Morning in Arizona

Morning in Arizona
Rainbows over Canyonlands - Dave Stoker

The Headline Animator

Thursday, June 25, 2015


Financial Review


DOW – 75 = 17,890
SPX – 6 = 2102
NAS – 10 = 5112
10 YR YLD + .02 = 2.39%
OIL – .57 = 59.70
GOLD – 2.10 = 1173.90
SILV – .04 = 15.94

The Supreme Court ruled to save subsidies for as many as 8 million people under the Affordable Care Act. In the case of King v. Burwell, justices determined that the subsidies should be available in states that don’t have their own exchanges. The court determined that the broader context of the ACA allows subsidies to all those under the Obamacare program. Justices voted 6-3 in favor of upholding the subsidies with Chief Justice John Roberts and swing vote Justice Anthony Kennedy joining the majority.

Obamacare, technically titled The Affordable Care Act, gave states the option to build their own healthcare marketplaces or simply use one operated by the federal government. In all, 34 states decided to rely on the federal “exchange.” And about 8 million low- to moderate-income Americans are now receiving subsidies of on average $260 a month through the federal exchange. But in a lawsuit challenging the law, critics insisted the federal government is not allowed to subsidize insurance in states that rejected their own exchange for the federal system. Those critics based their argument on a single phrase in Obamacare that refers only to participants enrolled through an exchange “established by the State.” The court finds that the act’s tax credits are available in states that have the federal exchange rather than merely in states that created state exchanges.

Yes, the term “established by the State” is ambiguous, but in the end—after taking a whack at the ACA for “more than a few examples of inartful drafting”, chief justice Roberts wrote: “The combination of no tax credits and an ineffective coverage requirement could well push a State’s individual insurance market into a death spiral.” Quoting the 2012 Obamacare challenge: “Without the federal subsidies … the exchanges would not operate as Congress intended and may not operate at all …” And Roberts notes, “It is implausible that Congress meant the Act to operate in this manner.”

And then Roberts concluded: “In a democracy, the power to make the law rests with those chosen by the people. Our role is more confined—“to say what the law is.”’ Which is kind of an admission that the Supremes could not figure out a way to turn the applesauce back into apples. The simple reality is that almost 11 million people have signed up for Obamacare and about 8 million are getting subsidies, which means they would likely not get healthcare without Obamacare; that’s nearly 11 million people with contracts; and those contracts represent something of definite value. Talk about a potential legal hot mess. Talk about killing off Obamacare is now moot.

President Obama held a press conference after the decision was announced, and he said: “This law is working, and it’s going to keep doing it.” Like it or not, the comment was pretty much a straightforward factual statement.

The Supreme Court also issued a ruling on “Texas Department of Housing and Community Affairs v. The Inclusive Communities Project”; in a 5-4 decision they determined plaintiffs can file suit under the Fair Housing Act for practices that have a discriminatory effect, even if the accused wasn’t purposely discriminating. The case dealt with low income housing which was built primarily in low-income, predominantly black neighborhoods. Texas may not have enacted this policy explicitly to keep blacks segregated from whites, but under the disparate impact claim which the court just affirmed, the effect of this decision perpetuated segregation.

The ruling affirms that the law forbids “disparate impact” discrimination—that is, discrimination that is race-neutral on the surface but racist in practice. Justice Anthony Kennedy wrote the majority opinion; he explains that the Fair Housing Act, as originally written made it unlawful to “refuse to sell or rent … or otherwise make unavailable or deny, a dwelling to a person because of race.” So, in that regard, the law bars both racist intent and racist consequences.

But wait, there’s more. The Supreme Court still has five big cases to announce in the next couple of days. Here’s a rundown of what’s left to settle:

In a landmark decision, the court will confront two questions. The first is whether states can ban same-sex marriage. The second is whether states must recognize same-sex marriages performed legally in other states.

The justices must also decide a challenge to the drug protocol several states use by to execute inmates. The case is from Oklahoma, and it looks at the mix of drugs used and whether the drugs inflict cruel and unusual pain.

The court could give thousands of federal prisoners new hope and potentially hamstring prosecutors in ruling on a federal law that sets mandatory minimum sentences for federal firearms offenders who already have three convictions for “violent felonies.” At the heart of this case is the vagueness of the term “violent felonies”.

Three cases being considered together ask the court to force the Environmental Protection Agency to consider the economic cost of complying with regulations limiting emissions from power plants before it issues any rules. The government argued that the Clean Air Act made no reference to costs when it required the EPA should to adopt “appropriate and necessary” emissions rules. Above and beyond that argument, there is another question of the true economic cost of emissions from power plants.

The court will also decide an issue that goes to the very founding of the U.S.: Who controls the creation of congressional districts? Arizona voters passed a constitutional amendment in 2000 stripping the Legislature of the power to draw districts and giving it to an independent redistricting commission. It’s meant to avoid “gerrymandering” — the habit of legislators to draw bizarrely shaped districts that give their parties’ candidates the best shot at winning. The Legislature went to court, pointing out that Article I of the Constitution specifies that “the times, places and manner of holding elections for Senators and Representatives shall be prescribed in each state by the legislature thereof” — and that only Congress, not state bodies, can change that.

In economic news: Consumer spending recorded its largest increase in nearly six years in May on strong demand for automobiles and other big-ticket items. Consumer spending rose a seasonally adjusted 0.9% in May. The amount consumers spent in April and March was also a bit stronger than initially reported. Personal income increased by 0.5% for the second straight month. The sharp uptick in spending in May, however, required Americans to draw down their savings. The personal savings rate fell to 5.1% from 5.4%.Despite a stronger labor market, households still aren’t spending as much as they normally do. Consumer spending has risen at modest 3.6% in the past 12 months, though lower gasoline prices has had something to do with that.

The number of people who applied for unemployment benefits in the period running from June 14 to June 20 rose by 3,000 to 271,000. Initial jobless claims have been under the key 300,000 level for 16 straight weeks, the longest stretch since 2000-2001.

The Census Bureau has issued a report on changes within the American populace between April 2010 and July 2014. America is becoming more diverse, and youthful. Ninety-five percent of population growth over the past year came from minorities, and millennials now outnumber baby boomers. Millennials, Americans born between 1982 and 2000, are 44.2 percent minority, a larger amount than previous generations. They also now outnumber Boomers by 7.7 million (83.1 million Millennials compared to 75.4 million Boomers). That actually isn’t anything new; Millennials have outnumbered Boomers for a long time; and part of it depends on what years you count to define Millennials. If you count 1980 to 2004, there are more than 104 million Millennials.

The majority of US children under age 5 are minorities; 50.2 percent are part of any ethnic or race group besides non-Hispanic white. By 2060, more than half of the American population will be a racial or ethnic minority. Migration seems to be a normal part of American life. The tendency to migrate is highest for young adults. However, in the ages following retirement (commonly around 65), we see another spike in migration.

The standoff between Greece and its international creditors was extended into the weekend, just days before Athens has to meet a crucial debt deadline which could decide whether it goes bankrupt and gets kicked out of the euro currency club. A key meeting of Eurozone finance ministers broke up without agreement on Greece’s rescue package.

Executive compensation is supposedly  geared toward results, but some CEOs still got massive pay packages in 2014 even though their investors didn’t do so well. Notables: Viacom’s Philippe Dauman +19.2% to $44.3M (shareholder return -6.6%); GE’s Jeff Immelt +88.4% to $37.3M (shareholder return -6.7%); Boeing’s James McNerney +24.1% to $28.9M (shareholder return -2.5%); IBM’s Virginia Rometty +38.5% to $19.3M (shareholder return -12.4%).

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