Morning Market Report

Let's start out today by talking about bonds. Those have quietly become a story lately and almost no one has noticed. The ten year is again weaker this morning, though just slightly. That's good news considering what's happened over the last week and a half. The ten year is up to 3.82%. It reached a low of 3.19% in November. It's more recently been in the 3.3% range. To put this into perspective, after the refinance boom ended, bonds averaged about 4.2% from 2003-2007. That was a guage to see where they were at. So, 3.8% is still very low. It's also getting dangerously high. That's because we're carrying nearly $13 trillion worth of debt and much of it will be financed by these ten year bonds. The yield spread between the two and ten year also continues to set all time records. It's currently at 2.83%. The three month t bill has raised itself from the critically negative levels to .041%. Bonds in England and Germany were relative unchanged today so we'll wait and see how domestic bonds respond.

Meanwhile, there was relatively good news on the retail front.

The spending bounce means retailers managed to avoid a repeat of last year's disaster even amid tight credit and double-digit unemployment. Profits should be healthier, too, because stores had a year to plan their inventories to match consumer demand and never needed to resort to fire-sale clearances.

Retail sales rose 3.6 percent from Nov. 1 through Dec. 24, compared with a 2.3 percent drop in the year-ago period, according to figures from MasterCard Advisors' SpendingPulse, which track all forms of payment, including cash.

Now, it's important to keep in mind that 2008 was an awful year for retailer and so I'm not sure how good this news really is. This is sort of like a .200 hitter getting excited because their batting average increased by ten percent.

The most interesting news if you will of the weekend came from Paul Krugman who said it was a "reasonably high chance" that we'd see a double dip recession. That means the economy will recover for a while and then fall back into recession. That happened to Reagan in 1982-83 and to FDR in 1937-38.

Paul Krugman was on ABC's The Week on Sunday declaring a "reasonably high chance" of a double dip coming next year.

Actually, he doesn't sound quite as gloomy as you might guess. Yes, he describes the entire recovery so far as being driven by government spending and inventory rebalancing, but the odds of a double dip he does place at lower than 50/50, so that's good. Obviously he wants much more spending.

I almost never agree with Krugman so I won't be one of those people that suddenly calls him an oracle since we do. It's very important to note that Krugman, from the beginning, has insisted that the stimulus wasn't nearly big enough and this is more of that skepticisim.

In commodities, oil is pushing $80 a barrel again. It's currently at $78.57 a barrel. It reached below $70 a barrel only two weeks ago. Gold is back above $1100 an ounce. It's currently at $1105 an ounce. It reached over $1200 an ounce and shot back down. It's been slowing pulling itself up since it reached a low in the $1080 range.

All three indices are opening just slightly higher this morning. They're all up about .25% forty five minutes in. Retailers are strong following the retail numbers. Markets in both Europe and the Far East were both up nearly across the board. The Hang Seng in China was down .17% but that's the only major indice that was down. The NIKKEI in Japan was up 1.33% and the Straits Time Index in Singapore was up .63%. The broader Chinese index was up 1.51%. In Europe, the FTSE in London is even, the DAX is up .7%, and the Spanish index is up .44%. All indices are up or even in Europe.

The Dollar is mixed. It's down .01% against the Euro, down .13 against the British Pound but up .41% against the Japanese Yen.

Here's a couple things of final note. China says its economy is growing faster than expected. Let's keep in mind that a week and a half ago, it was annouced that the U.S. again revised its most recent GDP data to a growth of 2.2%. It was originally measured at 3.2%, then revised to 2.8% and now 2.2%. So, everyone should keep that in mind when you hear initial data for any number.

Then, there's this news, a prediction from Morgan Stanley Dean Witter.

If Morgan Stanley is right, the best sale of U.S. Treasuries for 2010 may be the short sale. Yields on benchmark 10-year notes will climb about 40 percent to 5.5 percent, the biggest annual increase since 1999, according to David Greenlaw, chief fixed-income economist at Morgan Stanley in New York. The surge will push interest rates on 30-year fixed mortgages to 7.5 percent to 8 percent, almost the highest in a decade, Greenlaw said.

In fact, if MSDW is right, we're all in big trouble. That would severely stunt any recovery. It could even lead to inflation. This goes back to what I spoke about in the beginning. That is that U.S. Treasury bonds are weakening and no one is noticing. If the rate on the ten year bond is 5.5%, then mortgage rates will be in the neighborhood of 7%. You can forget any sort of housing recovery with those rates. Such high borrowing costs would almost certainly mean a double dip recession. Every market observer had better start to pay attention to bonds.

The Legislative Lessons of Health Care Reform

Joe Lieberman got his way and not only was the public option removed but so to was the lowered eligibility for Medicare. What's not reported quite as much was the multi hundred million dollars that Lieberman negotiated for the University of Connecticut along with his fellow Senator from Connecticut Chris Dodd.

Mary Landrieu was able to negotiate $300 million in federal aid from the health care bill. Here's how Landrieu described her vote.

