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Dallas, TX
January 15, 2010, 08:00 EST |
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Dr. Joe Duarte's Market I.Q. |
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The Internet's Intelligence Digest
Intelligence, Market Timing, And Trading Strategy For Traders and Investors
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Fraud: A Health Care Gold Mine
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What's Hot Today: |
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U.S. stock index futures are pointing to a slightly lower
opening on Friday. Global markets also moved slightly lower overnight.
Intel's earnings were better than expected but oil is heading lower and
the dollar is strengthening.
Today's Economic Calendar:
- Retail Sales 8:30 AM ET
- Consumer Price Index 8:30 AM ET
- Empire State Mfg Survey 8:30 AM ET
- Industrial Production 9:15 AM ET
- Consumer Sentiment 9:55 AM ET
News For Thought
Federal Commission to call former regulators to testify, but not Congress. According
to The Wall Street Journal: "The chairman of the commission investigating the
2008 financial crisis said Thursday he planned to probe the actions of regulators
back to the Clinton Administration, broadening his inquiry beyond bankers." The
Republicans on the panel want Congress to testify. It's not clear whether that
will happen or not. It should since Congress put the laws in place that allowed
subprime mortgage lending to take place.
Dodd likely thinks of legacy as he looks to exit as cleanly as possible. According
to The Wall Street Journal: "Senate Banking Committee Chairman Christopher Dodd
is considering scrapping the idea of creating a Consumer Financial Protection
Agency, people familiar with the matter said, an initiative at the heart of the
White House's proposal to revamp financial-sector regulations. The Connecticut
Democrat, who announced this month that he wouldn't run for re-election this
year, has discussed the possibility of abandoning the push for a new agency during
negotiations with key Senate Republicans as a way to secure a bipartisan deal
on the legislation, these people said."
Back door price controls on oil market? According to The Washington Post: "With
the price of gas at the pump at its highest point in well over a year, federal
regulators moved Thursday to prevent excessive speculation by financial traders
from driving the cost of oil even higher. The effort to adopt new limits on the
trading of oil and other energy commodities is a sharp reversal after years when
regulators left those markets alone."
The article added: "The proposal from the Commodity Futures Trading Commission,
which oversees oil and energy trading, would introduce new restrictions on what
the largest traders can do. Concerned that some firms can amass such large holdings
in energy commodities that their trades can have an outsize effect on the price
of gasoline, heating oil or natural gas, officials said they would prevent traders "from
establishing extraordinarily large positions.""
Massachussetts polls tighten. According to The Washington Post: "A new
poll in the Massachusetts Senate race shows a shift in favor of the Republican
Party and a potential disaster for President Barack Obama and his Democratic
political agenda in Tuesday's special election. The Suffolk University survey
released late Thursday showed Scott Brown, a Republican state senator, with 50
percent of the vote in the race to succeed the late Sen. Edward M. Kennedy in
this overwhelmingly Democratic state. Democrat Martha Coakley had 46 percent.
That was a statistical tie since it was within the poll's 4.4 percentage point
margin of error, but far different from a 15-point lead the Massachusetts attorney
general enjoyed in a Boston Globe survey released over the weekend. "
Today's items are interesting as they encompass a wide variety of current issues.
In the first item, it would be good to call those in Congress, and President
Clinton, who were champions of subprime lending in order to make home ownership
for "everyone" a reality. Nice thought for sure, but look at where things ended
up. Those guys, and those who followed them should explain themselves. Without
them, this is an incomplete, even if useful excersise. Don't forget Alan Greenspan.
He talked Clinton into pushing for the repealing of the Glass Steagall act. Alan,
what were you thinking? Ayn Rand is way cool, but we think you went too far.
Connecticut's Christopher Dodd is trying to figure out how he can salvage his
sullied reputation. He got a sweet deal on a Countrywide mortgage and how he's
retiring to avoid losing an election. He's clearly having second thoughts about
championing the health care reform bill and wants to try to do something to limit
the damage to his employability at a big corporation when he leaves the senate.
How original.
Next, controlling the oil markets won't work. Traders will find a way to do what
they've always done, try to manipulate the market, directly or indirectly. Maybe
the CFTC should convince Congress to lest U.S. oil companies look for oil on
U.S. rock formations where there is lots to go around. If you like green power,
then maybe they could pass laws that would actually encourage a green conversion.
The problem is that that the government wants to run everything but can't figure
out how. So they do stuff like this.
Finally, the stunning potential reversal in Massachussetss' special election
should give Washington something to think about, even if Ms. Coakley wins.
Bottom line? Lots of unintended consequences for those of us who actually work
for a living. Another way to look at it is that physics actually works in the
real world. Chaos will often fall into Disorder. But complex systems are self
correcting. That seems to apply both to global warming and potentially to the
Democrat's majorities in Congress.
