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us housing market 12 q2 earnings growth forecasts for the 10 s p 500 sectors more for subscribers posted by dr ed yardeni at 7 44 am no comments email this blogthis share to x share to facebook share to pinterest wednesday june 27 2012 health care obamacare could be in intensive care on thursday that s when the supreme court is expected to rule on the constitutionality of the affordable care act it s widely expected that a majority of the judges will vote to strike down at least the core provision of the health care law that requires most americans to purchase health insurance then again as reuters observed yesterday the supreme court s decision in the arizona immigration case on monday showed a conciliatory streak within a divided court that could emerge again when the justices issue their climactic healthcare decision on thursday health care is a big business in the us it accounts for lots of jobs and is one of the few industries that have been hiring more workers during the current jobless recovery the government spends a great deal of money providing health care benefits which have significantly widened the us budget deficit health care costs have been rising rapidly the number of americans eligible to receive government funded health care benefits is also rising rapidly and many more are becoming eligible as the baby boomers are starting to retire let s review the underlying statistics behind these trends 1 health care is a big business in current dollars americans spent a record 2 2 trillion saar during q1 2012 up 100 since 2000 spending on health care has accounted for a record 14 of nominal gdp over the past three years up from only 4 during the early 1960s over the past three years it has been at a record 20 of total pce personal consumption expenditures up from 6 in 1960 since the mid 1960s total pce rose from 61 of gdp to a record 71 of gdp now that entire increase was attributable to health care spending excluding health care consumer spending currently accounts for only 57 of gdp the same as in the mid 1960s the health care industry s private payrolls rose by 6 3 million since 1990 to a record 14 3 million during may that accounted for 26 4 of the gain in total payrolls over this period health care jobs now account for a record 10 8 of total payrolls up from 7 3 during january 1990 2 the government s tab for health care benefits is high and heading higher the us treasury provides monthly data on federal government outlays for medicaid and medicare i monitor the 12 month sums which totaled 734 billion for both combined through may that s up nearly 100 over the past 10 years well outpacing the 37 increase in wages and salaries additional perspective on the size of the government s role in the health care industry can be had by comparing the sum of federal outlays on medicare plus two times federal outlays on medicaid unlike medicare which is solely a federal program medicaid is a joint federal state program each state operates its own medicaid system but receives matching funds and grants the wealthiest states receive a federal match of 50 while poorer states receive a larger match our calculations show that the government accounts for roughly half of spending on health care in america 3 per capita spending on health care benefits is rising rapidly and so is the number of beneficiaries data available annually through 2010 show that enrollment in medicaid and medicare rose to 98 8 million that year a 36 7 increase over the past 10 years there are lots more beneficiaries coming soon as the baby boomers start to retire and become eligible for medicare medicare spending per capita and medicaid per capita rose 92 2 and 49 0 over the past 10 years today s morning briefing to your health 1 the supremes will rule on thursday 2 health care is a big business 3 consumer spending is 71 of gdp but only 57 without health care 4 government pays for half of health care spending 5 number of beneficiaries is soaring 6 s p 500 health care shares doing well despite uncertainty about obamacare 7 analysts expect less earnings growth for health care 8 q2 earnings revisions trending lower for all but two s p 500 sectors 9 jobs are getting harder to get again 10 four regional fed surveys add up to weaker economy in june more for subscribers posted by dr ed yardeni at 7 29 am no comments email this blogthis share to x share to facebook share to pinterest tuesday june 26 2012 s p 500 forward earnings the next earnings season is about to begin industry analysts have been curbing their enthusiasm for q2 2012 results since the end of q1 they ve lowered their s p 500 estimate for the current quarter from 26 11 during the week of march 30 to 25 38 during the week of june 21 that would put the quarter up only 5 2 y y the weakest since the end of the recession over the same period they ve also cut their estimates for q3 and q4 the consensus bottoms up forecasts for 2012 and 2013 are down to 105 07 and 117 