ObamaCare Strikes Back UPDATED

Besides spooking bonds, ObamaCare may be about to trash stocks. And its costs are supposed to be years away! Karl Denninger notes how Obama said there would be no financial impact until 2014, but already it is causing reduced earnings for major US companies. 

AT&T's charge is 8% for this quarter. Caterpillar's was 11%, and Deere's 16%. These are against retiree costs - the WSJ explains that the bill removes a deduction for providing drugs, hence the charge. An excerpt here. We should expect this percent to increase as employee healthcare costs themselves are driven up. 

This charge is non-cash today, but indicates higher taxes in the future. One estimate is $4.5B of charges. As this spreads across US companies, expect charges around 10-15% of quarterly earnings, which is 3-4% of annual earnings. Actual future cash losses will be about half of that due to higher State and Federal taxes. This suggests that the S&P became a 4% over-valued on earnings and 2% on cash flow when Obama signed the bill, not the 10-15% that Karl Denninger feared. 

The WSJ provides a handy chart to explain the changes. 

 

Comments

[nspolar]

Yelnick, it is easy to make statements. Do you really have factual basis to state what you have stated here?

Or do your writings just reflect the good Republican in you coming out?

Not more than ~ 3 weeks ago we had you stating something about we (the US Of A) were saddled with a Pres who chose to waste his time on a worthless bill that had zero chance of passing. I assumed then that this was a reflection of your bearish view as to where this country is headed, as well as your view of Obama. Well it looks like you were wrong on at least 50 % of that. Big wrong. Yet there was no retraction.

What else are you at least 50 % wrong on?

Ewaves? Bifornication? The IP Layer? Obamacare? Entropy?

I think you need to read this:

http://www.nytimes.com/2010/03/24/opinion/24dowd.html

Mareen is another one of those pulitzer prize winners, and I don't think she is that biased or otherwise that bad. But hey sorry, she does not work for Fox.

Palin works for Fox. I hear tell she had a blurb on the Inet that we (the repubs I guess) had to 'Reload', followed by a pictorial of cross hairs on targeted states. Where was the M-16 I wonder? But hey, Palin looked pretty sexy in her recent appearance for McCain, the real biker mama with leather uppers! Damn I would like to go fishing or hunting with Sarah! Hot Damn!

Although I do not profess to be a health care fan (I am mixed), I think Mareen got it about right w/r to the politics side of the issue.

I wonder if health care is the beginning of the end for The Republicans, The Party that got us involved in a mess in the ME, The Party that caused the WS mess, and the party that is essentially against 90 % of everything but only for me, myself and I.

Biden is correct. Health care legislation being passed is a Big F'ing deal. And it could just as easily come to haunt the repubs, as otherwise. If I were a lower class Joe Blow, and I may be or otherwise, I would be looking at this and asking about the repubs ... Just What Have You Done For Me Lately ... except go ask me to fight you f'ing wars, while you f off in DC.

And I'll tell you what else is a B F'en deal. It is the fact that this nation elected a non white Pres, at this stage in its development. Regardless of whether Obama goes down as a good, bad or even great Pres; it makes quite a statement for what this country represents, on the net.

I will finish by noting something about your IP layer post.

I think it was Born Again or something like that, that stated we already have the IP layer, and they are the root cause of many of our problems, because they are nothing more than a bunch of parasites (on average). I don't think you really grasp what he was saying.

I agree ... we have too many parasites floating around these days.

We have too many union or other non union workers with the name of Jose, shoveling and working in the ditch, while the IP layers sits on the outside and figures out how to make a living off of Jose's work. Your retort to me was on Jose that I don't understand CA, and that Jose was an illegal, working on a public works project no less.

So I guess the IP layer watching Jose forgot to check on this?

What? You think the rest of us are stupid? I think you really do.

Yelnick you obviously lead this sheltered existence, due to your history. Yes we all have history. If you really want to carry out some social related research, go play Jose, and get down in the ditch. You obviously have no idea of how the lower echelons of society function.

Electricity I guess, per your view, just comes out of the frigging wall, to power all those gadets dreamed up and designed by the IP layer. Maybe in a few years or less it will, it will just be beamed down by the Starship Enterprise. What a joke at this stage.

Parasites. Now I wonder. I have read your bio .... what is that you really did to make your millions?

Is history repeating itself here? We had The Great Depression, and FDR and The DEMS came in and saved us from ourselves. Ha Ha. The Repubs had to play second fiddle for years. And then the Big Top, or is a Big Top, that occurred on Bushies watch. First bottom, about coincident with the Obama inauguration no less.

How will history be recorded?

