The Market Ticker
Commentary on The Capital Markets
2016-11-19 11:35 by Karl Denninger
in Health Reform , 2011 references
[Comments enabled]  

Recently I penned an article entitled Listen Carefully Folks.

It made quite clear what will happen if we do not address monopolists in Health Care -- all of them.

From hospitals, to doctors themselves to pharmaceutical companies to medical supply houses and even insurance -- all of them are filled with monopolists, and a monstrous percentage of what each of these firms and individuals do as it pertains to how charges are generated, billed and collected is a clear violation of 100+ year old federal law.

Let me remind you what that law says:

Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.

Refuse to tell me what you're going to charge me before you perform a procedure?  You're restraining trade -- my ability to shop various providers before I commit to a procedure.  Go to prison.

Engage in conduct that prohibits or constrains someone from opening an MRI center near your existing one (thereby keeping that person from undercutting you on price)?  Go to prison.

Put together a "captive arrangement" so that I wind up having to pay $10 for an OTC Tylenol in your hospital, instead of paying ten cents for the same drug from the CVS literally next door to the hospital?  Go to prison.

Buy up (or consent to being bought) close-in practices so as to put doctors under salary and thus prohibit them from being able to negotiate prices with patients because it is now all under "central billing"?  That's restraining trade -- go to prison.

Obscure how you intend to and do bill so I can't possibly figure out that you're bilking me in this fashion, and even worse do it in collusion with damn near every other provider of similar services in the nation?  Go to prison.

Argue that none of this is interstate or international commerce?  Good luck -- where is the factory that made the drug, made the scalpel, made the colostomy bag?  Are any of them across a state line or national boundary?  GO TO PRISON.

Why has nobody gone to prison?  Because despite the clear evidence that these acts violate the law, and that's just the first section of the law (there are plenty more that are quite-clearly violated too, and that's before we get to the state-level consumer fraud and protection statutes) Washington DC is full of lobbyists that would go into anaphylactic shock should the mere mention of such an act come out of the Justice Department.  The same is true for lobbyists at the state level, which is why you don't hear State Attorneys General bringing consumer protection suits -- and criminal charges.

But what do voters want Trump to do?

Exactly this.

NEW YORK - Healthcare is the top issue Americans want Donald Trump to address during his first 100 days in the White House, according to a Reuters/Ipsos poll released on Thursday, reflecting apparent frustration over rising costs for prescription drugs and medical coverage.

Here's the problem that Trump has as President: Destroying the "everyone must be covered irrespective of existing conditions" mandate in Obamacare, or the "26 and under if in school or dependent" mandate will cause a massive voter revolt.

Let's say for the sake of argument that Trump doesn't care if the voters revolt (which I don't believe for one minute, by the way.)  He can't do it anyway, nor can The House.

You see when Obamacare was passed a supermajority Senate vote requirement for repeal was part of the bill and thus despite Ted Cruz's repeated spamming on Facebook and elsewhere demanding "Full Repeal Now" such a vote to repeal requires 60 votes in the Senate, not 51, to pass. Trump doesn't have 60 votes in the Senate.

What Trump (and Congress) can do with a simple majority due to the way budget reconciliation rules in the Senate are laid forth is to de-fund Obamacare -- stripping it of all budgetary spending authority.  Doing so, however, would leave the worst parts of the law intact (the mandate being one of the most-onerous) while destroying all of the subsidies and cost-sharing by zeroing the authority to spend money on them.  In other words it would take what is a "tolerable" law for many and turn it into an intolerable law for everyone impacted by it.

The only way to accomplish the goal of "repeal and replace", if there is any intent to accomplish that stated goal, is to make Obamacare -- and indeed virtually all health coverage unnecessary except for catastrophic, true insurance.

This can only be accomplished through a massive collapse in the cost of health care.

How massive?

80%+.

No, that's not impossible.  In fact it's not even slightly difficult.

Why is everyone worked up about "women's contraception" and demanding that "health insurance" provide it?  Because it's expensive.  Why is it expensive?  Birth control pills are off-patent and can be bought for cash in most of the world for well under $5/month.  In other words roughly a dime a day.  Who can't afford that?  Nobody!  Is there an argument here to be had?  Not really if we had a market economy in such things, because while you could choose an expensive option you could also walk into any pharmacy and buy an inexpensive option over the counter -- exactly as you can do in most of the world for less than the cost of a six-pack of beer or a couple of gallons of gasoline.

