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Nulllification fight begins: Health-Care Fight Shifts to States, Agencies After House Vote
By Alex Nussbaum
March 22 (Bloomberg) -- Health legislation passed yesterday by the U.S. House changes some rules immediately on insurance coverage while leaving much of the fight over how to remake the medical system to federal regulators, states and courts.
Insurers led by UnitedHealth Group Inc.and WellPoint Inc. must cover children with pre-existing health problems at once under the legislation, headed for a Senate vote, and let parents keep children on their insurance plans through age 26. The insurers will also be banned from revoking coverage because of severe illness and from limiting lifetime or annual benefits.
Beyond those changes, it will be up to U.S. regulators and state lawmakers to structure the marketplaces where health plans will compete, write the rules governing their profit and decide which medical benefits must be covered. While insurers may gain as many as 32 million customers, the potential for pumped-up profits remains unclear, said Sheryl Skolnick, a health-industry analyst at CRT Capital Group LLC.
“There’s going to be a whole other round of uncertainty associated with the implementation of this,” she said in a telephone interview March 19. “There’ll be much, much more to fight on and much, much more to write on.”
The U.S. Health and Human Services Department will have two years to set penalties on hospitals with high readmission rates and longer to test new payment systems for Franklin, Tennessee- based Community Health Systems Inc., the largest U.S. chain, and its rivals. Officials in Idaho and Virginia have promised lawsuits over the bills’ mandate that all Americans get insured.
Senate, Obama
Democrats must shepherd the package of changes through the U.S. Senate before President Barack Obama can sign their $940 billion health-care overhaul, one of his top domestic priorities, into law. The measures subsidize coverage for uninsured Americans, financed by Medicare cuts to hospitals and fees or taxes on insurers, drugmakers, medical-device companies and Americans earning more than $200,000 a year. The tax on those earners begins in 2013.
The subsidies and the expansion of Medicaid, the joint federal-state program for the poor, won’t kick in until 2014. Other changes will take effect with Obama’s pen stroke.
While the measure immediately bans insurers from barring coverage for children with pre-existing conditions, adults won’t be protected until 2014. Until then, they’ll be eligible to join high-risk pools funded by $5 billion in federal grants.
The drug industry, led by New York-based Pfizer Inc., will begin offering discounted drugs to elderly Medicare patients next year, part of $80 billion in concessions agreed to by pharmaceutical companies. Generic copies of biotechnology drugs will be allowed for the first time, though the Food and Drug Administration must draft rules governing the process.
Revealing Costs
Insurers also will have to reveal how much of members’ premiums they spend on medical care, as opposed to executive salaries or other administrative costs. Next year, they’ll owe a rebate to customers if the insurers spend less than 80 percent on benefits for people in individual or small-group plans.
How heavy a burden that imposes on industry will depend on the health and human services department, said Carl McDonald, an Oppenheimer & Co. analyst in New York, in a March 17 note to clients. The cap will be easier to meet if it’s applied companywide rather than to individual lines of business, he said.
The agency also will set formulas for Medicare payments, define the “essential benefits” that insurers must provide and draft rules on how carriers verify claims and pay doctors. Health and Human Services Secretary Kathleen Sebelius, who has spent weeks criticizing insurers’ “jaw-dropping” rate increases, will have the final verdict, McDonald said.
Out From Spotlight
“Over the next couple of years, HHS will be consistently churning out regulations and documents explaining exactly how health reform will be implemented,” he said. “Given the stance of this administration toward health insurers over the past year, it’s hard to see how much of this will be favorable.”
Insurers may benefit by exiting the spotlight of the current political debate, said Len Nichols, a health economist at George Mason University in Fairfax, Virginia. Their arguments that premiums are rising because medical costs are outpacing inflation may hold more sway with government actuaries, he said in a telephone interview.
“It’ll get out of the blatantly political and into the hands of folks who are more used to dealing with these issues,” he said. “It will move the conversation from the headlines to the arena of the actuarial gladiators, which is probably where it should be.”
Health Shares
Health insurance company shares have gained 71 percent in the past 12 months, as measured by the six-member Standard & Poor’s 500 Managed-Care Index, led by the 124 percent increase for Coventry Health Care Inc. of Bethesda, Maryland. WellPoint, based in Indianapolis, is the biggest U.S. health plan by enrollment, and its shares have gained 80 percent.UnitedHealth, of Minnetonka, Minnesota, is second. Its shares have gained 61 percent over 12 months.
Starting in 2014, states have their say. The legislation leaves it to them to set up and run the online marketplaces, known as exchanges, where customers will comparison-shop for coverage. Among other powers, the exchanges will be able to banish plans for premium increases deemed to be unjustified.
Lawmakers may merge exchanges with neighboring states, exposing carriers to more competition. They could set up government-run insurance plans for low-income buyers ineligible for Medicaid to pool their bargaining power or apply for federal waivers to impose stricter rules on insurers.
The legislation also creates an Independent Payment Advisory Board to suggest cuts in spending by Medicare, the government health program for the elderly and disabled, that could threaten payments for drug and device-makers. Starting in 2014, the panel’s recommendations would take effect unless federal lawmakers substitute their own reductions.
A tax on high-cost “Cadillac” policies offered by health plans kicks in in 2018. The industry also faces about $60 billion in additional fees under the health bill through 2018, and more beyond, though it was able to postpone the levy until 2014.
“We suspect that over time, the industry lobby may find ways to chip away at those payments,” said Dave Shove, a BMO Capital Markets analyst, in a March 19 note. “For now, we consider this a successful exercise in kicking the can further down the road.”