It’s not $100 million, it’s $300 million, and I’m proud of it and will keep fighting for it,” she told reporters after a floor speech announcing her support of a vote to begin debate on health care reform.

Meanwhile, Bill Nelson of Florida was able to win this concession.

a provision he said will let about 800,000 Florida seniors enrolled in private Medicare Advantage plans keep their extra benefits

Why, just a week earlier, Bill Nelson was on Greta telling the public that this bill was essentially a non starter.

We all know about the concessions that Ben Nelson won.

What do all of these people have in common? They all held out their yes votes until the end. Mind you, they aren't the only ones to get concessions for their home states, but nearly each and every Senator that got one made it known at one time that their vote wasn't decided.

What did my Senator, Dick Durbin, get? Nothing, that's what. Then again, Durbin's vote was never in doubt. We call this horse trading but that word doesn't nearly describe the ugliness of the process.

So, the lesson is hold out. Then, you can get stuff. In the House, the only hold out left is Bart Stupak. He's holding out for stronger anti abortion language. Then again, so was Ben Nelson. Suddenly, he got an exemption for his home state and the anti abortion language wasn't as important.

The deal makers are those who's votes are in doubt. They make the rules, and in this Congress, that also means they get free stuff for their states. That appears to be the lesson.

Video, Quote and Word of the Day

expatiate

to speak or write at length

One cannot and must not try to erase the past merely because it does not fit the present.

Golda Meir

Point Counter Point Weekly Addresses

This was the first time that President Obama was joined by his wife, Michelle, for the weekly address. This address done for Christmas focused mostly on our fighting men and women who are enjoying Christmas from the comforts of a military base.

The Obama's did show off the official White House Christmas tree. This tree isn't as controversial as the tree outside which reportedly was decorated with, among other things, an ornament of Mao and other sexually explicit ornaments.

That said, this was a good and wholesome address in which the Obama's thanked our troops and gave everyone else simple ways to thank the troops as well. This includes sending phone cards, care packages, and other items that the folks in the military are in need of.

The Republicans handed their address to a rising star within the party, Duncan Hunter. No, this isn't the former Presidential candidate but rather his son. Hunter is a veteran of both Iraq and Afghanistan and he has the charisma and presence to do some big things in politics.

He also spent the majority of his address thanking the troops and wishing them and the rest of us a Merry Christmas and a Happy New Year. He spent about half the address, however, taking back handed shots at the Democrats and their policies. Hunter talked about the policies the Republicans have favored which would have "provided jobs without adding to the deficit", "decreased not increased the size of government", and "not added to the debt". Hunter ended the address by proclaiming that we should commit to policies that won't add to our deficit and kill jobs like Cap and Trade and Card Check.

It was a slick way of attacking Democrats without being so in your face. Given the occasion, it would have been out of place. Hunter showed some good political acumen in the way he pulled it off though I could have gone without the partisanship in this address.

The Scourge of Fannie/Freddie

This past week, both Fannie Mae and Freddie Mac reared their ugly heads with two stories. First, here's the most important one.

The Obama administration's decision to cover an unlimited amount of losses at the mortgage-finance giants Fannie Mae and Freddie Mac over the next three years stirred controversy over the holiday.

The Treasury announced Thursday it was removing the caps that limited the amount of available capital to the companies to $200 billion each.Unlimited access to bailout funds through 2012 was "necessary for preserving the continued strength and stability of the mortgage market," the Treasury said. Fannie and Freddie purchase or guarantee most U.S. home mortgages and have run up huge losses stemming from the worst wave of defaults since the 1930s.

Beyond that, we found out that the two mortgage giants will be paying their top execs handsomely over the next few years.

The chief executives of Fannie Mae and Freddie Mac each could earn as much as $6 million this year and next, despite huge continued losses at the seized mortgage giants and a government bailout tab of more than $100 billion that the Obama administration said could rise even higher.

Fannie Mae Chief Executive Michael Williams will earn a base salary of $900,000 in 2009 and 2010, with a deferred base salary of $3.1 million each year to be paid "only if the enterprise meets performance metrics" set by its board and subject to government review, according to filings Thursday with the Securities and Exchange Commission. An additional $2 million is possible annually, identified as "target incentive opportunity." Freddie Mac Chief Executive Charles E. Haldeman Jr. will get the same compensation package.

Four additional Fannie Mae executives will earn base salaries above $500,000 and have compensation packages for 2009 and 2010 that could pay each of them at least $2.7 million annually. One other Freddie Mac executive will receive a base salary over $500,000 and could earn as much as $1.15 million a year.

Stories about executive pays and bonuses aren't necessarily all that important in the larger scheme of things. After all, whether or not the CEO of Fannie Mae makes $6 million next year or $6 isn't going to make or break our economy. Those stories are fueled mostly by class warfare, envy, AND the sense that incompetence at the top is being rewarded and HANDSOMELY.

