Morning in Arizona

Morning in Arizona
Rainbows over Canyonlands - Dave Stoker

The Headline Animator

Monday, June 26, 2017


Financial Review


DOW + 14 = 21,409
SPX +0.77 = 2439
NAS – 18 = 6247
RUT + 1 = 1416
10 Y UN = 2.14%
OIL + .42 = 43.43
GOLD – 12.10 = 1245.50

Another quiet day on Wall Street. That is the new normal. The S&P 500 this year has been more likely to move less than 0.1 percent than to move more than 0.5 percent in a trading session. The index has closed at least 1 percent higher or lower a mere four times this year.

The CBOE volatility index has fallen to 23-year lows. And still the market keeps inching higher. The market is still hovering near record highs.

The non-partisan Congressional Budget Office has released its score of the Better Care Reconciliation Act, this is the Senate version of legislation to repeal and replace Obamacare. The Senate Republican health care bill would leave 22 million fewer Americans with health insurance by 2026 than under Obamacare.

And while that is a slight improvement on 23 million that would lose insurance under the House version, it is still a dreadful number. Next year, 15 million more people would be uninsured compared with current law. Like the House bill, the Senate’s version would end enhanced funding for Medicaid expansion, though at a slower pace, while overhauling the entire Medicaid program.

It would eliminate the mandates that require nearly all Americans to have coverage and companies with more than 50 workers to provide health benefits. And it would jettison Obamacare’s taxes on the wealthy, insurers and others, while allowing insurers to charge more to older policyholders.

However, the Senate bill would maintain much of Obamacare’s subsidy structure to help people pay for individual coverage, but make it less generous, particularly for older enrollees. And it would keep more of Obamacare’s insurance regulations than the House legislation. The Senate version also provides funds to stabilize the Obamacare market over the next few years, including money for a key set of subsidies for insurers.

The legislation is wildly unpopular. Before the budget office released its report this afternoon, the American Medical Association officially announced its opposition to the bill, and the National Governors Association urged the Senate to slow down. The AARP slammed the Senate GOP bill, calling efforts to repeal and replace ObamaCare “harmful” and denouncing what it calls an “Age Tax” affecting the nation’s senior citizens.

The GOP plan allows insurance companies to charge older adults up to five times more than younger people, while under ObamaCare older Americans can only be charged three times as much as younger people. The lobbying group for seniors accused Senate GOP leaders of crafting legislation in “secrecy” that “would hit millions of Americans with higher costs and result in less coverage for them.”

Here are a few other key findings from the CBO:
Premiums would increase in 2018 and 2019 compared to the current baseline, but decline thereafter: According to the CBO, premiums would increase 30% more than the current projection in 2018 and 10% higher than the current baseline in 2019. From 2020 and beyond, the change in the risk pool with older and poorer Americans likely priced out would bring these premiums down.

Deductibles and out of pocket costs would increase substantially: The benchmark plan on the individual insurance market would have an actuarial value of 58%, meaning insurance was obligated to cover 58% of the total costs. That is down from the current 70% benchmark value. According to the CBO, that opens the door for higher deductibles and out-of-pocket costs.

Earlier today, Republicans released changes to their healthcare bill, adding a measure that would penalize people who let their insurance coverage lapse. The revised bill would impose a six-month waiting period for anyone who lets their health insurance lapse for over 63 days and then wants to re-enroll in a plan in the individual market.

The legislation would decrease federal deficits by a total of $321 billion over a decade; more than the $119 million in savings in the House bill, between 2017 and 2026. The savings are made possible by cutting $862 billion in spending over that time-frame while also reducing tax revenue by $541 billion. It represents a big tax cut for wealthy taxpayers, but even bigger spending cuts, mainly to Medicaid.

That means the legislation can continue under the budget reconciliation process, which only requires 51 votes to pass. As of today, it does not have enough votes to pass. Five Republican senators have said they would not vote for the BCRA, several others have indicated they are leaning in the direction of a vote against and it doesn’t look like the CBO score will help turn those to support the bill.

