Morning Report – Existing Home Sales rise 6/22/15

Markets are higher this morning after the Greek government offered a new proposal to end the standoff. Bonds and MBS are down

The Chicago Fed National Activity Index improved slightly in May to -.17. The 3 month moving average was also negative, which means the economy is growing a little below trend. Production and Consumption were negative, while employment was positive.

Merger mania in the health insurance space: Cigna rejected an offer from Anthem, and Aetna supposedly approached Humana. Insurers are looking to cut costs.

Existing Home Sales improved 5.1% to 5.35 million in May, according to the NAR. This is the highest since May 2009.  The first time homebuyer accounted for 32% of sales, up from 30% in April, but still below its historical average of about 40%. All cash transactions were flat at 24%, while days on market ticked up slightly to 40 days. The median price of a home rose 7.9% to $228,700. This puts the median home price to median income ratio at 4.3x, which is again stretched and well outside the historical norm of 3.2x – 3.6x.

In political news, the Supreme Court is supposed to rule on King vs Burwell, the case which decides whether states that did not set up exchanges are eligible for federal subsidies. This will dominate the news headlines in Washington if the Court decides the language in the law needs to be changed.

42 Responses

  1. Good Salon piece on Clinton v Sanders

    “Hillary Clinton is going to lose: She doesn’t even see the frustrated progressive wave that will nominate Bernie Sanders

    Clinton’s positioning on TPP is way too cute. When it passes with Dems’ implicit support, grass roots will explode

    Bill Curry
    Monday, Jun 22, 2015 06:00 AM EST”

    http://www.salon.com/2015/06/22/hillary_clinton_is_going_to_lose_she_doesnt_even_see_the_frustrated_progressive_wave_that_will_nominate_bernie_sanders/

    Like

  2. This, whatever I am, not sure anymore really, will never vote for either Clinton or Sanders.

    Like

  3. Democrats will come home to Hillary because she still be better than the greater enemy.

    In the end, the only way for the progressive base to influence things is to be prepared to lose. That has been somewhat successful in the Republican party.

    Like

    • McWing:

      In the end, the only way for the progressive base to influence things is to be prepared to lose. That has been somewhat successful in the Republican party.

      Which is interesting because I would imagine that there is far less risk to progressives in being willing to lose in the short term than there is to conservatives.

      Progressives are ideologically inclined to implement policies and programs which, by their very nature, become difficult if not impossible to reverse once they are put in place. Think of things like Social Security and Obamacare. So when the conservative base is willing to lose in order to make a point to the R establishment, it actually makes their ultimate task even more difficult by allowing progressives the power to implement these kinds of things.

      The progressive base itself faces no such risk when being willing to lose in order to make a point to the D establishment, because conservatives are ideologically disinclined to implement the kinds of domestic policies and programs that by their nature become politically difficult or impossible to reverse.

      Like

  4. Scott, I completely agree, however the progressive Democratic base actually believes the media’s portrayal of Republicans ergo losing to them is the Worst Possible Outcome.

    Like

  5. “It worked for Obama. “Yes we can,” audiences called out. “Do what?” few bothered to ask, or thought they had to.”

    [grinds teeth]

    Like

  6. Nova, any chatter regarding the government’s position on the proposed CI / ANTM merger?

    I know there will be antitrust issues, but would the government prefer fewer, bigger insurers or would they prefer to see more, but smaller insurers.

    Like

    • Brent:

      I know there will be antitrust issues, but would the government prefer fewer, bigger insurers or would they prefer to see more, but smaller insurers.

      It is a testament to how far we have sunk as a nation that what the government prefers in this regard matters at all.

      Like

  7. Well, in all fairness, this is #2 and #4 combining to become #1. That almost invariably will necessitate an in-depth antitrust review. I am thinking more from the standpoint of whether the government wants to deal with a few giants or a larger number. The stock prices are telling you this is a long shot.

    Like

    • Brent:

      I am thinking more from the standpoint of whether the government wants to deal with a few giants or a larger number.

      My guess is a few giants. It will make the ultimate transition to one giant – the government itself – easier when the time comes.

      Like

      • Brent – insurers are state regulated, still, and under McCarran Ferguson are exempt from federal antitrust laws unless all that changed with Dodd Frank.

