WallStreetWeather.net Forecast For Week Of February 22, 2010

Summary Of Last Week’s Influences:
As explained in last week’s Forecast, the combination of Venus conjoining Jupiter in Pisces harmonizing with the USA’s natal Venus/Jupiter conjunction in Cancer reflected Wall St’s optimism over indications the U.S. economy is expanding.

Oil had a big move last week, closing just under $80 a barrel. Copper is ruled by Venus which saw its biggest gains since last October thanks to the Venus/Jupiter conjunction in Pisces.

The biggest news last week caught the market off guard when the Fed issued a 4:30 PM press release Thursday announcing the rate charged to banks who borrow from the Fed’s discount window would increase 0.25% to 0.75% as part of the Fed’s “exit strategy” outlined by Chairman Bernanke on February 10. Fed heads were out in force on Friday seeking to assure the market that this was a “technical” move and not the start of Fed tightening. As I’ve been writing since last fall, I think circumstances will arise that will force the Fed to raise interest rates at the June 23 FOMC meeting.

Summary Of This Week’s Influences:
The First Quarter Moon in Gemini today at 7:42 PM EST reflects that Washington is back to business this week. The week between the New and Full Moon is known as the “crisis in action” phase. With the Moon in dualistic Gemini, Washington is holding multiple hearings on two controversial issues.

Gemini and Mercury rule motor vehicles. There will be two hearings this week to investigate Toyota’s problems with unintended acceleration and the NHTSA’s handling of the matter. The House Energy & Commerce Committee will hold a hearing Tuesday at 10:00 AM. Wednesday at 10:00 AM Akio Toyoda and Transportation Secretary Ray LaHood will appear before the House Oversight Committee.

Rather than the usual dog and pony show that these hearings tend to be, it would be helpful if the Committee pushed Congress to revamp the NHTSA and allocate more funding and resources to the agency that has a staff of around 56 people to investigate consumer vehicle safety complaints. Other automakers should not gloat over Toyota’s troubles but view it as a wakeup call to thoroughly scrutinize their own quality control measures and response to consumer problems with their vehicles.

In the USA, the Sun, Jupiter, Venus, and Uranus in Pisces lined up in the sector of the First Quarter Moon chart representing healthcare reflects President Obama finally releasing his vision of healthcare reform on the White House website Monday prior to his healthcare summit with Republicans on Thursday.

On Wednesday at 10:00 AM the House Energy & Commerce Subcommittee on Oversight and Investigations will hold a hearing on the decision by Anthem Blue Cross (a subsidiary of WellPoint) to raise premiums on individual health insurance policies by 39% in California. In a letter to Wellpoint (WLP) CEO Angela Braly asking her to testify at the hearing, Committee Chairmen Waxman and Stupak requested that Wellpoint provide information for all premium increases in all states that WellPoint and its subsidiaries do business.

Wellpoint had to postpone their February 23 Investor Day with analysts to prepare for the hearing which will make a good warm up act for President Obama’s healthcare summit with Republicans on Thursday. Wall St. should view what goes on in Washington this week as “investor days” for the health insurance sector whose business model is dying even if Republicans could have their wish granted and get Democrats to “start from scratch.”

Committee members should ask Ms. Braly whether the private sector has failed to provide a health insurance product that the average consumer can afford to buy, and is it the government’s responsibility to do so? The questions need to be carefully targeted so Braly is backed into a corner and forced to admit that the only viable solution is to have a health insurance pool that includes everyone. Now that Saturn is opposing Uranus for the first time since Congress enacted Medicare in 1965, Americans under 65 are in the exact same situation as seniors were then. If the entire nation was covered under Medicare, the risk pool would be spread out which is the most import way to lower healthcare costs.

Democrats need to counter Republican arguments by asking Ms. Braly to break out the dollar and percent amounts of monthly premiums that go towards mandated coverage imposed by each state as well as the amount Wellpoint allocates in premiums toward malpractice litigation so the public understands this is has been greatly exaggerated by Republicans and The Wall Street Journal editorial board. However, Democrats do need to get on board with tort reform so they can do what the Republicans only talk about yet did nothing about when they were the party in power.

While we’re on the subject of accounting, Braly needs to be questioned how Wellpoint allocates expenses between plans. Specifically, corporate overhead allocated to the individual market vs. the large group market. The only way to determine Wellpoint or any other health insurance company’s true medical loss ratio is to account for only payments made to outside medical service providers. I think that what will come out of the hearing is that Wellpoint will need a medical loss ratio far south of 80% (as required in the Senate bill) to cover their bloated administrative costs and profit requirements. It will be hard to justify these inefficiencies to Congress and the public.

Republicans act as if allowing health insurers to sell policies “across state lines” would solve everything. This is a misnomer since health insurers already sell policies across state lines to groups - policies no cheaper than ones issued by insurance companies who are state regulated to offer a policies in that state! What the Republicans really mean is if one state has few regulations, an insurance company should be able to offer that state’s policy in a state that has stricter regulations.

In a previous post I wrote that the Republicans might regret Scott Brown’s win. There are small signs that President Obama and the Democrats are finally starting to view what appeared to be a loss as a liberating opportunity to use reconciliation just like Republicans did when they were the majority. (I also think that something previously undisclosed is going to surface with Brown that will embarrass the GOP.)

Sandwiched between Toyota and healthcare reform is Ben Bernanke who will appear before the House Financial Services Committee at 10:00 AM Wednesday and the Senate Banking Committee the following morning as part of the Fed’s semi-annual testimony to Congress postponed from the snowstorm two weeks ago. Other “Fed heads” will be speaking throughout the week and at a U.S. monetary policy forum on Friday.

Monday, February 22, 2010
Choppy/mixed conditions; swings between moderately positive to negative.

Tuesday, February 23, 2010

Wednesday, February 24, 2010

Thursday, February 25, 2010
Improving conditions as day progresses to choppy/mixed to moderately positive.

Friday, February 26, 2010
Positive trend could weaken going into the close.


Daves Markets said...

You mention Toyota, interestingly enough a couple more auto makers announced recalls subsequent to your post....


This is exactly why I wrote that Toyota's competitors should not gloat! For GM to recall 1.3M small cars in North America and blame the supplier partly owned by Toyota for the faulty part affecting the recalled Chevy and Pontiacs power steering is pretty pathetic when it is the automakers responsibility to ensure the quality of the part's design as well as running quality conrol check on the parts that enter the automaker's factory prior to being installed on their vehicles.

Except for the Ford recall involving Firestone tires several years ago, it is highly unusual for an automaker to blame a recall on a supplier and to emphasize that the supplier is partly owned by Toyota. This is evidence that GM is trying to take advantage of Toyota's troubles rather than GM (aka Government Motors) focusing on their own problems.