Category Archives: Amerca

Rising Nursing Home Prices Bode Poorly For The Future

Georgetown University Medical Center reveals brutal dynamic governing long-term care in America

The results of a six-year study by Georgetown University Medical Center revealed just how fast U.S. nursing home prices have been increasing all across America. And the future looks just as grim.

Dr. Sean Huang, the study’s lead author, said the brutal dynamic governing long-term care in America — where many nursing home residents must spend down the bulk of their life savings before qualifying for federal assistance — is intensifying. California, Florida, New York and Texas all saw increases that far outstripped the 11.6% rise in inflation between 2005 and 2010, the period reviewed by Georgetown’s analysis of eight states. Additional data show the upward trend has continued in the years since.

And it’s not just baby boomers who need to worry — Generation X, millennials and Generation Z might face an even darker old age. Rising wage pressure on a sector in need of workers is driving up costs, and unless Washington comes up with a fix, be it a version of Medicare-for-All or something less ambitious, the funding for some programs is projected to start running out in the next decade.

“We’re talking about long stays — people who have disabilities, dementia, Parkinson’s disease,” Mr. Huang explained about the growing nursing home population. “Medicare does not cover that. They will pay out-of-pocket until they use all of their wealth.”

Many Americans have no idea how Medicare works, including those approaching retirement. A sort-of government health insurance policy largely for older Americans, eligibility generally begins at age 65, covering some of the costs of routine and emergency medical care. What it doesn’t cover is most aspects of long-term “custodial” care — as in nursing homes, where a large portion of Americans can expect to spend the last years of their lives.

That’s where Medicaid — state-administered coverage for Americans whose assets fall below a certain level — comes in. For those who qualify for nursing home admission, Medicaid generally requires they exhaust most of their assets first before qualifying for coverage. Without expensive long-term care insurance, which most people don’t have, an increasing number of older Americans are falling into this financial trap, Mr. Huang said.

And their nest eggs are being depleted more quickly than ever. Mr. Huang’s study found nursing home price rises over the period measured generally outpaced increases in overall medical care (20.2%) and consumer prices (11.7%). For example, in California between 2002 and 2011, the median out-of-pocket cost for nursing home care increased by 56.7%.

Mr. Huang and three co-authors began looking into the matter in 2013. With no central database, they had to collect information from each state and individual nursing homes. Some states only had data through 2010, he said. In the end, they managed to crunch data from an average of 3,900 nursing homes for each of the years measured, representing approximately 27% of freestanding U.S. facilities.

Nursing homes in New York during the period reviewed had the highest average daily price of $302, while Texas had the lowest average daily price of $121. Additional information has shown that nursing home costs have continued to increase at a much higher rate than inflation, albeit slightly slower than the study period.

In 2010, the average price per day for nursing home care in California was $217, up more than 30% (with Florida close behind) from 2005. In a more recent analysis, Mr. Huang calculated that, from 2010 to 2015, nursing home prices in California rose more slowly, by roughly 19.6% to $258 per day. However, inflation from 2010 to 2015 only increased by 8.7%, he noted. Mr. Huang said his research doesn’t point to any improvement going forward.

“I don’t see there’s any major changes that suggest the trend will be different,” Mr. Huang said.

Indeed, the median daily price for a private room in a California nursing home just last year was $323, while the national median was $275 per day, according to life insurance company Genworth. Looking at the issue from an annual perspective, the median cost in the U.S. for a private room in a nursing home was $100,375. Oklahoma provided the cheapest annual median cost at $63,510, while Alaska was the most expensive at $330,873, Genworth data showed.

Nursing homes have long been a financial drain on most who need them, constituting one of the greatest risks retirees face when it comes to managing retirement funds, a report from the U.S. Department of Health and Human Services showed. Unfortunately, the annual costs for nursing home care will continue to grow at a rate much faster than inflation, according to Urban Institute Senior Fellow Richard W. Johnson.

“It’s that labor market pressure,” Mr. Johnson said. More elderly Americans mean more demand for nursing home care, and more demand for nursing home employees. Wages go up, and the cost is passed along to consumers who, under the current system by which America looks after its elderly, coverage is limited.