To contact the reporter on this story: Alex Nussbaum in New Yorkanussbaum1@bloomberg.net.
Last Updated: March 22, 2010 00:00 EDT
BL: Obama Pays More Than Buffett as U.S. Risks AAA Rating (Update2)
By Daniel Kruger and Bryan Keogh
March 22 (Bloomberg) -- The bond market is saying that it’s safer to lend to Warren Buffett than Barack Obama.
Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity, according to data compiled by Bloomberg. Procter & Gamble Co., Johnson & Johnson and Lowe’s Cos. debt also traded at lower yields in recent weeks, a situation former Lehman Brothers Holdings Inc. chief fixed-income strategist Jack Malvey calls an “exceedingly rare” event in the history of the bond market.
The $2.59 trillion of Treasury Department sales since the start of 2009 have created a glut as the budget deficit swelled to a post-World War II-record 10 percent of the economy and raised concerns whether the U.S. deserves its AAA credit rating. The increased borrowing may also undermine the first-quarter rally in Treasuries as the economy improves.
“It’s a slap upside the head of the government,” said Mitchell Stapley, the chief fixed-income officer in Grand Rapids, Michigan, at Fifth Third Asset Management, which oversees $22 billion. “It could be the moment where hopefully you realize that risk is beginning to creep into your credit profile and the costs associated with that can be pretty scary.”
Moody’s Warning
While Treasuries backed by the full faith and credit of the government typically yield less than corporate debt, the relationship has flipped as Moody’s Investors Service predicts the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K. America will use about 7 percent of taxes for debt payments in 2010 and almost 11 percent in 2013, moving “substantially” closer to losing its AAA rating, Moody’s said last week.
“Those economies have been caught in a crisis while they are highly leveraged,” said Pierre Cailleteau, the managing director of sovereign risk at Moody’s in London. “They have to make the required adjustment to stabilize markets without choking off growth.”
Advanced economies face “acute” challenges in tackling high public debt, and unwinding existing stimulus measures will not come close to bringing deficits back to prudent levels, said John Lipsky, first deputy managing director of the International Monetary Fund.
Unprecedented Spending
All G7 countries, except Canada and Germany, will have debt-to-GDP ratios close to or exceeding 100 percent by 2014, Lipsky said in a speech yesterday at the China Development Forum in Beijing. Already this year, the average ratio in advanced economies is expected to reach the levels seen in 1950, after World War II, he said.
Obama’s unprecedented spending and the Federal Reserve’s emergency measures to fix the financial system are boosting the economy and cutting the risk of corporate failures. Standard & Poor’s said the default rate will drop to 5 percent by year-end from 10.4 percent in February.
Bonds sold by companies have returned 3.24 percent this year, including reinvested interest, compared with a 1.55 percent gain for Treasuries, Bank of America Merrill Lynch index data show. Returns exceeded government debt by a record 23 percentage points in 2009.
Berkshire Hathaway
Berkshire Hathaway’s 1.4 percent notes due February 2012 yielded 0.89 percent on March 18, 3.5 basis points, or 0.035 percentage point, less than Treasuries, composite prices compiled by Bloomberg show. The Omaha, Nebraska-based company, which is rated Aa2 by Moody’s and AA+ by S&P, has about $157 billion of cash and equivalents and about $52 billion of debt.
P&G, the world’s largest consumer-products maker, saw the yield on its 1.375 percent notes due August 2012 fall to 1.12 percent on March 18, 6 basis points below government debt. The Cincinnati-based company, rated Aa3 by Moody’s and AA- by S&P, makes everything from Tide detergent to Swiffer dusters.
New Brunswick, New Jersey-based Johnson & Johnson’s 5.15 percent securities due August 2012 yielded 1.11 percent on Feb. 17, 3 basis points less than Treasuries, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The world’s largest health products company is rated AAA by S&P and Moody’s.
Yields on bonds of home-improvement retailer Lowe’s in Mooresville, North Carolina, drugmaker Abbott Laboratories of Abbott Park, Illinois, and Toronto-based Royal Bank of Canada have also been below Treasuries, Trace data show.
‘Avalanche’
“It’s a manifestation of this avalanche, this growth in U.S. Treasury supply which is under way and continues for the foreseeable future, and the comparative scarcity of high-quality credit,” particularly in shorter-maturity debt, said Malvey, whose Lehman team was ranked No. 1 in fixed-income strategy by Institutional Investor magazine from 1998 through 2007.
Last year’s $2.1 trillion in borrowing by the government exceeded the $1.08 trillion issued by investment-grade companies, the biggest gap ever, Bloomberg data show. Malvey said the last time he can recall that a corporate bond yield traded below Treasuries was when he was head of company debt research at Kidder Peabody & Co. in the mid-1980s.
While Treasuries are poised to make money for investors this quarter, they are losing momentum. The securities are down 0.43 percent in March after gaining 0.4 percent last month and 1.58 percent in January, Bank of America Merrill Lynch indexes show.
Benchmark 10-year Treasury yields will reach 4.20 percent by year-end, up from 3.69 percent last week, according to the median forecast of 48 economists in a Bloomberg News survey. Two-year yields will rise to 1.77 percent, from 0.99 percent.
Relative Yields
Investors demand 0.59 percentage point more in yield to own 10-year Treasuries than German bunds of similar maturity, Bloomberg data show. A year ago, debt of Germany, whose deficit is 4.2 percent of its economy, yielded about half a percentage point more than Treasuries.
