Provision in Obamacare Likely to Force Up Cost of Many Family Plans

Saturday, November 30, 2013
In an ongoing trend, unrelated to Obamacare, companies have been passing on more and more healthcare costs to employees.

However, an ACA gotcha has impacted the way costs are passed on, with families taking a bigger hit than individuals at many companies.

Please consider Companies Prepare to Pass More Health Costs to Workers.
Many employers are betting that the Affordable Care Act's requirement that all Americans have health insurance starting in 2014 will bring more people into their plans who have previously opted out. That, along with other rising expenses, is prompting companies to raise workers' premium contributions, steer them toward high-deductible plans and charge them more to cover family members.

The changes as companies roll out their health plans for 2014 aren't solely the result of the ACA. Employers have been pushing more of the cost of providing health insurance on to their workers for years, and firms that aren't booking much sales growth due to the sluggish economy are under heavy pressure to keep expenses down.

A quirk of the Affordable Care Act could make it more appealing for companies to raise rates for family coverage than for individuals, said Vivian Ho, a Rice University health-care economist.

Starting in 2015, companies employing 50 or more people must offer affordable health-care coverage to anyone working 30 hours a week or more. But affordability is measured using the cost of individual coverage, capping the cost at 9.5% of income, Ms. Ho said. Raising family rates could help companies recoup costs without running afoul of that limit, she said.

Gannett Co., which owns more than 80 newspapers and 23 television stations, expects one factor in its increased health costs to be the addition of more employees to its insurance plans due to the ACA rules, according to a person familiar with the company's projections.

To address an overall increase in costs, Gannett has replaced the two plans for families it used to offer its workers with a single high-deductible plan that requires employees to pay the first $3,000 of medical costs each year, according to workers at the Indianapolis Star, one of the company's papers. For those with individual coverage, who make up a little over half of Gannett's insurance pool, the figure is $1,500.

The company also scrapped a sliding scale that let lower-income workers pay lower premiums. For some employees, the result was a 60% jump in monthly premiums for family coverage, to $575 from about $360.

Gannett said more than half of its employees will see premiums fall by 12%.

United Parcel Service Inc. made headlines in August when it said that it would bar spouses from its nonunion health plan if they could get coverage at their own jobs. The company said it expected to see an increase in its health-care costs in part from adding employees to its plan who currently opt out.

About 6% of employers ban coverage for spouses who can get it elsewhere, and another 6% impose an explicit surcharge for covering a spouse, according to Mercer. American Electric Power Co., for example, began imposing a $50 monthly surcharge this year to cover spouses with access to insurance at their own workplace. AEP said 92% of its employees usually sign up for coverage, so it doesn't expect a surge of new enrollment.

In another shift this year, companies have become increasingly aggressive about steering employees toward plans in which they pay more of the initial costs for their care in exchange for lower premiums.

Trucking and logistics company Ryder System Inc. has replaced one of its two insurance options with one such high-deductible plan. Ryder is encouraging employees to choose the new option in part by raising the cost of more traditional coverage.
Winners and Losers

Half of Gannett employees will see a 12% drop in premiums. But others will see a 60% rise. And for those who do see premiums decline, the drop will be solely because they are forced into high deductible plans.

Obamacare created a pool of winners and losers, with some of the losers far worse off than before. Many people were hardly affected at all, at least initially. In aggregate, ACA did nothing to lower overall costs, it just shifted costs around in an inefficient manner, making things worse than before. 

The most widely reported "success" has been the enrollment of tens of thousands of people into Medicaid. Because of cost sharing that kicks in later, many states are likely to regret that effort.

Mike "Mish" Shedlock

Important Rules In The Credit Card Payment Agreement

People are so busy in their life that they do not have sufficient time to read the terms and conditions on the credit card agreement. Nowadays in most parts of the world having such a card is really a must. However, sometimes people make a big mistake by not reading the credit card payment agreement form carefully.

Credit card companies put those agreements to make the user aware of the features offered by the card and consequences which they may have to face if they miss to make the payments on time. So you must know all the details of the credit card payment agreement form, before you sign it. On this form, you can find many clauses, which are extremely important.

The terms and conditions in the credit card payment agreement may have a substantial change and the credit companies send out notices when they increase the annual or yearly percentage rates which they charge on the outstanding balances. Hence, it’s important to go through those notices too in order to avoid unpleasant surprises at the end.

The credit card payment agreement forms include information about fees, interest rate, credit limit, grace period and so on. It provides you with the perspective of a situation which can happen if you do not pay on time. So it is important to keep a constant eye on the credit card payment agreement form. In this kind of situation, it is good to transfer the amount in a card which has low APR to the one that has high APR, if you have multiple credit cards. Many credit card companies use tricks of raising the fees and intimating clients with a notice. You may sign the contract by trusting the words in the agreement but later you realize that you need to pay more than what you expected.

Recently many companies are charging transaction fees charged on advance cash from the card. So, do not be in the impression that all the credit cards charge you the same fees and interests. You must go through the clauses that explain the charges before signing any credit card payment agreement form. You must have knowledge on the updated interest charges which are levied on the cash by the companies. These rates always change according to the APR charged by the company. Sometimes companies do not charge anything extra, but they may include some surprising new clauses which were not included before.

Having such a card can be really helpful when you are for example shopping and you do not have enough cash. However, if not used with care, these cards can build up a debt and you may end up paying all your earnings to settle your bills.

Many credit card companies put the client into trouble with the changes in the terms and conditions of the credit card payment agreement form. They sometimes make very little alterations, which can get you into a big trouble. You must ensure that you notice every possible change in the agreement.

Black Friday Roundup: Walmart has 10M Transactions in 4 Hrs; Exhausted Shoppers Head Home; Fights Break Out at Walmart; Real Fight is Online

Friday, November 29, 2013
In some locations, people pushed, shoved, and fought their way through the shopping aisles. In other locations, traffic was normal.

All in all, I suspect people once again bought more junk they do not need and cannot afford.

Here is a sampling of the news.

Walmart Processes 10 Million Transactions in 4 Hours

The New York Times reports Exhausted Shoppers Head Home, Replaced by the Next Wave.
While some malls across the country were busy during the traditional postholiday shopping on Friday, the crowds at others seemed sparse to some regular customers, who compared them to a regular weekend’s atmosphere. Perhaps it’s possible that the earlier Thanksgiving hours and the increase in online shopping — with so many e-tailers offering competitive deals — had lessened the desire to peruse racks of clothes inside some physical stores.

Still, customers sensed there were deals to be had on both days, and parking lots at some malls were jammed again on Friday. On both Friday and Thursday, some customers complained about their fellow shoppers. Holly Schneider, another shopper at the Leesburg outlets, said prices were far better than consumer behavior. “People are rude, just really rude,” Mrs. Schneider said. “There’s no personal space. It’s like you’re not even there. They’re bumping into you, knocking you down. They don’t see you. They see where they’re going.”

IPad Airs and several televisions sold out on by midmorning on Thursday. Walmart announced that the company had sold 1.4 million tablets on Thanksgiving Day. Walmart also said it had processed more than 10 million transactions at its registers from 6 p.m. to 10 p.m. Thursday, including lower-tech items like nearly two million dolls.

Over all, online sales were up nearly 10 percent over last year by Black Friday afternoon, according to IBM Digital Analytics Benchmark.

Walmart Black Friday Fight

What would Black Friday be without a fight? 

Link if video does not play: Wal-Mart Black Friday Fight

Real Fight Was Online

The Wall Street Journal reports On Black Friday, the Real Fight Was Online.
Brick-and-mortar retailers mounted a furious defense on Black Friday to head off incursions into one of the industry's biggest shopping days by such online rivals as Inc.

The tactics were evident in stores and on websites as millions of holiday shoppers lined up to spend their dollars on highly touted deals.

Chains like Macy's Inc. opened on Thanksgiving for the first time, and giants like Wal-Mart Stores Inc. and Target moved their deals earlier Thursday, shifts intended to retrieve valuable shopping time that had been ceded to e-commerce, where the doors never close.

Best Buy Co. kept some deals hidden until customers showed up at stores, and retailers put more deals on the Web to better compete with Amazon on its own playing field.

In the early predawn hours of Thanksgiving, Jason Goldberger huddled with his team on the 20th floor of a Target Corp. building in Minneapolis to make sure everything was ready at the chain's most important store:

Mr. Goldberger, who runs Target's website and mobile business, arrived at 2 a.m., His staff split into two conference rooms. One held a technology team responsible for the workings of the site. The other had people comparing Target's deals with offers from and

Such big retailers as Wal-Mart and Target continue to struggle to keep up with Amazon on the Web. Despite years of effort, online sales still typically account for only around 2% of sales for the two chains.

But both companies are investing heavily to catch up. Target expects to spend more on technology next year than it does building and upgrading new stores. This year, it made virtually all of its Black Friday deals available online.

Store chains used rolling discounts to keep shoppers lingering and competitors' guessing. On Friday at 8 a.m. Wal-Mart started "Manager's Specials," which included unannounced promotions set by individual store managers who received a set budget to spur sales.