If you want to actually improve women's health and access to contraceptive products then get the damned monopolists out of it and if they won't stop put them all in prison.  Now no woman needs "insurance" for such a thing nor does she have to give up all sorts of private information to anyone -- all she needs to do is walk up to a pharmacy counter with $5 in cash, leaving exactly no record anywhere of her private, elective choice.

Let's take the other end of that (non) decision -- childbirth.  I have several copies of child birth bills from hospitals in the 1960s.  Inflating them by the CPI-U to today's dollars you should be able to have a normal childbirth in a hospital, with a several day stay, including the epidural and attending physician charges, for under $1,000.  Good luck attempting that; the actual charges today start at close to 10x that amount.  Why?  Monopolists.  Lock them all up and this problem disappears, along with the "need" for said "insurance."  Who can't come up with $1,000 to have a kid given nine months warning?  Almost-literally nobody.  To be sure there are a few exceptions but not many at that (realistic) price.

Let's say you discover you need a mastectomy.  How much will you be charged?  Who the hell knows, right?  Well, what if it was $6,500. It can be -- today, even with the supplies and other aspects (e.g. anesthesia drugs) being monopolist-provided!  Can you come up with, or finance, $6,500 if you need to save your life?  Probably, even if you're poor.  Hell, the average American household has nearly $16,000 in credit card debt!  You're telling me $6,500 is "beyond the ability of the average American" for a life-saving procedure?  Of course it's not but it's still overpriced by, probably, somewhere around a third.  If it was $4,000 then the argument would be even more-compelling.  The problem is that today you're probably going to face down a $30,000 bill for that procedure in most hospitals.  Why?  Because monopoly (and quite-arguably felony), that's why.

Cut the crap, Mr. President-Elect.  And cut the crap America.  This is the way forward.  It is the solution not only to the personal issues surrounding health care it is also the only way to prevent detonation of the Federal Budget inside of the next four to five years.

"Repealing Obamacare" is a non-starter -- unless you make it unnecessary first.  Then nobody will want it because nobody will need it, and it won't make any economic sense for anyone.  At the same time demand that insurance companies that want to sell "health insurance" sell actual insurance -- meaning that you pay a premium for coverage up until the covered event happens and then you stop paying and the company pays you because the risk you contracted for coverage against occurred.  That's exactly how it works in every other area, and we should insist that this is how it works in this area of the market as well.  But no, you can't buy fire insurance on a building that is already on fire.

Only by eliminating the monopolies -- and thus eliminating the screaming for coverage of buildings that are already on fire when it comes to health care -- can we accomplish this.

As a (beneficial) side effect we eliminate the federal deficit permanently, we eliminate state budget deficits permanently, we stabilize existing pension funds permanently and we enjoy a couple of percent improvement in purchasing power of money every year as the federal debt is paid down.

We do all that without raising a single tax anywhere.

If President-elect Trump is to not be an abject failure as President and in fact be the President who presides over the destruction of our nation's finances and economy this, above and before all else, must be what he does.  As the chief of the Executive he holds the power to do this even without Congressional help and indeed he can accomplish most of it even against attempted Congressional obstruction.

This is what the first 100 days must focus on like a laser.  If it is, Mr. President-Elect Trump, you will easily cement your legacy as the greatest President ever to serve the United States.

Yes, the challenge is that stark, the risks that high, and the potential reward that great.

There is no middle ground; there is only success or failure.

View this entry with comments (registration required to post)
 

There's apparently a full-court press on to try to "get" electors to flip their votes.

Let me point out a few things.

First, there is a "viral attempt" video circulating of "electors" allegedly going to vote for Hillary "anyway."  There's a problem: I identified them and they're Hillary electors.  It does not matter who they vote for, obviously, since they're not Trump electors and thus even being in a state that went Blue it does them exactly zero good because irrespective of their vote the number of electoral votes Trump gets will not be impacted at all.

Second, bombarding Republican electors with hate-filled messages is not going to get them to change their votes to Hillary.  First and foremost, calling someone a racist, islamophobe or similar is a great way to get the middle finger in response.  If anyone thinks they can actually get an elector to flip a vote by calling them a racist jackass they need to go drink a bottle of Drano right now.