        Like

  8. Thanks Mark. I forgot about that. Of course the state regulators will be able to stop it on that basis, I presume..

    Like

  9. I’ll bet the state regulators will demand concessions in order to allow the deal to go through.. They’ll play the same game that the state public utility commissions play when regulated utilities want to merge..

    Like

  10. I haven’t heard much — some trade press on it. but my experience has been that Medicare prefers but won’t ever acknowledge that it would rather have fewer players in a market that are easier to regulate.

    Like

  11. So apparently Too Big To Fail doesn’t apply to insurers, the experience with AIG not withstanding.

    Like

  12. I think TBTF is an act. The problem with all of these non-banks is that the left cannot control them the way they can control a Citibank.

    Like

  13. @lmsinca: “Clinton or Sanders.”

    You wouldn’t vote for Sanders? Clinton is Obama is Bill Clinton is Dubya in many respects (although hardly all) but Sanders would be a lurch to the left that would fill the senate and congress with Tea Partiers . . . more so than it is now. That would be interesting, at least. As it is, it looks like the campaign may come down to Jeb Clinton vs. Hillary Bush.

    Like

  14. @Scottc1: “My guess is a few giants. It will make the ultimate transition to one giant – the government itself – easier when the time comes.”

    You think they’ll ever get it? Once you’ve got a few giants they become their own governments and tend to wield a great deal of power. You might get “single payer” but the money will be channeled into the remaining powerful insurance companies, not parsimoniously dribbled out to physicians.

    Like

    • Kevin:

      You think they’ll ever get it?

      Yes.

      You might get “single payer” but the money will be channeled into the remaining powerful insurance companies, not parsimoniously dribbled out to physicians.

      Unlikely. What “power” will insurance companies hold once a single payer system is created? With the advent of universal care under single payer, the very function that insurance companies exist to serve, ie price risk and negotiate prices for service, disappears. ACA has already started this process by 1) mandating must be covered and 2) limiting the price that insurance companies can charge. Once the government becomes the single payer, insurance companies will serve no purpose (and hence will have no leverage over the government) other than as a simple administrator, which the government can easily do itself.

      As I have mentioned before, the model for this is the student loan system. First the government provided guarantees in order to entice banks to make low interest loans to students to pay for college. Then the government became outraged that the banks were actually making money without taking any risk, demonized the banks to the electorate, and cut them out of the process by lending direct to students. This will happen with insurance companies, too.

      To be fair, insurance companies will probably still exist (as they do in the UK) to provide real insurance to wealthy people as a way of avoiding the inevitable care rationing that must occur under any single payer system. There will be a two-tiered system unless private insurance gets outlawed.

      Like

      • I just doubt we’ll get a single-payer system that is government-to-care provider. I think any attempts to create one will continue to get squashed as remaining insurers maneuver to get the government to pay them and not the doctors.

        Still, your comparison to student loans is compelling. Perhaps it will help. I certainly don’t see private insurance getting outlawed, but who knows in this crazy world.

        Like

        • Kevin:

          I think any attempts to create one will continue to get squashed as remaining insurers maneuver to get the government to pay them and not the doctors.

          The majority of government expenditures (medicare/medicaid) already go directly to the doctors. Only the Obamacare subsidies are funneled through insurance companies. And I find it very likely that, as government subsidies grow and the government implicitly takes on more and more insurance risk, a movement to have “medicare for all” and cut out the “rapacious” insurance company middlemen will gain traction a lot of traction.

          Still, your comparison to student loans is compelling. Perhaps it will help.

          To be clear, I do not view that model as a good thing.

          BTW…it appears that SCOTUS has ruled that the words of ACA mean whatever Obama wants them to mean.

          Like

        • All right, you’ve convinced me. National Healthcare is imminent, alas. Just another reason not to get old or sick, I’ll say that.

          Like

  15. If the SC sides with the government re subsidies, then we essentially have one health insurance company, no?

    Like

    • If the SC sides with the government re subsidies, then we essentially have one health insurance company, no?

      Whether or not the gov wins the case in the Supremes the taxpayers are the major provider of healthcare in America [VA plus medicare plus medicaid plus state subsidies plus hospital district taxes], and total govt spending on health care won’t be affected by the decision – although more of the spending will come through the hospital district taxes until states cave on the exchanges.

