The market has that incessant feel to it.
Incessant, because every day, no matter what, it is going up.
Its incessancy is dragging in the sideliners.
Positive data is convincing folks of its legitimacy.
It is hard to know when this worm will turn.
But it certainly feels as though it is setting itself up for a nice trade on the downside.
Need to be patient and disciplined.
Thursday, March 11, 2010
Friday, March 5, 2010
Healthcare issues
Here are what I see as the biggest healthcare issues:
(1) High healthcare costs - due to everyone supping at the trough.
(2) Lack of universal coverage - creates insecurity.
(3) Lack of transportability - reduces flexibility.
(4) Doctors paid too much - this is hard because they study for so long and those costs are huge, but the reality is that US doctors are way overpaid relative to doctors in other countries; implication is fewer people entering the profession (now that could be a problem).
(5) Drug companies and medical device companies make too much profit - by allowing medical companies to charge a market rate the US is subsidizing the rest of the world's healthcare costs, but to control domestic expenses the US needs to manage medical company profitability kind of like it does with utilities.
(6) Legal framework increases costs - so many issues and problems here; one nasty by-product is the overprescribing of procedures and medical services (also related to the conflict of interest between the doctors fiduciary duty to their patient and their desire to make money).
(7) Multiple payers creates an administrative mess - not to mention duplicative administrative costs.
(8) US consumers won't accept "no" for an answer - resources are limited and there are constraints in any system.
(9) Too many vested interests supping at the trough - makes the development of good policy unlikely.
There are no easy solutions for the country's problems. Solving one problem leads to a compounding of other problems. The problem with instituting a universal healthcare system is you are creating a massive new entitlement program. If you were to go this route, you would need to manage everyones margins in the system and the only way to do that effectively is through a single payer entity.
(1) High healthcare costs - due to everyone supping at the trough.
(2) Lack of universal coverage - creates insecurity.
(3) Lack of transportability - reduces flexibility.
(4) Doctors paid too much - this is hard because they study for so long and those costs are huge, but the reality is that US doctors are way overpaid relative to doctors in other countries; implication is fewer people entering the profession (now that could be a problem).
(5) Drug companies and medical device companies make too much profit - by allowing medical companies to charge a market rate the US is subsidizing the rest of the world's healthcare costs, but to control domestic expenses the US needs to manage medical company profitability kind of like it does with utilities.
(6) Legal framework increases costs - so many issues and problems here; one nasty by-product is the overprescribing of procedures and medical services (also related to the conflict of interest between the doctors fiduciary duty to their patient and their desire to make money).
(7) Multiple payers creates an administrative mess - not to mention duplicative administrative costs.
(8) US consumers won't accept "no" for an answer - resources are limited and there are constraints in any system.
(9) Too many vested interests supping at the trough - makes the development of good policy unlikely.
There are no easy solutions for the country's problems. Solving one problem leads to a compounding of other problems. The problem with instituting a universal healthcare system is you are creating a massive new entitlement program. If you were to go this route, you would need to manage everyones margins in the system and the only way to do that effectively is through a single payer entity.
Getting a read on the Fed
The markets focus is upon working out when the Fed will begin its exit from quantitative easing.
Some would say that it has already begun with the dismantling of various "market support" programs. The critical element will be when they begin raising the Fed funds rate.
With the knowledge that any "real" exit could send the economy in the tank again, I wonder whether the reality is that the Fed has little intention of raising rates anytime soon (read that in the next couple of years).
Any increase in rates will weigh heavily upon the economy, the govt's expenditures, and the markets. In many ways, the Fed has no choice, but to try and keep rates at ZIRP until it is patently obvious that the economy is totally recovered. In the same way that the govt is "all-in" on the fiscal side (and is committed to doing whatever is necessary to keep things from going back down), the Fed is in a similar boat. In spite of it's credibility and reputation being on the line, the Fed has little choice, but to keep rates low. Any removal of the foot from the pedal stands a high likelihood of choking off recovery (all that ZIRP for nothing). It has to go "all-in" on the monetary side. Failure to put the economy back on an even keel means we are left in a worse position than when we started.
With the Fed's priority upon the recovery of the economy, it has to risk inflation and the debasement of the currency in order to get us through this period.
Some would say that it has already begun with the dismantling of various "market support" programs. The critical element will be when they begin raising the Fed funds rate.
With the knowledge that any "real" exit could send the economy in the tank again, I wonder whether the reality is that the Fed has little intention of raising rates anytime soon (read that in the next couple of years).