Third, electors are chosen by the party for their sworn loyalty and history of loyalty to the party.  Even the most-ardent "never Trump" people in such a position would almost-certainly never, under any circumstances, vote for the Democrat nominee.  They might vote for a different Republican but even if you managed to get 30+ of them to do so that throws the election to the House, which is Republican, and thus Trump wins anyway.

Finally, there's one last check and balance.  The Congress meets in Joint Session on January 6th to count the electoral votes.  An objection to the certificates may be raised at that time and if voted in the affirmative by both houses of Congress, is sustained.

Guess who controls both Houses of Congress?

So let's cut the crap, eh?  This sort of puerile harassment not only has zero chance of success on the merits, it has zero odds of success on the procedure -- and that's before we discuss the tactical idiocy of calling people racists and harassing them by phone, email and letter.

All you are doing by engaging in such is strengthening the argument that the Democrat party as a whole is incapable of adult behavior.  Add to this the riots egged on by both Barack Obama and Hillary and you have a perfect storm of demonstration of the infantile state of a large portion of the Democrat voter base complete with the inability of the party machinery to call out such lawless behavior for what it is and insist that it stop.

The most-productive thing to do when your opponent is in the process of swallowing a pulled-pin grenade is to let them do so and duck around hard cover so as to not be hit by the impending ketchup-painting of everything within a couple of dozen yards.

View this entry with comments (registration required to post)
 

I'm going to make this as clear as I possibly can.

If you are dependent in any way of health care being available at all, or if you are dependent in any way on the flow of money from the Federal Government to you then you have somewhere between now and four years from now to become independent of both of those requirements.

The fuse that has been lit for 30 years will soon go inside the box.  There is a fiscal bomb in the box and it is large enough to destroy the federal budget and thus the ability of the government to raise funds in the bond market.

The detonation will also destroy all state budgets and pension obligations.

Let me make sure you understand this -- It will destroy all of these and more:

  • Pensions.
  • Food stamps.
  • Federal and State Unemployment.
  • Section 8.
  • Medicare.
  • Medicaid.
  • Student loans.

All other forms of welfare and "social assistance"; indeed, virtually everything other than the lights in the Capitol and a good part of defense will disappear.

All of it.  All gone.  "Gone", in this context, means 50% or more immediate and permanent reductions, and many of them will be completely gone.  Not to some of these programs and not over some period of time -- to all of them at once.

When this happens virtually every organ of government that exists now that you enjoy the peace and protection of, and benefit from, will disappear.  All of them will be either severely compromised or cease to exist entirely.

This is not politics.  It is arithmetic.

There is nobody -- literally nobody -- who knows how long the fuse is inside the box, except that it has less than five years to burn.  It probably has four years to burn, but there is some risk the rate of burning may accelerate.

That burning fuse will go inside the box approximately one year from now.

That is when the Trump "honeymoon" ends, just as it has for every previous President.  It ends because every Congresscritter starts running for re-election approximately one year from now.  This was true for Bush, it was true for Clinton, it was true for Bush Senior, it was true for Obama, it was true for Carter and Ford.  It will be true for Trump as well.

Once the fuse goes inside the box you can't put it out any more through the simple means of taking out a pair of scissors and cutting it just ahead of where it is burning.  In fact, the odds are high that you wind up in this situation:

There is exactly one way to cut that fuse and stop this.

The Federal Government must demand that all monopolist practices in the health industry end immediately under penalty of prosecution using existing federal law found in 15 United States Code Chapter 1.

Doing so will collapse the cost of health care.  It will thus collapse the demand on federal spending along with state budgets and pension funds.  At the same time it will collapse the private costs of health care as well -- those that fall on you and your employer.

Socialist medical systems around the developed world deliver superior results at half of what we spend.  A material part of that is a cost-shift to Americans through the monopoly practices of health-related firms -- that is, forcing America's 330 million to subsidize persons in other countries.  Capitalism should easily do better than half the current price (even if only by removing said forced subsidies), but it will not do worse.  If we were to take half of the current Medicare and Medicaid spending out of budget we would save $700 billion dollars a year.  This would eliminate half of last year's depreciation of your spending power.  The same savings applied to the private sector would free up over a trillion dollars a year for other purposes, some of which would go into capital investment and if that resulted in 20% of it flowing back to the government in tax revenue that would bring in another $200 billion in taxes.  That is a $900 billion a year swing before you add on the improvements in productivity and business cost, and thus the businesses that would be attracted to the United States from other nations.