President Obama’s budget proposal would create bigger deficits every year of the next decade, with the gaps totaling $1.2 trillion more than his administration projects, the nonpartisan Congressional Budget Office said this month. Publicly held debt will zoom to $20.3 trillion, or 90 percent of gross domestic product, by 2020, the CBO forecast.
There’s “a lack of a long-term plan to deal with the federal budget deficit,” said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York. “At some point in time the market may lose its patience.”
Balance Sheets
Deutsche Bank and Barclays Plc, two of the 18 primary dealers of U.S. government securities that are obligated to bid at the Treasury’s auctions, say balance sheets of high-rated companies make them more attractive than Treasuries.
Corporate borrowers are reducing debt at a record pace. Companies in the S&P 500 cut their liabilities by $282 billion to $7.1 trillion in the fourth quarter from the prior three months, Bloomberg data show. That represents 28 percent of assets, the least in at least a decade.
Investors are accepting smaller premiums to lend to companies, with yields on bonds rated at least AA falling to within 107 basis points of Treasuries on average, Bank of America Merrill Lynch indexes show. That’s down from the peak of 515 basis points in November 2008, and approaching the record low of 36 in 1997.
Adding to Corporates
New York Life Investment Management is adding to bets the difference in yields will continue to shrink.
“As the balance sheet of corporate America continues to improve and the balance sheet of the government deteriorates, that spread should narrow,” said Thomas Girard, a senior money manager who helps invest $115 billion at the New York-based insurer. “There is some sort of breaking point. The federal government can’t keep expanding its borrowing without having to incur some costs.”
For all the concern about U.S. finances, Treasuries are unlikely to lose their role as the world’s borrowing benchmark, said Michael Cheah, who manages $2 billion in bonds at SunAmerica Asset Management in Jersey City, New Jersey. The U.S. has the biggest, most liquid securities markets, said Cheah.
Speculating that Treasuries may lose their privileged position is “not a bet I want to put on,” said Cheah, who worked at Singapore’s central bank. Yields on 10-year notes are about half their average since 1980.
Losing its Status
The last time there was talk of the U.S. losing its status as the world’s benchmark for bonds was in the late 1990s, when the government began amassing budget surpluses in 1998 for the first time in almost three decades. The amount of Treasuries outstanding dropped 8 percent to $3.4 trillion in 2000, the biggest annual decline since 1946.
Treasury supply resumed growing in 2001 after two rounds of tax cuts proposed by President George W. Bush led to deficits. Outstanding Treasury supply rose 53 percent to $4.5 trillion in 2007 from 2000 as the U.S. borrowed to finance tax cuts intended to revive a slumping economy. The amount has since risen 64 percent to $7.4 trillion.
More is on the way. The U.S. will sell a record $2.43 trillion of debt in 2010, according to the average forecast of 10 of the 18 primary dealers in a Bloomberg survey.
At the same time Treasury sales are rising, the cash position of the largest corporations is swelling. Companies in the S&P 500 held a record $2.3 trillion as of the fourth quarter, Bloomberg data show.
Growing Supply
High-rated corporate bonds due in three to five years are most likely to yield less than Treasuries, according to Deutsche Bank’s Pollack. The growing supply of Treasuries with those maturities will make government debt a bigger proportion of indexes that fund managers measure their performance against, he said. Managers betting Treasury yields will rise may diversify into corporate debt, Pollack said.
“There’s no natural law that says a Treasury has to yield less than a corporate,” said Daniel Shackelford, who is part of a group that manages $18 billion in bonds at T. Rowe Price Group Inc. in Baltimore. “It wouldn’t be the first time that I would scratch my head and say ‘this doesn’t make sense, the market’s behaving irrationally.’ And it can go on for much longer than you may think.”
To contact the reporters on this story: Daniel Kruger in New York at dkruger1@bloomberg.net; Bryan Keogh in London at bkeogh4@bloomberg.net
Last Updated: March 22, 2010 06:52 EDT
BL: Lipsky Says Debt Challenges Face Advanced Economies (Update1)
By Joyce Koh
March 21 (Bloomberg) -- Advanced economies face “acute” challenges in tackling high public debt, and unwinding existing stimulus measures will not come close to bringing deficits back to prudent levels, said John Lipsky, first deputy managing director of the International Monetary Fund.
All G7 countries, except Canada and Germany, will have debt-to-GDP ratios close to or exceeding 100 percent by 2014, Lipsky said in a speech today at the China Development Forum in Beijing. Already this year, the average ratio in advanced economies is expected to reach the levels seen in 1950, after World War II, he said. The government debt ratio in some emerging market nations had also reached a “worrisome level.”
“This surge in government debt is occurring at a time when pressure from rising health and pension spending is building up,” Lipsky said. Stimulus measures account for about one-tenth of the projected debt increase, and rolling them back won’t be enough to bring deficits and debt ratios back to prudent levels.
Rising public debt could lead governments to seek to eliminate it through inflation or even default if they fail to carry out fiscal measures in time, Mohamed A. El-Erian, co-chief investment officer at Pacific Investment Management Co. warned earlier this month. Nassim Nicholas Taleb, author of “The Black Swan,” a book arguing that unforeseen events can roil markets, said March 12 he is concerned about hyperinflation as governments around the world take on more debt and print money.
Budget Deficit
The U.S. budget deficit widened to a record in February as the government spent more to help revive the economy. The gap grew to $221 billion after a shortfall of $194 billion in February 2009, the Treasury Department said on March 10. The figures indicate the deficit this year will probably surpass the record $1.4 trillion in the fiscal year that ended in September.