In an industry that requires significant hands-on attention, technology can’t eliminate many jobs, Mr. Johnson said. And just when the labor market for nursing homes is already tight, uncertainty over U.S. immigration policies may further reduce available workers, he said. In 2017, immigrants made up 23.5% of formal and non-formal long-term care sector workers, according to Health Affairs.

“It’s unlikely that you’re going to see any improvement in these trends, and if anything, things will probably get worse because nursing homes are probably going to face something of a worker shortage,” Mr. Johnson said. Home health aides and personal care aides are ranked as the third and fourth fastest growing occupations and are expected to increase 47% and 39% respectively from 2016 to 2026, according to the Bureau of Labor Statistics.

“The baby boom generation is so large,” Mr. Johnson said. “They’re approaching their 80s, and that means that many more of them are going to need nursing home care or other types of long term care.”

“If there would be a higher reimbursement rate, either by Medicaid or Medicare, nursing home quality would be likely to improve.”

Another trend emerging in the industry that may be driving up costs is Wall Street. Four out of the 10 largest for-profit nursing home chains were purchased by private equity firms from 2003-2008, according to a case study analyzing private equity takeover.

Research on the impact of private equity has shown mixed results, though one study showed how a nursing home chain that was taken over by a private equity firm showed a general reinforcement of profit-seeking strategies that were already in place, while adding some strategies aimed at improving efficiency. Other reports have detailed darker results.

During the Obama administration, the Community Living Assistance Services and Supports Act (CLASS Act) was signed into law to help ease the burden as part of the Affordable Care Act (ACA), but it was later rescinded by Congress over concerns voluntary enrollment wasn’t viable — premiums would be too high and the system would eventually collapse, Mr. Johnson said. This left the ACA with little to no assistance for long-term care costs.

Some states have started taking matters into their own hands. Washington State passed a bill in April that would implement a 0.58% payroll tax that would give residents up to $36,500 to pay for long-term care services. Payroll tax will begin collecting in 2022, while residents can start withdrawing in 2025. But that’s just one state, and the problem, Huang and Johnson note, is national in scope.

“If there would be a higher reimbursement rate, either by Medicaid or Medicare, nursing home quality would be likely to improve,” Mr. Huang said. “But I don’t see that happening in the near future.

Source: Investment News

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Gasoline Futures Soar As Largest East Coast Refinery Set To Permanently Close

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RBOB Gasoline futures jumped overnight, accelerating their recent ascent ever since the explosion and massive inferon at the Philadelphia Energy Solutions (PES) plant, following a Reuters report that the largest east coast refinery is expected to seek to permanently shut its oil refinery in the city after a massive fire caused substantial damage to the complex.

Shutting the refinery, the largest and oldest on the U.S. East Coast, would result in not only hundreds of lost jobs but also sharply higher gasoline prices as gasoline supplies are squeezed in the busiest, most densely populated corridor of the United States.

PES is expected to file a notice of intent with state and federal regulators as early as Wednesday, setting in motion the process of closing the refinery, the sources said.

The refinery, which could still change its plans, is also expected to begin layoffs of the 700 union workers at the plant as early as Wednesday, Reuters reported. The layoffs could include about half of the union workforce, with the remaining staff staying at the site until the investigation into the blast concludes.

As reported previously, the 335,000 barrel-per-day (bpd) complex, located in a densely populated area in the southern part of the city, erupted in flames in the early hours on Friday, in a series of explosions that could be heard miles away and which some compared to a meteor strike or a nuclear bomb going off.

The cause of the fire was still unknown as of Tuesday, though city fire officials said it started in a butane vat around 4 a.m. (0800 GMT). It destroyed a 30,000-bpd alkylation unit that uses hydrofluoric acid to process refined products. Had the acid caught fire, it could have resulted in a vapor cloud that can damage the skin, eyes and lungs of nearby residents.