That's a low estimate, by the way.  The more-likely figure is in the neighborhood of $2 trillion annually between private, public and federal savings.

We have one year, literally, to see this action implemented.  Not talked about, not debated, implemented.

One year.

Not five, not four, one.

We, as a nation, must demand, insist, and do whatever is necessary up to and including calling and honoring a General Strike to enforce that demand.

Donald Trump can cause this to happen with the stroke of a pen by appointing an AG who he directs to bring these actions using existing law.  This requires no new law from Congress and in fact Congress can't block it -- since it is existing law they would have to amend or repeal said law and Trump can veto any such attempt.

Donald Trump the candidate had vague words in his health care "platform" which hinted at doing this.

But Trump's transition web site has removed all such references.

We cannot allow this as a people or a nation.  If we fail to act now our nation fiscally dies within five years and we have exactly one year to cut the fuse -- or if you prefer turn the cooling pumps back on -- or we're screwed.

Until and unless this becomes our national focus as a people irrespective of what other policy measures you may want or oppose I'm out.

It's that serious folks.  I'm going to go enjoy my last four years if you're going to let the option to cancel self-destruct expire without doing whatever is necessary -- and possible -- to turn the damn cooling system back on.

View this entry with comments (registration required to post)
 

2016-11-13 09:50 by Karl Denninger
in Editorial , 1205 references
[Comments enabled]  

Compare these two pages:

First, Candidate Trump:

5. Require price transparency from all healthcare providers, especially doctors and healthcare organizations like clinics and hospitals. Individuals should be able to shop to find the best prices for procedures, exams or any other medical-related procedure.

.....

7. Remove barriers to entry into free markets for drug providers that offer safe, reliable and cheaper products. Congress will need the courage to step away from the special interests and do what is right for America. Though the pharmaceutical industry is in the private sector, drug companies provide a public service. Allowing consumers access to imported, safe and dependable drugs from overseas will bring more options to consumers.

Now read what President-Elect Trump has said.

Where did #5 and #7 go?

The rest is pretty much there, with a few (expected "red meat") additions.

Where is any hint of any sort, now that Trump has won and no longer can be claimed to be "shoving Granny down the stairs" as a campaign tactic, of breaking up medical monopolies?

Thisand only this, is why health care costs are so high.  Between prescription drug importation bans (a monopolistic practice Congress created out of whole cloth, and thus Congress can repeal) to CON laws to refusal to post and quote prices to practices such as a differential billing (which is responsible for Michigan having car insurance that's 3x as expensive as states without it for starters) this has utterly disappeared.  This is the issue that must be addressed and this act must take place NOW or our nation dies fiscally within the next four to five years.

This is not a maybe, it is not a possibility, it is not political rhetoric it is immutable mathematical fact.

The Federal government spent 37% of every dollar it spent in total on Medicare and Medicaid last fiscal year.  This rate of spending is increasing by roughly 9% a year.  Within four years that will result in roughly $2 trillion a year of spending on these two programs alone and blow an additional $600 billion a year hole in the federal budget. For scale $600 billion is roughly the size of all defense spending and that's the additional amount we will try to tack onto to what is already being spent today. This is not due to people getting older, it is due to medical monopolies that in any other line of work would land everyone involved in federal prison under 100+ year old law found in 15 United States Code.

Remember that socialist medicine in most of the developed world manages to deliver better health care outcomes than we have at half the cost per person.  Capitalism always outperforms socialism for the simple reason that a capitalist system adds an incentive to bash your competitors over the head with price right up to the limit of excess margin.  That is it adds price discovery as an incredibly powerful cudgel and drives incentives to remove inefficiencies and improve productivity, thereby allowing competitors to undercut one another on price even further.  This means that a capitalist system minus the existing monopolies would wind up delivering health care at one fifth to one tenth of today's cost and also deliver superior outcomes!  If you think this is impossible then explain the $95 MRI you can buy today in Japan (which is not a third-world country) .vs. the same scan that costs $1,000 or more here.

