And Obama saith unto you, "Insurance companies will be prohibited from denying insurance coverage based on a pre-existing medical condition. Period."
And there was a health care famine in the land...
Relax, Amerika. I'm just kidding. There's no famine in the land. Medical care falls like manna. And even if it doesn't, kindly old Komrade Obama will protect you.
After all, just look at how he's protecting you from evil credit-card companies...
American Express and Discover will no longer charge customers who exceed their spending limit on credit cards... And the other card companies will soon fall victim to the same CARD Act legislation, which, among other things, requires credit-card companies to make borrowers "opt in" for the ability to overspend.
The blog at whitehouse.gov says the CARD Act "bans unfair rate increases, prevents unfair fee traps, requires plain language in plain sight for disclosures, increases accountability all around, and institutes protections for students and young people."
American Banker says these are, "the first concrete examples of how a new law will restrict issuers' abilities to turn a profit." The implied warning is so thinly veiled, we wonder if Obama himself wrote it. If card issuer profits don't deteriorate, rest assured, Komrade Obama will step in to protect you.
Obama says he doesn't "begrudge [credit card cos] turning a profit." He just wants to make sure they're fair to borrowers. He's also "demand[ing] credit card users to act responsibly." And if you won't comply, you poor, irresponsible slob, Komrade Obama will legislate the desired behavior into existence.
Obama says he's helping students and young people... by banning the fees that allow card companies to provide credit to these higher credit-risk individuals. Without that compensation, those individuals will now have a harder time getting credit cards.
The new credit-card rules are exactly like the cash for clunkers subsidy for new car buyers, which is simply a program to destroy thousands of automobiles that could have provided affordable transportation to people who can't afford new cars. Obama's programs, like most boneheaded government interventions, are simply another attack against poor people and another subsidy to banks and car companies with connections in government. The aristocracy of pull has arrived.
The CARD Act will shift at least some of the penalty to responsible cardholders who pay their bills on time and don't exceed their credit limits. They'll suffer bigger interest rate hikes and fewer perks (airline miles, cash back). Some cards are also initiating an annual spending minimum, which, if not met, carries a nominal fine.
It's just like gun control. Crooks get away with murder, and good people suffer.
Having protected your ability to steal from your credit-card issuer, Komrade Obama needs also to protect your ability to steal from your bank through your checking account. A Financial Times article yesterday pointed out that banks are on track to earn a record $38.5 billion from overdraft fees on checking accounts... and 90% of those fees come from 10% of the 130 million checking accounts in the U.S. The government is already on the case. The Federal Reserve is working on rules for overdraft fees. Don't worry, overspending Amerikan couch potato, Komrade Obama will protect you from yourself.
When you swipe your debit card or write a check, you agree to pay a merchant. If you don't have enough money in your account, the bank makes up the difference, in effect loaning you the money.
Considering you made a commitment you couldn't honor, the loan is high risk. As a business (which cannot exist without making a profit), the bank must be compensated for taking that risk. Once again, if Komrade Obama interferes, the bank will have little recourse but to deny opening accounts for high-risk customers.
Again, if you don't spend money you don't have, you won't get hit with an overdraft fee. It takes two minutes to go online and check your account balance to make sure you can honor the promise you make when you use your card or write a check. Is it really "the people's" responsibility to pay for the 10% of checking-account users that can't balance their finances?
The truly criminal part of banking remains untouched by Komrade Obama's fixers. For every $1 you deposit, banks still get to lend and invest $10, with the Federal Reserve still standing by as the lender of last resort and the FDIC still at the ready to bail out your deposit when... er... if... the bank fails. So far this year, 72 banks have failed.
CIT Group, the troubled lender to small- and medium-sized businesses, delayed filing its quarterly report, and says it's trying to avoid bankruptcy. If a $1 billion tender offer for CIT Group debt due August 17 is unsuccessful, bankruptcy may be unavoidable.
That'll be a big problem for many of CIT Group's more than 950,000 customers. Some of those businesses will find that CIT owes them money... money that will become frozen upon filing Chapter 11.
If the worst of the crisis is behind us, as the headlines, the president, the Treasury Secretary, Barton Biggs, Dennis Gartman, and a host of others have indicated, CIT Group clients didn't get the memo. The worst lies ahead for them.
Sugar refuses to recognize the deflationary trend many have identified. It jumped 86% this year to 22.44 cents a pound – the highest since March 1981. India's biggest producer says sugar will hit 25 cents a pound. Japanese bank Mizuho forecasts 30 cents. And commodities bull Jim Rogers is with them...
"Sugar is certainly going to go much, much higher during the course of the bull market," Rogers said in an August 6 interview. "Sugar is still 70 percent below its all-time high and not many things in life are 70 percent below what they were in 1974. Sugar has a wonderful future."
New high: Addax Petroleum (AXC.TO).
In the mailbag today, why the government needs consequences and when to sell your gold. Wax on at feedback@stansberryresearch.com.
"I certainly agree with your sound views on paying ones debt. I am not so sure about the hyper part of inflation or the demise of the dollar. Why? Because 1) OBAMA! will find conversion like Clinton before him. The townhall "mobs" will see to it. 2) The world needs the US more than it needs them, at least for the foreseeable future. The major currencies of the world are weapons of Assured Mutual Destruction. When the world decides to flee from the dollar, the consequences will be unprecedented for the world as well as the US – that's why it won't happen." – Paid-up subscriber Erich
Ferris comment: If government understood that consequences exist for its actions, would we be in this mess in the first place? If it did, it would never suggest it's a good idea for the government to take over 16% of the economy (health care). No one in Obama's position who truly understood that actions have consequences would ever come up with a plan that didn't have shrinking the government and abolishing the Fed as top priorities.
As for the foreseeable future, you are more qualified apparently than I. I have trouble seeing past my next deadline. I know MetLife is going to have a lot of trouble with its commercial mortgage loans, but when? I know Zions Bancorporation is in horrible financial condition and will have major problems, but when? I know Smithtown Bancorp grew its loan book more than 70% last year, but when will that awful decision ever play out? Will all these problems be inflated away?
Stocks will fluctuate, reader. Stocks will fluctuate.
"I understand buying and having hard assets in my possession to counter the coming inflationary period but when are those assets inflated values realized? Do you sell them at a point that you feel they have reached their peak, for an inflated fiat currency or do you hold it through the inflationary/hyper-inflationary period in the event the fiat currency blows up and becomes worthless? I own bullion and coins for this purpose." – Paid-up subscriber Phil
Ferris comment: I have no plans to sell my gold. As for gold stocks and other typical inflation-oriented speculations, experience will be the best guide. My experience tells me history doesn't repeat, but it definitely rhymes. We could see a moment similar to 1980, when gold hit $850... more than 24 times the U.S. dollar price it went for about seven years earlier. The run-up to $850 was a furious blow-off top, a huge spike from the $600s.
Afterward, interest rates will soar, inflation will be squelched, and the foundation for a new bull market in stocks will be laid.
Well-informed gold speculators who have some idea of the intrinsic value of small, speculative gold stocks will have their own ideas about when to unload, though they'll be very early in many cases. Some of those little companies will be acquired by big gold companies, giving you a perfect exit opportunity. Others will do deals with major gold producers, making headlines and signaling a possible exit opportunity.
But you raise an interesting question: Is this it? Is this the big one? Is the dollar truly, finally on its last legs? Impossible to say... but wise to ask.
Regards,
Dan Ferris
Medford, Oregon
August 11, 2009