Prior to the massive inferno, the refinery had suffered from years of financial struggles, forcing it to slash worker benefits and scale back capital projects to save cash. It went through a bankruptcy process last year to reduce its debt, but its difficulties continued as its cash on hand dwindled even after emerging from bankruptcy in August; some have speculated that cost cutting resulted in the structure becoming fragile and susceptible to accident.

After bankruptcy, Credit Suisse Asset Management and Bardin Hill became the controlling owners, with former primary owners Carlyle Group and Sunoco Logistics, an Energy Transfer subsidiary, holding a minority stake.

Last Friday’s blaze was the second in two weeks at the complex, spurring calls from Philadelphia’s mayor for a task force to look into both the cause and community outreach in the wake of the incidents. A spokesperson for Mayor Jim Kenney declined to comment on the potential closure of the plant.

That may be difficult as investigators on the scene are said to be dealing with unstable structures that need to be certified by engineers, slowing down the inquiry, city officials said. The investigation could ultimately take months or perhaps years. Additionally, the state Department of Environmental Protection said they have concerns about the integrity of storage tanks on site, the agency said on Tuesday. The U.S. Chemical Safety Board is also investigating the incident, according to Reuters.

While none of this will make much news outside of Philly, what will impact all East Coast drivers is that gasoline futures rose as much as 5.4% on Wednesday to $1.9787 a gallon, the highest since May 23. The front month price was at $1.945 early on Wednesday.

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Futures are up 8.9% since Thursday’s close.

NY Gasoline prices have surged back into a premium over US Gulf Gasoline…

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All of which will drag, as always with a lag, the price of gas at the pump notably higher…

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The rally in U.S. gasoline futures has pushed U.S. gasoline prices above European and Asian markets, raising the prospects for US imports. According to Matthew Chew, oil analyst at IHS Markit, “chances are that (the wider price spread) could open up the arbs between U.S. Gulf/Europe and [the East Coast] PADD 1.”

Source: ZeroHedge

Millennials Are More Than A Trillion Dollars In Debt, And Most Of Them Don’t Even Own A Home

When compared to a similar point in time, Millennials are deeper in debt than any other generation that has come before them.  And the biggest reason why they are in so much debt may surprise you.

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We’ll get to that in a minute, but first let’s talk about the giant mountain of debt that Millennials have accumulated.  According to the New York Fed, the total amount of debt that Millennials are carrying has risen by a whopping 22 percent in just the last five years

New findings from the New York Federal Reserve reveal that millennials have now racked up over US$1 trillion of debt.

This troubling amount of debt, an increase of over 22% in just five years, is more than any other generation in history. This situation may leave you wondering how millennials ended up in such a sorry state.

Many young adults are absolutely drowning in debt, but the composition of that debt is quite different when compared to previous generations at a similar point in time.

Mortgage debt and credit card debt levels are far lower for Millennials, but the level of student loan debt is far, far higher

While the debt levels accumulated by millennials eclipse those of the previous generation, Generation X, at a similar point in time, the complexion of the debt is very different.

According to a 2018 report from the St. Louis Federal Reserve Bank, mortgage debt is about 15% lower for millennials and credit card debt among millennials was about two-thirds that of Gen X.

However, student loan debt was over 300% greater.

Over the last 10 years, the total amount of student loan debt in the United States has more than doubled.

It is an absolutely enormous financial problem, and there doesn’t seem to be an easy solution.  Some politicians on the left are pledging to make college education “free” in the United States, but they never seem to explain who is going to pay for that.

But what everyone can agree on is that student loan debt levels are wildly out of control.  The following statistics come from Forbes

The latest student loan debt statistics for 2019 show how serious the student loan debt crisis has become for borrowers across all demographics and age groups. There are more than 44 million borrowers who collectively owe $1.5 trillion in student loan debt in the U.S. alone. Student loan debt is now the second highest consumer debt category – behind only mortgage debt – and higher than both credit cards and auto loans. Borrowers in the Class of 2017, on average, owe $28,650, according to the Institute for College Access and Success.