In the first story, the government announced that they would raise the debt they will cover for Fannie/Freddie to an unlimited amount. It was $200 billion each. Here's how a Treasury spokesperson characterized the decision.

(the move was) necessary for preserving the continued strength and stability of the mortgage market,

That's all nonsense. The government wouldn't be making the debt ceiling unlimited unless their number crunchers thought that was necessary to cover the necessary losses. A year and a half ago, when this crisis first hit with Fannie/Freddie, I pointed out their two problems. First, there's only two of them and so they are essentially monopolies, or technically duopolies. Second, they are extensions of the government making them quasi socialistic. I said the solution would be to break them up and privatize them.

Since then, the government has gone backwards. They're no longer merely extensions of the government but wholly owned subsidiaries of the government. This leads to all sorts of moral hazards. That's why we're here in the first place.

The problem is that mortgage securitization is necessary to the entire mortgage world. Since they're the only securitization game in town, we have to prop them up. So, if they're about to collapse without a significant lifeline, we have to bail them out.

Long ago, I said that we must use this as an opportunity to reform both. Instead, the government has made the situation worse. Now, these two giants hold the real estate market, the economy, and with it everything else at the barrel of their financial gun. They can't fail, and so we must continue to bail them out. Instead of fixing the problem, we've made it worse.

Video, Quote and Word of the Day

robustious

boisterous

I couldn't help but say to [Mr. Gorbachev], just think how easy his task and mine might be in these meetings that we held if suddenly there was a threat to this world from another planet. [We'd] find out once and for all that we really are all human beings here on this earth together.

Ronald Reagan, 1985

Dr. Chacko In Montana's Sphere (UPDATED) With New Document Drop

UPDATE: Please also check out my new book, The Definitive Dossier on PTSD in Whistleblowers, for only $3.99, in which I dedicate chapter four entirely to the exploits of Dr. Anna Chacko. 

Crystal Cox has posted my tip to her about Dr. Anna Chacko. When Dr. Chacko arrived in Butte, Montana to work for St. James Hospital, the CEO was James Kiser. Kiser was the one responsible for hiring Dr. Chacko. In fact, a source familiar with the hiring process said that Kiser took a hands off approach. In fact, the same source told me that Kiser once admitted that he hadn't called any of Chacko's past employers or references.

In reality, it was Scott Steinfeldt that was most responsible for hiring Dr. Chacko. Scott Steinfeldt arrived at St. James Hospital about a year prior to Dr. Chacko. He and Dr. Chacko were friends and had worked together before. In fact, the two of them were princples in several companies including Moly99Montana, Chaco Corp, and Radiology Solutions LLC. Steinfeld was brought in to manage the imaging center, Intermountain Imaging. Here's a puff piece about the imaging center in which Steinfeldt is quoted.

Scott Steinfeldt, executive director of the Intermountain Imaging Center, said the new team is providing a "critical, essential component" to patient care.

Intermountain Imaging Center is an outpatient radiology center located in St. James, and was recently put under the auspices of the hospital. The two companies have a cooperative agreement and are "integrated financially and clinically," Steinfeldt said.

Both companies understand the importance of a stable, reliable radiology department."

A radiologist's value to a hospital is immeasurable," Steinfeldt said.

Within two months of this story being written, Steinfeldt was fired from the imaging center. It closed down as a joint venture in May of this year. Prior to May, it was run as a joint venture between the non profit St. James Hospital and a group of local radiologists.

Kiser "resigned" from St. James in March of 2008. Chacko herself moved on to the Pittsburgh VA in September of 2008. James Kiser has recently gotten a new gig as the interim CEO of St. Joseph's Hospital in Polsom, Montana.

The first person that Dr. Anna Chacko went after was Kristi George. What follows is a copy of George's complaint against St. James and Dr. Anna Chacko. It's important to note that this is the complaint filed by George's attorneys. So, it's obviously from the side of Kristi George. That case has since been settled and the findings have been sealed. (that's a common occurrence in legal matters involving Dr. Anna Chacko)



5[1][1].29.09 Second Amended Complaint and Demand for Jury Trial
What's most interesting in these pages are numbers 12-16. (that's the counts not the pages) This relays the period when Dr. Chacko first began being employed by St. James Hospital. According to the complaint, Dr. Chacko immediately made malicious and false statements about George. She "began criticizing and complaining about George's work performance". Why is this interesting? It's because Kristi George was still on vacation when Dr. Anna Chacko first arrived at St. James. Kristi George doesn't even arrive at the hospital from vacation until count 16. It's a nice trick to criticize someone's work performance when you haven't yet worked with them, but welcome to the world of Dr. Anna Chacko.

Of course, the complaint wasn't merely against Chacko but the hospital itself. As such, Kristi George asserted that not only did Dr. Anna Chacko create a hostile work environment, but that the hospital failed to supervise Dr. Chacko properly. James Kiser was the hospital's CEO during this period.

We'll see if the media in the area notice his dubious history. Here's the full dossier of Dr. Anna Chacko.