For-Profit Nursing Homes Lead in Overcharging While Care Suffers – Bloomberg 12-31-12

Salient to Investors:

The US nursing home industry overbills Medicare $1.5 billion a year for treatments patients don’t need or never receive. 30 percent of claims sampled from for-profit homes were deemed improper versus 12 percent from non-profits.

At least 6 government and academic studies in the last 3 years show that the rise of for-profit providers is fueling waste, fraud and patient harm. At nursing homes, 78 percent of $105 billion in revenues went to for-profits in 2010 versus 72 percent in 2002.

Jill Horwitz at the University of California said research shows for-profits are more likely than non-profits to pursue money in many ways.

For-profit providers dominate most health care sectors, including 96 percent of the outpatient surgery centers, more than half of hospices, 84 percent of home-health care agencies, and 85 percent of dialysis clinics. Nonprofit and government-operated hospitals had 88 percent of revenue in 2010.

The rising influence of for-profits has led to tensions with doctors, insurers and regulators on several fronts.

Scott Becker at Becker’s Hospital Review said wherever government spends huge funds, it incubates growth, and private equity investors have recently taken aim at hospitals, too, because their size and community roots make them the best politically situated to thrive under the Patient Protection and Affordable Care Act.

Medpac says investor-owned facilities earn a 20 percent profit margin on Medicare patients compared to 9 percent for nonprofit operators, according to Medpac.

Read the full article at http://www.bloomberg.com/news/2012-12-31/for-profit-nursing-homes-lead-in-overcharging-while-care-suffers.html.

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BRIC Dominance Fades as State Meddling Curbs Equity Returns – Bloomberg 12-31-12

Salient to Investors:

John-Paul Smith at Deutsche Bank said stocks in the major developing markets will again lag global equities in 2013 – China has focused on increasing the pool of buyers for Chinese assets, rather than boosting the role of free markets and privately run companies in the broader economy. Smith prefers cash to BRIC shares, which he sees as a contest between the un-investible and the overvalued.

The IMF expects growth in BRICs to average 4.5 percent in 2012 versus 8.1 percent in 2010 and 3.3 percent for the global economy.

Mark Mobius at Templeton Emerging Markets said we are only in the middle of the revolution from socialism to market economies, with a long way to go. Mobius is selling Indian mining stocks because of government restrictions.

Allan Conway at Schroder Investment Mgmt said the fact that we talk about how much further there is to go, shows the opportunity.

The MSCI BRIC index is at 10 times earnings, 30 percent less than the MSCI’s All-Country P/E. The MSCI index of Chinese financial stocks trades at 8 times earnings, 36 percent below its 5-yr average and versus MSCI’s index of consumer staples at 28 times earnings, a 34 premium to its historical mean. The Micex index trades at 5.9 times earnings, the lowest level of 45 emerging and developed markets.

Ruchir Sharma at Morgan Stanley Investment Mgmt said governments reform only when they have their back to the wall – we’re moving in the right direction in some countries, but the task is enormous.

The McKinsey Global Institute said Brazil may face an equity gap of more than $1 trillion this decade as companies’ financing needs outstrip investor demand for shares. Many investors in BRIC companies prefer to buy shares on overseas exchanges. The drop in stock trading makes it harder for governments to revive growth.

Jeff Urbina at William Blair said:

  • Chinese companies need funding sources outside the banking system.
  • Good publicly traded markets are necessary for developin long-term.
  • Investors are more concerned about a lack of corporate governance in Russia than how they access local markets.
  • The real big issue in develping markets, particularly Russia, is the lack of corporate governance – all the value in the world is not going to get to the shareholders.

Jim O’Neill at Goldman Sachs Asset Mgmt said India is the most promising BRIC in terms of long-term stock gains. O’Neill is bullish on Chinese equities as China’s changes are very exciting and very positive. .

Soren Beck-Petersen at HSBC Global Asset Mgmt said India is tackling the issues head on to stimulate growth and restore investor confidence.