What makes all of this even more depressing is the fact that the quality of “higher education” in the U.S. has gone down the toilet in recent years.  For much more on this, please see my recent article entitled “50 Actual College Course Titles That Prove That America’s Universities Are Training Our College Students To Be Socialists”.

Our colleges and universities are not adequately preparing our young people for their future careers, but they are burdening them with gigantic financial obligations that will haunt many of them for decades to come.

We have a deeply broken system, and we desperately need a complete and total overhaul of our system of higher education.

Due to the fact that so many of them are swamped by student loan debt, the homeownership rate for Millennials is much, much lower than the homeownership rate for the generations that immediately preceded them.  The following comes from CNBC

The homeownership rate for those under 35 was just 36.5 percent in the last quarter of 2018, compared with 61 percent for those aged 35 to 44, and 70 percent for those aged 45 to 54, according to the U.S. Census. The millennial homeownership rate actually dropped in the fourth quarter compared with the third quarter, but was unchanged year over year.

This is one of the big reasons why “Housing Bubble 2” is beginning to burst.  There are not enough Millennials buying homes, and it looks like things could be even worse for Generation Z.

If you are a young adult, I would encourage you to limit your exposure to student loan debt as much as possible, because the debt that you accumulate while in school can have very serious long-term implications that you may not even be considering right now.

Source: ZeroHedge

Did Russia Just Trigger A Global Reserve Currency Reset Process?

Russia De-Dollarizes Deeper: Shifts $100 Billion To Yuan, Yen, And Euro

(Listen to the report here)

Russia is continuing to ramp up its efforts to move away from the American dollar (Federal Reserve Notes). The country just shifted $100 billion of its reserves to the yuan, the yen, and the euro in their ongoing effort to ditch the US Dollar.

The Central Bank of Russia has moved further away from its reliance on the United States dollar and has axed its share in the country’s foreign reserves to a historic low, transferring about $100 billion into euro, Japanese yen, and Chinese yuan according to a report by RT. The share of the U.S. dollar in Russia’s international reserves portfolio has dramatically decreased in just three months between March and June 2018. The holding decreased from 43.7 percent to a new low of 21.9 percent, according to the Central Bank’s latest quarterly report, which is issued with a six-month lag.

The money pulled from the dollar reserves was redistributed to increase the share of the euro to 32 percent and the share of Chinese yuan to 14.7 percent. Another 14.7 percent of the portfolio was invested in other currencies, including the British pound (6.3 percent), Japanese yen (4.5 percent), as well as Canadian (2.3 percent) and Australian (1 percent) dollars.

The Central Bank’s total assets in foreign currencies and gold increased by $40.4 billion from July 2017 to June 2018, reaching $458.1 billion. –RT

Russian and others have been consistently moving away from the dollar and toward other currencies. Economic sanctions, which are losing their power as more countries move from the dollar, and trade wars seem to be fueling the dollar’s uncertainty.

Peter Schiff warns that as the supply of dollars is going to grow and grow, the demand for the American currency can fall, while the US Fed will be unable to stop the dollar’s demise. Schiff says that what is coming for Americans, is massive inflation.

“Eventually, what’s going to happen is it’s going to be the demand for those dollars is going to collapse, not the supply. And when the demand for dollars collapses, then the price of the dollar collapses. You get massive inflation. That is what is coming.”

Russia began its unprecedented dumping of U.S. Treasury bonds in April and May of last year. Russia appears to be moving on from the rise in tensions with the United States. The massive $81 billion spring sell-off coincided with the U.S.’s sanctioning of Russian businessmen, companies, and government officials. But Russia has long had plans to “beat” the U.S. when it comes to sanctions by stockpiling gold.

The Russian central bank’s First Deputy Governor Dmitry Tulin said that Moscow sees the acquisition of gold as a “100-percent guarantee from legal and political risks.”

As reported by RT, the Kremlin has openly stated that American sanctions and pressure are forcing Russia to find alternative settlement currencies to the U.S. dollar to ensure the security of the country’s economy. Other countries, such as China, India, and Iran, are also pursuing steps to challenge the greenback’s dominance in global trade.