Flagging bargains too early risks having competitors match or beat prices. Market Track LLC, which tracks pricing on the Web, said Best Buy had advertised a Samsung gas range for $699 in its Black Friday flier. On Wednesday, Sears dropped its price for the oven to $599. By Thursday, Best Buy and hhgregg Inc. had matched the lower price.
It's far too early to tell if stores actually did better than last year or not. The answer depends on what people bought: loss leader sales items, stuff in general, or high-markup items.

According to a couple of close friends, store traffic was lighter than usual in my area, at least later in the day. I did not venture out personally.

Mike "Mish" Shedlock

Texas Welfare Recipient Says "Working is Stupid"

Please consider the viewpoint of a 32-year old Austin Texas welfare recipient who says working is stupid because she gets nearly free housing, food stamps, a welfare check, and other handouts.

Mike "Mish" Shedlock

France Minister of Industrial Renewal has New Target in his Sights

Arnaud Montebourg, Minister of Industrial Renewal of France, has a new target in his sights, the French public procurement group UGAP.

Here is some background information about UGAP. Montebourg's complaint follows.
The Union of Public Purchasing Groups (UGAP), the French public procurement centre operates under the supervision of the Ministries of Economy and Finance and the Ministry of Education. UGAP's overall objective is to strengthen the social and environmental performance of public procurement, without increasing the cost of services offered.

Alice Piednoir, Sustainable Development Policy Officer & Purchasing Manager, says "We centralise applications and mutualise costs in order to propose offers that are financially successful. We ensure that the inclusion of social and environmental requirements in our bidding do not cause additional costs to the services offered."
Montebourg Targets UGAP Over "Made in France"

Montebourg is upset that UGAP does not supply enough products made in France, and he threatens to dissolve the group.

Via translation from Le Monde, Arnaud Montebourg Targets UGAP Over "Made in France"
Arnaud Montebourg has a new target in his sights: UGAP, the main central purchasing agency for state and local communities.

UGAP does not provide enough support for French companies in the eyes of the minister of productive recovery . In response, Montebourg threatens to apply for dissolution of the company.

"I consider that there is a serious problem with patriotic UGAP ," thundered the minister Tuesday, November 26 , before the presidents of the regions he received at Bercy. UGAP has a global order book except for France .
Montebourg is willing to overpay for everything as long as it's made in France.

Is it any wonder French government spending accounts for 56% of French GDP, highest in the EU (not that there is anything productive about that setup).

Mike "Mish" Shedlock

Social Marketing For Free Network Marketing Business Leads and Traffic

Everyone wants something for nothing. It's true. In a Network Marketing business, it is no different. Why is it, then, that we still think we have to pay out loads of money, particularly when it comes to business leads, to make money? Well, there are a lot of business opportunities out there that would like you to think you must pay to play. You can get plenty of things for free if you just take the time to look around.

We all want to believe that because we think our Network Marketing opportunity is great, so will everyone else that sees it. That belief alone will not help us generate Network Marketing business leads. That still doesn't mean we can't learn how to market our Network Marketing opportunity for free. That reminds me...your prospects have to be able to find you on the Internet in order to become your business leads!

So, before I get off on a tangent, I want to state that you CAN expect to get tons of business leads and traffic to find you on the Internet, without spending any money at all!

Start Getting Free Business Leads with Social Marketing.

Social Marketing is a form of Internet marketing that attempts to reach marketing goals by communication and participation in various Social Media markets such as MySpace,Facebook, YouTube; and bookmarking sites like Digg, StumbleUpon, Squidoo, and others, like Blogs.

What this means is that you can change the way you obtain business leads for your Network Marketing business opportunity, and remove some stress from your life. Be more social; take time to learn new Internet Network Marketing training concepts, and spend less money by learning free methods of attracting business leads to you, instead of paying for them, or hounding them. Think about what a unique tool this could be for your Network Marketing business!

How to start Attracting Free Business Leads:

By using Social Marketing methods, and socializing on social media sites to attract leads to you instead in hunting for them, you can enter the Social Media Sites and set up house with this new Internet Network Marketing style. This is a form of Attraction Marketing, which is the practice of attracting pre-qualified prospects, or business leads, to find what it is that you are offering on the Internet. So get started on setting up some new social marketing sites and make some friends! Try those listed above, or there are tons of other sites to choose from.

How Does Social Marketing Bring You Business Leads?

Just think of the extremely successful people you know in Network Marketing...what is different about them? In most cases, they are extremely likable and charismatic; some may say...lucky. People are drawn to them like a moth to a flame. Business leads just seem to appear. I think that's the leads come to them! They've established themselves as a "likable leader". I doubt they chase any prospects, or pay for them.

That's the way I want you to think...that success comes easily to you by just being yourself. You are already a leader. Your prospects just need to know "who" you are...without your "sales hat" on. You can do all this with Social Marketing; on sites like FaceBook, MySpace, YouTube, StumbleUpon, and others. Work on being a friend and sharing your knowledge, but in a giving way, and not selling. People usually do business with people they like and trust. Business leads will be attracted to you! Doesn't that sound a lot less stressful? And, it doesn't cost you a dime!

Next: To learn techniques on how these Social Media sites work best for business and Internet Marketing, just search the Internet for free training on Internet Network Marketing. You can find valuable training information at a support site for Internet Network Marketing trainees. I found that I really needed this type of support to keep my training on track when I was just starting out as an Internet Marketing Coach.

You can quickly learn how to set up these sites correctly and then learn how to get business leads and traffic to find your sites without sending unsolicited network marketing information. You can find tons of free Internet Network Marketing training on how to learn Social Marketing in order to help prospects, or business leads, find you and your business opportunity.

Once these wonderful, free business leads start coming to you, you must have a way to find out who's interested in what you are offering. You need to have a "lead capture page" in place in order to capture the information of those who have "asked" for more information, or to be kept informed. After all those years of verbally bludgeoning people over the head to pay attention to your network marketing business opportunity, they simply ask to be associated with you, the leader! It's a beautiful thing! I initially joined a free Internet Marketing training class to help me set it all up.

Last: There are Internet Network Marketing coaches out there, like myself, that enjoy teaching how to successfully bring in free business leads for your Network Marketing business. We are all beginners at some point, in something. And, it's much easier to learn from someone willing to share what they've learned, than to stumble around and learn everything the hard way. I have plenty of my own examples to share about that subject!

Just remember the principles about being yourself, having fun, making friends, and presenting your Network Marketing business opportunity in a giving and "Attractive Marketing" manner. And don't forget the Golden Rule, "Treat Others as You would Like to be Treated".

25% of Spanish Would Consider Leaving Spain for Economic Reasons; But Where Would They Go?

Thursday, November 28, 2013
The employment and pay situation in Spain is so bad that 33% struggle to pay their bills. More importantly, 25% would consider leaving the country for better opportunities.

Via translation from La Vanguardia, please consider One in three Spaniards have no money after paying their bills.
One in three Spanish claims to have no money left after paying the bills, according to a report on consumer payments. The study further reveals that 25% would be think of emigrating because of their economic situation. The same percentage say do not have enough money for a decent life.

Those are the most conclusive findings in the study Consumer Payments 2013, made by the Credit Management firm Intrum Justitia which surveyed 10,000 consumers from 21 European countries with the aim of understanding their payment behavior.

In regard to Spain, the percentage of citizens who say they have no money after paying the bills is higher than the European average, which stands at 26 percent, although some countries like Greece, Estonia and Hungary reach 40 percent.

If they have to prioritize in order to pay bills, the Spaniards choose to pay for the latest mobile phone and internet purchases. And if they can get savings on their household budgets, 79% do so by reducing leisure and clothing  expenses.

Another revealing statistic is that 25% of Spaniards say they do not having a sufficient amount of money for a decent life.  Estonia leads this ranking with 52%, followed by Hungary with 47% and Greece with 44%.

Eight in ten think that the Government lacks good financial control, compared to an average of 60 percent for the EU.
Trapped in Spain

25% would leave for better opportunities, but where would they go? The same question applies to Greece, Portugal, and Estonia.

The answer is nowhere. There are too few jobs elsewhere,  and plenty of xenophobia in France and other countries that are struggling as well.

Mike "Mish" Shedlock

Cotton Balls Go Rotten; Bale of a Tale of State Planning

Two years ago China amassed half the global supply of Cotton with huge price supports in an effort to encourage more cotton production. China "succeeded".

Farmers produced, and the state paid more for cotton than farmers could get elsewhere. Worldwide supplies soared, but the cotton was withheld from the market.

China's Cotton Policy "Success" Story

Bale of a Tale of State Planning

Please consider China Cotton: Bale of a Tale
It is never easy to put a positive spin on buying high and then selling low. Then again, the cotton that China plans to start selling from its vast state reserves this week, at a price below what it paid for this year’s harvest, might be rather hard actually to spin, period. Cotton can go brittle if stored for a long time. The China National Cotton Reserve will be auctioning bales that came off farms in 2011.

