May 2009

First budget deficit in April since 1983

When the government can't post a surplus in tax month, you know something is seriously wrong.

(Bloomberg) -- The U.S. reported the first budget deficit for April in 26 years, recording a shortfall in the month that usually sees a jump in individual tax payments before the Internal Revenue Service’s mid-month deadline.

“When the government can’t post a surplus in April, you know things are dire,” said Richard Yamarone, director of economic research at Argus Research Corp. in New York. “It’s going to take a very long time until we see anything close to a balanced budget.”

Creditors likely to force GM into bankruptcy

In a world before credit default swaps, it was in the best interests of creditors to avoid bankruptcy. But in today's world of casino financing, forcing companies into bankruptcy has become a profitable enterprise.

Hedge funds and other investors stand to make billions of dollars on credit insurance contracts if GM declares bankruptcy, a prospect that is complicating efforts to persuade creditors to agree to a restructuring plan for the automaker, analysts say.

Holders of $27bn in GM bonds have until June 1 to decide whether to swap their debt for a 10 per cent equity stake in the company as part of an offer that would give the US government 50 per cent of the shares, a United Auto Workers union healthcare fund 39 per cent and existing shareholders 1 per cent.

Median Home Price Down 13.8% - Foreclosures cited as reason

You've probably already seen the headlines, Median Home Price down 14%, but what is behind the latest numbers?

So, this latest drop is in just a 3 month period. But the regional differences are staggering.

In Fort Myers Florida, prices are down 59.1%. Akron Ohio, down 48%. San Francisco and San Jose are down 42%. Miami Florida is down 35% and Los Angeles is down 34%.

Much of this corresponds to foreclosure rates.

You might also be interested in this tidbit on geographic immigrant areas (read illegals) have a much higher foreclosure rate:

Everything You Ever Wanted to Know about National Health Plans ….and maybe more - United Kingdom

United Kingdom

Britain’s public provider of health care is known as the National Health Services (NHS). Services provided by the NHS include hospitals, family doctors, specialists, dentists, chemists, opticians and the ambulance service.

Not all services provided by the NHS are free of charge. Unless exempt, patients pay (subsidised) fixed costs for prescriptions, sight tests, NHS glasses and dental treatment. Hospital treatment, the ambulance service and medical consultations remain free.
 

The UK’s NHS was the first state organisation in the world to provide free universal healthcare. Today, it is an organisation with some severe structural problems which means:

U3 and U6 Unemployment during the Great Depression

A frequent meme propounded in the economic blogosphere is that U6 unemployment, running near 17% now, is a truer measure (and there are good reasons to believe it is), so that means we have unemployment already approaching Great Depression levels of 25%. Left out of the comparison is the fact that U3 and U6 measurements didn't exist during the 1930s. So, is the 25% unemployment peak for the Great Depression a fair comparison to U6 unemployment today?

N. Andrews compared historical versions of unemployment statistics with the modern U3 and U6 versions, published as "Historical Unemployment in Relationship to Today" , has an answer. He writes:

Unemployment 9.6% in 2010; 8.5% in 2011

A poll of economists has been released, and it isn't very encouraging.

Unemployment will average 8.5 percent in 2011 after a 9.6 percent rate next year, higher than previously expected, according to the median forecast in the survey taken from May 4 to May 11. The economy may expand 2.8 percent in 2011, less than estimated last month, after a 1.9 percent rise in 2010.

“The worse the labor market is and the longer that lasts, the more difficult it’ll be for consumers to recover,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc., a New York forecasting firm. “The economy isn’t going to come roaring out of the box here.”

Gov't borrows 46 cents for every dollar it spends

The projected federal deficit keeps going up, and is now expected to be four times the previous record.

As the economy performs worse than expected, the deficit for the 2010 budget year beginning in October will worsen by $87 billion to $1.3 trillion, the White House says. The deterioration reflects lower tax revenues and higher costs for bank failures, unemployment benefits and food stamps.

Just a few days ago, Obama touted an administration plan to cut $17 billion in wasteful or duplicative programs from the budget next year. The erosion in the deficit announced Monday is five times the size of those savings.

For the current year, the government would borrow 46 cents for every dollar it takes to run the government under the administration's plan. In 2010, it would borrow 35 cents for every dollar spent.
...

Hope for Homeowners Program Makes Only 51 Loans

Hope for Homeowners lender, Lend America, is under investigation by the DOJ:

As the Obama administration attempts to turn around the beleaguered Hope for Homeowners program to fight foreclosures, it faces a nettlesome new headache. The primary lender involved is under investigation by the Department of Justice.

Senior federal housing officials say that of 51 loans made under the program, 50 were made by Melville, N.Y.-based Lend America, and those 50 loans are being held up pending ongoing federal investigations. The officials, who insisted on anonymity because they are not authorized to speak on the matter, declined to offer specifics except to say anything from inadequate documentation to unethical practices could be the focus of the queries.

Everything You Ever Wanted to Know about National Health Plans ….and maybe more - Netherlands and Sweden

Netherlands and Sweden

In both countries, the majority of the population buys supplemental policies, often purchased from the insurer providing basic coverage. Insurers providing supplemental coverage are subject to fewer (Netherlands) or no (Switzerland) risk-rating restrictions. This has had complex effects on competition and mobility of the insured in the supplemental insurance market.

Tight regulation of basic health insurance markets, with requirements for open enrollment and community rating. Both countries require that insurers accept all applicants and prohibit variations in premiums by health status—community rating, with guaranteed offer and renewal.

What do Corporate Insiders Know?

One well-known contrary sentiment indicator for what the next direction of the stock market is corporate insider trading. In the aggregate, insiders are more likely to purchase their company's stock when they think it's cheap, and to sell when it is expensive. In that way, they also tell us something about the health of the overall economy.

At the exact market bottom in March, when people thought the economy was about to drop into a black hole, I copied the insider trading graph from Barron's (which is a terrific weekly financial magazine and the best way imho to educate yourself about what is really going on in the markets and to become more sophisticated about the economy. Anyway, I digress). Here's what caught my eye about the graph then:

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