Source: ZeroHedge

***

India Begins Paying For Iranian Oil In Rupees Instead Of US Dollars

Three months ago, in Mid-October, Subhash Chandra Garg, economic affairs secretary at India’s finance ministry, said that India still hasn’t worked out yet a payment system for continued purchases of crude oil from Iran, just before receiving a waiver to continue importing oil from Iran in its capacity as Iran’s second largest oil client after China.

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That took place amid reports that India had discussed ditching the U.S. dollar in its trading of oil with Russia, Venezuela, and Iran, instead settling the trade either in Indian rupees or under a barter agreement. One thing was certain: India wanted to keep importing oil from Iran, because Tehran offers generous discounts and incentives for Indian buyers at a time when the Indian government is struggling with higher oil prices and a weakening local currency that additionally weighs on its oil import bill.

Fast forward to the new year when we learn that India has found a solution to the problem, and has begun paying Iran for oil in rupees, a senior bank official said on Tuesday, the first such payments since the United States imposed new sanctions against Tehran in November. An industry source told Reuters that India’s top refiner Indian Oil Corp and Mangalore Refinery & Petrochemicals have made payments for Iranian oil imports.

To be sure, India, the world’s third biggest oil importer, has wanted to continue buying oil from Iran as it offers free shipping and an extended credit period, while Iran will use the rupee funds to mostly pay for imports from India.

“Today we received a good amount from some oil companies,” Charan Singh, executive director at state-owned UCO Bank told Reuters. He did not disclose the names of refiners or how much had been deposited.

Hinting that it wants to extend oil trade with Tehran, New Delhi recently issued a notification exempting payments to the National Iranian Oil Company (NIOC) for crude oil imports from steep withholding taxes, enabling refiners to clear an estimated $1.5 billion in dues.

Meanwhile, in lieu of transacting in US Dollars, Iran is devising payment mechanisms including barter with trading partners like India, China and Russia following a delay in the setting up of a European Union-led special purpose vehicle to facilitate trade with Tehran, its foreign minister Javad Zarif said earlier on Tuesday.

As Reuters notes, in the previous round of U.S. sanctions, India settled 45% of oil payments in rupees and the remainder in euros but this time it has signed deal with Iran to make all payments in rupees as New Delhi wanted to fix its trade balance with Tehran.  Case in point: Indian imports from Iran totaled about $11 billion between April and November, with oil accounting for about 90 percent.

Singh said Indian refiners had previously made payments to 15 banks, but they will now be making deposits into the accounts of only 9 Iranian lenders as one had since closed and the U.S has imposed secondary sanctions on five others.

It’s all about control… Robert Fripp

Source: ZeroHedge

What Gen Z Learned From Millennials: Skip College

Generation Z is already learning from the millennial generation’s mistakes…

(LibertyNation) For years, millennials have scoffed at the notion of fixing someone else’s toilet, installing elevators, or cleaning a patient’s teeth. Instead, they wanted to get educated in lesbian dance theory, gender studies, and how white people and western civilization destroyed the world. As a result, student loan debt has surpassed the $1 trillion mark, the youth unemployment rate hovers around 9%, and the most tech-savvy and educated generation is delaying adulthood.

But their generational successors are not making the same mistakes, choosing to put in a good day’s work rather than whining on Twitter about how “problematic” the TV series Seinfeld was. It appears that young folks are paying attention to the wisdom of Mike Rowe, the American television host who has highlighted the benefits and importance of trade schools and blue-collar work – he has also made headlines for poking fun at man-babies and so-called Starbucks shelters.

Will Generation Z become the laughing stock of the world, too? Unlikely.

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Z Is Abandoning University

A new report from VICE Magazine suggests that Generation Z – those born around the late-1990s and early-2000s – are turning to trade schools, not university and college, for careers. Ostensibly, a growing number of younger students are seeing stable paychecks in in-demand fields without having to collapse under the weight of crushing debt.

Because Gen Zers want to learn now and work now, they are abandoning the traditional four-year route, a somewhat precocious response to the ever-evolving global economy.