Still, what a marvellous monument to state planning has been created, even if the buying programme might finally end overall next year. China started its stockpiling to encourage farmers to plant cotton when prices looked set to go south two years ago (price volatility threatened a crisis for the nation’s cotton industry). But it has ended holding about 10m tons, or more than half of global inventory. It is now considering direct subsidies to cotton farmers instead.

Australia took a decade to get rid of every last thread of its wool reserves after ending its own farmer support policy in 1991. In the process, the farming industry suffered plenty of damage. But free-market innovation won out over state control in the end. The Australians probably made the fine merino wool in your suit. Not to spin a tale, but perhaps a similar process can work for the Chinese.
State Central Planning

In autumn of 2011, a clothing importer told me the price of clothes was about to soar because of a huge shortage of cotton. Clothing prices rose a few percent, but nothing like what many expected.

But there never was a cotton shortage. Rather there was huge accumulation of cotton by China at ridiculous prices. So now, what to do with it?

If China holds on to the cotton long enough, the matter will take care of itself as the "cotton balls go rotten".

Money does not go rotten in the same way, but rotten results from Fed and central bank money manipulation policies are eventually headed this way. Centralized state planning of anything never works over the long haul.

Huge boom-bust bubbles in housing and the stock market are proof enough.

Mike "Mish" Shedlock

Happy Thanksgiving!

Happy Thanksgiving to you and your loved ones!

Mike "Mish" Shedlock

El Mejor Regalo para su Familia

Wednesday, November 27, 2013
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Time for Banks to Be Banks, Not Hedge Funds or Slush Funds; Free Money Math vs. 100% Gold Backed Dollar

In the wake of all the misguided pleas for negative interest rates in Europe (hoping to get banks to lend), comes news US banks warn Fed interest cut could force them to charge depositors

Leading US banks have warned that they could start charging companies and consumers for deposits if the US Federal Reserve cuts the interest it pays on bank reserves.

Depositors already have to cope with near-zero interest rates, but paying just to leave money in the bank would be highly unusual and unwelcome for companies and households.

The warning by bank executives highlights the dangers of one strategy the Fed could use to offset an eventual “tapering” of the $85bn a month in asset purchases that have fuelled global financial markets for the last year.

Minutes of the Fed’s October meeting published last week showed it was heading towards a taper in the coming months – perhaps as soon as December – but wants to find a different way to add stimulus at the same time. “Most” officials thought a cut in the interest on bank reserves was an option worth considering.

Executives at two of the top five US banks said a cut in the 0.25 per cent rate of interest on the $2.4tn in reserves they hold at the Fed would lead them to pass on the cost to depositors.

Banks say they may have to charge because taking in deposits is not free: they have to pay premiums of a few basis points to a US government insurance programme.

“Right now you can at least break even from a revenue perspective,” said one executive, adding that a rate cut by the Fed “would turn it into negative revenue – banks would be disincentivised to take deposits and potentially charge for them”.

Other bankers said that a move to negative rates would not only trim margins but could backfire for banks and the system as a whole, as it would incentivise treasury managers to find higher-yielding, riskier assets.

About half of the reserves come from non-US banks that do not have to pay the deposit insurance fee. Their favourite manoeuvre is to take deposits from money market funds and park them overnight at the Fed, earning millions of dollars risk-free. Cutting the interest on reserves would stop that.
Excess Reserves

Free Money Math

The Fed pays .25% interest on excess reserves.
A quarter of a percent on $2.4 trillion happens to be $6,000,000,000 (six billion) annually.

Time for Banks to Be Banks, Not Hedge Funds or Slush Funds

Printing money that just sits overnight at the Fed allowing banks to make risk-free profits on $2.4 trillion in excess reserves is of course ridiculous.

It is also ludicrous for banks to complain about the take-away of free money that it should not be getting in the first place.

The Fed has so distorted the economy that no true pricing mechanism exists on anything.

Should banks feel the need to charge depositors interest on deposits, then so be it. That's the way it should be in the first place.

100% Gold Backed Dollar

In a true free market economy, with a 100% gold-backed dollar (where one dollar represented a fixed amount of gold, as opposed to a fixed price of gold), banks would of course charge a fee for safekeeping and other services.

The closer we get to that model the better, regardless of complaints by banks or others.

Notice the emphasis on safekeeping.

A 100% gold backed dollar would not stop lending. It would stop fractional reserve lending, lending of money in demand accounts, and lending of money for greater terms than the bank has use of funds.

Banks could not lend money available on demand (checking accounts), but they could lend money in interest bearing accounts such as CDs, for the term of the CD.

Mike "Mish" Shedlock

War Between Spain and Germany Erupts Over Next Round of Watered Down Stress Tests; Germany Complains About the "Carry Trade"

On October 23, ECB president Mario Draghi announced new bank stress tests. At the time, I offered a "Draghize" Translation. Here is a small snip.
Translating Draghize

For those of you who do not speak Draghize I offer these translations.

Draghize: "Banks do need to fail to prove the credibility of the exercise".
Mish: We are carefully scrutinizing several non-critical banks, looking for a couple of scapegoats, hoping to fool the public regarding the credibility of the exercise.

Draghize: "If they do have to fail, they have to fail. There’s no question about that."
Mish: If any big banks are in trouble. They won't fail. There’s no question about that.

Draghize: "The test is credible because the ultimate purpose of it is to restore or strengthen private sector confidence in the soundness of the banks, in the quality of their balance sheets"
Mish: The test is credible because we say it is.
War Erupts Over How Much to Water Down Stress Tests

Via translation El Confidencial reports War between Spain and Germany Erupts Over the Hardness of Stress Tests
The new stress tests of European banks have caused the outbreak of a new confrontation between the governments of Spain and Germany. Until now, it was Spain who argued in favor of a tough exercise, similar to what Spain had to undergo when seeking bailout funds.

By contrast, Germany (supported by France and Italy) preferred more lax exercises that do not bring to light the shame of their banks balance sheets of billions in toxic assets, including Spanish mortgage securitizations.

But now the German authorities found one flank to counterattack: the huge public debt exposure of Spanish banks, which they believe should be penalized in these exercises, which can be catastrophic for our financial system when it just starts to lift head.

Sovereign Debt Not All Risk-Free

The German authorities consider that if the tests need to be hard, then they should be hard in every way, including sovereign debt. In addition, the German central bank seeks to distinguish between the sovereign debt of their country and peripherals. It is what they call "enforce the triple A".

The penalty is a recurring request from the Bundesbank. Its president, Jens Weidmann, has warned several times about the risk posed by this link between governments and entities, and has called for a regulatory change that public debt is not considered a risk-free asset.

"It makes no sense that risk-free treatment is given to BBB Spain titles. Sovereign debt cannot all be considered as zero risk equally. Only those with the highest rating can be considered risk free" is the argument from Germany.

Germany Complains About the "Carry Trade"

Weidmann's claim is deeper than a mere fight stress tests estate. In its latest monthly report, the Bundesbank takes offense at the stratospheric rise in the positions of the Spanish banking debt: an increase of 133 billion euros over two years, to around 300 billion euros today. This is explained by the famous carry trade with which banks borrow very cheap on the open bar ECB liquidity at 0.75%, then invest in public debt paying 4% interest.

Spanish officials claim it makes no sense to penalize these asset as if they were bad loans. But the answer to this argument is simple: a stress test is by definition a simulation of a worst case scenario that the current (or adverse stressed scenario) and that scenario should take a further fall in bond prices and an increase yields.

If the Bubdesbank imposes its criteria, the result can be disastrous for some of our institutions. Some industry sources are confident that the Spanish government reaches a deal with the German to "not to hurt each other."
Germany Convinced of Easy Stress Tests

Via translation, also consider Merkel stands up to Guindos Regarding Stress Tests
According to a source familiar with the situation, "Germany is convinced that the test will be very light because of so much opposition to make the stress tests a serious exercise."

In fact, postponing these tests from the last quarter of 2013 to the first quarter of 2014 is another sign of the imposition of the German thesis. Neither France nor Italy wants very rigorous stress tests so as to not aerate the shame of their own banks.

French reluctance is justified by the enormous exposure with their banks in recent years. As for the Italians, "they are in a state of denial as that Spanish banks had before the disaster," explain the sources cited. "And the worst is that they usually get away with it, not least because Mario Draghi is Italian."
"Deal to Not Hurt Each Other"

In return for watering down stress tests on certain toxic assets that French banks, German banks, and Italian banks do not want, industry sources think a deal will be reached to also not include skyrocketing sovereign debt of Spanish banks.

Conclusion: expect another stress-free test.

Mike "Mish" Shedlock

Optionfair Rebates Or Ezbinary Rebates – Which Is The Better Deal?

So you have been shopping around for a binary options broker and narrowed your options down to either OptionFair or EZBinary. Now, however, you need to decide between the two, and if you are serious about getting the best value for your money, then you will need to conduct a careful side-by-side comparison of the two brokers before you make your decision. Of course, when you sign up, you should also do so through a website that will allow you to get either OptionFair rebates or EZBinary rebates, depending on which broker you eventually choose to trade with.

