That Escalated Quickly
5 Idea Friday: Homehealthfraud; Perfect Inflationary Storm; Auto Supplychain Puzzle; Mobile FTW; GLP-1 Yimbyism
home healthcare GDP [fraud] under a spotlight (maybe). there are rhinos involved
the perfect inflationary storm (and what not to do about it)
a mystery on the auto supply chain
mobile’s platform shift comes with some strange tidings
the housing YIMBY case is very weak, but the healthcare YIMBY case is strong
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On the same day that Random Walk declared “yeah, it seems like fraud is a big part of the home healthcare job story,” the administration announced:
Does JD Vance read Random Walk? I doubt it. But, yes, complying with anti-fraud statutes is probably good.
More specifically:
The administration also froze Medicare enrollments for new healthcare and home providers, alleging that the system is already rife with waste, fraud, and abuse. The task force cut off approximately 800 hospices suspected of fraud, withholding $1.4 billion in payments nationwide.
Dr. Mehmet Oz, the administrator for the Centers for Medicare and Medicaid Services, said that the Department of Health and Human Services is a frequent target for fraud, describing it as “a large rhino that can be stabbed effortlessly by foreign governments, syndicated criminal entities and smaller-time operators who can take advantage of a system.” He estimated that at least half of the hospices in the greater Los Angeles area were “fraudulent.”
Freezing enrollments for the #1 jobmaker in the country is certainly going to have some effects.
Also, Dr. Oz, please speak less. “A large rhino that can be stabbed effortlessly by foreign governments” wtf is he even talking about? Who stabs a rhino? Of all animals to pick. I mean, rhinos have notoriously thick skin. Idiot. Way to make a good thing seem dumb.
Fortunately, it’s not just the admin getting on board:
California Gov. Gavin Newsom’s press office said that the Trump administration was following the state’s lead in implementing a moratorium on new Medicaid hospices. Representatives for the Democratic governor pushed back on Oz’s claim about the 800 Los Angeles hospices, accusing him in a social-media post of “refusing to coordinate and share info”.
Oh good. It was Governor Newsome’s plan all along. Lol.
Well, this is progress, and it’s long overdue.
Whether intentional or not—although, in my book (and theirs), asleep at the wheel is no defense—this should be a scandal with life-altering consequences for the officials involved. It won’t be, of course. We’re far too partisan for all that.
ICYMI
2. A Perfect Inflationary “Storm”
Inflation is heading the wrong direction and some people are saying “the fed is going to have to hike,” but they are stupid and wrong.
I mean, the fed might raise (although I don’t think it will), but the sort of rising prices we’ve got are a good argument for cutting, if the Fed were to do anything at all (which I don’t think that it will).
“High prices necessitate high rates” ought to be the axiom of exactly no one. I don’t care what anyone thinks they may have learned from Volcker. They are stupid and wrong.
What is to be done about inflation all depends on why prices are rising.
If central bankers and fiscal enthusiasts are overheating the economy then, yes, clearly they should stop doing that, and raising rates is probably a good mechanism (although query whether the Fed can stop the fiscal train).
If, on the other hand, structural shortages are causing prices to rise, then raising rates makes a bad problem worse. There’s just no reason to add a capital shortage to an [insert other shortage here]. Do you raise rates in a famine? Only if you’re some kind of psychopath.
So let’s count the ways by which prices are mounting:
Iran’s hijacking of the Strait is causing shortages of distillates, fertilizer, and lots of other things downstream of petrochemicals. That’s flowing through to food, fuel (car and jet), and other random but important things, like resin and helium.
Historic levels of Capex (and high-energy compute) are overwhelming the historically cyclical supply capacity of semiconductors, memory chips, and basically anything silicon related, as well as transmission gear, gas turbines, and basically anything powertrain related. That’s flowing through to industrial prices, freight, consumer electronics, and utility bills.
Secularly declining able-bodied population growth is (or might be) putting upward pressure on wages, particularly in the industries adjacent to point two, but also more anodyne things, like auto repair (and services more generally).
Potentially widespread medicaid fraud is shifting an even greater cost burden of our wildly over-regulated “healthcare” system on to privately insured people, and taxpayers, generally.
All of these offer varying degrees of stress to the Almighty Consumer, who will, in turn respond with its own brand of demand destruction where possible, i.e. not buying as much. The cure to higher prices will be, you guessed it, high prices. In other cases, the Almighty R&D will respond to high prices by figuring out new and clever ways to be (a) be more efficient; (b) find substitutes; and/or (c) make more stuff.
On the other hand, exactly none of the modus inflationati enumerated above are alleviated by even more expensive borrowing costs.
Oh, your gas is too expensive? How about we stab you in the eye, and make your credit cards and variable rate mortgages more expensive too? We do that because we are wise and enlightened stewards of the economy.
“Stupid and wrong” is generous.
Anyways, just a quick peak at a hodgepodge of charts related to infra.
No more memories
Have you considered buying a dinky little memory stick lately?
Well, don’t:
Hyperscaler demand for high bandwidth memory is hogging all the silicon, which means even boring old steady-state memory sticks are suddenly 2x-ing in price.
I mean, we already knew that Micron MU 0.00%↑ was hogging all the upward profit revisions:
But, man, the little memory sticks, too? It’s so unfair.
Enter the powertrain
Yes, data centers (and the electrification of everything) do consume a lot of electricity. Yes, it’s still an open question as to who will internalize the costs of that net-new demand (and the infrastructure it will require), and in what amounts.
We do know who is internalizing the benefits.
Consider the latest entrant into the industrial powertrain sweepstakes: Forgent Power Solutions FPS 0.00%↑
“Historic backlog, raising estimates . . . blah blah blah.”
Doing boring utilities work has never been this not-boring since the 1930s.
Elsewhere, the largest grid operator in the country had a record-breaking auction:
Capacity prices in the PJM Interconnection’s latest capacity auction hit a $333.44/MW-day price cap across its region, setting a record-high price for the third auction in a row . . .
PJM estimates that without a temporary price cap that was established in an agreement with Pennsylvania Gov. Josh Shapiro, the capacity price for the 2027-28 delivery year would have been nearly $530/MW-day, or about 60% higher
Data centers need moar power! Are price caps the best way to deal with that? Probably not.
Roadtrippin’
Gas is getting expensive too.
Good thing that demand for gas is very elastic:
Gas prices went up, gallon-buying went down.
Smart. Not smart for road trips and solo-commuting, but otherwise . . . saving the environment? Let’s go with that.
That’s real dollars though. In nominal dollars, gas-spending is breaking the y-axis:
Yeah, so driving is not a great idea right now. Flying neither.
Notice also the shift from grocery to discounter. Once again, the cure to high prices is . . . high prices.
Look, it’s not a good thing that real wage growth is flat-to-negative, but it will be put all the downward pressure on inflation that we want or need.
At the same time, there’s no universe where raising interest rates makes the situation better. It will, in fact, make it a good deal worse.
3. Auto Supply-Chain Puzzle
On the broader subject on supply-related stress, I find this to be a bit of a mystery.
According to KKR, auto supply chains are showing signs of excess demand (and have been since 2022):
The semis supply surge makes sense (and is a thing to behold), but auto sales are supposedly stressing supply chains, as well.
That’s super weird because auto-sales are the opposite of hot right now:
Auto-sales have been flat-to-down since they recovered their pre-pandemic flat-to-down trend, sometime back in 2023.
No surge in demand that I can see (unless it’s a surge off the post-rate-hike collapse).
Pricing has also been flat-to-down (and definitely down, if you include incentives):
The sticker price on cars hasn’t moved since ‘22, and if anything, prices have come down, as incentives have risen to boost demand).
That demand for big, expensive, financed durables would be soft is entirely what Random Walk would expect.
So how is it that auto supply chains are tight? I genuinely have no idea. Could be a data issue. Could be that transpo allocation was shifted elsewhere, and when the market recovered, it wasn’t returned? Maybe it’s the broader silicon shortage dragging car-related chips down in its wake? Idk. Very strange.
4. Mobile FTW
Nearly 20 years ago, the iphone was released into the wild, and it changed consumption habits forever (among other things).
At the time, some prescient folks declared that mobile was the next platform shift. Everything that we used to do on our desktops (and many other things that we’d never done digitally at all), we’d begin to do on our “handheld devices.” In the aftermath of the GFC (which followed ~1.5 years later), many of these techno-optimists were mocked for their techno-optimism, but we all know how the story ended.
Well, ‘Q1 2026 was something of a watershed moment in that mobile platform shift:
According to SensorTower, mobile captured the majority of worldwide site visits for the first time ever.
More visits to the internet via phone than desktop. It took 15 years, but that’s pretty incredible.
It turns out that globally web-visits and time-spent has actually been in decline:
Time spent appears to have peaked in 2024, and has been declining ever since.
To be fair, a good chunk of the shift to mobile primacy is driven by India, and to a lesser extent, Indonesia and Japan:
India’s entire internet economy runs via phones. Mobile’s share in the US is still less than half (and has actually been declining a bit since 2025, again, according to Sensor Tower).
What to make of this? Idk. Platform shifts can take time?
It’s actually a funny thing because there’s some evidence that social media time has peaked, and Meta recorded only its second (and most substantial) drop in daily users in the company’s history.
Although, I don’t know how to square that evidence with the increasing magnetic attraction of short-form video, which continues to move up-and-to-the-right:
Almost 9 hours/month of Insta-reels on average. That seems low, tbh.