Cosmetologist, petroleum technician, and respiratory therapist are just some of the positions that this generation of selfies, Snapchat, and emoticons are taking. And this is an encouraging development, considering that participation in career and technical education (CTE) has steadily declined since 1990.

David Abreu, a teacher at Queens Technical High School, told a class of young whippersnappers at the start of the semester:

“When you go out there, there’s no reason why anyone should be sitting on mommy’s couch, eating cereal, and watching cartoons or a telenovela. There’s tons of construction, and there’s not enough people. So they’re hiring from outside of New York City. They’re getting people from the Midwest. I love the accents, but they don’t have enough of you.”

While students feel the pressure of attaining a four-year degree in a subject that offers fewer employment opportunities, the blue-collar jobs are out there to be filled. It iestimated that more than one-third of businesses in construction, manufacturing, and financial services are unable to fill open jobs, mainly because of a skills shortage and a paucity of qualifications.

This could change in the coming years.

The Future Of College

Over the last decade or so, the college experience has turned into a circus. At Evergreen College, the inmates ran the asylum. The University of Missouri staff requested “some muscle over here” to suppress journalists. Harvard University has turned into a politically correct institution. What do all these places of higher learning have in common? They’re losing money, whether it’s from fewer donations or tumbling enrollment.

Not only are these places of higher learning metastasizing into leftist indoctrination centers, their rates for graduates obtaining employment are putrid. And parents and students are realizing this.

With the trend of Gen Zers embracing the trades, the future of post-secondary education might be different. Since colleges need to remain competitive in the sector, they will have to offer alternative programs and eliminate eclectic courses, and the administration will be required to justify their utility.

A pupil seeking out a STEM education will not be subjected to the inane ramblings of an ecofeminism teacher or the asinine curriculum of a queer theory course.

Moreover, colleges could no longer afford to spend chunks of their budgets on opulent settings. A student interested in the trades is unlikely to be attracted to in-house day spas, luxury dorms, and exorbitant gyms. They want the skills, the tools, and the training to garner a high-paying career without sacrificing 15 years’ worth of earnings just so they could enjoy lobster for lunch twice a week.

Generation Smart?

Millennials are typically the butt of jokes, known for texting in the middle of job interviews, demanding complicated Starbucks beverages, and ignoring their friends at the restaurant. Perhaps Generation Z doesn’t want to experience the same humiliation and stereotypes. This could explain why they are dismissing the millennial trends and instead adopting common sense, conservatism, tradition, and anything else that is contrary to those who need to be coddled.

The next 20 years should be fascinating.

In 2039, Ryder, who prefers the pronoun “xe,” is employed as a barista, a position he claims is temporary to pay off his student debt. He lives on his friend’s sofa, still protests former President Donald Trump, and spends his disposable income on tattoos. In the same year, Frank operates an HVAC business, owns his home without a mortgage, and has a wife and three children who enjoy their summer weekends at the ballpark with the grandparents.

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One went to college for feminist philosophy, the other went to trade school. You decide who.

Source: ZeroHedge

U.S. National Trade Council Director Peter Navarro Warns Wall Street Globalists: “Stand Down” Or Else…

(TheLastRefuge) The words from Peter Navarro will come as no surprise to any CTH reader who is fully engaged and reviewing the multi-trillion stakes, within the Globalist (Wall St-vs- Nationalist (Main Street) confrontation.

For several decades Wall Street, through lobbying arms such as the U.S. Chamber of Commerce (Tom Donohue), has structurally opposed Main Street economic policy in order to inflate profits and hold power – “The Big Club”. This manipulative intent is really the epicenter of the corruption within the DC swamp.

U.S. National Trade Council Director Peter Navarro discusses how Wall Street bankers and hedge-fund managers are attempting to influence U.S.-China trade talks. He speaks at the Center for Strategic and International Studies in Washington, D.C.

This article was built around the following short news clip…

Originally outlined a year ago. At the heart of the professional/political opposition the issue is money; there are trillions at stake.