Time will show of course. But I for one do not think Bonds have topped. And Obama's history has yet to be written.

ns

[Goldieee]

That post was awesome NS! Good work.

[Veteran]

That Dowd column is dull. She's usually pretty good though.

Don't know if we'll have inflation or deflation but pretty sure this country is going to hell in a handbasket. Hussein ObamaCare more a symptom than a cause. Or, better said, a palliative. But what are you going to do? The patient has end stage cancer. What really sucks is we have nukes. Sure hope it'll be a while before they are used.

[Les]

It mostly affects old-line companies with huge pension obligations. That corporate tax break should never have been created. The companies received a tax deduction for the government's subsidy to the retiree prescription plans. It's not unlike the tax deduction that corporations receive for non-cash matching contributions to employee 401k plans.

[fwiw imho]

Biden, for once, got it right. It is a big F'ING deal. And they are doing the F'ING.

[DG]

Frankly, I'm not sure why the US doesn't just split into two countries. I see no reason why I should have to share a country with people whose views are so diametrically opposed to mine that there can never be any middle ground. Either way, that's the only way to end the rancor we see in politics today. The Left can pursue its socialist dreams and the Right can pursue a dismantling of the welfare state, each on its own sovereign territory.

All this bickering is just a huge waste of time and money.

[yelnick]

ns, why the bubbling over of resentments? You may be surprised to know my votes in the last 10 elections Prez are only 50% Repub. And I never voted for W.

Yes, I thought pursuing healthcare a waste of time, and I guess so did Maureen Dowd and her friends until it did, because her whole column is over how shocked & surprised the Dems are it actually got through. But my concern was not over the winner-loser angle seen in the mainstream media. It was that Obama has wasted his first year chasing this instead of fixing the economic problems still festering. History will show whether a second wave of the financial crisis is coming, and whether we can handle a second go around. If not, then Obama made the wrong bet, and tragically so.

Let me add something about the IP Layer. I see from your comments and others it is a poor description of what I am referring to, since it is taken too narrowly. In my sidebar version of it, Creative Reconstruction, I change the description to the Value Add Layer. It is a whole bucket of activities that are much broader than seeking patents or similar. In Silicon Valley "IP" is used more broadly than that, to indicate that which makes a competitive difference.

As to Born Again and Jose, the economy is changing, as it always does, into a new set of occupations that help us in global markets and others that do not. We can pursue policies that support the transformation, and get in front of it, or try to slow it down, and fall behind. Dem's like to think they are on the side of history, and Repubs are trying to say "stop!" and slow down change. The policies of Obama on this are mixed, but the preponderance of money has gone to bolster the past. Bush did the same thing. Right now it is hard to pick a party of the future.

Sadly, due to the healthcare bill, the red/blue divide is heightened, and the political focus will be on that bill (repealling it, fixing it, funding it) more than other issues. Also, the Obama agenda seems to be even more likely, with the surprising healthcare win, to push issues that hurt US competitiveness, like global warming, higher taxes, trade spats with China, etc.

[upstart]

Like that idea, DG!

[upstart]

This socialist health care thing is enough to make me start investigating what little island I can move to with hands off and low taxes.

[rc]

I'll join you DG.

[Mamma Boom Boom]

Help! I've been blocked from posting on this site.

[DG]

upstart,

Funny enough, the Constitution is written so that we have, in essence, 50 little countries who can do anything they want, so long as it doesn't violate the Constitution, which applies to all. The problem is that as technology developed and "economies of scale" became more important, having one central location setting all the rules became more feasible and, at least on some level, desirable. The problem is that it decreased flexibility.

Now, economies of scale are still important, but they are actually decreasing in importance, in part because of some of the things Yelnick's been talking about lately. Economies of scale matter most when you are engaged in commodity manufacturing, not when you are trying to create a new technology, where flexibility and the ability to iterate quickly are more important. I read a book once that outlined what this would mean in practice, saying that a new software program could be created by a guy eating a peanut butter sandwich at his desk, but a new method for manufacturing steel would require billions in fixed capital to come to realization. Yes, that's an extreme example, but it illustrates the point.

Anyway, quite frankly I read nspolar's post and I think to myself "I hope he gets the country he wants, I just hope it isn't mine". I have no more desire to tell nspolar what he should think about the optimal society than I have a desire to tell the Belgians how they should think about that issue. The main problem is that, as of now, I'm forced to exist under the same legal and political system as nspolar, so, by the fact, he becomes my enemy. It's not that I dislike him personally, because I don't, but I dislike his idea of the ideal society. If we had two countries, this issue would go away immediately and we could all focus on more productive activities. In 50-100 years we can compare notes and see whose vision of the ideal society worked out better.