The 8 largest companies by market cap in the Shanghai Composite are state-controlled. The World bank says over 25 percent of China’s state-run enterprises are unprofitable, while productivity growth has trailed non-state firms by 66 percent over the past 3 decades.

Read the full article at http://www.bloomberg.com/news/2012-12-30/bric-dominance-ebbs-as-state-meddling-means-equities-trail-world.html.

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Singapore 2012 GDP Grew 1.2% as Recession Seen in Second Half – Bloomberg 12-31-12

Salient to Investors:

Wai Ho Leong at Barclays says the Monetary Authority of Singapore faces stubborn inflation and sluggish growth and may continue a gradual appreciation stance, even in an environment of below-trend growth.

Kit Wei Zheng at Citigroup said the hurdle for easing remains high, and inflation will stay elevated through Q1 and economic growth within the official forecast in 2013.

The World Bank ranks Singapore as the easiest place to do business.

Read the full article at http://www.bloomberg.com/news/2012-12-30/singapore-price-risks-persist-as-economy-seen-entering-recession.html.

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Lumber May Fall 25% After Leading Commodities in 2012 – Bloomberg 12-31-12

Salient to Investors:

Lumber prices through Dec. 28 have risen 47 percent in 2012, heading for the biggest annual gain since 1993.

Paul F. Jannke at Forest Economic Advisors expects lumber futures to tumble as much as 25 percent from a 7-yr high due to output increases in Canada.

Scotiabank says lumber is its top commodity pick for 2013 because rising demand in the US and China will strain tight supplies. China consumes 10 percent of the world’s softwood lumber.

Patricia Mohr at Scotiabank predicts the average cash price of lumber to be $360 per 1,000 board feet in 2013 versus $298 in 2012.

Shawn Hackett at Hackett Financial Advisors sees a tremendous crash in the lumber market as its way overdone to the upside – Chinese demand is ebbing because builders made regular purchases in half2 2012, and rising production in North America will drive prices lower in 2013.

Read the full article at http://www.bloomberg.com/news/2012-12-31/lumber-prices-may-tumble-25-after-leading-commodities-in-2012.html.

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Birinyi Odds Favor S&P 500 Record as Individuals Return – Bloomberg 12-31-12

Salient to Investors:

Laszlo Birinyi at Birinyi Associates expects the fourth and final stage of the bull market to take the S&P 500 to a record high in 2013, driven by capitulating bears, individual investors piling in, US housing continuing to expand, and markets rallying in Europe. Birinyi said this 4-year bull market resembles the bull markets in the 1980s, up threefold, and the 1990s, up fourfold.

The S&P 500’s 12 percent advance in 2012 has exceeded the average strategist prediction of 6.9 percent.

Roger Pine at Briaud Financial Advisors said short-term, 2011 is the most direct and relevant precedent to today.

Analysts predict profits will rise 5.2 percent in 2012 implying a P/E ratio of 13.6 for the S&P 500 versus the 6-decade average of 16.4. The median economist expects GDP to grow 2 percent in 2013 and 2.8 percent in 2014.

Chad Morganlander at Stifel Nicolaus expects a gradual improvement in the US economy which will follow through to global markets.

David Joy at Ameriprise Financial said the US economy is improving, in housing and manufacturing – stocks will have a good 2013.

The S&P 500 took 25 years to reach a new high after the Great Depression. Since then, it has taken 3 years on average for the index to surpass previous records – the last high was in October 2007, and it took 7 years in the 1970s and 2000s to exceed old highs. It has taken 6.5 years to surpass previous DJI highs.

 Read the full article at http://www.bloomberg.com/news/2012-12-31/birinyi-odds-favor-s-p-500-record-in-2013-as-individuals-return.html

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Hedge Funds Cut Bullish Bets to Lowest Since June: Commodities – Bloomberg 12-31-12

Salient to Investors:

Hedge funds et al reduced net-long positions across 18 US futures and options last week to the lowest since June 19. Gold holdings reached a 4-month low, copper holding dropped for the first time in five weeks, and investors were the most bearish on natural gas since May.