It sure looks like Insta users are maintaining a healthy addiction to their phones (perhaps more so than any other platform):
By time-spent, Insta has seen the biggest gains globally and in the US, although Reddit is close.1
Idk. Clickstream data is wonky. Personally, I barely ever view anything on Instagram, and I think Reddit is a wasteland of useless information. Twitter (which also appears to be down on its luck) is still by far the best, and perhaps only, useful bit of social media, as far as Random Walk is concerned.
Of course, I also think twitter indexes to readers, who are smarter and better than video-watchers in every way, so perhaps the slide of twitter is just another sign that the apocalypse is nigh (because that’s a take you hear every day).
Take heart, though, because you’ll never guess what took the #7 spot on the “Top Web Subgenre” chart:
Archiveofourown.org—a site for books—was the #1 website for the #7 subgenre of time-spent-on-the-web, and it’s growing <squints> 6% yoy.
Books are so back, baby.
5. ‘Someone Else Pay For My Healthcare’ Is Probably the Worst Idea Ever (reprise)
As Random Walk has expounded countless times before, the case for housing YIMBYism is very weak.
And oh yeah, it’s still weak. One of Random Walk’s favorite indicators, the Opendoor price index, says so:
OPEN 0.00%↑ shows negative price appreciation yoy, and tracking at-or-below last year’s appreciation.
Realtor.com says so too:
Listing prices down, new listings also down, active listings building, and time on market longer.
Cotality also says so too:
Outside of NY and Chicago, new median listing prices are down (and down ~1% nationally).
The reality is that we’ve got a moderate housing surplus. It’s ok to feel happy about it, but acceptance is the first step. I gotchu. It’s ok though. Builders are dialing back, letting inventory clear, and in due time, they will start building again.
But, however weak the case may be for housing YIMBYism may be, it’s not the subject at hand. The subject at hand is the iron-clad case for Healthcare YIMBYism..
Un-throttling healthcare is the closest thing to a silver bullet we’ve got, and relatedly, ‘Someone Else Pay For My Healthcare’ is probably the worst idea ever. All of this is indisputably true, even though people will dispute it until they’re spitting mad (right after they’re done being spitting mad about the lack of a housing shortage).
Apparently, weight-loss miracle drugs are now 70% cheaper, mostly through the magic of paying for our own damn healthcare:
Why are GLP-1s getting cheaper while health care remains expensive? The answer lies in what makes GLP-1 drugs different: actual consumers have to pay actual prices.
Manufacturers initially followed the standard playbook: maintain high retail prices (paid by almost no one) while offering modest discounts to Medicare and insurers. But coverage for weight-loss drugs expanded much less rapidly than usual. As a result, manufacturers had to sell directly to consumers; a majority of weight-loss patients pay for their GLP-1s out of pocket. Manufacturers therefore face the same incentives confronting companies outside health care: reduce prices or lose customers and profits.
Exposure to real consumer demand reliably makes the difference. Whenever health-care providers must sell directly to consumers—whether in LASIK surgery, orthodontics, chiropractic services, mental health care, or cosmetic procedures—competitive pressures frequently produce meaningful price reductions.
Demand grew more quickly than the insured market could handle, and generics (and eventually out-of-pocket purchases) escaped containment, driving prices down.
Truthfully, this isn’t the best example of how paying for our own damn healthcare is a win for everyone. Pharma is a bit different in that the gatekeeping is an assbackwards way of recouping the very high barriers to entry on developing drugs (by which high US prices subsidize lower cost drugs for the rest of the world).
LASIK, etc. are much better examples of non-covered procedures with mass appeal getting better and cheaper because that’s what happens when you let supply and demand do their dance.
Previously, on Random Walk
Private Credit and Insurance, two peas in a pod (reprise), and a chart dump on default rates
five charts on the rise of private credit in life insurance
Energy in 1776
It’s July 4th, so Happy Birthday America, and we’re going to keep it light and only semi-topical.
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Consider, by contrast, the slow descent of longer-form (and increasingly more expensive) Netflix:
I’m not entirely sure why Netflix and Spotify are comped, but either way, their trajectories have diverged.
Who knew it would take a TV personality or hustler or whatever Oz is, to take on the fraud other administrations have happily lived with. Probably because they typically filled the position with someone from the healthcare industry.
I don’t mind whatever “stabbing with their steely knives” image was in his probably self-medicated head. I guess he was going for - you can grift off Americans forever, without killing the golden rhino.
GLP1s encountered something I’ve never seen before in the drug market. People willing to embrace compounded knock offs on mass.
Part of this was a self own. The drug makers didn’t keep up with demand and so they ended up on the compounding list due to shortage. People got used to using the compounders and so once it was off the list there was already a market and normality.
But beyond that people seem willing to take compounded GlP1s in a way they won’t take any other expensive brand name drug. Even though in theory it should be the same thing to take eliquis or whatever compounded.
So with the compounders at $200-$250 they had to come down close enough for people to do Lilly direct.