My concern as expressed during the campaign in multiple Tickers was that without a firm commitment to break up the medical monopolies we had no standard by which to judge.  The push-back was that Trump would be accused of throwing Granny off the mountain if he took such a position and the army of health lobbyists would band together to try to destroy his campaign with lies and innuendo (which in reality was all about protecting their jobs and not your health), and would likely succeed.  Ok.  Fair enough.

But now the campaign is over and there is utterly no reason to not put forward said intentions if he ever had them.

As I pointed out at the time I was skeptical that any such intention was ever present.

It appears on the weight of the evidence thus far that I was right.

The evidence for that light you saw a few days ago being, in fact, the sun rising is fading fast.  The manifest weight of the evidence appears to be that it in fact was a fireworks display and, while perhaps some light will leak in around the edges in various ways the most-serious issue the nation faces, and the one that will destroy us during the next President's term is being intentionally ignored yet again.  Yes, it's good that President-Elect Trump will roll back many regulations including those on guns, because you're probably going to need them to protect yourself and your family. Prepare for the darkness, in short, because the odds are rising, not falling, that it is coming.

View this entry with comments (registration required to post)
 

2016-11-13 05:00 by Karl Denninger
in Market Musings , 441 references
[Comments enabled]  

Why is tech falling apart post-election while the DOW is at all-time highs?

Simple: A Trump Presidency probably means the end of the leech.

Let's look at who this impacts:

1. Forced "net neutrality" that in fact isn't "net neutrality" at all, but was crammed down the throat of the cable industry to help Netflix.  That's probably gone under a Trump Administration.  What does Netflix have left as a business model if it has to pay for its own distribution costs without being able to shift them onto non-customers?  Nothing, as I've pointed out for years, and given Netflix's forward content cost commitments that makes them odds-on to be a zero.

2. Profiting from counterfeit products from China is likely to be curtailed -- or even prosecuted.  Bye-bye Amazon's ridiculous P/E.  No, they're not a zero, but they might be a sub-$100 stock -- easily.

3. Facebook -- think you can steal everyone's location data and use it as you wish?  Uh, maybe not.  More to the point, The Rule of Law may get in the way of a lot of those sorts of plans.  Hmmm.... Not looking so good eh?  Back to $20 you go.

4. Google -- advertising for counterfeit products from China is very profitable.  What happens if that all goes away?  No, this doesn't zero Google by any means but it sure does hurt them.  25% haircut?  Probably.

5. Tesla/Solar City.  Bye-bye.  Tax farms?  They're all zeros for the simple reason that they're all highly-levered on the debt side and have no prayer in hell of survival without said tax farming capacity.  Expect all of that to disappear under a Trump administration, and with it all the firms reliant on it.

6. Any CEO or company that whines about the election or issues what some would consider thinly-veiled threats aimed at "wrong-voting" employees or customers.  We've had two so far that I'm aware of, and both have been taken out back and bent over the woodpile behind the shed.  I suspect CEOs will learn fast that it's a path to immediate ruin to***** off half your customers, but you'd have thought they were smarter than that in the first place, so......  (PS: I ran an Internet company in the 1990s and while I had strong political views even then I certainly was smart enough to keep my damn mouth and corporate wallet shut in that regard since I also knew half the nation didn't agree with me!)

Who's not getting hurt?  Mostly eBAY and ETSY -- so far.  Gee, I wonder why?

Who else gets murdered?  Anyone with a heavy reliance on overseas labor.  Hello a lot of folks -- Apple anyone, for instance?

Start looking at stocks as "who relies on either (1) cheap foreign labor, (2) getting a skim from foreign knock-off products or (3) crammed-through "regulations" without which they do not exist."

Then adjust for who's got either a sky-high P/E (which means a big fall) or worse, on or off-balance sheet debt and forward commitment cash requirements (in which case they're a potential zero.)

That's the easy one, without a single bit of policy yet being announced or enacted.

View this entry with comments (registration required to post)
 

Main Navigation
MUST-READ Selection:
The CERTAIN Destruction Of Our Nation

Full-Text Search & Archives
Archive Access
Legal Disclaimer

The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions.

NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES.

The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.

Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein.

The Market Ticker content may be excerpted online for non-commercial purposes provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media, to republish full articles, or for any commercial use (which includes any site where advertising is displayed.)

Submissions or tips on matters of economic or political interest may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.