Maintaining public debt at its post-crisis levels could cut potential growth in advanced economies by as much as half a percentage point annually, compared with pre-crisis performance, Lipsky said. The Washington-based IMF, which rescued countries including Pakistan and Iceland during the recession, expects global growth of about 4 percent this year, and a somewhat faster pace in 2011, reflecting expansionary fiscal and monetary policies, he said.
‘Bulging Fiscal Deficits’
“When we look at the picture right now, recovery has been encouraging in both developed and emerging economies, and inflation has remained fairly contained,” said David Cohen, a Singapore-based economist at Action Economics. “The biggest cloud over the outlook would be bulging fiscal deficits. The concern is that the situation in Greece is a dress-rehearsal for problems in bigger economies.”
Greece is racing to cut its borrowing costs as 20 billion euros ($27 billion) of debt comes due in the next two months. In the U.S., President Barack Obama on Feb. 12 signed a bill into law that raised the federal debt limit by $1.9 trillion to $14.3 trillion and placed new curbs on spending in an attempt to prevent this year’s record deficit from becoming worse.
Inflation is “clearly not the answer” as a moderate increase in inflation would have a limited effect, while accelerating inflation would impose major economic costs and create significant risks to a sustained expansion, Lipsky said. Instead, growth-enhancing reforms such as liberalization of goods and labor markets, as well as the removal of tax distortions should be pursued vigorously.
Pension, Tax Reforms
The bulk of the needed debt reduction should be focused on reforms of pension and health entitlements, containment of other primary spending and increased tax revenues and improving both tax policy and tax administration measures, Lipsky said.
For most advanced economies, maintaining fiscal stimulus in 2010 remains appropriate, the IMF official said. Still, fiscal consolidation should begin in 2011 if the recovery occurs at the projected pace. Some actions should be undertaken now by all countries that will need fiscal adjustment, he said.
Lipsky said it was “fully appropriate” for China to maintain its fiscal stimulus through this year, while seeking to rein in its rapid loan growth. He said fiscal consolidation would be appropriate in the U.S., where a higher public savings rate will be required to ensure long-term fiscal sustainability.
For Related News and Information: Most-read stories on the IMF: TNI MOSTREAD IMF <GO> Top economy stories: TOP ECO <GO> Emerging market debt: NI EMD <GO> Top finance stories: TOP FIN <GO> Stories on emerging markets: NI EM <GO> For emerging-market stocks news: TNI EM STK <GO> Developing economy market moves: EMMV <GO> Emerging-market economic statistics: STAT4 <GO> Stories on the Greek deficit: EXT3 <GO>
Last Updated: March 21, 2010 01:48 EDT
GM! Stocks Fall on Global Debt-Burden Concern; Dollar Strengthens
By Justin Carrigan
March 22 (Bloomberg) -- Stocks declined for a third day and the dollar rallied on concern increasing sovereign-debt burdens will hamper the economic recovery. Greek bonds and shares fell.
The MSCI World Index dropped 0.5 percent at 7:22 a.m. in New York, marking its longest losing streak in six weeks. Futures on the Standard & Poor’s 500 Index retreated 0.7 percent. The dollar strengthened against 13 of its 16 most- traded counterparts. Greece’s ASE Index sank 3.5 percent and the premium investors demand to hold the nation’s 10-year notes instead of benchmark German bunds widened 25 basis points.
Maintaining government debt at post-crisis levels may reduce growth in advanced economies by as much as half a percentage point a year from the pace before the first global recession since World War II, John Lipsky, first deputy managing director of the International Monetary Fund, said in Beijing yesterday. German Chancellor Angela Merkel told investors they shouldn’t expect this week’s European Union summit to agree on a package to help Greece tackle the region’s biggest deficit.
“There has been an uptick in sovereign-default concerns and there is uncertainty over support for Greece,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo- Mitsubishi UFJ Ltd. in London. “Investors are likely to be disappointed again from the EU summit this week and that’s going to continue to weigh on the euro to the benefit of the dollar.”
Europe, Asia
The Stoxx Europe 600 Index declined 1 percent while the MSCI Asia Pacific Index dropped 0.9 percent. Vedanta Resources Plc, the largest copper producer in India, led basic resources shares lower, falling 2.1 percent in London.
Royal Dutch Shell Plc slipped 1.2 percent after agreeing with PetroChina Co. to buy Arrow Energy Ltd. for A$3.5 billion ($3.2 billion). PetroChina Co., the nation’s biggest energy producer, declined 2.7 percent in Hong Kong.
India’s central bank raised interest rates for the first time in almost two years late on March 19, saying that controlling prices was imperative after inflation accelerated to a 16-month high.
The decline in U.S. futures indicated the S&P 500 may trim its third straight weekly gain. The Dow Jones Industrial Average snapped an eight-day winning streak on March 19 after India’s unexpected rate increase.
The Dollar Index, which tracks the currency against those of six U.S. trading partners, climbed for a third day, adding 0.2 percent. Government bonds gained, with the yield on the German bund falling 2 basis points to 3.09 percent. The yield on the 10-year Treasury note was little changed at 3.69 percent.
Risk Aversion
“Risk aversion has come up after developments in India and Greece,” said Henrik Gullberg, a fixed-income strategist at Deutsche Bank AG in London. “Any exiting of the current accommodative policy stance is bad for risk appetite and good for the dollar.”