Both OptionFair and EZBinary offer the same rebate amounts and cover the same major categories of asset types. This already puts the two brokers on par for a large part of the possible factors for comparison.

Maximum Gain

The first main difference between the two appears when you compare the maximum gain with each broker. With OptionFair, you can have a maximum gain of up to 350%, whereas with EZBinary, the maximum gain varies greatly with the type of trading that you choose to do. The EZBinary platform features different kinds of trading, and your maximum gain with their Digital trading is only 85% but for their Touch trading, that soars to a maximum gain of 400%.

Which of these is the better choice for you depends largely on the type of trading that you prefer to do. If you have traded before and prefer straightforward trading, then perhaps OptionFair is the better choice for you in this regard because it does not have the different platforms that EZBinary has. With EZBinary, you will be better rewarded if you are willing to take the time and effort to learn about their different trading platforms and take advantage of the high maximum gain offered by their Touch trading.


Although both brokers feature assets across the same major categories, EZBinary offers over 200 different assets that you can trade on, whereas OptionFair offers only 40 different underlying assets. This is a big difference, and on the surface it seems that EZBinary should be the clear choice. However, you need to understand your own trading preferences before you make a decision based on this factor. OptionFair offers the major underlying assets, which would in fact be more than adequate for most casual traders. It is only the more sophisticated traders who are ready to start diversifying their financial holdings widely who would require the larger range of underlying assets offered by EZBinary. If you are such a trader, however, then EZBinary is the clear choice in this case.


Finally, EZBinary also offers a great many extras, whereas OptionFair offers a much more no-frills experience with mostly no extras. The extras offered by EZBinary mostly involve the provision of information and alerts through email, which can be useful for the conscientious trader who makes use of all the information at hand before deciding on a trade.

Making A Choice

While the ultimate decision rests with you and should be determined by the broker that you feel most comfortable with, OptionFair seems to be the better choice for beginner traders who need a straightforward and easy-to-understand trading platform while EZBinary is the better choice for more experienced traders. With OptionFair rebates and EZBinary rebates when you sign up through the right website, however, you should be well set to trade no matter which broker you eventually sign up with.

Reader Reflections on Socialism Theory vs. Practice

Tuesday, November 26, 2013
In response to Record Number of French Corporate Bankruptcies; Socialist Theory vs. Practice; What Went Wrong? I received a number of noteworthy comments via email and as direct comment to my blog.

Reader Jay commented ...

The first thing all you capitalism bashers need to understand is that capitalism is not what we have in this country. We have crony capitalism/socialism/fascism at work right now. We have never had real capitalism.

Jay replied to the ridiculous comment by "ClimbingSand " The rich have socialism, the poor have dog eat dog Capitalism.

Acting Man Commented ...

Via email, Pater Tenebrarum at the Acting Man Blog hit the nail precisely on the head. Here is his comment:

I would point out that socialism works neither in practice nor in theory. It is already the theory that is wrong, as the concept must fail due to the calculation problem. Economic calculation is literally impossible under socialism, and so no rational socialistic economy is possible. If the whole world were to adopt socialism, we would soon live from hand to mouth, as the division of labor would completely collapse within a few short years.

Thanks Pater!

I take this opportunity to point out that his blog is still having "technical difficulties", related to his current host. Pater is looking for a new host site, and hopefully his blog will be back up, and running soon.

Pater has taught me a lot over the years. He is the person who introduced me to Austrian economics.

I highly recommend bookmarking his site. It will be back up soon.

Mike "Mish" Shedlock

Record Number of French Corporate Bankruptcies; Socialist Theory vs. Practice; What Went Wrong?

The number of French business bankruptcies hit a record in the third quarter of 2013 and the yearly total is on a pace that will come close to the total reached in the dark days of the great financial collapse in 2009.

Via translation here are a few articles from Le Monde.

Corporate Liquidations Reaching New Heights in France
The newspaper L'Autre Journal has filed for bankruptcy.

Michel Butel, the former boss of the newspaper does not admit defeat so far, and promises new adventures. But under another name ...

In the last twelve months, 43,981 companies were liquidated after having filed for bankruptcy, according to the records of the credit insurer Coface. This is a record number of third quarter bankruptcies.
Mory Ducros, Largest Bankruptcy in France for a Year
With 5,200 jobs at stake, the bankruptcy of transport company Mory Ducros is in social terms the heaviest recorded bankruptcy this year. The previous failure of this magnitude was Neo Security, the second largest French security firm, which was declared insolvent in April 2012. At the time, it employed him as more than 5,000 people.

Some 62,500 company s should file for bankruptcy this year, almost as much as during the dark year of 2009, according to credit insurer Coface. The number of bankruptcies may be slightly lower in 2014.
Ayrault Wants to "Save as Many Transport Jobs" as Possible
Transport company Mory Ducros, which employs 5,200 people in France, announced during a special Works Council (EWC) on Friday its request for receivership with the Commercial Court of Pontoise and the appointment of a temporary administrator.

Unions of the company are very pessimistic. "It is feared between 2,000 and 3,000 job cuts," said Fabian Tosolini, national secretary of the Federation of Transport of the French Democratic Confederation of Labour (CFDT). This is one of the biggest bankruptcy filings since the start of François Hollande term, and one of the largest ever happened to France since the collapse of Moulinex in 2001.

Following the bankruptcy announcement, Prime Minister Jean-Marc Ayrault commented "We are looking for all solutions, site by site, with the social partners, of course. Where we can find the buyers, everything will be done to save the maximum number of jobs. This is a very difficult job."

Arnaud Montebourg, the Minister of Industrial Renewal, is "mobilized" on this issue. Potential buyers have expressed interest but no proposal has been expressed.

Frédéric Cuvillier, Minister of State Transport added "Everything will be studied: first how to consolidate the rescue at least 2,000 jobs, and then look at how we can ensure the recovery or offer jobs to those who are victims of this plan." The Minister announced that he wanted "to meet as soon as possible" with management and the unions.
The prime minister, the minister of industrial renewal, and the minister of state transport are all mobilized. How comforting.

Understanding Montebourg

To understand Montebourg, take a look at some "Made in France" images.

Montebourg "advertises Made in France" while holding Moulinex blenders and wearing classical "marinière" shirts.
He is literally the object of tons of sarcastic comments and gags.

When telecom operator Free was awarded the fourth mobile license in France and launched its very low cost service, Montebourg said that Free had done more for purchasing power of French people than all the actions of then president Nicolas Sarkozy.

But when Montebourg became Minister he started a very aggressive campaign against Free and its pricing, accusing them of destroying French jobs.

The above Montebourg clip courtesy of reader "AC" who lives in France (see Made in France: Montebourg Ridiculed in Text and Pictures; France Goes After "Red Bull" Energy Drinks to Finance Social Security).

Hopefully "AC" will not be arrested for "insulting the president". That's not precisely a joke. (See Founder of French Website "Hollande Resignation" Arrested, Car Impounded for "Insulting the President")

More on Montebourg

If you are interested in other absurdities by the Minister of Industrial Renewal, simply search my blog for Arnaud Montebourg.

What Went Wrong?

The answer to this question should be obvious: The socialist policies of president Francois Hollande went deeply wrong.

In particular, I would like to point out my June 8, 2012 post Hollande About to Wreck France With Economically Insane Proposal: "Make Layoffs So Expensive For Companies That It's Not Worth It".

Hollande's layoff clampdown solution according to Labour Minister Michel Sapin is to "make layoffs so expensive for companies that it's not worth it." ....

To which I commented:  Ongoing, if it's difficult to fire people, companies will not hire them in the first place.

Couple that preposterous idea with a set of tax hikes so huge that even the socialists complained:

See Hollande's Tax Everything Plan Blows Sky High With Riots by Farmers

Socialist Theory vs. Practice

In theory, Hollande proposed "Make Layoffs So Expensive For Companies That It's Not Worth It". In practice, his policies harmed many companies so badly they could not possibly stay in business!

Mike "Mish" Shedlock

10 Simple Ways to Grow Your MLM Or Network Marketing Business Online

Building your Network Marketing business online is not necessary but typically at some point in your MLM journey you will find yourself out of leads and your warm market as you know it exhausted. This of course brings up the fact that you never actually run out of leads or your warm market. I find when people on my team hit this wall they just need to change their perspective. One way to do this is to take another approach to attracting new leads for your MLM opportunity. Here are 10 simple ways to grow your MLM or Network Marketing business online that anyone can implement:

1) Facebook - Make sure to update your profile and let people know you have a business. When you connect with old friends send them a message ask them to call you to catch up. Just like any meeting ask them questions, learn what has been going on in their life. When they ask about you share what you have done since your last conversation and talk about what is really exciting in your life now! (MLM, Network Marketing, or Direct Selling opportunity)

2) Twitter - Twitter is a virtual gold mind for leads and resources. Follow people with your same interests and engage them in conversations. Conversations lead to site traffic and site traffic leads to more leads for your Network Marketing business.