94 forward earnings which is the time weighted average of the current and coming year estimates has recently flattened out around 111 26 that s actually quite bullish since forward earnings tends to be a very good leading indicator of actual s p 500 operating earnings over the coming year if so then actual earnings should add up to about 110 from now through mid 2013 i am forecasting 110 for next year so i feel very comfortable with the latest forward earnings there is one rather important caveat i must add forward earnings is an excellent leading indicator of actual earnings when the economy is expanding industry analysts don t see recessions coming and tend to lower their estimates as the economic news worsens so forward earnings is actually a lagging indicator during recessions today s morning briefing china syndrome 1 not so hot and spicy 2 less power in electricity output 3 wage hikes are squeezing profits but aren t boosting consumption 4 demography driving the new normal in china 5 mr li s favorite indicators 6 no train wrecks or meltdowns in china 7 analysts expecting weakest s p 500 earnings growth since the recession 8 forward earnings still bullish 9 energy and materials expected to disappoint most more for subscribers posted by dr ed yardeni at 7 46 am no comments email this blogthis share to x share to facebook share to pinterest monday june 25 2012 monetary ledge i m sure fed chairman ben bernanke keeps a calendar however he must have forgotten to look at what is scheduled to happen at the beginning of 2013 on several occasions recently he himself warned members of congress about the fiscal cliff of spending cuts and tax increases that could clobber the economy early next year unless current legislation is changed before the end of this year yet he and his colleagues on the fomc voted last week to extend operation twist to the end of this year the 6 21 wsj editorialized in addition to the tax cliff facing the economy in january you can now add a monetary ledge the federal reserve added that extra uncertainty by announcing wednesday that it will extend its operation twist bond swap program by another 267 billion and through the end of the year just what the economy needs another temporary stimulus that may or may not end when the powers in washington claim it will so now the us economy is facing three homegrown challenges the fiscal cliff the monetary ledge and the credit divide the fed should get lots of the blame for putting us in this predicament with qe2 the fed enabled more of washington s fiscal recklessness by purchasing 600 billion of us treasuries at an effective cost of 25bps to the treasury qe2 was followed by operation twist the goal was to bring bond yields down at the same time that the fomc was extending its promise to keep the federal funds rate near zero through 2014 it worked as the 10 year bond yield fell sharply this year and the yield curve flattened however record low interest rates aren t working as predicted by the textbooks that bernanke keeps in his office 1 as i discussed last week the credit divide has made it very hard for debt challenged borrowers with negative home equity to refinance their mortgages the value of homes plunged 30 0 by 6 7 trillion from a record high of 22 7 trillion at the end of q4 2006 to 16 0 trillion at the end of q4 2011 over this same period the value of homeowners equity imploded by 51 5 to 6 2 trillion americans collectively now own only 40 7 of their homes down from a recent peak of 61 2 during q1 2001 according to the fed s flow of funds data 2 last wednesday on bloomberg radio doug duncan the chief economist of fannie mae said that his firm will be releasing within the next two weeks a study of the ability of first time homebuyers saddled with student loans to qualify for a mortgage he said we are worried about that 3 exacerbating the credit divide is the flattening of the yield curve that has been so successfully engineered by the fed banks have less incentive to lend when the spread is narrow the squeeze on their net interest margins depresses their net operating income for all fdic insured institutions that margin has dropped from a recent peak of 3 84 during q1 2010 to 3 52 during q1 2012 over this period their net interest income has been flat just north of 100 billion per quarter last week moody s downgraded 15 major banks that are the largest players in the global capital markets including five us based banks some of them reacted by charging that the downgrades were unwarranted and don t jibe with their improved liquidity and capital adequacy this weekend the wsj editors had fun asking wasn t dodd frank reform supposed to make the financial system stronger they suggested that such regulatory excesses might be making banks weaker rather than stronger i would add that the fed s monetary policy excesses aren t good for banks either today s morning briefing monetary ledge 1 timing is everything 2 operation twist ii ends when fiscal cliff starts 3 homeowners equity