Greek bonds tumbled for a third day, with the yield on the two-year note jumping as much as 18 basis points to 5.55 percent. National Bank of Greece SA, the nation’s biggest lender, led stock declines in Athens, sinking as much as 5.3 percent. The cost of insuring against a default on Greek government bonds rose, with credit-default swaps climbing 26 basis points to 356, according to CMA DataVision.
Credit-default swaps on the Markit iTraxx Crossover Index of high-yield European corporates climbed 14 basis points to 467, according to JPMorgan Chase & Co. Credit-swap gauges in Europe rolled into their 13th series today. New series of the benchmarks are created every six months when companies are added or dropped depending on their ratings, cost of protection and ease of trading.
Emerging Markets
The MSCI Emerging Markets Index dropped 1 percent for a third day of declines. South Korea’s Kospi Index and Taiwan’s Taiex Index fell 0.8 percent, and India’s Sensitive Index slid 1 percent. Russia’s Micex Index lost 1.2 percent and the ruble depreciated against the central bank’s target basket for the first time in a week, slipping 0.5 percent. The rand weakened 0.5 percent against the dollar in limited trading during a public holiday today.
Copper for delivery in three months fell 1.1 percent to $7,350 a metric ton on the London Metal Exchange, retreating for a third day. Rice added 0.8 percent to $12.80 per 100 pounds in Chicago. Crude oil for April delivery dropped 1.4 percent to $79.55 a barrel in New York trading, falling for a third day. The April contract expires today.
To contact the reporter on this story: Justin Carrigan in London at jcarrigan@bloomberg.net
Last Updated: March 22, 2010 07:43 EDT
Looks like puts might be in order soon...RSI in nosebleed territory
jmho
BL: Obama Faces Friction Among House Democrats Over Push for Health-Care Bill
By Kristin Jensen and Laura Litvan
March 1 (Bloomberg) -- President Barack Obama, taking charge of health-care legislation, is facing resistance from lawmakers in his own Democratic Party over the prospect of pushing the bill through Congress.
Obama plans to announce a way forward this week on the biggest overhaul of the U.S. health system in 45 years in a bid to break an impasse on the bill. Some House Democrats are uneasy over the likely use of a procedure called reconciliation that would sidestep Republican opposition by requiring only a simple majority vote in the Senate.
“It looks like we’re trying to cram something through,” said Representative Baron Hill, an Indiana Democrat who voted for the original House bill.
Hill said he might not back a measure if it goes through reconciliation, which is intended for budget matters. A “sizeable number” of the 54 fiscally conservative Democrats who call themselves Blue Dogs are also concerned, said South Dakota Representative Stephanie Herseth Sandlin.
House Speaker Nancy Pelosi, who yesterday said “time is up” for Congress to pass the legislation, can ill afford to lose votes. The first House bill passed 220-215 in November, and Democrats have lost at least three “yes” votes since then. Other party lawmakers are objecting to the substance of a new plan Obama released on Feb. 22.
Next Steps
Pelosi, of California, and Senate Majority Leader Harry Reid, of Nevada, will meet with fellow Democrats this week to talk about the next steps, said Jim Manley, a Reid spokesman. Illinois Senator Dick Durbin, the No. 2 Senate Democrat, said the goal is to pass a bill before Congress leaves for a two-week break on March 26.
“We’re going to get this done,” Durbin told reporters on Feb. 25.
Obama and aides may add proposals from Republicans to a revised version of their plan, White House spokesman Robert Gibbs said on Feb. 26. Today, he wouldn’t say whether Obama would support use of reconciliation, telling reporters that Republicans could avoid the use of the tactic by agreeing not to employ a filibuster to derail the legislation.
“The president believes that an up-or-down vote is necessary,” Gibbs said. He also said Obama will announce his plan on how to move forward “likely on Wednesday.”
Undone by Massachusetts
Democrats were days away from passing a House-Senate compromise when Republican Scott Brown won a Jan. 19 special Senate election in Massachusetts, depriving Democrats of the 60th vote they needed to pass a bill.
At stake is a measure that would give drugmakers such as Indianapolis-based Eli Lilly & Co. and insurers including Minnetonka, Minnesota-based UnitedHealth Group Inc. millions of new customers. Insurers, in turn, would accept all customers, even with preexisting conditions; drugmakers would help the elderly afford medicines.
Obama would require Americans to get insurance, offering new purchasing exchanges and subsidies to help. The White House estimated the proposal, based largely on a Senate bill passed in December, would cost $950 billion over 10 years and cover 31 million uninsured Americans.
With reconciliation, Senate Democrats could pass changes to their measure with 51 votes. The House would also approve what lawmakers call a “fix” to amend parts of the original Senate bill. One concern for House Democrats: They might have to act first, without a guarantee the Senate will pass the changes.
‘Consternation’
“There is some consternation,” said New York Representative Louise Slaughter, a Democrat who runs the House Rules Committee.
Senator Lamar Alexander, a Tennessee Republican, said on ABC TV’s “This Week” yesterday that use of reconciliation “would be a political kamikaze mission” for Democrats.
Representative Paul Ryan, a Wisconsin Republican, said Democrats face a challenge in the House. “Right now, they don’t have the votes,” he said on “Fox News Sunday.”
House Majority Leader Steny Hoyer, a Maryland Democrat, didn’t dispute that, saying on CBS’s “Face the Nation” program, “I don’t think we have the votes in terms of a specific proposal because there’s not a specific proposal on the table yet.”
He also said, “Within the next couple of weeks we are going to have a specific proposal and start counting votes.”