3) Linkedin - Network Marketers have a huge opportunity on Linkedin! It's not about spamming people with your opportunity but looking for good connections that you can learn more about and convert to a live conversation. Learn about their business, find out how you can help them, and tell these connections how they can help you!

4) YouTube - YouTube is the #2 search engine online! If you are passionate about your Network Marketing, MLM, or your Direct Selling opportunity start making videos! Talk about all aspects of your business and opportunity. Each video should be entertaining or educational, people want to be entertained or they want to learn something. Don't be boring and make sure to have fun. You will attract people with your passion!

5) Craigslist - Free adds! Need I say more? Be creative, think outside of the box. If you have a weekly opportunity meeting make sure it's listed on Craigslist. Try different ads, be authentic, and test, test, test. Determine which adds result in new leads for your business opportunity and then expand on these ads.

6) Plaxo - This is a great online address book that is used by business professionals. I think of it as an old school social network but it works. Setup your profile and engage each new connection! Start out by sending a friendly email. Please note, friendly emails do not include your Network Marketing link, video, or pitch. Always remember you want to date the person a few times before asking them to marry you. Too many Network Marketers try to sign someone up before their prospect even understands what it is you do.

7) Forums - Look for forums about your MLM business and things you are interested in. Once you find the right forum online that you enjoy make sure you become active, leave comments and be helpful. In your signature have your opportunity link or better yet your blog or personal website. When people get used to seeing your comments they will naturally click on your links to learn more about you and your business.

8) Yahoo Answers - Very under used but a great way for you to be a category expert. Create a profile and start answering questions. This is a great way for people to discover you and want to learn more about what you do. You can easily answer a few simple questions a day and attract new leads for your business.

9) MLM Lead System - I can't recommend the value of having a great Network Marketing Lead system. By lead system I mean a system that you can create your own lead capture pages, add leads to your auto responder like Aweber or Get Response, and funnel all the leads from the above online marketing activities. Growing your MLM online requires you to have a great lead capture system.

10) Blogging - Create your own blog and write often. Your blog can me about your company, you, your industry or all three. A blog is a hub where you can drive traffic to. Similar to your MLM Lead System but different as this will be a place for you to continue to write and attract new leads over a long period of time. If you want to be successful in growing your Network Marketing business online having a blog is essential.

You don't have to do all 10 of these strategies to successfully grow your MLM online but each of these strategies will make a huge difference in attracting new leads to your business opportunity. If I was to pick two to focus on it would be setting up your MLM Lead System and creating your Blog. Over time these two strategies alone can propel you to online success.

Jobs vs. Employment Analysis Suggests Huge Obamacare Impact (And Way Less Job Growth than Anyone Thinks)

Every month (on average), for about a year, there has been a startling discrepancy between employment as measured by the household survey and jobs as reported by the establishment survey.

I believe the discrepancy is yet another Obamacare artifact.

Jobs vs. Employment Discussion

Before diving into the details, it is important to understand limits on data, and how the BLS measures jobs in the establishment survey vs. employment in the household survey.

Establishment Survey: If you work one hour that counts as a job. There is no difference between one hour and 50 hours.
Establishment Survey: If you work multiple jobs you are counted twice. The BLS does not weed out duplicate social security numbers.

Household Survey: If you work one hour or 80 you are employed.
Household Survey: If you work a total of 35 hours you are considered a full time employee. If you work 25 hours at one job and 10 hours at another, you are a fulltime employee.

Recall that the definition of fulltime under Obamacare is 30 hours, but fulltime to the BLS is 35 hours.

Next, consider what happens under Obamacare if someone working 34 hours is cut back to 25 hours, then picks up another parttime job.

Obamacare Effect

Prior to Obamacare
34 hours worked = 1 parttime job household survey
34 hours worked = 1 job establishment survey

Enter obamacare
Person cut back to 25 hours and takes a second job for 10 hours
Here is the new math

25 + 10 = 1 fulltime job on the household survey.
25 + 10 = 2 jobs on the establishment survey.

In my example, the household survey totals up all the hours and says, voilla! (35 hours = full time). So a few extra hours that people pick up working 2 part time jobs now throws someone into full time status – thus no surge in part-time employment, but there is a surge in jobs.

I am quite sure this is what is happening, but I cannot prove it.

Household Survey Normalized

The BLS has a chart (shown below) that normalizes the household survey to the establishment survey, but that just transfers establishment survey double-counting to the household survey!

I contacted the BLS and asked if they could please weed out duplicate social security numbers. They can't because they do not capture social security numbers.

This is not a fault of the BLS. They wish they had more data but they don't.

Does Any Available Data Lend Credence to My Theory?

Yes, and overwhelmingly so. An unusual discrepancy between the household and establishment surveys is the key to the puzzle.

Household survey:
Establishment Survey:

Numbers are in thousands.

October Employment and Jobs vs. October in Prior Years

Employed Household144,802 138,421 139,097 140,314 143,328 143,568
Jobs Establishment135,905 129,614 130,156 132,094 134,225 136,554

Year-Over-Year Gains or Losses vs. Prior Years

Yoy Change Household(6,381)676 1,217 3,014 240
Yoy Change establishment(6,291)542 1,938 2,131 2,329
Monthly Average Household-5325610125120
Monthly Average Establishment-52445162178194

Fore the year ending October 2009, 2010, 2011, and 2012, the household survey and the establishment survey were very well aligned.

However, something happened between October 2012 and October 2013. In the last year, the household survey says employment rose by 20,000 a month while jobs rose by 194,000 per month!

Let's drill down by month and take a look.

Month-over-Month Gains or losses vs. Prior Month

MonthHouseholdEstablishmentM/M Change HHM/M Change Establishment

Because of the government shutdown, some will object (and rightfully so) about October. So let's throw that month away.

12-Month Results Excluding October 2013

Oct 2012-September 201313292489
12 Month Avg Excluding October 2013111207

Even after eliminating the government shutdown effect, the difference between the two surveys is still huge.

From October 2012 through September 2013, the household survey suggests employment rose by an average of 111,000 per month. The establishment survey suggests 207,000 jobs per month on average.

Which is correct?

Actually because of what they measure, both might be. Thus my blog subtitle "And Way Less Job Growth than Anyone Thinks" is not technically accurate.

Practically speaking however, job growth has been nowhere near as good as it looks. People picking up a second parttime job following cutbacks in hours does not do a thing for the economy except perhaps waste gasoline.

However, in spite of strong evidence, this is still a theory. To prove it, we need to weed out duplicate social security numbers. The BLS can't, but ADP can. I contacted them twice but to no avail.

I would like ADP to crunch the data and determine how many duplicate social security numbers show up vs. the same months in prior years. If I am wrong it won't be the first time. But let's have a look at the numbers and see what they say.

Mike "Mish" Shedlock

The Defense Rests

Monday, November 25, 2013

It is exhausting.  This choice.  This job.  This desire to craft a non-ideological, pragmatic path is taking all of my energy.  Confronted daily by people who either cannot, or will not, see the full picture that is the Patient Protection and Affordable Care Act (PPACA or Obamacare), I find myself calming the fears of its detractors or clarifying the rules to its biggest supporters.  To the right, and the righter than right, I find myself defending the law, or at the very least, the need for change.  Defending the insurers from the left could be a full time job in of itself.

Randy (name changed) called Friday.  He wanted to know when they were going to cancel his group health insurance policy.

Why would Medical Mutual cancel your company’s insurance?

Because my policy doesn’t cover any women or children.

But you don’t have any female employees, right?

Yeah, but they’re gonna cancel me!

OY, Randy, you’ve been watching FOX again.

It took fifteen minutes to reassure Randy.  Now, no one on FOX really said that a small business would lose its health insurance if there weren't any women or children on the policy.  That’s silly.  But the daily barrage of negativity, conspiracy theories, and half-truths take their toll on the viewers.  One day you’re a concerned business owner.  The next you are trying to get one of your employees to get married so that you can retain your group coverage.

It doesn’t get any better on MSNBC.  With neither an ounce of irony nor embarrassment, the outpost of the left gives us Howard Dean, the former governor of Vermont.  I’m sure that an extensive GOOGLE search might find an instance when Gov. Dean knew what he was talking about.  I’m just positive that none of his pronouncements about health insurance or the PPACA have any basis in reality.

For example, Governor Dean was recently discussing the disastrous roll-out and the policy cancellations.  He was on Morning Joe and several other shows.  He opined that all the President had to do was to hire a bunch of unemployed kids, put them in a call center, and have them ring up everyone whose policy had been cancelled.  The kids could enroll everyone into Obamacare!

I doubt that approach would be welcome in Vermont, a state with less than half the population of Greater Cleveland.  I know that wouldn’t fly here.  Who explains the policies to the “kids”?  Vermont may have only one or two insurers and only a few options, but Ohio, California, and any other state that has an actual city or two will have multiple insurers and dozens of choices.  But on one has ever explained insurance, or economics, or city life to Governor Dean.  And there is absolutely no reason to do so now.

40 vs. 5

The PPACA was sold to the American public as a universal win.  Everyone would get better, more comprehensive health insurance for a lower monthly premium.  This blog has repeatedly pointed out that that was not possible.  The airwaves are now filled with the horror stories of cancelled policies and jacked-up premiums.  The right emphasizes every problem, real or imagined.  The left has a new argument – Isn’t it OK to inconvenience five million people so that 40 MILLION AMERICANS can now get access to affordable health care?

What a bunch of hooey.  This wasn’t a Hobson’s choice.  It wasn’t remake our entire system or do nothing to help the uninsured and the under-insured in our country.  We could have accomplished much of that goal by expanding Medicaid.  You don’t score many points by minimizing someone else’s loss.

I have watched my words parsed in the comment sections of Facebook and the AOL Patch.  The attorneys and attorney wanna-be’s who troll for fights can’t tolerate civil discussions.  One guy was convinced that all insurers will cancel their clients at the first sign of a claim.  Another reader is positive that the PPACA is the harbinger of the Apocalypse.  The extremes are so extreme.  The middle is lonely and damn near empty.

For the record:
  • Insurers pay claims.  My clients have benefited from their coverage.
  • The status quo was not sustainable.
  • There is a kernel of truth in everything you see and hear on FOX and MSNBC.  You need more than kernels.  You need a meal.
Take a deep breath.  We will all get through this together.  But for the moment, the defense rests.


Encrypt Everything, Store Nothing, Leave No Trace! (Dissolving Messages, Wickr, Snapchat)

US corporations like Google, Facebook, and Microsoft benefit from "safe harbor" treaties with the US that allow those companies exemption from European privacy rules.

Then the NSA and FBI came along and forced those companies to put in "back doors" so that nothing is private. 

In the latest 100% believable accusation, EU accuses US of improperly trawling citizens’ online data. In response, Europe is threatening to end the safe harbor laws.
Brussels is to warn Washington that US tech companies risk losing their exemption from privacy rules unless the US changes the way it treats EU citizens’ online data.

A European Commission review of the “safe harbour” pact that allows US technology groups such as Google, Facebook and Microsoft to operate in Europe without EU oversight will conclude that Washington has improperly forced US companies to hand over European customers’ data. It also says that breaches of the data deal have given US tech companies a competitive advantage over European rivals. 

Although the review, which will be unveiled on Wednesday, stops short of calling for the safe harbour agreement to be scrapped, its wording signals that the EU will move in that direction unless the US changes the way that it uses data held by companies on EU citizens.

A scrapping of the safe harbour deal is one of the most formidable weapons the EU has in its arsenal to punish the Obama administration after claims of snooping on Europeans by the National Security Agency.

Such a move would wreak havoc for any US tech company doing business in Europe – especially Google, Facebook and Microsoft, which rely on the agreement to transfer customers’ data seamlessly between countries.

Ending safe harbour and subjecting US companies to European privacy laws would put them in a legal bind over NSA requests for information about European citizens. Under US law they would still be forced to hand over the information, provided the request was backed by an order from the secret foreign intelligence surveillance court but doing so would breach their extra responsibilities in Europe.

Internet companies say the conflict would force them to ringfence EU operations and hold data about the bloc’s citizens in new legal entities there, creating separate islands of data that would lessen the efficiency of their operations and risk balkanizing the internet into separate regional networks.
You've Got "Unsecure" Mail

In an attempt to circumvent NSA spying, a fast growing Russian internet company, Mail.Ru seeks US expansion.
Russia’s largest internet company is expanding into the US, trying to lure customers by keeping the data from its services offshore., which has more monthly users than any other Russian website, is targeting the US with a suite of mail and messaging apps under the brand as it tries to crack what its chief executive Dmitry Grishin calls “the most competitive and most difficult market that has ever existed”.

Mr Grishin said the data centres for its US services would be based in the Netherlands, which he said was a “good neutral place” outside of the US and Russia that was “very liberal” and “respected globally”.

The Netherlands has robust data protection laws and a broad definition of what constitutes personal data, as well as some large data centres. However, some privacy experts say keeping the data offshore would not be enough to stop the NSA accessing it.

Jeff Chester, executive director of the Center for Digital Democracy in the US, said the data may be more secure in Europe but the problem was it had to be shipped from the US.

“I don’t think it keeps it from the NSA at all because the data are collected here and shipped to the cloud, it doesn’t make a difference where it goes,” he said. “The NSA can access it during the transportation process.”

James Lewis, a security expert at the Center for Strategic and International Studies in Washington, said: “The location of the server makes absolutely no difference, particularly for Russian companies that have very close relations with their security services. Ask Snowden if he feels like his email is safer.”
Encrypt Everything, Store Nothing!

Mail.Ru is not the answer. At some point the data is unencrypted, and accessible to NSA snoops. Enter Wickr, a secure messaging app, that stores nothing and at no point in routing is there an unencrypted message.

Wickr, has already received a request from the FBI for a back door. Thankfully, the company cannot provide one because it stores no data.

The Financial Times reports US spying fuels popularity of secure messaging app Wickr.
Wickr, the secure messaging app that positions itself “halfway between Snapchat and Snowden”, is set to raise more funds and launch a major update on Monday after its popularity soared following revelations of a US mass surveillance programme.

The Silicon Valley start-up enables encrypted peer-to-peer communications from email to instant messaging while keeping no data whatsoever. It plans to rival Skype by rolling out secure and private international video calling next year.

Nico Sell, co-founder and chief executive of Wickr, said the year-and-a-half-old company had seen an extreme spike in interest after revelations about the National Security Agency’s surveillance programme were published earlier this year.

Wickr works by providing connections between message senders, which are not stored on any central server. Ms Sell said the FBI had already asked for a back door to get information for law enforcement but because the company holds no data, there was not even a way of co-operating.

“I didn’t want to be responsible for securing everyone’s gold – because that’s impossible,” she said. As a hacker who helps organise one of the most important hacker conventions of the year, she knew nothing was foolproof. The sender can set how long he or she wants the message to stay on the recipient’s computer before deleting itself.

Wickr, which has been downloaded 1m times, is free but will begin to offer advanced subscriptions and in-app purchases next year.
Wickr vs. Snapchat

Snapchat is a messaging service that provides text and photo messages that dissolve in a few seconds. The Wall Street Journal reports Snapchat Spurned $3 Billion Acquisition Offer from Facebook.
Snapchat, a rapidly growing messaging service, recently spurned an all-cash acquisition offer from Facebook for close to $3 billion or more, according to people briefed on the matter. Evan Spiegel, Snapchat’s 23-year-old co-founder and CEO, will not likely consider an acquisition or an investment at least until early next year, the people briefed on the matter said. They said Spiegel is hoping Snapchat’s numbers – of users and messages – will grow enough by then to justify an even larger valuation, the people said.

Snapchat specializes in ephemeral mobile messages, including text or photographs, that disappear after a few seconds. The service has not generated any revenue, but is especially popular among teenagers and young adults, who use the app to send messages to friends.

Facebook is interested in Snapchat because more of its users are tapping the service via smartphones, where messaging is a core function. Facebook has rapidly increased the share of its revenue coming from mobile advertising, but said last month that fewer young teens were using the service on a daily basis.

Tencent, a diverse Internet company, owns WeChat, a major messaging service in China, and has a stake in KaKao, a popular South Korean app. It was vying to lead a group of investors that had offered to invest $200 million in Snapchat at a valuation of roughly $4 billion.
Meaning of $3 Billion

Snapchat has no profit and no revenues. Last year it was reportedly worth $100 million. Now it is worth $3 billion.

I cannot fathom turning down an all cash offer of that amount. Isn't $3 billion enough to do whatever you want for the rest of your life? Would $10 billion make one happier? Is the race on to see what deal gets valued at $100 billion? $1 trillion?

Wickr Business Model

Leaving philosophical questions aside, Let's take a closer look at the model of Wickr straight from its website.
The Internet is forever.
Your private communications don´t need to be.

Wickr is a free app that provides:

  • Military-grade encryption of text, picture, audio and video messages
  • Sender-based control over who can read messages, where and for how long
  • Best available privacy, anonymity and secure file shredding features
  • Security that is simple to use

"Wickr - an iPhone encryption app a 3-year-old can use."

New York Times: "There is no reason your pictures, videos and communications should be available on some server, where it can easily be accessed by who-knows-who, or what service, without any control over what people do with it."
Wickr vs. Silk Road

The government shut down "Silk Road", but that model had a fatal problem. It stored data.

From the Wickr privacy policy...

  • We use military-grade encryption. Our encryption is based on 256-bit symmetric AES encryption, RSA 4096 encryption, ECDH521 encryption, transport layer security, and our proprietary algorithm.
  • We canʼt see information you give us. Your information is always disguised with multiple rounds of salted, cryptographic hashing before (if) it is transmitted to our servers. Because of this we donʼt know — and canʼt reveal — anything about you or how you use the Wickr App.
  • Deletion is forever. When you delete a message, or when a message expires, our “secure file shredder” technology uses forensic deletion techniques to ensure that your data can never be recovered by us or anyone else.
  • You own your data. We do not share or sell any data about our users. Period.
What Information Does Wickr Collect, and How Is It Used?