      That answer may sound more cynical than your question but as long as hospitals must provide charity emergency care it is, I think, a factual answer.

      NoVA?

      Like

      • Mark:

        Whether or not the gov wins the case in the Supremes the taxpayers are the major provider of healthcare in America…

        The only thing I could find on this was this chart, which shows that private health care expenditures in the US are actually slighlty larger than public health care expenditures.

        http://www.oecd.org/unitedstates/Briefing-Note-UNITED-STATES-2014.pdf

        and total govt spending on health care won’t be affected by the decision

        I don’t know how you can say that. The whole point of ACA was to “cover” the very people who can’t afford their own insurance, thus encouraging those people to consume more health care than they otherwise would. If more people who can’t pay for themselves are consuming more health care, then by definition government spending must increase.

        Like

        • So it is the 48% provider? OK.

          As long as hospitals must provide care, if subsidized insurance doesn’t pay for it either medicaid or local hospital taxes will, Scott. As George says, if taxpayer subsidization is the problem reversing the mandate on hospitals is the choice. But if as NoVA says [and I agree] the shortage of health care pros [reverse of cost of labor] is fundamental, then either training more or stealing them from abroad is a plan.

          Like

        • Mark:

          As long as hospitals must provide care, if subsidized insurance doesn’t pay for it either medicaid or local hospital taxes will, Scott.

          Yes, I know, but you are talking only about emergency care. ACA is designed to encourage people to spend more on non-emergency care, and the people it encourages are precisely those that get the subsidies. Hence more government spending (and, in fact, spending overall because their spending drives up insurance costs even for those who don’t get subsidies.)

          But if as NoVA says [and I agree] the shortage of health care pros [reverse of cost of labor] is fundamental, then either training more or stealing them from abroad is a plan.

          You can’t train more people where there is no interest in getting trained. Doctors are leaving the industry and youngsters are avoiding it in part (if not largely) because of ACA itself. It is interesting that we rarely ever have a shortage of professionals in industries that the government isn’t trying to micromanage. Funny how that happens.

          Like

  16. There is a simple solution.

    Like

    • There is a simple solution.

      To which problem? Seriously.

      Is the problem the burden to the taxpayer? Is it the shortage of health care workers/docs? The gaming of non-profit status by hospitals? The spread of infection in American hospitals? Too many fat people? Too many old people?

      Like

  17. Wasn’t sure what the Quadrant link was, so I went looking.

    https://quadrant.org.au/magazine/2015/06/climate-wars-done-science/

    Not sure this is it but I loved this line, as I could have written it myself:

    Scientists are terrible at making forecasts—indeed as Dan Gardner documents in his book Future Babble they are often worse than laymen. And the climate is a chaotic system with multiple influences of which human emissions are just one, which makes prediction even harder.

    Put another way in my hierarchy of lies:

    4. Lies
    3. Damned Lies
    2. Statistics
    1. Forecasts

    Like

  18. @markinaustin:

    “Too many old people?”

    There’s a simple solution to that, to be sure, but I’m not sure it will be popular. 😉

    Like

  19. A) Stop forcing hospitals to treat all patients. B) give Medicare benefits to patients in the form of cash to be spent on anything they want.

    Like

  20. I think insurance coverage — particularly first dollar coverage — drives spending. the more in insulate people from the cost of care, the more care they will use.

    And it’s not charity care that’s pushing the cost of care. It’s labor. 24-7-365 skilled staffing isn’t cheap.

    Like

    • nova:

      I think insurance coverage — particularly first dollar coverage — drives spending. the more in insulate people from the cost of care, the more care they will use.

      Absolutely agree with this. It seems to me the most fundamental economic truism.

      Like

      • particularly first dollar coverage

        Seems obvious, too. People moan about deductibles, but they are absolutely necessary to ameliorate over-demand.

        Like

  21. Why would competent people be drawn to an industry if wages in that industry are decreasing?

    Like

    • McWing:

      Why would competent people be drawn to an industry if wages in that industry are decreasing?

      Future government planners will surely be asking themselves exactly that question as they try to devise yet another policy to “fix” the problems created by their previous “solution”.

      Like

  22. Kevin, that’s the article I linked to. It’s all kinds of awesome.

    Like

Be kind, show respect, and all will be right with the world.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: