Here's the Deal with the Economy- December 8, 2024

Economy: In Slowdown

Market Cycle: Bullish

_{Week 49 of 52 for 2024: 94.2% of the way through 2024}

Weekly Note:

There are weeks when little happens, and then there are weeks where a quarter’s worth of information plays out. This week was most definitely the latter.

For stress reduction, take 2 consecutive inhales through your nose (one big one followed by another inhale with no exhale until your lungs are inflated to the max), then exhale thru you mouth until your lungs are empty.

Here we go.

The past week was nothing short of eventful. It began with former and incoming President Trump threatening 100% tariffs on BRIC countries and any nation adopting their proposed currency. This statement was unexpected and seemingly unprovoked, especially since the BRIC currency poses no real threat to the dollar’s status as the world’s reserve currency. The irony here is that Trump supports Bitcoin, which, in the long run, actually could present a genuine challenge to the dollar’s dominance. This action not only felt out of place but also reinforced a troubling pattern: many of our leaders on both sides of the aisle appear to lack a solid understanding of the very economic system they oversee.

But that already seems like a lifetime ago after what transpired the rest of the week.

On Tuesday, the South Korean PM apparently decided that he wanted to be the one responsible for the nuttiest thing to happen all week. When, again completely out of the blue and unwarranted, decided he needed to declare martial law “to protect the freedoms and safety of the people as well as ensure the nations sustainability and security against the anti-state forces, attempting to overthrow our system.”

Huh?

Lawmakers then voted unanimously to end martial law which made the PM acquiesce.

To make things even stranger, U.S. officials were caught off guard by the announcement of martial law in South Korea. This is a major development, as South Korea is one of America’s closest allies and key trading partners. Prolonged instability of this scale in such a vital ally would undoubtedly ripple through the U.S. economy and financial markets in short order.

It may be the first time in history that a sovereign leader initiated a coup against himself as he now may get impeached over the call. I guess that’s one way to go into the history books. So, well done… I guess.

On the home front, we got a closer look at the current state of the U.S. job market with the release of the monthly jobs reports. While the JOLTs and payroll data showed strength, a deeper dive into the data hinted at cracks forming in the labor market. Something which was also reflected in a higher-than-expected figure for initial jobless claims.

This shift signals that it’s time to begin paying closer attention to the Challenger monthly report, which tracks monthly job cuts. Should this deterioration in the jobs market continue to play out, it is yet another sign that the economy is in the Economic Slowdown phase of the current credit cycle.

Jay Powell sat down with CNBC’s Andrew Sorkin this week and discussed The Fed’s decision to begin the rate cutting phase with an initial .5% cut. Saying “We wanted to send a strong signal that we were going to support the labor market if it continued to weaken.” Remember this if/when it is time to get bullish the economy again after the Slowdown/Recession. The Fed and Congress will act should it be warranted. It has worked each time, so that is the bet you want you will want to make until it proves otherwise.

Remember, your views of the Federal Reserve do not matter when forecasting the economy. It’s instead the actions of The Fed and Congress that will matter at that time. The Fed tells us what they are thinking before they act. The trick is to read between the lines and not allow your opinion of their intentions to affect your forecasting. This is probably the most common mistake people make when forecasting/predicting the economy.

The week also brought news that the already high probability of an east coast port strike now looks even more certain. With the port strike now being call “inevitable” by port forwarders.

Remember to keep an eye on this along with the budget negotiations and debt limit extension into January as possible disruptors in the economy.

While a showdown on the debt limit extension and budget negotiations alone are not big disruptors, they will give us some insight into what to expect in the coming years to a certain extent. Not fully as some seats in Congress will change hands after the deadlines, but it could still offer some clues. Whereas the port strikes are absolutely disruptive on their own. Should the all three be unresolved at the same time, it could cause some serious turbulence at a critical time in the economy. We’ll see how it plays out.