We are committed to limiting our collection of your information to what is necessary to provide you with our Services.

We only collect information from users who create Wickr Accounts. You must create a Wickr Account to use the Wickr App.

What We Donʼt Collect:

Equally important to us is the information we donʼt collect. We will NEVER collect any location information or have access to the contents of the communications you send using the Wickr App. After messages are deleted (or after they expire), they are forensically deleted and are not retrievable by us or anyone else. (Remember, however, that if you send a Wickr message to another Wickr user, that message might remain on their device even after you delete it from yours, depending on the value you set for the self-destruct time of that message.)
Leave No Trace!

I commend any app or any service that stops NSA spying in its tracks. But don't blame me or Snowden if such services become used by crooks, or worse.

Were it not for the massive, unwarranted spying, people would not be so paranoid as to demand these services in the first place.

The end result is as expected: Governmental spying, back doors, denials, and loss of the constitutional right to privacy has made us less secure than before.

That is precisely what the loss of freedom always does!

Mike "Mish" Shedlock

Majority in U.S. Say Healthcare Not Government's Responsibility

By a 56 to 42 margin, Gallup reports Majority in U.S. Say Healthcare Not Government Responsibility.

Question: Do you think it is the responsibility of the federal government to make sure all Americans have healthcare coverage, or is that not the responsibility of the federal government?

No Responsibility by Political Party

Percentage Point Change Since 2000

  • Since 2000, the share of republicans who say healthcare is not the responsibility has increased from 53% to 86%, a rise of 33 percentage points.
  • Since 2000, the share of independents who say healthcare is not the responsibility has increased from 27% to 55%, a rise of 28 percentage points.
  • Since 2000, the share of democrats who say healthcare is not the responsibility has increased from 19% to 30%, a rise of 11 percentage points.

Percentage Point Change Since 2006

  • Since 2006, the share of republicans who say healthcare is not the responsibility has increased from 57% to 86%, a rise of 29 percentage points.
  • Since 2006, the share of independents who say healthcare is not the responsibility has increased from 25% to 55%, a rise of 30 percentage points.
  • Since 2006, the share of democrats who say healthcare is not the responsibility has increased from 10% to 30%, a rise of 20 percentage points.

In 2006, the overall share was 69% to 28% in favor of the view that healthcare was the responsibility! Now it is 56% to 46% against.

This is a startling change in sentiment in 7 years, especially among independents.

Gallp comments "It is possible that this sharp change has been caused by a politicization of the issue as it became a major part of Obama's campaign platform, and as he and other Democratic leaders pressed for and passed the ACA, sometimes called Obamacare, in 2010."

However, a close look at the timeline suggests Obamacare cannot be the blame for the bulk of the move. Between 2006 and 2009 the percentage changed from  69% to 28% in favor to 50% to 47% against. Since 2009, the sentiment change has been in the same direction (against the healthcare mandate), but the percentage point move was much smaller.

Something happened between 2006 and 2009. What was it? Housing collapse? Demographics? Boomer retirement? Medicare seen as "I got mine. I waited. You can wait too?"

The latter would require an illogical disassociation between Medicare and government sponsored healthcare.

Regardless of what happened, politically speaking, Obamacare came at a last-chance now-or-never point with public opinion split nearly 50-50.

For now, it's waiting time. The next presidential election will determine what major changes in healthcare are coming.

Mike "Mish" Shedlock

Things You Must Not Do When Applying For A Job Online

If you think that you are awesome and highly skillful, it must be driving you nuts that nobody has had an interest in hiring you. Well, there could be several reasons for this, and one is that you may not seem as awesome as you are in your online job application. It is a sad truth that there are so many job seekers out there who just can’t find a way to give a good impression to employers due to the things they say and don’t say as well as they apply for a job. To help you get it right on your coming job applications, here are some of the mistakes you should avoid.

1. You look as if you were a job hopper.

Everything you put in your application letter reflects who you are as a person and an employee. If you have on your past jobs list those positions you held for just a month or two, you will be in trouble. Of course, no company will be confident in hiring someone who can’t seem to stay long in his job.

What you can do is to delete all the jobs in your profile that lasted below three months. If you think you have a less impressive work history, you can make use of the “Tell Us About Yourself” section to give a brief explanation of why you were not able to stay in a job for a long time.

2. You don’t act like you are interested in the job.

As a job seeker, there is no excuse for you not to return the calls of prospective employers. Keep in mind that employers don’t wait for a particular job applicant to respond to them as there are many others out there just waiting for their call. Once you get a message from the human resources department of an interested employer, it is so wrong to think that they may call you once again. Make sure they will feel that you really like the job and will do everything to get it.

3. You seem too weird.

Although you may have all the skills and experience required to get a particular job, these will be of no use if you start to freak out the hiring manager. When posting an online profile, make sure that the email address you will use sounds formal and see to it also that the photo you are going to post looks professional. Of course you don’t have to pretend to be someone else, but it is really improper for you to show off all your tattoos on your profile picture.

4. You are careless.

You may not know this, but many employers simply dump job applications that are full of typos. You need not be a spelling champ, but the simple spelling or typing mistakes that will appear in your application letter can definitely give employers the impression that you are careless. When you write your online profile and your job application letter, try to have someone else read it. This way, it will be easier for to come up with a flawless and impressive profile and application.

Hussman's Open Letter to the Fed; The Problem with Bubbles; Textbook Pre-Crash Bubble; Reflections on Not Chasing Bubbles; Integrity vs. Respect

John Hussman's last three weekly emails have been outstanding. Let's take a look at a couple short snips from the first two articles and then a longer snip from his letter to the Fed.

Textbook Pre-Crash Bubble

November 11: Textbook Pre-Crash Bubble by John Hussman

Hussman: "The problem with bubbles is that they force one to decide whether to look like an idiot before the peak, or an idiot after the peak."

This is exactly how I have felt for two years running. It reminds me of 1999-2000 when tech stocks put on that last big rally. Avoiding a bubble is incredibly hard to do, and this one has been exceptional.

Here is a chart from the article with Hussman's comments.
Though I don’t believe that markets follow math, it’s striking how closely market action in recent years has followed a “log-periodic bubble” as described by Didier Sornette (see Increasingly Immediate Impulses to Buy the Dip).

A log periodic pattern is essentially one where troughs occur at increasingly frequent and increasingly shallow intervals. Frankly, I thought that this pattern was nearly exhausted in April or May of this year. But here we are. What’s important here is that the only way to extend that finite-time singularity is for the advance to become even more vertical and for periodic fluctuations to become even more closely spaced. That’s exactly what has happened, and the fidelity to the log-periodic pattern is almost creepy. At this point, the only way to extend the singularity beyond the present date is to envision a nearly vertical pre-crash blowoff.

At this horizon, even “buy-and-hold” strategies in stocks are inappropriate except for a small fraction of assets. In general, the appropriate rule for setting investment exposure for passive investors is to align the duration of the asset portfolio with the duration of expected liabilities. At a 2% dividend yield on the S&P 500, equities are effectively instruments with 50-year duration. That means that even stock holdings amounting to 10% of assets exhaust a 5-year duration. For most investors, a material exposure to equities requires a very long investment horizon and a wholly passive view about market prospects.
Hugh Hendry Throws In Towel

On November 22, InvestmentWeek reported long-time bear Hugh Hendry threw in the towel. 'I can't look at myself in the mirror': Hendry reveals why he has turned bullish
Speaking at Harrington Cooper's 2013 conference, Hendry said he is no longer fighting the "two-way feedback loop" which is continuing to boost risk assets.

"I can no longer say I am bearish. When markets become parabolic, the people who exist within them are trend followers, because the guys who are qualitative have got taken out. I have been prepared to underperform for the fun of being proved right when markets crash. But that could be in three-and-a-half-years' time."

"I cannot look at myself in the mirror; everything I have believed in I have had to reject. This environment only makes sense through the prism of trends."
Trend Is Your Friend Until It Changes

Hendry is now looking for ‘auto-correlations' that benefit from this feedback loop. "You have got to be in things that are trending," says Hendry.

Why Now?

The market has been trending ever since March 2009. There were a few pullbacks along the way, but every one was bought with vigor. Does that mean the next one will be bought?

Hardly. And why should it?

My friend Pater Tenebrarum at the Acting Man blog commented via email ...

"Hendry's change in stance is akin to Druckenmiller covering all his shorts in Internet stocks in November of 1999 and going long tech. The internet stock shorts he covered topped out two weeks later (they topped well before the Nasdaq did), the Nasdaq's final high came in early March, about 3 months later. Thereafter, an 85% decline in the index - and 3/4 of the internet stocks in which Druckenmiller covered shorts eventually went to ZERO, while the remainder fell between 90% to 99%."

Hendry is aware, but unconcerned about that possibility.