Walter Hellwig at BB&T Wealth Mgmt says it’s easier to sit on the sidelines or go short because of the lack of sustained, healthy global growth.

Evan Smith at US Global Investors says increasing government and central bank stimulus measures will bolster commodity demand.

The median economist expects China to snap a 7-quarter slowdown as growth accelerates to 7.8 percent in Q4 2012 and keep accelerating for at least the next six months.

Chad Morganlander at Stifel Nicolaus said the Chinese slowdown has reversed and global growth expectations will slowly improve in Q2 and Q3 2013, ginning up commodity prices.

Cameron Brandt at EPFR Global said money managers withdrew $188 million from commodity funds last week  and $451 million from gold and precious-metal funds.

Jack Ablin at BMO Private Bank said commodities are caught in a risk-asset slide.

Read the full article at http://www.bloomberg.com/news/2012-12-30/hedge-funds-cut-bullish-bets-to-lowest-since-june-commodities.html.

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Pound Advances for Fourth Year Versus Euro on Demand for Haven – Bloomberg 12-31-12

Salient to Investors:

The British pound advanced for the first time in 3 years against the dollar in 2012 and advance for the fourth year against the euro. The median analyst expects the pound to end 2013 at 79 pence per euro and at $1.60, and the 10-yr gilt yield to rise to 2.38 percent.

Neil Mellor at Bank of New York Mellon said he doesn’t buy into the euro-positive story and ultimately sterling will be better placed against the euro. Mellor said no euro-zone country will have a positive year in 2013. Mellor said Sterling is one of the more difficult currencies to pin down, and will remain trapped between the euro and the dollar.

Sam Hill at Royal Bank of Canada said low and stable yields will continue to be an important part of the slow recovery.

Read the full article at http://www.bloomberg.com/news/2013-01-01/pound-advances-for-fourth-year-versus-euro-on-demand-for-haven.html.

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Pimco’s Gross Sees Less Return, Stubborn Unemployment – Bloomberg 12-31-12

Salient to Investors:

Bill Gross at Pimco said:

  • Stocks and bonds will return less than 5 percent in 2013 due to a sluggish economy as the effect of Fed stimulus diminishes
  • Structural headwinds lower real GDP to below 2 percent in the US and other developed nations.
  • Bernanke is not Rumpelstiltskin and can only spin straw into gold for so long.
  • Globalization, technological and demographic changes will restrict growth, so investors should invest in commodities like oil and gold, US inflation-protected bonds, high-quality munis and non-dollar emerging market stocks.

Read the full article at http://www.bloomberg.com/news/2012-12-31/pimco-s-gross-sees-less-return-stubborn-unemployment.html.

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Treasuries Drop on Bets Congress May Reach Budget-Deficit Deal – Bloomberg 12-31-12

Salient to Investors:

Economists expect the 10-yr Treasury yield to end 2013 at 2.17 percent.

Bill Gross at Pimco expects Treasury 5-yr notes to yield 0.7 percent at the end of 2013 versus 0.72 percent today, and the dollar to decline and oil climb above $100 in 2013. Gross expects stocks and bonds to return less than 5 percent in 2013 and unemployment persist at 7.5 percent or higher.

David Ader at CRT Capital said the returns produced by the 30-yr bull market in fixed-income won’t repeat because it is mathematically impossible.

Read the full article at http://www.bloomberg.com/news/2012-12-31/treasuries-decline-on-speculation-deficit-cut-deal-may-be-found.html.

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A Year of Market Gains, Despite Turmoil – New York Times 12-31-12

Salient to Investors:

Fears a year ago of break-up of the euro zone and bank disasters did not happen. The S&P 500 gained 13 percent for the year.

Stand outs were financial and consumer discretionary stocks, while health care and consumer staples were the only sectors in the US and Europe  to completely recover their losses.  

Read the full article at http://www.investmentnews.com/section/video?playerType=CMWealth&bctid=1795622419001&issuedate=20130102&sid=INTEL&utm_source=marketintel-20130102&utm_medium=in-newsletter&utm_campaign=investmentnews&utm_term=image.

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