces long-run solvency problems due in part to nearly 15 years of underfunding its state and local pensions. It has an estimated unfunded pension liability of around $25.6 billion as well as $59.3 billion in unfunded liabilities for the health benefits of retired teachers, police, firefighters, and other government workers (State Budget Crisis Task Force 2012).Bottom 5 in Long-Term Solvency  In terms of long-term solvency (the most critical issue), New Jersey and Illinois are at the bottom of the heap. Pension plans and union activism are to blame. All five states at the bottom of the list have one thing in common: they got that way via "progressive" extreme-liberal politics, fueled by union activism, and promises that cannot possibly be met. Compare to the top five. Top 5 in Long-Term Solvency  Ellen Brown Revisited Ellen Brown has made a career promoting the idea North Dakota is doing well because it is the only state with a state run bank. Here's reality: A number of states are in good shape because of sound fiscal policies. If you are looking for academic silliness, do a search for Ellen Brown North Dakota Sate Bank. Better yet, play this downright scary video If I only Had a Bank The idea that North Dakota, a small loosely-populated farm state is in good shape only because it has a state bank is preposterous. Worse yet, Brown takes that absurd position to the extreme, with a proposal to end the Fed and put California politicians (state politicians in general) in charge of printing money to support union causes. Ellen Brown understands various problems with the Fed, but proposes a solution that is even worse, putting state politicians in charge of printing presses. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Italian Banks Need Extra $57 Billion for Loan Loss Reserves, 18% of Loans Non-Performing Posted: 22 Jan 2014 05:45 PM PST It will be interesting to see how well Italian banks handle stress tests later this year given new S&P capital shortfall estimates. Of course, the stress tests were watered down twice already, and if need be I am sure ECB president Mario Draghi can find additional ways to further dilute the tests. Yet, whether or not the losses are hidden, they are real. S&P warns Full recovery a long way off for Italian banks Italian banks will need to set aside as much as 42 billion euros ($57 billion) in new provisions for credit losses by the end of 2014 and some may have to raise additional capital, rating agency Standard & Poor's said on Tuesday.History suggests the rating agencies are rather conservative when estimating such losses. Thus, I expect shortfalls to be much bigger than estimated, especially given the overly rosy estimates of a European recovery that is realistically nowhere in sight. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| False Thesis of the Day: Huge Cash Pile Puts Recovery in Hands of Corporations; Cash Cow Revisited Posted: 22 Jan 2014 01:00 PM PST Anousha Sakoui, M&A Correspondent for the Financial Times says Huge cash pile puts recovery in hands of the few. The pile of unspent corporate cash that has built up since the start of the financial crisis is being held by an increasingly concentrated pool of companies that will be crucial to hopes of a pick-up in business investment to stimulate the world economy.One can stop reading right there, knowing full well the report by Deloitte is totally useless at best. By ignoring debt, Deloitte's analysis does not represent the true corporate financial picture. For example, if a corporation has $50 billion cash on hand and $50 billion in debt, Deloitte treats that as more available cash than a company with $10 billion in cash and no debt. Investors are equally foolish. A survey of fund managers conducted by Bank of America Merrill Lynch released on Tuesday shows record 58 per cent of investors polled want companies' cash piles spent on capex. A record 67 per cent said companies were "underinvesting". Expand capacity for what? What is it we need more of? Mergers and acquisitions? At these prices? I suggest any company smart enough to have genuine cash on hand, hold it, hope for a crash, then and only then acquire assets after they have plunged in value. Cash Cow Revisited I did a report on corporate cash in April of 2013. At that time, the five largest corporations, led by Apple, were sitting on available cash of $39.71 billion. Care to guess the actual cash levels of the top 50 non-financial companies? Taking debt into consideration, even counting short-term investments as cash, the answer back in April was negative $543.67 billion. For more details, please see Cash Cow: Of the 50 Largest US Companies, Who has the Cash? Who has the Debt? No Net Cash Simply put, there is no net available cash, although a handful of companies do have some. Is a continued recovery really in the hands of Apple, Google, Microsoft, and a few others? Clearly not. Equally clearly, Deloitte wants companies to spend money they have already spent! By the way, this "alleged cash" is nothing more than an economic distortion caused by the Fed's artificially low interest rate policy that enables corporations to borrow at lower and lower rates. Many do, even though they have little use for the money, and so it sits. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Posted: 22 Jan 2014 10:13 AM PST Obamacare does not mandate healthcare coverage for part-time employees (defined as those working less than 30 hours a week). As a direct result, numerous retail stores including Trader Joe's and Home Depot have already stopped offering healthcare plans to part-time workers. Today, Target, the second-largest U.S. discount retailer by sales with about 361,000 total employees last fiscal year, joined the list. Effective April 1, Target to Drop Health Insurance for Part-Time Workers. "You see a lot of retailers making adjustments in contemplation of the full effect of the employer mandate penalties in 2015," Neil Trautwein, a lobbyist with the National Retail Federation, a trade group in Washington, said in a phone interview. "Even though it is not effective yet, it is already having an effect on the job market and putting companies where they would probably not otherwise want to be."No Reduction in Hours? Target claims there will be no reductions in hours worked. The only way I believe that is if Target already reduced hours, well in advance. The huge, ongoing discrepancy between Household Survey employment, and the Establishment Survey jobs report suggests just that. For example, over the last year, the household survey (on which unemployment is based), shows an average monthly gain in employment of 115,000 per month. In contrast, the establishment survey jobs report shows an average gain of 182,000 jobs per month. The difference is 67,000 per month. Where are those jobs? I suggest two things happened as a direct result of Obamacare.
For further discussion, please see Employment vs. Jobs Discrepancy - December 2013 Data. Thank Your Employer? If you are a part-time employee, Rick Newman writing for Yahoo!Finance says You May Want to Thank Your Employer. Trader Joe's is one employer known for offering generous health care benefits, even for part-timers (until now). But even those workers could end up better off under Obamacare. In an internal email published by the Washington Post, a Trader Joe's exec provided some calculations for a part-time employee who earns about $24,000 per year and has been paying about $167 per month as her share of a Trader Joe's policy similar to a "silver" plan under the ACA. If she enrolls in Obamacare, the subsidized cost would fall to about $70 per month for nearly identical coverage. And that's before a $500 annual stipend Trader Joe's plan to offer part-timers to help them pay for insurance. Questions Abound
Before we blindly march down the "thank your employer" path proposed by Rick Newman, please recall that Obamacare did not solve any long-term problems in terms of reducing overall costs. All Obamacare did was create a different set of winners and losers with massive distortions on the job front, and insurance front, including incentivising companies to reduce worker hours. Is everyone supposed to thank Obama for that? Addendum: Reader Charles commented (and I agree): The number one loser is the taxpayer, as federal subsidies for all involved will be much higher than estimates. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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