Said Hendry ... "I may be providing a public utility here, as the last bear to capitulate. You are well within your rights to say ‘sell'. The S&P 500 is up 30% over the past year: I wish I had thought this last year. Crashing is the least of my concerns. I can deal with that, but I cannot risk my reputation because we are in this virtuous loop where the market is trending."

Wow. Given valuations, crashing should be everyone's big concern. But if it was, prices would not have gotten this ridiculous in the first place.

Reflections on Not Chasing Bubbles

November 18: Chumps, Champs, and Bamboo by John Hussman
“The seed of a bamboo tree is planted, fertilized and watered. Nothing happens for the first year. There´s no sign of growth. Not even a hint. The same thing happens – or doesn´t happen – the second year. And then the third year. The tree is carefully watered and fertilized each year, but nothing shows. No growth. No anything. Then the bamboo tree suddenly sprouts and grows thirty feet in three months.” ― Zig Ziglar

This story is more than a quote about persistence – it’s actually a reasonable description of risk-managed investing.

At bull market peaks, it often seems that the market is simply headed higher with no end in sight, and “buy-and-hold” appears superior to every alternative. Meanwhile, the reputation of value-conscious investors and risk-managers goes from “champ” to “chump.” Then, the bamboo tree suddenly sprouts, and the entire lag is often replaced by outperformance in less than a year. Only after the fact does the reputation of risk-managed strategies surge from “chump” to “champ.” By then, it’s unfortunately too late to be of help to many investors who capitulated in frustration at the peak.

As Jeremy Grantham at GMO has observed, “we often arrive at the winning post with good long-term results and less absolute volatility than most, but not necessarily with the same clients that we started out with.
Hussman's Open Letter to the Fed

November 25: An Open Letter to the FOMC: Recognizing the Valuation Bubble In Equities by John Hussman

The chart below is from one of the best tools that the Fed offers the public, the Federal Reserve Economic Database (FRED). The chart shows the ratio of corporate profits to GDP, which is presently at a record. The fact that profits as a share of GDP are more than 70% above their historical norm should immediately raise a question as to whether current year earnings or next year’s projected “forward earnings” should be used as a sufficient statistic for long-term cash flows and equity market valuation without any further reflection. Then again, more work is required to demonstrate that such an approach would be misleading. We’re just getting warmed up.

A simple way to see the implications of the present elevation of the profit share is to relate the level of profit margins to subsequent growth in profits over a reasonably “cyclical” horizon of several years. Remember, when one values equities, one is valuing a long-term stream, not just next year’s earnings. Investors taking current-year or forward-year profits as a sufficient statistic should be aware that high margins are reliably associated with weak profit growth over subsequent years.

The next relevant question is to ask why profit margins are presently so high. One might argue that the profitability of companies has achieved a permanently high plateau. Despite historical mean-reversion in profit margins (which tend to collapse over the full course of the business cycle), maybe this time is different. As it happens, we can relate the surfeit of corporate profits in recent years rather precisely to the extraordinary combined deficits of the household and government sectors during the same period. ....

Corporate profits as a share of GDP are nearly the mirror image of deficits in the household and government sectors. A simple way to think about this is that dissaving in both sectors helps to support corporate revenues and limit the need for competition, even when wages and salaries are depressed. It follows that most of the variability in corporate profits over time is driven by mirror image variations in the household and government sectors. ....

The fact is that valuation measures driven by single-period earnings (whether trailing earnings or forward operating earnings) are poorly correlated with subsequent market returns, mainly because they impose the counterfactual assumption that profit margins can be held constant over time.

Though Fed officials including Alan Greenspan and Janet Yellen seem attracted to the seemingly elegant simplicity of these “equity risk premium” models, they seem somehow oblivious to the fact that they don’t actually work.
Why is the historical record of these simple “equity risk premium” estimates such a cacophony of noise? The answer should be immediately apparent. It turns out that the error between these estimates and actual subsequent 10-year S&P 500 total returns (in excess of 10-year Treasury yields) has a correlation of 0.86 with – you guessed it – profit margins. With profit margins at the highest level in history, the record suggests that these models are grossly overestimating prospective equity returns at today's all-time stock market highs.  Unfortunately, this evidence also suggests that the faith expressed in these “equity risk premium” estimates by Janet Yellen and others is likely to coincide with their most epic failure in history.

My strong disagreement should not be confused with disrespect, and none is intended, but wasn't it Janet Yellen who in October 2005, at the height of the housing bubble, delivered a speech effectively proposing that monetary policy could mitigate any negative economic consequences of a housing collapse, and arguing that the Fed had no role in preventing further housing distortions? Given the lack of concern with the present elevation of the equity markets, these remarks from 2005 have a rather ominous ring in hindsight:

“First, if the bubble were to deflate on its own, would the effect on the economy be exceedingly large? Second, is it unlikely that the Fed could mitigate the consequences? Third, is monetary policy the best tool to use to deflate a house-price bubble? My answers to these questions in the shortest possible form are, ‘no,’ ‘no,’ and ‘no.’”

The reason that the Fed does not see an “obvious” stock market bubble (to use a word regularly used by Governor Bullard, as if to imply that misvaluations cannot exist unless they smack their observers with a two-by-four) is because while price/earnings multiples appear only moderately elevated, those multiples themselves reflect earnings that embed record profit margins that stand about 70% above their historical norms.

We can demonstrate in a century of evidence that a) profit margins are mean-reverting and inversely related to subsequent earnings growth, b) margin fluctuations are largely driven by cyclical variations in the combined savings of households and government, and importantly, c) valuation measures that normalize or otherwise dampen cyclical variation in profit margins are dramatically better correlated with actual subsequent outcomes in the equity markets.

If one examines the stocks in the S&P 500 individually, the median price/revenue multiple is actually higher today than it was in 2000 (smaller stocks were more reasonably valued in 2000, compared with the present). This is a dangerous situation. In this context, the dismissive view of FOMC officials regarding equity overvaluation appears misplaced, and seems likely to be followed by disruptive financial adjustments.

One obtains a similar view, with equal historical reliability, from the ratio of nonfinancial equity capitalization to nominal GDP, using Federal Reserve Z.1 Flow of Funds data. On this measure, equities are already beyond their 2007 peak valuations, and are approaching the 2000 extreme. The associated 10-year expected nominal total return for the S&P 500 is negative.
Fed Policy

Hussman concludes with a discussion on Fed policy ...
The policy of quantitative easing has run its course. It undermines planning, as every economic decision must be made in the context of what the Federal Reserve may or may not do next. It starves risk-averse savers, the elderly, and the disabled from interest income. It lowers the bar for speculative, unproductive, low-covenant lending (as it did during the housing bubble). It relaxes a constraint that is not binding – as there are already trillions of dollars in idle reserves at U.S. banks, on which the Federal Reserve pays interest both to keep them idle and to avoid disruptions in short-term money markets. It undermines price signals and misallocates scarce savings to speculative pursuits. It further skews the distribution of wealth, and while the extent of this skew has a scarce chance of persisting, the benefits of any spending from transiently elevated stock market wealth will accrue to primarily to higher-income individuals who are not as constrained as the millions of lower-income, low-asset families hoping for some “trickle-down” effect. We have seen numerous variants of this movie before, and we should have learned the ending by now.

Importantly, the magnitude of the “wealth effect” on employment is dismally small. Even if the entire relationship between stock market fluctuations and employment fluctuations was causal and one-directional, it would still take a roughly 40% advance in the stock market to draw the unemployment rate down by 1%. Unfortunately, price advances do not create the underlying cash flows to support them, so the strategy of manipulating stock prices higher also involves a piper that must be paid.

The intent of this letter is not to criticize, but hopefully to increase the mindfulness of the FOMC as to historical evidence, the strength of various financial and economic relationships, and the potentially grave consequences of further relaxing constraints that are not binding in the first place.
Integrity vs. Respect

In the opening paragraph, Hussman, stated (to the Fed) "I don’t question your motives or integrity."

I side solidly with Hussman on this point although many believe this is all  part of some "grand plan" for the Fed or big banks to take over the world.

Yet, I cannot offer Hussman's same sense of "no disrespect".

We are in this mess, precisely because the Fed blows bubbles of increasing magnitude over time. It happens time and time again, and every time banks are bailed out at the expense of the poor and middle class.

The Fed deserves no respect for what they have done and the problems they have caused. They deserve no respect for missing the dotcom bubble, for missing the housing bubble, and for missing this bubble.

John and Aretha can sing "Respect", but I sure can't.


One Hell of a Time To Become a Trend Follower

Everyone who believes in valuation metrics would do themselves a favor to click on the three links by Hussman that I presented, and read the articles in entirety.

As I stated upfront, avoiding bubbles is incredibly hard to do, and this one has been exceptional. But that is precisely the problem with bubbles.

Hussman points out (and I agree) "The associated 10-year expected nominal total return for the S&P 500 is negative."

Read that sentence again and again until it sinks in. Here is another way of putting it. "10 years from now, the S&P is likely to be lower than it is today". That is how over-valued equities now are.

Yes, Hussman sounds like a broken record. And so do I. But this is one hell of a time to become a trend follower.

Mike "Mish" Shedlock