President Trump’s MAGAnomic trade and foreign policy agenda is jaw-dropping in scale, scope and consequence. There are multiple simultaneous aspects to each policy objective; however, many have been visible for a long time – some even before the election victory in November ’16.

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If we get too far in the weeds the larger picture is lost. CTH objective is to continue pointing focus toward the larger horizon, and then at specific inflection points to dive into the topic and explain how each moment is connected to the larger strategy.

If you understand the basic elements behind the new dimension in American economics, you already understand how three decades of DC legislative and regulatory policy was structured to benefit Wall Street and not Main Street. The intentional shift in fiscal policy is what created the distance between two entirely divergent economic engines.

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REMEMBER […] there had to be a point where the value of the second economy (Wall Street) surpassed the value of the first economy (Main Street).

Investments, and the bets therein, needed to expand outside of the USA. hence, globalist investing.

However, a second more consequential aspect happened simultaneously. The politicians became more valuable to the Wall Street team than the Main Street team; and Wall Street had deeper pockets because their economy was now larger.

As a consequence Wall Street started funding political candidates and asking for legislation that benefited their interests.

When Main Street was purchasing the legislative influence the outcomes were -generally speaking- beneficial to Main Street, and by direct attachment those outcomes also benefited the average American inside the real economy.

When Wall Street began purchasing the legislative influence, the outcomes therein became beneficial to Wall Street. Those benefits are detached from improving the livelihoods of main street Americans because the benefits are “global”. Global financial interests, multinational investment interests -and corporations therein- became the primary filter through which the DC legislative outcomes were considered.

There is a natural disconnect. (more)

As an outcome of national financial policy blending commercial banking with institutional investment banking something happened on Wall Street that few understand. If we take the time to understand what happened we can understand why the Stock Market grew and what risks exist today as the monetary policy is reversed to benefit Main Street.

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President Trump and Treasury Secretary Mnuchin have already begun assembling and delivering a new banking system.

Instead of attempting to put Glass-Stegal regulations back into massive banking systems, the Trump administration is creating a parallel financial system of less-regulated small commercial banks, credit unions and traditional lenders who can operate to the benefit of Main Street without the burdensome regulation of the mega-banks and multinationals. This really is one of the more brilliant solutions to work around a uniquely American economic problem.

♦ When U.S. banks were allowed to merge their investment divisions with their commercial banking operations (the removal of Glass Stegal) something changed on Wall Street.

Companies who are evaluated based on their financial results, profits and losses, remained in their traditional role as traded stocks on the U.S. Stock Market and were evaluated accordingly. However, over time investment instruments -which are secondary to actual company results- created a sub-set within Wall Street that detached from actual bottom line company results.

The resulting secondary financial market system was essentially ‘investment markets’. Both ordinary company stocks and the investment market stocks operate on the same stock exchanges. But the underlying valuation is tied to entirely different metrics.

Financial products were developed (as investment instruments) that are essentially wagers or bets on the outcomes of actual companies traded on Wall Street. Those bets/wagers form the hedge markets and are [essentially] people trading on expectations of performance. The “derivatives market” is the ‘betting system’.

♦Ford Motor Company (only chosen as a commonly known entity) has a stock valuation based on their actual company performance in the market of manufacturing and consumer purchasing of their product. However, there can be thousands of financial instruments wagering on the actual outcome of their performance.

There are two initial bets on these outcomes that form the basis for Hedge-fund activity. Bet ‘A’ that Ford hits a profit number, or bet ‘B’ that they don’t. There are financial instruments created to place each wager. [The wagers form the derivatives] But it doesn’t stop there.

Additionally, more financial products are created that bet on the outcomes of the A/B bets. A secondary financial product might find two sides betting on both A outcome and B outcome.

Party C bets the “A” bet is accurate, and party D bets against the A bet. Party E bets the “B” bet is accurate, and party F bets against the B. If it stopped there we would only have six total participants. But it doesn’t stop there, it goes on and on and on…

The outcome of the bets forms the basis for the tenuous investment markets. The important part to understand is that the investment funds are not necessarily attached to the original company stock, they are now attached to the outcome of bet(s). Hence an inherent disconnect is created.