And yet, all of that paled in comparison to the tragic news of UnitedHealth Group’s CEO, Brian Thompson, being gunned down on the streets of Manhattan Wednesday morning. The targeted murder took place in front of the Hilton before the company’s investor day was set to begin at the hotel.

I am going to preface this next part with the obvious fact that Brian Thompson’s murder was a heinous and disgusting act. He obviously did not deserve to lose his life, even if the most serious of allegations against he and UnitedHealth turn out to be true.

With that being said, I feel it is important to comprehend how and why so many people have celebrated, joked, and lashed out at he and the company upon hearing the news.

While it was shocking to learn of an executive being murdered in such a high profile way, upon hearing it was an executive from UnitedHealth (UNH) it was much less of a surprise, unfortunately. What we ended up learning about the crime scene confirmed early suspicions from those who had researched the company.

Over the years, UNH has developed a reputation as a predatory and unscrupulous company by many who have had experience working with the company and those who closely monitor business, markets, and the economy. So it wasn’t a surprise to hear back in February that the U.S. Department of justice had opened an Antitrust Probe into UnitedHealth. Specifically, the probe is directed at UNH’s UnitedHealthcare division, which Brian Thompson was the CEO.

According the the above article, UNH was also already “facing a private antitrust suit by a California hospital system called Emanate Health, alleging that the company tried to strong-arm the nonprofit over its affiliated physician groups and exert control over primary-care doctors in its region.”

UNH is also being accused of having a drastically higher health insurance denial rate than that of it’s peers. However, this does not appear to be able to be substantiated across the country. The problem goes back to a stipulation in the Affordable Care Act which states that health insurance companies must disclose how often the deny claims. Problem is, the requirement has never been implemented in almost 15 years since the ACA was signed into law nor in the 10 years since the law was “fully” implemented. So the chart below is only reflective of Affordable Care Act exchanges in two states. Yet, it paints a picture.

It has also now been reported that the US DOJ was also investigating Brian Thompson for insider trading in addition to the alleged monopolistic practices of UNH. Which to my knowledge, was not publicly available until after the murder occurred.

As if that wasn’t intriguing enough, we now know that “Deny” “Defend” “Depose” were written on shell casings found at the murder scene. Further substantiating the initial reaction of those who have been following UNH and their alleged business practices.

As “Deny” “Defend” “Depose” is a close reference to the phrase “Delay. Deny. Defend.” which are the tactics insurance companies use to get out of paying claims of all types. This is well known to any person or entity who has extensive experience in dealing with insurance companies during a high priced claims process.

“Delay Deny Defend” is also the title of a 2011 book written by Rutgers professor, Jay M. Feinman, regarding the insurance companies use of these very tactics.

While you can all make your own assessment from here, I decided to go more in depth with this one as I have a pretty fair amount of first hand experience within this realm. Specifically in helping individuals and businesses during the claims process brought upon by a catastrophic property and casualty loss. Not nearly as much as some of my closest family members who battled insurance companies on behalf of the insured for decades. (Yes, battled is the appropriate term.) However, in working for said family members while in High School and a little after college, I experienced first hand the tactics insurance companies use to avoid or wrongly minimize the settlement to their own customers. Resulting in additional turmoil and anxiety during what is already a tumultuous and life altering time.

Now, is fraud a somewhat regular occurrence which insurance companies have to deal with? Absolutely. So it is definitely incumbent on them to verify each claim as much as possible. Yet many claims, both fraudulent and genuine, are pretty explicit and should not take long to be verified.

I cannot stress this enough, if you have a large loss or necessitate high priced treatment for your health, you need to view your insurance company as your adversary, because that is how they view you and your predicament. (Again, yes. In my experience “adversary” is the appropriate term here.) For large enough claims, it would absolutely benefit you to, at the very least, speak with a seasoned professional who has a history of helping clients get what they have been paying for with their premiums. The more you educate yourself on the process, the less likely you are to be taken advantage of when you’re already swimming in a sea of emotions, uncertainty, and fear. As all three of those things drastically reduce your ability to make good sound decisions rooted in solid judgement.