[yelnick]

Mamma, not by me - caught in the automatic spam filter? Or maybe the auntomatic PC filter? Try again.

[betterdays]

It will the middle class chumps who will pay for this communist health care bill...How can you add tens of milions of people to a health care system and expect costs to go down??..yea sure.. Congress and their staff members are exempt from this B.S. change
Don't fret .. 2011-2013 will bring economic change that will spin your head and your wallet

[Wave Rust]

I love it when marxists get all riled up. Their bigotry shows out, clothed in derision and condescension of all things anti-marxist. They especially hate reality and facts that point to their historical failure because there are no successes in the history of man. Read 'Rules for Radicals'.

Marxism is fascism is communism is totalitarianism. Everyone will serve the state. Obama's lackey here says his history hasn't been written. It was written in stone for him by Frank Marshall Davis, Obama's earliest low down. On Obama's heart of stone Davis wrote "Destroy America".

That he became President is gravy. That history won't be read by many people, nor will they care. They'll be foraging for roots.

[bob m]

nspolar,

Regarding that article by dowd... they did not "accomplish" something historic; they lied cheated and stole it. They ruined the playing field and bribed every democrat who could vote. I think they are criminal, not accomplished. And I am not speaking about the bill itself, either - just the process.

Now regarding the bill - WE NEVER SAW IT!!!! HALF OF THEM NEVER SAW IT. So what are we all happy about. We spent more money than exists, practically, and we don't know what is in it. BUT we know this, the IRS is about to get on steroids!!! These people (dems and repubs) did nothing to "help Americans"; this is about CONTROLLING and TAXING the American people!!! Yeah the sky did not fall, but the full weight of this has not been felt, believe me. We JUST hit the iceberg. Like the Titanic, it will take a while to A) understand the implications of that "thud" and B) to begin to struggle against what is very probably inevitable.

This is NOT the end of "republicans" because this system is like pro-wrestling - it HAS to have an adversary. I celebrated the passage of health care by taking my name off the voter rolls. This is no longer a free country and I refuse to pretend any more. Like pro-wrestlers, politicians show up to receive their scripts. The outcome is known in advance. Come ON!!! - Obama: in public for about an hour and a half vs McCain: like he was the best of the field. No. Sorry. This was staged.

My apologies to pro-wrestling fans for besmirching their good name with a comparison to our filthy political system.

Oh what the heck - while I am upsetting the status quo, I might as well tip this cart over too: there is no santa claus or easter bunny. chri@#mas and eas$#er (so vile I will not say the words) are pagan rituals unfit for use to honor the creator. Wake up folks, we are being duped in many, many ways.

[bob m]

Upstart,

Great idea but I think they put a 45% tax on MONEY leaving the states. YOU can go but your money stays here. I am sure the POLITICIANS are exempt from that as well.

[Wavist]

Anyway, quite frankly I read nspolar's post and I think to myself "I hope he gets the country he wants, I just hope it isn't mine". I have no more desire to tell nspolar what he should think about the optimal society than I have a desire to tell the Belgians how they should think about that issue. The main problem is that, as of now, I'm forced to exist under the same legal and political system as nspolar, so, by the fact, he becomes my enemy. It's not that I dislike him personally, because I don't, but I dislike his idea of the ideal society. If we had two countries, this issue would go away immediately and we could all focus on more productive activities. In 50-100 years we can compare notes and see whose vision of the ideal society worked out better.

Can you say CSA? The trouble is in getting the loyalist half to agree. Even without the foolhardy attack on Sumter war would probably have occurred the moment one side saw themselves as having a major advantage.

[DG]

Can you say CSA? The trouble is in getting the loyalist half to agree. Even without the foolhardy attack on Sumter war would probably have occurred the moment one side saw themselves as having a major advantage.

That was a different time. I think the only "side" which would disagree are the plutocrats who run DC as their own personal money-laundering scheme. Which, of course, is why it'll never happen.

[Wavist]

It wasn't that long ago and aside from slavery all the splits - on economic liberty vs statism, industrial subsidy, social cohesion, religion/tradition, libertarianism are in pretty much the same place now as then. In addition to which in a confederacy central government is automatically smaller and less powerful with regions getting to largely choose what they want.

[Wavist]

Democracy is rule by the mob is rule by the chequebook is bad government.

[DG]

In addition to which in a confederacy central government is automatically smaller and less powerful with regions getting to largely choose what they want.

Yes, but this would, again, take power away from the power brokers in DC, so it's a non-starter with them. Not to mention that there are a lot of big corporations who prefer to only have to pay off one set of government officials, rather than 50 sets.

[Wavist]

Very true.