Category Archives: markets

Government Arrogance

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Texas EquuSearch is a drone operating company, based in a Houston suburb, that uses small drones, in their case, model aircraft equipped with cameras, in searches for missing persons. Or at least they used to, before the Federal government put a stop to their effrontery. The FAA has ordered them to cease because the FAA doesn’t have a rule that allows for such a thing.

Texas EquuSearch has an appeal before the DC Circuit court, but in the meantime, they’re barred from helping various other government agencies—like local police—conduct their searches.

The FAA has rationalized its decision with this:

The agency approves emergency Certificates of Authorization (COAs) for natural disaster relief, search and rescue operations, and other urgent circumstances, sometimes in a matter of hours.

“In a matter of hours.” When the bad man comes and seconds count, the FAA will be only hours away. Sometimes. Other times, well, sorry about that.

In addition to which, “many law enforcement agencies in rural areas being searched don’t have the authorization certificates to use drones.”

The FAA went on with this appallingly arrogant remark:

We are not aware that any government entity with an existing COA has applied for an emergency naming Texas EquuSearch as its contractor.

Because a business requires government permission, at the least in the form of a government contract, before it can go about its affairs. Aside from this small matter, what problem does the FAA think it’s solving with its…position?

Yeah, that’s what I thought, too.

More Government Regulation Foolishness

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Used to be, brewers could send their spent grains, the leftovers after their brewing is done and the beverage…decanted…to ranchers to add to the latter’s feed supply.  Now, though, the FDA is “proposing” a set of regulations that would require brewers to treat their spent grains as pet food(!), meaning these leftovers must be dried and packaged without human contact.

This is expensive—too expensive for most brewers to handle.  Their landfill alternative isn’t any better: one Chicago brewer says it would cost him $100,000, every year, to send his leftover grains to a landfill.

To illustrate the benefits of this arrangement, so disliked by the government, for both parties, there’s this example.

…the brewers get those leftovers removed from their facilities for free.

And

…dairy and cattle farmers like Jim Minich, who gets 30 tons of spent grain from Revolution Brewing each week.  Not only does the grain save him more than $100,000 a year in feed costs, his 750 cows also produce more milk after [getting the spent grains.]

Never mind that there’s never been a problem for cattle or for humans eating/drinking the beef or milk from spent grain-fed cows.

There might be.  Sometime.  Maybe.  Gotta regulate.

The FDA does say, after a hue and cry, that they’re looking at revising these proposed regulations.  We’ll see.

Obamacare Rates

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So much (to pound the dead horse) for rates going down $2,500 per, courtesy of Obamacare.

The research team at investment bank Morgan Stanley surveyed 131 brokers, finding that December 2013 rates are rising in excess of 6% in the small group market, and 9% in the individual market.

But that’s just chump change, so far (except for the victims of the rise).

More:

[H]ealth plans are also predicting higher cost trends in 2014, after years of stabilization (much of it attributable to the economic downturn [and its long-term non-recovery, say I], which reduced medical utilization rates).

And:

Among the states seeing the highest annualized rate hikes (for the full 2013 year) in the individual market are Connecticut, which is averaging a 37% increase; Florida (42%); Illinois (33%); Michigan (39%); and Minnesota (35%).

Among the states with the biggest annualized spike in the small group rates are Delaware, which is averaging a 35% increase; Michigan (30%); and Minnesota (50%).

It’s interesting, too, to note that these are some of the most tightly regulated states; their regulations (now superseded by Obamacare regulations) greatly suppressed health “insurance” rates.

More Failed Government

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This example isn’t a demonstration of dishonesty, and it isn’t unique to this administration.

Market-sensitive information vitally important to health-insurance companies has once again reached Wall Street before the public, and this time it appears to have come from the government itself.

On Dec 3, an official with the agency in charge of Medicare spending held a conference call for industry officials.  During the call, he provided data suggesting that federal funding for private Medicare plans would likely fall more than expected.

Word soon reached Wall Street, prompting a selloff in insurance shares.  In the subsequent 10 trading days, shares of several major health insurance firms lost between 3% and 9% of their value.  Over that same period, the S&P 500 was down 0.5%.

There’s this to color that failure:

Government departments are struggling with a fundamental tension between their duty to keep the public informed and a need to keep market-moving information from reaching investors.  The tendency toward openness has helped fuel a burgeoning business of government insiders who mine Washington for information that could affect stock prices.

There’s no need for the tension to exist, though, especially in a 21st century of online investing and trading, discount brokering, and Common Man doing much of that.  There’s also no need for the tension to exist given the falseness of the premise that market-moving information should be prevented from reaching investors.

Keep us informed.  Release all the data, to all of us simultaneously.  How to do so isn’t rocket science.  It isn’t even Internet science.  And it would eliminate a class of government insiders.

Obamacare Jobs Impact

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The American Health Policy Institute has some data [emphasis in the original].  Although their study concerned itself primarily with the cost impact of Obamacare to large employers—those with 10,000 or more employees—the study’s outcome has implications for our economy’s jobs picture.

  • The cost of the ACA…is estimated to be between $4,800 to $5,900 per employee.
  • These large employers will see overall ACA-related cost hikes of…4.3 percent in 2016 and 8.4 percent in 2023 over and above what they would otherwise be spending.
  • The total cost of the ACA to all large US employers over the next ten years is estimated to be from $151 billion to $186 billion.

This comes after a downward trend in employer cost increases—to no and nearly no increase just prior to Obamacare’s passage—for employee health care benefits has been completely reversed by Obamacare, as this graph from the study demonstrates:

Now for those implications:

At the US median annual wage of $51,000 in 2013 (a decrease from 2012, an added bonus of President Barack Obama’s economic policies), and just taking the lower bound of the 10-year cost range, those $151 billion in added dollar costs work out to a jobs cost of nearly 3 million jobs over that decade—300,000 jobs per year—in a static analysis that ignores the economy’s response to the loss of those jobs: a loss that would increase by some amount each succeeding year as the economy actually responded.

Alternatively, that $151 billion cost is money not being spent on R&D or product development.  To put this in perspective, US companies spent some $424 billion on R&D in 2013; at $15.1 billion/year over the decade, that works out to a 3.6% cut in R&D.  This is a very large drop in a company expense that’s already very low in an increasingly competitive global economy (if not particularly competitive anymore in the US)—Apple’s R&D spending, for instance, amounted to just 3% of net sales in 2013; IBM and GM spent just 5-6% of total revenue on R&D.  This reduction leads directly to a commensurate cut in company profitability, with its own cascade effect on jobs in the US.

Of course, the true outcome will be somewhere in between—a loss of fewer than 3 million jobs, but still a large loss, and a cut in R&D of less than 3.6%, but still a significant cut—each and both with still significant cascade effects in future job losses.