At the very least, a good professional who acts on the behalf of the policy holder will be able to give you an idea of how the claims process and system works. Most reputable professionals will explain this during an initial consultation without a fee.

While the cost of hiring a professional who understands the system and process may seem high initially, in my experience it’s rare if it doesn’t more than pay for itself. You can always negotiate that with a professional you choose to hire if you have already received a settlement offer, but it’s best to speak with one right away as the clock is often ticking on your end with deadlines you are not yet aware exist.

Emotions are running hot on this one. It is not difficult to see why a person would carry out such a heinous act if they lost a loved one and had their entire world upended due to being denied and/or have seen a loved one suffer more due to being jerked around by the company that promised to take care of them should the situation arise. However, Brian Thompson was still a person with children, family, friends, dreams, ambition, and more than likely a lot more life to be lived.

He did not deserve this. Both he and his family are deserving of more dignity in the aftermath of his death. Same as UnitedHealthcare’s customers and survivors of customers who have been telling their heartbreaking stories since this tragedy unfolded.

I can relate to both sides of this tragic discourse, and quite frankly, I’m not quite sure that says about me as a person.

So it goes sometimes.

Anyway, I grew up and spent a significant part of my life in Minnesota. Factor that in with the fact that UNH is a Minnesota company, Brian Thompson lived in the Twin Cities, my experience with and through close family members during many claims processes, and this one hits pretty close to home on multiple levels.

A massive tragedy across the board, and one which has fired up many from all sides. The act has happened, and there’s no going back. Hopefully, some good will come out of this and it will amplify the much needed discussion about the horrendous state of the insurance industry in this country. That to me is the real villain in this situation.

While this tragedy is already horrendous enough, the situation would be made worse if we wasted the opportunity to pay attention to the hurt and pain behind the many posts celebrating the cold blooded murder of a fellow human being. Sometimes to find the light, we must first dive into the darkness to identify and understand how and why our society behaves the way it does at times.

The world can be a cold and uncaring place. Understanding why often requires setting emotions aside and focusing on uncovering the truth, whether it aligns with our beliefs or challenges them. By seeking the truth objectively, we gain clarity and perspective, even if the truth is not what we were hoping to find.

Other Top Economic Stories of the Week:

Construction Industry Braces for One-Two Punch: Tariffs and Deportations

Why it matters: Cannot recommend this article enough. It shows the real world inflationary ramifications of tariffs and mass deportations of workers.

‘Brain Rot’ Is Why Your Kids All Sound Like That

Why it matters: The passage below from this article is either intriguing or creepy AF. It speaks to how the mind works, and how what we decide to consume eventually ends up consuming us. Choose your media and entertainment content wisely.

AI is Changing Oil Country—and Pumping Up Profits

Why it matters: More examples of how AI is being implemented and changing businesses, sectors, and the economy as a whole.

Nuclear Energy Wins New Fans—Even in New York State

Why it matters: More proof that the move to nuclear energy is only just beginning.

Insurers Collected Billions From Medicare for Veterans Who Cost Them Almost Nothing

Why it matters: Another look at the insurance industry.

The Railroad on the Wrong Side of Trump’s Tariffs

Why it matters: Interesting look at the effects of tariffs from one companies perspective in the middle of the storm.

Global Test Scores Show U.S. Students Still Struggling After Pandemic

Why it matters: A sad look at the education system in the US. If this trend remains, it will eventually lead to a prolonged period of rough economic times.

How Tariffs Threaten an American Manufacturer’s Big Investment in Mexico

Why it matters: Interestingly look at a Minnesota company which took advantage of free trade policies to change their business model, and their reasons for doing so.

It’s Taking Longer to Find a New Job in the US

November Jobs Report Isn't as Strong as It Looks. What It Means for the Fed.

Why it matters: Some evidence of a deteriorating job market.

Most Important Data Drops from the Past Week:

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