Republican Mitt Romney’s pick of Paul Ryan as running mate for November’s US presidential election has catapulted Medicare to the top of the agenda (along with his budget plan).

Already the attack ads have boiled down the essence of the campaign: Ryan wants to push granny off a cliff by handing Medicare budgets to states and turning the medical support for the elderly into a voucher scheme. The Romney response is to attack “Obamacare”, pointing out the scale of cuts to Medicare made by the president in order to fund a wider healthcare scheme.

As usual in politics, neither is addressing the real question: why is American healthcare such poor value for money?

This is best shown by just one amazing statistic: the US government spends a bigger chunk of GDP on health than the British government – which gets a nationwide  healthcare system for it. Americans only get care for the elderly (Medicare) and the poor (Medicaid). Read more

The eurozone may be doing a bit better than expected, but its economy is still weak in the extreme. Today’s Short View discusses the prospects for equities and the likelihood that  eurozone shares beat US shares.

Lex thinks an improved economic outlook should be bad for shares, as equities are more sensitive to future discount rates (ie higher bond yields) than to the prospects of higher revenue.

And research by the London Business School has demonstrated there is no correlation between the performance of an economy and share prices over the past century and a bit.

But both of these miss the idea of what future prospects are already priced in, something extremely hard to measure. What matters is what people expect, and how it changes. If investors are braced for recession and instead get dismal growth, shares should rise – as we saw towards the end of last year. Read more

So the Federal Reserve did almost nothing, and the Bank of England did nothing. All now rests on the European Central Bank for hopes of monetary policy action this week.

The Fed is forgiveable. The Bank, less so: Britain is suffering in a double-dip recession worse than the eurozone (although the eurozone looks set to catch up soon).

Consider this chart: it shows the UK and US inflation expected by bond markets for the five years starting in five years’ time (the 5 year 5 year breakeven, as it is known, derived from bond futures).

UK and US five year five year breakeven inflation (Source: Bloomberg)

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You already knew the manufacturing purchasing managers‘ indices mattered, given today’s disappointing figures for the US ISM. But perhaps you hadn’t appreciated how much Wall Street analysts focused on it.

This chart (with a big h/t to Gerard Minack at Morgan Stanley) demonstrates the value of the ISM, the oldest of the PMI surveys. Read more

It’s PMI day again, and the news so far is once again terrible for Europe. The manufacturing purchasing managers’ indices are one of the best set of indicators of what is going on in the economy, because they are so much more timely than GDP figures.

The data produced by Markit for the eurozone are awful. Greece goes from bad to worse, and even the motor of the eurozone – Germany – is struggling badly, with manufacturing output and new orders falling at the fastest since April 2009, shortly after the recovery began.

This matters for equities. Consider these two charts: Read more