Category Archives: Rogues and Rascals

Why I Like The Dutch

Mario Draghi visited the Dutch parliament today and received an “unenviable grilling” from Dutch MPs for nearly two hours which, as the FT said, left the usually implacable Italian confrontational and riled up as tempers flared.

At the end of the meeting, the Dutch gave Draghi a gift – a tulip.

At least someone still has a sense of humor.

The Swamp

President Trump promised to “drain the swamp” in Washington. In doing so, he took on not only the Democratic party but also the McCain-led Republican party establishment, both part of the same swamp, to say nothing of the “deep state” of politicized judges, bureaucrats and contractors.

While it clearly needs doing, the swamp is fighting back, obstructing him at every turn. So far his strategy has been appeasement and it has not worked. Does Comey’s firing mark a return to open hostilities?

We’ll see. But the conflict does mean that government is essentially at a standstill and will remain so indefinitely. It puts basis of the Trump rally in grave doubt. Taken together with an economic slowdown and the mess resulting from Obama’s disastrous international relations policies, the whole situation is an accident waiting for a place to happen.

Don’t believe the VIX as a measure of risk. These days, it is simply a trader’s tool for running short squeezes. Risk is as high as it gets.

Nobamacare

The repeal or gutting of Obamacare is apparently back on the table.

This US system of so-called health insurance is a joke. The principle behind all insurance is that you pay the statistical or actuarial cost of your protection, based on your personal risk exposure. To over-simplify, the idea is that you can afford to pay 1% of the cost of a condition that you have a 1% chance of getting, and if your number comes up, the insurance company can afford to cover your costs because of the 99 other people paying, who don’t get the condition.

In the case of health “insurance”, this simply doesn’t work for everyone because many people can’t afford to pay, especially those with known conditions. So they are denied coverage, either explicitly, at any price, or implicitly by prohibitive premiums.

Many countries simply say, well that’s no good, so we’ll throw out the insurance model and simply pay for everyone’s healthcare out of tax revenues. This is better than one might think because getting rid of the insurance companies saves enormous amounts of money, and controlling the pay of health care providers saves even more.

Obamacare took a different tack, which was to say we’ll keep the insurance model but make healthy pay insurance premiums which are much higher than their risk to subside the cost of care for the sick. In effect, this gave the worst of both worlds – a tax paid to the “insurers”  and out-of-control costs of care. The insurers liked this because they could charge what they liked, the providers loved it because the insurers had no motive to control costs.

Unfortunately for this model, a loophole was left where healthy people could pay a relatively small penalty and avoid paying the “tax” – excessive premiums. So they did. and the insurers were left with a client base of sick people who could not afford to pay the cost of their care. In order to avoid complete collapse, President Obama took the profits from Fannie Mae and other government lenders and funneled them to the insurance companies as a sub-rosa subsidy. President Trump can stop this with a stroke of his pen.

Personally, I think we should get rid of the insurance companies and fall in line with everyone else. This is not likely to happen, because the insurers and the providers will bribe Congress to continue their largesse.

The Dog That Didn’t Bark

The boyz pulled out all the stops today, including a spectacular VIX slam, to squeeze the shorts. This travesty of a market responded as usual. However, what is unusual and interesting is that crude oil is not participating in the bullish euphoria. At least so far today, 3pm, it has extended yesterday’s losses as OPEC jawboning has failed to generate any enthusiasm.

Inventories continue to set new records as OPEC production cuts are offset by weaker demand from a slowing economy. My suspicion is that it will be a  serious sell-off in crude that triggers the next major stock market decline.

The End Of Hope

I had hoped that Donald Trump’s presidency would see some change in Washington. The attack on Syria finally dashed this hope.  The neocons’ campaign to demonize Russia has shaken his confidence to the point that they are now back in charge. This is a catastrophe, for which there is no one to blame but Trump.

Almost as seriously, presumably at the urging of the Goldmanites, he has not only failed to even attempt to slow the financial bubble, of which his pre-election statements show he is well aware, but has cynically relished it as proof of his success. This failure is likely to be his downfall.

We are so screwed. Sauve qui peut.

Pension Tsunami Sighted

NY Teamsters Pension Fund becomes first to run out of money.

Oh, and after the close the API announced that crude and product inventories continue to set new records. Not to worry, speculative buying continues. GLWT.

 

You Can’t Make This Stuff Up

At some point we moved into an alternate universe, where illegal is legal and false is true.

The American Association of Cosmetology Schools sued Education Secretary Betsy DeVos claiming that a gainful-employment rule implemented by the Obama administration shouldn’t be applied to beauty schools.

The lawsuit, filed Friday in federal court in Washington, seeks an order barring the rule that threatens career schools’ access to federal student aid if they saddle their graduates with too much debt relative to their earnings. The trade group said the rule is harmful when applied to beauty schools, whose graduates typically underreport income from cash tips.

Give them a break because their graduates cheat on their taxes? Whatever happened to the clean hands rule?

Bloomberg. Emphasis mine.

DROP kills

The Dallas Police and Fire Pension System is mired in political conflict and facing insolvency, due to a combination of poor investment decisions and generous DROP plans. Just like the ones in California that have not yet hit the wall.

California Government Pay

In case you were feeling that government employees in California were underpaid, here’s BART janitor Liang Zhao Zhang pulling down a mere $271,243 for 2015 (and a total of $705,000 in pay and benefits during the four years from 2012 to 2015.).

Check out some of his colleagues here.

Manipulation

Yesterday, the API reported a huge build in crude oil inventories. This morning, the EIA confirmed it. After a couple of minutes hesitation, the algos took over and marched crude up – and turned the Nasdaq and S&P green at the same time. As they have consistently as inventories have built.

MAnipulation has become completely obvious and shameless as the SEC’s so-called supervision turns a blind eye – could it be, perhaps? so that the SEC folks can discreetly become “compliance officers” with no work and large paychecks when they leave.