‘Gut Feeling’
Representative Brad Ellsworth, an Indiana Democrat who voted for the original House bill said his “gut feeling” is that the “House is committed to continue to push for health- care legislation, but it doesn’t feel as strong about the reconciliation process.”
Ellsworth said he’d favor a series of incremental bills instead. He also said language designed to prevent federal funds from being used for abortion isn’t strong enough in the Senate bill.
Michigan Representative Bart Stupak, a Democrat who led efforts to get stricter abortion language into the original House bill, said he won’t vote for the new one without changes. The problem is that language in a reconciliation measure must be related to the budget, and abortion may not qualify.
The vote count may get tricky. Representative Joseph Cao of Louisiana, the only Republican to support a bill, says he probably won’t vote for the final House measure.
Three Democratic House votes were also lost. Florida Representative Robert Wexler resigned in January to head a research group; Pennsylvania Representative John Murtha died last month; and Neil Abercrombie is leaving to campaign for governor of Hawaii.
And Democrats facing tight elections might abandon the party on what they see as an unpopular issue.
“I see a risk of some people who are vulnerable being made more vulnerable,” said Representative Alcee Hastings, a Florida Democrat.
To contact the reporters on this story: Kristin Jensen in Washington at kjensen@bloomberg.net; Laura Litvan in Washington at llitvan@bloomberg.net
Last Updated: March 1, 2010 15:07 EST
BL: Asia Stocks Rise on Improving Economic Outlook; Pound Drops for Sixth Day
By Linus Chua and Weiyi Lim
March 2 (Bloomberg) -- Asian stocks rose to the highest in five weeks as gains in U.S. consumer spending, South Korean exports and lower unemployment in Japan signal faster economic growth. The Australian dollar traded near a one-week high.
The MSCI Asia Pacific Index added 0.3 percent to 119.33 as of 1:25 p.m. in Tokyo, the highest since Jan. 26, and the cost of protecting bonds in the region from default fell. The so- called Aussie climbed after the central bank raised interest rates. The pound dropped for a sixth day versus the dollar, and futures on the Standard & Poor’s 500 Index declined 0.1 percent.
U.S. consumer spending and South Korean exports increased for a fourth straight month, while Japan’s unemployment rate unexpectedly slid in January, one of the first signs that a rebound in overseas shipments is benefitting workers. The data lifted investor optimism for stable economic growth.
“We are expecting global recovery to come through, and this should be a reasonable backdrop for stocks,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which oversees $90 billion. “Economic indicators have been consistent, showing a gradual recovery.”
South Korea’s Kospi Index climbed 1.1 percent. Taiwan’s Taiex rose 0.5 percent. New Zealand’s NZX 50 Index advanced 0.6 percent.
Hon Hai Precision Industry Co., an Apple Inc. supplier, climbed 2.3 percent in Taipei. Li & Fung Ltd., a Hong Kong trading company that sells goods to Wal-Mart Stores Inc. and Target Corp., rose 2.6 percent.
Technology Stocks
Technology companies gained the most among the 10 industry groups in the MSCI Asia Pacific Index. South Korea’s Samsung Electronics Co., the world’s biggest maker of computer memory chips, climbed 3.2 percent in Seoul. Toshiba Corp., Japan’s biggest memory-chip maker, rose 1.6 percent in Tokyo. Taiwan Semiconductor Manufacturing Co., the world’s biggest maker of customized chips, gained 0.5 percent.
Hong Kong’s Hang Seng Index lost 0.7 percent, led by HSBC Holdings Plc, which slumped 6.4 percent to HK$80.85 after the bank reported lower-than-estimated profit.
Australia’s S&P/ASX 200 Index pared gains of as much as 0.6 percent, rising 0.1 percent after the rate increase. The Australian dollar briefly climbed to 90.31 U.S. cents, its strongest since Feb. 23, after the decision which was forecast by 14 of 19 economists in a Bloomberg survey. The currency was little changed, trading 89.89 cents.
Bond Risk Falls
The cost of protecting bonds in the Asia-Pacific region from default fell. The Markit iTraxx Australia index dropped 2 basis points to 89.5, according to Citigroup Inc. The Markit iTraxx Japan index lost 2 basis points to 140, Morgan Stanley prices show. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan fell 1.5 basis points to 109 basis points, according to Citigroup Inc. Credit-default swap indexes are benchmarks for protecting bonds against default, and a drop shows improving perceptions of credit quality.
“The market is becoming comfortable that the U.S. recovery is in place,” said Tim Schroeders, who helps manage about $1.1 billion at Pengana Capital Ltd. in Melbourne. “There is still a pervading caution given the volatility in markets.”
The pound dropped after polls showed Britain may have its first minority government since 1974 and ahead of a report forecast to show that a recovery in consumer confidence stalled in February. The pound was at $1.4941 in Tokyo from $1.4991 in New York yesterday when it dropped to $1.4784, the lowest level since May 1. It was at 90.56 pence per euro from 90.47 pence yesterday after reaching 91.50, the weakest since Dec. 1.
Copper Dips
Copper for three-month delivery dropped 0.2 percent to $7,385 a metric ton as Codelco and Anglo American Plc ramped up output in Chile after power was restored following the Feb. 27 earthquake. Codelco, the world’s largest copper producer, said it will be able to make up for “minor” production losses at its mines later this year.
Oil traded below $80 a barrel in New York as the dollar gained, before a report that is expected to show U.S. crude supplies increased for a fifth week, signaling demand from the world’s biggest energy consumer may be slowing.