Any increase in rates will weigh heavily upon the economy, the govt's expenditures, and the markets. In many ways, the Fed has no choice, but to try and keep rates at ZIRP until it is patently obvious that the economy is totally recovered. In the same way that the govt is "all-in" on the fiscal side (and is committed to doing whatever is necessary to keep things from going back down), the Fed is in a similar boat. In spite of it's credibility and reputation being on the line, the Fed has little choice, but to keep rates low. Any removal of the foot from the pedal stands a high likelihood of choking off recovery (all that ZIRP for nothing). It has to go "all-in" on the monetary side. Failure to put the economy back on an even keel means we are left in a worse position than when we started.
With the Fed's priority upon the recovery of the economy, it has to risk inflation and the debasement of the currency in order to get us through this period.
Thursday, March 4, 2010
Above the fray
My day is a panoply of information. From sign-on to sign-off, it is all about gathering and processing the latest information.
It is one thing to gather and process information, but at some point, you need a view, a conviction. And rather than seek additional information to either affirm or deny that view, you need to take a step back and process the current zeitgeist, as translated by the markets, in the context of that view.
It is the ability to stand above the fray and discern the general forces at play that I most admire.
It is one thing to gather and process information, but at some point, you need a view, a conviction. And rather than seek additional information to either affirm or deny that view, you need to take a step back and process the current zeitgeist, as translated by the markets, in the context of that view.
It is the ability to stand above the fray and discern the general forces at play that I most admire.
Is Greece the tip of the iceberg?
Have we seen this before!
Is Greece the tip of the iceberg?
Is Greece like New Century Financial Corp signalling the beginning of the fall in the sovereign dominos?
Only time will tell. It may, or it may not. If failure in Greece is the tipping point, then it will be all too obvious in hindsight. If it isn't, then it will be quickly forgotten as a footnote.
Is Greece the tip of the iceberg?
Is Greece like New Century Financial Corp signalling the beginning of the fall in the sovereign dominos?
Only time will tell. It may, or it may not. If failure in Greece is the tipping point, then it will be all too obvious in hindsight. If it isn't, then it will be quickly forgotten as a footnote.
Forest for the trees
I feel as though I am so caught up in the day to day fear wranglings that are our present situation, that I risk missing the forest for the trees.
One of my problems is that my short term outlook is heavily influenced by my longer term outlook (hard sledging ahead), and it is hard to get away from that.
But at another level, I have the feeling that if only I could step back from the fear abyss, I could see that the market is fine and the current fearalysis provides opportunity on the upside.
One of my problems is that my short term outlook is heavily influenced by my longer term outlook (hard sledging ahead), and it is hard to get away from that.
But at another level, I have the feeling that if only I could step back from the fear abyss, I could see that the market is fine and the current fearalysis provides opportunity on the upside.
Wednesday, March 3, 2010
Let the Good Times Roll
Sort of as a contra-note to the previous post*, I want to remind myself of recovery mathematics.
The economy is bottoming and beginning the process of healing.
There are two points to make. First, the damage inflicted by the severity of the recession means it will take a long time to regain previous economic highs. Second, the YOY and MOM change numbers will look real good going forward.
The great thing (if you can call it that) is that asset prices were re-set when the economy imploded. As such, expected returns going forward will probably mirror the rate and extent of recovery.
In an environment where systemic risk factors and secular headwinds are in play, however, it is hard to see equity markets getting too exuberant, even as positive economic numbers come in. There again, that might be ascribing a level of rationality to the market that it does not warrant.
Depending upon how you look at it, it will be both a lost decade and a growth decade.
*The post was really about risk factors. Always got to keep an eye on the downside.
The economy is bottoming and beginning the process of healing.
There are two points to make. First, the damage inflicted by the severity of the recession means it will take a long time to regain previous economic highs. Second, the YOY and MOM change numbers will look real good going forward.
The great thing (if you can call it that) is that asset prices were re-set when the economy imploded. As such, expected returns going forward will probably mirror the rate and extent of recovery.
In an environment where systemic risk factors and secular headwinds are in play, however, it is hard to see equity markets getting too exuberant, even as positive economic numbers come in. There again, that might be ascribing a level of rationality to the market that it does not warrant.
Depending upon how you look at it, it will be both a lost decade and a growth decade.
*The post was really about risk factors. Always got to keep an eye on the downside.
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