Subsequently, if the actual stock doesn’t meet it’s expected P-n-L outcome (if the company actually doesn’t do well), and if the financial investment was betting against the outcome, the value of the investment actually goes up. The company performance and the investment bets on the outcome of that performance are two entirely different aspects of the stock market. [Hence two metrics.]

♦Understanding the disconnect between an actual company on the stock market, and the bets for and against that company stock, helps to understand what can happen when fiscal policy is geared toward the underlying company (Main Street MAGAnomics), and not toward the bets therein (Investment Class).

The U.S. stock markets’ overall value can increase with Main Street policy, and yet the investment class can simultaneously decrease in value even though the company(ies) in the stock market is/are doing better. This detachment is critical to understand because the ‘real economy’ is based on the company, the ‘paper economy’ is based on the financial investment instruments betting on the company.

Trillions can be lost in investment instruments, and yet the overall stock market -as valued by company operations/profits- can increase.

Conversely, there are now classes of companies on the U.S. stock exchange that never make a dime in profit, yet the value of the company increases. This dynamic is possible because the financial investment bets are not connected to the bottom line profit. (Examples include Tesla Motors, Amazon and a host of internet stocks like Facebook and Twitter.) It is this investment group of companies that stands to lose the most if/when the underlying system of betting on them stops or slows.

Specifically due to most recent U.S. fiscal policy, modern multinational banks, including all of the investment products therein, are more closely attached to this investment system on Wall Street. It stands to reason they are at greater risk of financial losses overall with a shift in fiscal policy.

That financial and economic risk is the basic reason behind Trump and Mnuchin putting a protective, secondary and parallel, banking system in place for Main Street.

Big multinational banks can suffer big losses from their investments, and yet the Main Street economy can continue growing, and have access to capital, uninterrupted.

Bottom Line: U.S. companies who have actual connection to a growing U.S. economy can succeed; based on the advantages of the new economic environment and MAGA policy, specifically in the areas of manufacturing, trade and the ancillary benefactors.

Meanwhile U.S. investment assets (multinational investment portfolios) that are disconnected from the actual results of those benefiting U.S. companies, and as a consequence also disconnected from the U.S. economic expansion, can simultaneously drop in value even though the U.S. economy is thriving.

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Source: by Sundance | The Conservative Tree House

Americans Are Migrating to Low-Tax States

Cato released author Chris Edwards’ study onTax Reform and Interstate Migration.”

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The 2017 federal tax law increased the tax pain of living in a high-tax state for millions of people. Will the law induce those folks to flee to lower-tax states?

To find clues, the study looks at recent IRS data and reviews academic studies on interstate migration.

For each state, the study calculated the ratio of domestic in-migration to out-migration for 2016. States losing population have ratios of less than 1.0. States gaining population have ratios of more than 1.0. New York’s ratio is 0.65, meaning for every 100 residents that left, only 65 moved in. Florida’s ratio is 1.45, meaning that 145 households moved in for every 100 that left.

Figure 1 maps the ratios. People are generally moving out of the Northeast and Midwest to the South and West, but they are also leaving California, on net.

People move between states for many reasons, including climate, housing costs, and job opportunities. But when you look at the detailed patterns of movement, it is clear that taxes also play a role.

I divided the country into the 25 highest-tax and 25 lowest-tax states by a measure of household taxes. In 2016, almost 600,000 people moved, on net, from the former to the latter.

People are moving into low-tax New Hampshire and out of Massachusetts. Into low-tax South Dakota and out of its neighbors. Into low-tax Tennessee and out of Kentucky. And into low-tax Florida from New York, Connecticut, New Jersey, and just about every other high-tax state.

On the West Coast, California is a high-tax state, while Oregon and Washington fall just on the side of the lower-tax states.

Of the 25 highest-tax states, 24 of them had net out-migration in 2016.

Of the 25 lowest-tax states, 17 had net in-migration.

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Source: by Chris Edwards | Cato Institute