Oil was trading at $78.79 a barrel after dropping 1.2 percent yesterday as the dollar advanced against the euro, making investments in dollar-denominated commodities less attractive. Crude inventories in the U.S. probably rose 0.5 percent last week, according to a Bloomberg News survey before an Energy Department report this week.
To contact the reporters for this story: Linus Chua at lchua@bloomberg.net; Weiyi Lim in Taipei at wlim26@bloomberg.net
Last Updated: March 1, 2010 23:27 EST
BL: Greenwich ‘Move-Up’ Homes Don’t Sell as New Yorkers Stay Put
By Oshrat Carmiel
March 1 (Bloomberg) -- Bryan Roddy says it seemed a smart investment in April 2007 when he and his partners bought a $1.2 million home in Greenwich, Connecticut, added two bedrooms and baths and priced it at $2.9 million to lure Manhattan buyers.
They listed the Havemeyer Place property in October 2008, a month after Lehman Brothers Holdings Inc. went bankrupt and sent markets tumbling. The house is still for sale. The so-called move-up market in Greenwich, known as the hedge-fund capital of the U.S., has dried up as the lingering effects of the financial crisis strand potential buyers in their current homes.
“There was no one in that price range looking,” said Roddy, 48, a principal of Roddy Construction LLC, a residential building and renovation firm in Norwalk, Connecticut.
Greenwich home sales from $2 million to $2.99 million fell 45 percent last year, more than any other price category and the most since broker Russell Pruner began tracking the data in 1976. Fifty-two such properties in town changed hands, compared with 94 in 2008.
“That’s in many cases a trade-up, or entry level,” said Pruner, also the owner of Shore & Country Properties in Riverside, Connecticut. Move-up sales are largely driven by locals looking for bigger homes and New York apartment owners seeking their first place in the suburbs, he said.
Buyers who can afford to pay $2 million to $3 million still rely on mortgage financing, said Alan Rosenbaum, principal of GuardHill Financial Corp., a New York-based mortgage brokerage with Greenwich clients. Lenders have curbed financing at that level to between 50 percent and 70 percent of the purchase price, he said.
Financing Obstacle
At the same time, declining real estate prices mean people who need to sell their existing homes before buying another may have less cash for the purchase.
“In the past, when you sold one home to buy another, you normally reaped a nice profit and you used that profit as a down payment for your new home,” Rosenbaum said. “Many people who are trading up from the smaller home don’t have enough equity.”
Manhattan apartment prices fell 21 percent from their market peak in 2008, according to data from New York appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate. The median price of co-operatives and condominiums slid 10 percent to $810,000 in the fourth quarter from a year earlier, the companies said in a Jan. 5 report. The median price hit $1.03 million at the top of the Manhattan market in the second quarter of 2008.
Wall Street Cutbacks
Wall Street firms paid about $20 billion in bonuses in 2009, down about a third from 2007, New York State Comptroller Thomas DiNapoli said Feb. 23. The average industry bonus was $123,000, excluding stock options or other deferred pay.
The financial industry cut 26,300 jobs in New York last year, contributing to the decline in the Connecticut real estate market.
The median price of a single-family home in Greenwich, which lies about 30 miles (48 kilometers) northeast of midtown Manhattan, dropped a record 18 percent to $1.6 million, according to Pruner. Sales fell 20 percent to 370, with declines in all price ranges of more than $1 million.
Transactions of $3 million to $3.99 million dropped 30 percent to 37, according to Shore & Country data. There were 21 sales between $4 million and $4.99 million, a 16 percent decline. Forty-three properties changed hands for $5 million or more, a 19 percent decrease.
Sternlicht Can’t Sell
Real estate investor Barry Sternlicht, chairman and chief executive officer of Starwood Capital Group LLC., has been trying to sell his 5.8-acre Greenwich property since June 2008. The gated estate, with tennis and shuffleboard courts and a swimming pool, was on the market for $5.95 million. The listing is no longer active on the Greenwich Multiple Listing Service. Starwood is based in Greenwich, which is also home to about 100 hedge funds.
Of 514 homes for sale in town at the beginning of February, 20 percent were priced between $2 million and $3 million, according to Shore & Country. Of 98 new listings between Jan. 10 and Feb. 10, more than half had previously failed to attract a buyer, according to data compiled by Jeanne Howell, a broker forGreenwich Fine Properties.
The owners of 17 Tomac Avenue, in the waterfront neighborhood of Old Greenwich, are among those trying again. They have been seeking to sell the five-bedroom, five-bath, cul- de-sac property since 2008.
Cutting the Price
After attracting no buyers at $3.5 million, the property, which features a stone terrace and hand-painted wood floors, was relisted in October and is priced at $3.075 million, said Julianne C. Ward, the owners’ broker at Prudential Connecticut Realty in Greenwich.
Gary Disher, a co-investor with Roddy on the Havemeyer Place home, was unable to sell it last year after reducing the price to $2.5 million, so he took it off the market in December. The house dates to 1911 and was gutted and renovated to include amenities such as centralized stereo and light controls.
Disher, a broker with William Raveis in Greenwich, relisted the residence in January for $3 million in a bid to grab attention from buyers in a different price bracket, he said.
“We wanted to make sure that we weren’t missing people that would be potential buyers in the $3 million-to-$4 million category,” he said. “We let it soak in that range so we could at least give it a shot and capture anyone who was there.”
On Feb. 18, he dropped the price to $2.49 million.
To contact the reporter on this story: Oshrat Carmiel in New York atocarmiel1@bloomberg.net.
Last Updated: March 1, 2010 00:01 EST
Hello all...resolving a real estate issue this week, and something from Canada..I will resume posting
Hope all are green and happy!