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Fraud: A Health Care Gold Mine
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Putting A Value On Health Care Crime
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$100 billion per year is lost in health care fraud, says a
report from the insurance industry. That's enough to pay for a big portion of
Obama care if remedied, without costing the rest of us a dime.
According to CNN Money.com: "Health care identity theft dominated all other crimes
in the sector last year, according to Louis Saccoccio, executive director of
the National Health Care Anti-Fraud Association (NHCAA), an advocacy group whose
members include insurers, law enforcement and regulatory agencies." And "The
most common method of health care identity fraud occurs when someone with legitimate
access, such as a hospital administrator or a doctor's assistant, sells patients'
information to organized criminal groups."
So who's getting ripped off the most? The U.S. government. According to the report: "criminal
groups are hacking into digital medical records so that they can steal money
from the $450 billion, 44-million-beneficiary Medicare system -- making the government,
by far, the "single biggest victim" of health care fraud, according to Rob Montemorra,
chief of the FBI's Health Care Fraud Unit." On a smaller scale, criminals also
sell medical information in some communities to uninsured people who are desperate
to get medical care." And "To collect the money, the criminals set up shell billing
companies that disappear as soon as there's any indication of an investigation,
according to the FBI."
And how much can you make in this business? According to the article: "The payoff
for health care identity fraud is huge. In 2008, criminals pocketed more than
$19,000 per incident of health care fraud -- four times the amount gained through
overall ID theft, according to Javelin. The cost to the individual victim was
nearly $1,200, more than double that of overall ID theft."
Conclusion
President Obama is fond of saying that the health care system doesn't work. But
this data suggests that it's Medicare, a government program that has problems
figuring out who to pay that's costing a lot of money. Yet, the public is about
to fork out billions per year for a new system that will have to be created by
scratch by a government who can't figure out which claims that it currently receives
are fraudulent.
Oh yeah. That's because the government hires private insurers to process the
claims. And private insurers don't take care of government money the way they
take care of their own.
O.K., let's take a deep breath and do a little math. Obama's "reform" is calculated
to cost anywhere from $900 billion to $1.5 trillion over the next ten years.
That's using a generous range of opinions and figures that have been thrown around.
Just for argument's sake, let's use them.
The government gets hit for $60 billion per year in Medicare fraud, according
to figures cited on 60 minutes. If they could improve the system and recover
or fail to pay out just half of that, they would save $300 billion over ten years.
If they could really get spiffy and prevent all the fraud, that would be $600
billion.
That means that private insurers get hit for $40 billion per year. If you apply
the same calculation to this figure that would throw in another $200-$400 billion
back into patient care over ten years. And that's just about one trillion, just
by cutting fraud.
If you get more people to quit smoking, lose weight, stop using drugs, drink
responsibly, spend more time doing good deeds and getting some sleep, you'd see
a lot of costs being cut on high blood pressure, COPD, diabetes, trauma and cancer.
Throw that into the pot and now you're talking some money.
If Congress would stop giving itself pay raises over that period of time that
would add a few billion to the kitty. And if they would stop going on junkets
to Copenhagen and Maui on tax payer money and members of the administration would
pay their taxes, then you'd really have something.
What's our point? The health care system isn't perfect, but it's pretty good
for a lot of people. It works better than the government too. Better health care
would be great. But maybe leaving what works in place and seeking better control
of the system, where it needs it, would be a good place to start the process.
But this is a case where it's applicable to do as John Belushi used to say..
But NOOOOOOOOOOO! NOOOOOOOOOOOOOOOOOOOO!!
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All Seasons. Also Available As Kindle Books. |
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Market Moves - Stock Of The Day
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Nokia (NYSE: NOK) Forms Base
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Once the darling
of the cell phone set, Nokia (NYSE: NOK) has lost a lot
of respect to Apple (Nasdaq: AAPL) and Research in Motion
(Nasdaq: RIMM).
Chart Courtesy of StockCharts.com
Nokia's problem is that it's lost market share to Apple,
RIMM, and others. Nokia's advantage is that it still has
about a 34% share of the cell phone market. That means
that based on volume, it's still the leader.
What it doesn't have is a killer phone like the Blackberry or the Iphone. Yet,
if you look at the stock, it's starting to form a base, and it's showing a bit
more strength.
Apple and RIMM shares are both starting to struggle. Nokia is selling at less
than ten times earnings, which makes it cheap. Apple sells at 33 times earnings
and RIMM at 17 times.
So that means that Nokia is the cheapest of the three, while having the leading
market share. The question, though, is whether Nokia can keep its market share
from eroding further.
Still, it current trends remain in place, Nokia's market share is likely to continue
to drop. Unless, of course, anyone who's ever going to buy an I-phone or a Blackberry
has already done so, which is hard to believe.
What's the point? The company that comes up with the next generation gadget that
really rules the roost, is likely to solidify its place in the cell phone wars.
It could be anyone of these three. For now, the charts say that value players
may be starting to build positions in Nokia.
The stock is worth watching very carefully. We give it 3-stars right now.
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