has already fallen off a cliff 4 flattening yield curve isn t good for banks and their borrowers 5 new greek finance minister is sick to his stomach 6 the ecb accepts sangria as collateral 7 unsettling headlines unsettle us economy 8 more weak global indicators 9 sector neutral still looks like the best bet for now more for subscribers posted by dr ed yardeni at 7 49 am no comments email this blogthis share to x share to facebook share to pinterest thursday june 21 2012 credit divide we all know about the dreaded fiscal cliff now there is also the credit divide in monday s wsj jon hilsenrath coined the phrase and explained in previous downturns the lowered interest rates triggered broad waves of mortgage refinancing and new borrowing the spending that resulted helped power the recoveries this time around many would be borrowers with lower incomes or blemished credit histories are finding it difficult and more costly or sometimes impossible to refinance their mortgages or get new loans let s review some of the developments in consumer finance that might account for the credit divide 1 mortgage activity indexes are mixed the good news is that record low mortgage rates are starting to boost the refinancing index compiled by the mortgage bankers association it rose during the week of june 15 to the highest reading since april 2009 the bad news is that the index of mortgage applications for new purchases has been stalled at the lowest level since the mid 1990s for the past three years overall home mortgage net lending continued to contract during the first quarter as it has been doing since q4 2008 2 negative home equity is a major cause of the credit divide households with negative equity can t refinance their mortgages to take advantage of record low rates the fed s flow of funds data show that owners equity in household real estate has been hovering around 6 trillion since late 2008 it is down a whopping 50 4 from its record high of 13 5 trillion during q1 2006 prior to q4 2007 homeowners equity exceeded outstanding mortgage loans since then households have collectively owed more than the equity in their homes prior to q4 2007 owners equity exceeded 50 of the value of household real estate it was down to 40 7 during q1 2012 3 consumer credit is expanding again revolving credit i e credit card debt is growing again but very slowly after falling by 177 billion from july 2008 through april 2011 since then it is up by 11 4 billion nonrevolving credit is expanding more rapidly auto loans are rising along with auto sales however the fastest growing component of consumer credit is student loans that s certainly contributing to the credit divide college graduates who are saddled with large tuition debts are less likely to qualify for auto and mortgage loans today s morning briefing credit divide 1 the fed s epiphany 2 running out of options 3 could the economics textbooks be wrong 4 the credit divide examined 5 refinancing activity is rebounding 6 mortgage lending isn t 7 homeowners equity has plunged 50 8 consumer credit led by student loans 9 fed s financial repression is depressing interest income 10 is the summer rally over already 11 germans and greeks more for subscribers posted by dr ed yardeni at 5 49 am no comments email this blogthis share to x share to facebook share to pinterest wednesday june 20 2012 s p 500 earnings another earnings season is starting and industry analysts are preparing for it by once again lowering their estimates and once again this may set the stage for lots of positive earnings surprises however this time their downward revisions may reflect fundamental weakness in business for companies with exposure to europe in this case there might be fewer positive and more negative surprises the consensus forecast for s p 500 operating earnings during q2 fell to 25 45 per share during the week of june 14 that s down 0 70 from the end of the previous earnings season at the end of april the estimates for q3 and q4 have also been revised down over this period by 0 51 and 0 40 respectively as a result the estimate for all of 2012 is now down 1 24 since the end of april to a new low of 105 31 the 2013 estimate is also down to a new low of 118 18 that s still above the 110 number that joe and i are using for next year since rising to a new record high during the week of june 1 s p 500 forward earnings has stalled around 110 today s morning briefing lots of tight oil 1 central banks stand ready 2 ot2 or qe3 are the fed s lame choices 3 no jolt to jolts from previous fed easing 4 thrill or spill for stock prices 5 still expecting a romney rally this summer 6 analysts preparing for another earnings season by lowering their estimates 7 this time europe could bite 8 thinking like a saudi 9 squeezing more tight oil out of us shale 10 no vacation from the europeans who will soon be on vacation more for subscribers posted by dr ed yardeni at 7 48 am no comments email this blogthis 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