Real estate numbers were weak...not great for market psychology, and it's a snowy Friday in New York
I'm staying on the short side today, ymmv
OGJ: Texas takes legal steps to stop EPA from regulating GHGs under CAA
Feb 17, 2010
Nick Snow
Oil & Gas Journal
OGJ Washington Editor
WASHINGTON, DC, Feb. 17 -- Saying the US Environmental Protection Agency wrongly outsourced scientific review to a United Nations commission, Texas government leaders said on Feb. 16 that the state will legally challenge EPA efforts to regulate greenhouse gases under the Clean Air Act.
Separately, a coalition of eight national trade associations, including three from the oil and gas industry, mounted their own legal challenge of EPA’s proposed GHG regulations on the same day. The US Chamber of Commerce, the nation’s largest business association, announced similar plans on Feb. 12.
“Texas is aggressively seeking its future in alternative energy through incentives and innovation, not mandates and overreaching regulation,” Gov. Rick Perry (R) said at a press conference in Austin with Atty. Gen. Greg Abbott and Agriculture Commissioner Todd Staples.
“EPA’s misguided plan paints a big target on the backs of Texas agriculture and energy producers, and the hundreds of thousands of Texans they employ,” Perry stated, adding, “This legal action is being taken to protect the Texas economy and the jobs that go with it, as well as defend Texas’ freedom to continue our successful environmental strategies free from federal overreach.”
Perry said Texas has filed a petition for review with the US Court of Appeals for the DC Circuit, and also will file a petition for reconsideration with EPA, asking Administrator Lisa P. Jackson to review her finding that GHGs threaten public health and safety and should be regulated under CAA.
The state argues that this endangerment finding is not legally supported because EPA relied on the UN’s International Panel on Climate Change for scientific support. IPCC’s global warming report has been discredited since e-mails were leaked showing that key scientists coordinated efforts to hide flaws in their research and tried to keep contravening evidence out of reports, according to Abbott.
‘Parade of controversies’
Perry said, “Prominent climate scientists associated with the IPCC were engaged in an ongoing, orchestrated effort to violate freedom of information laws, exclude scientific research, and manipulate temperature data. In light of the parade of controversies and improper conduct that has been uncovered, we know that the IPCC cannot be relied upon for objective unbiased science, so EPA should not rely upon it to reach a decision that will hurt small businesses, farmers, ranchers, and the larger Texas economy.”
The state’s actions came the same day that the American Petroleum Institute, National Petrochemical & Refiners Association, Western States Petroleum Association, and five other large trade organizations jointly challenged EPA’s finding that GHGs from new motor vehicles and engines contribute to air pollution which poses a threat to public health.
The group is focused first on significant impacts that the endangerment finding will have on stationary sources of GHGs, according to Matt Paulson, a partner in Baker Botts LLP’s Austin office who filed a petition in the DC Circuit Court of Appeals on the coalition’s behalf.
“Specifically, because the [CAA] was not designed to address a problem like global climate change but rather is intend to address local or regional pollution such as smog, EPA’s endangerment finding will open the door to what will be, as acknowledged by EPA, burdensome and wholly unworkable permitting requirements for stationary sources,” Paulson said.
Paulson emphasized that the organizations are not disputing the science behind the existence of global change itself, but believe that EPA’s record supporting its endangerment finding is inadequate. Four days earlier, when the US Chamber of Commerce announced that it filed a formal petition challenging EPA’s decision, Steven J. Law, its chief legal officer and general counsel, made a similar statement.
Tremendous burden
In comments filed with EPA in 2009, Perry noted that regulating GHGs under CAA would impose a tremendous regulatory and financial burden on farmers and ranchers, small businesses, and an energy industry that employs hundreds of thousands of Texans. Families in the state would each face an estimated additional $1,200/year in living costs under the scheme, he added.
“Around the world, Texas has a well-deserved reputation as a rich source of traditional fuels,” Perry said on Feb. 16. “Thanks to bountiful natural resources and an entrepreneurial culture, we have been providing energy for our nation and world for almost as long as there has been a Texas. As a result, we understand that those traditional energy sources are an essential part of any viable energy strategy to meet the needs of our state and nation.
“Unfortunately, the powers-that-be in Washington are anxious to usher in a ‘new era’ by tearing down the old one, using sweeping mandates and draconian punishments to force the square peg of their vision into the round hole of reality,” he continued. “In the process, they are preparing to undo decades of progress while painting hard-working entrepreneurs as self and destroying hundreds of thousands of jobs.”
Perry commented that Texas has aggressively staked its energy future on alternative and renewable technologies through incentives and innovation instead of mandates and regulations. It produces more power from wind than any other US state, and more than all but four of the world’s countries, he indicated. It also is investing heavily in solar energy, with three utility-scale projects due to begin construction soon and others being developed, he added.
Commissioner Staples noted that Texas agriculture, which accounts for $106 billion or 9.5% of the state’s gross product, would be disproportionately damaged by EPA’s proposed regulations. “As a regulatory agency, the Texas Department of Agriculture is required to impose rules based on sound science, not political science,” Staples said, adding, “Not only does state law require this, but it is also a fundamental principle by which regulators all across the US have always lived. EPA has ignored extensive research on [GHG] emissions and based this significant regulation on faulty data.”
Contact Nick Snow at nicks@pennwell.com.
http://www.ogj.com/index/article-display/articles/oil-gas-journal/general-interest-2/hse/2010/02/texas-takes_legal.html