Senate Majority Leader Mitch McConnell is insisting on a vote this week before lawmakers leave town for the July 4th recess, but a vote could be delayed, especially if it looks like it will go down in flames. Look for tweaking, name calling, arm twisting and much more over the coming days or weeks.

The Supreme Court will allow most of the Trump administration’s travel ban to go forward before it hears a case on the matter in October. The ruling grants a stay of lower court rulings that had piled up against the administration. The court’s decision found that the lower courts’ preliminary injunctions, which fully halted the key provisions of the executive order, were too broad.

So, the court narrowed these injunctions, ruling that the travel ban “may not be enforced against foreign nationals who have a credible claim of a bona fide relationship with a person or entity in the United States.”

That would apply to people who have family members stateside, those who have been admitted to a college or hired by an employer. However, “all other foreign nationals are still subject to the provisions” of the order.

In practice, the court’s ruling means Trump’s travel ban won’t be able to affect the great majority of foreign nationals who were trying to get to the U.S. from the six countries. It was already extremely difficult to get a visa from these countries unless you had family ties or a specific invitation.

The court also set arguments on the merits of the case for the first day of its next term in early October. The government may now exclude citizens from six Muslim-majority countries from coming into the United States unless they have some meaningful connection with a “person or entity” in the country. The court’s order also allows the government to exclude refugees, even those who are already vetted and poised to resettle here, unless they have the required connections.

SCOTUS agreed to consider whether employees who report misconduct at their companies are entitled to protections as “whistleblowers” if they report the alleged wrongdoing only internally, not to the Securities and Exchange Commission.

The announcement is welcome news for corporate defendants that have lamented the broad way in which the SEC and some federal courts have interpreted the 2010 Dodd-Frank financial overhaul, which is ambiguous about whether employees who only make internal corporate reports of securities fraud are protected under federal law.

The Supreme Court also agreed to consider whether the Constitution’s religion clauses allow a bakery to deny service to gay couples. In a separate ruling, the Supremes ruled that the Constitution requires states to list married same-sex couples on their children’s birth certificate. The decision marks a landmark victory for gay rights, confirming that the court’s decision in Obergefell v. Hodges protects all rights relating to marriage, not simply the recognition of marriage itself.

The Supreme Court ruled that taxpayer-funded grants for playgrounds available to nonprofits under a state program could not be denied to a school run by a church.

The Supreme Court declined to hear a Second Amendment challenge to a California law that places strict limits on carrying guns in public. The California case essentially bans carrying guns openly in public and allows carrying concealed weapons only if applicants can demonstrate good cause.

Orders for durable goods such as planes and computers fell in May for the second month in a row and registered the biggest drop in six months. Durable-goods orders slipped 1.1% last month following a similar decline in April. A key measure of business investment known as core capital-goods orders, meanwhile, fell 0.2% to mark the first decline of 2017. Businesses that were eagerly anticipating tax and regulatory relief may be taking a wait-and-see attitude.

Government websites in Ohio, Maryland and New York have been hacked with what appears to be pro-ISIS propaganda. It was not immediately clear who the group is — or whether it is genuinely affiliated with ISIS. The Ohio sites were back to normal this morning.

Twitter, Facebook, YouTube and Microsoft have formed the Global Internet Forum to Counter Terrorism. The group will share technical tools for combating extremist content, such as violent imagery and terrorist propaganda, and commission research to guide future resources. It’ll also work with academic and policy experts to learn more about terrorism.

Martin Shkreli, the former pharmaceutical executive is going to trial. In 2017, Shkreli sparked outrage in 2015 for increasing the price of Daraprim, a drug used by AIDS patients, by more than 5,000% from $13.50 to $750 a pill while he was CEO of Turing Pharmaceuticals. But the trial deals with charges of securities fraud, wire fraud and conspiracy for allegedly cheating investors out of more than $11 million between 2009 and 2014 in what federal prosecutors called a “Ponzi scheme.”

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