Tag Archives: remember

Socialized Heathcare… Do we want this?

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First Step: Watch this video on Canadian Healthcare

Did you watch the video?  I would embed it so you can watch it here, but it seems that due to technological limitations (or decisions) that isn’t going to happen.  And no I’ve decided against figuring out how to circumvent such actions.  So, click the link already.  It is only 20 minutes out of your life to watch a humorous yet somewhat painful video on the realization of socialized health care.  Don’t believe me then click the link.

Obama Plan: How do we pay for it?

You may be wondering what my take on the Obama plan is.  Well, firstly I want to know how we are going to pay for it.  Really, Social Security is going in the red, and so is Medicare.  Last I check in the red means that it isn’t profitable, and also means that there is no money to fund it.  Tax reciepts are down significantly, not to mention State Tax receipts.

So, the “income” that the Federal Governement receives is down.  Remember that the government doesn’t actually make or produce anything and is soley funded by us the taxpayer.  So, to pay for this we are going to go further in the red.  We already have a trillion plus deficit for 2009, which means borrowing or printing substantial sums of money.

While Univeral Health Care sounds wonderful, but again to pay for it we have to get the money from somewhere.  That somewhere is from the “rich”.  Maybe you feel entitled to health care, maybe not.  Essentially what is going to happen is that money will be siphoned from those with high incomes to subsidize the plans.  This is a blatant transfer of wealth, which is what the government does.

At what point do high income earners decide that enough is enough and decide to earn less?  If I were taxed at say 60%, which means I get to keep 40% of my income my incentive to earn more declines.

Rationing: Supply and Demand

Here is where socialized health care gets interesting.  Let’s say there is $100 billion dollars allocated to public health care per year.  For the moment don’t worry about the exact sums of money as this is an example.

With that $100b services can be provided up to that point.  Once that point is reached or even if we start to near that point where if anything else is spent then the program is in the red.  How might the administrators prevent that from happening?

1) You have to wait in line for your turn… these lines could get really long

2) Deny you service… bummer looks like you don’t get that MRI

3) Rationing, where there is a limited number of services available

So, in a perfect world we would all be healthy, and have 100% health care.  As much as I’d like that to be a reality we have to be realistic.  The only thing we get for free is the air we breath.  Anything else requires work, which then can be exchanged for a good or service.  I’m not saying our present system is perfect, by no means, but I don’t think this is the way.

A bond bubble… Really?

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Bonds, bonds, bonds…  United States Government bonds ARE the safest investment in the world besides cash.  Right?  They are aren’t they?  I mean they are backed by the taxing power of the United States Government so they have to be.  Well, sure you will get your money back at a measly 2.x% these days.  Isn’t that below the rate of inflation you ask…  why yes it is.  T-bills are paying tenths of a percentage so you choose.  Besides stocks and commodites have cost many a small fortune so investing in bonds is a wise decision.  Right?

There is much talk about a bond bubble, and I’ve been watching bond prices and their rates take off recently and also have a nice correction.   Generally I watch $TNX, which is the 10-year government bond yield.  Remember bond yields move inversley to their prices.  So, if yields go down then prices go up and vice versa.

So, we have seen equity and commodity prices collapse, housing prices, and while that was occuring treasury bond prices have taken off.  This MUST be a bubble right?  Perhaps, but you have to take into account who buys and sells bonds.  We have the individual investor, which makes up a small group.  The major purchasers of bonds are large institutions and governments.  For institutions let’s look at the money market industry.  They must hold a number of bonds based on their funds requirements.  For governments they buy and sell bonds all the time.  They sell them to raise money and other governments or institutions buy them for a “safe” return.

As a last resort the Federal Reserve will purchase bonds directly, thus monetizing debt (PRINTING MONEY), thus keeping bond prices high and yields low. Therefore bonds aren’t really controlled by investors as we like to think, but much larger fish in the sea.

So, what might we see when the world loses faith in the bond markets?  Auctions will be devoid of foreign buyers signaling that foreign demand has dried up.  This will spark the necesitated increase in interst rate as an incentive for others to borrow.  Simultaneously we might see a flee from bonds as investors are concerned about their future safety.

If you look at the news you will see exports are way down from exporting countries, which means that importing coutries aren’t importing anywhere near previous levels.  Welcome to a major recession, yes there are grumblings of this being a depresssion.  I supose it depends on your viewpoint.  Now what happens when these net exporting countries decide to stop buying our debt because they have their own problems at home and have to use their saving?  They will no longer be purchasing our debt, which will make it more and more difficult for the USA to spend, and service existing debt.  Being that most of our debt is short term as the interest rate rises so do the debt servicing costs.  As these costs rise, tax income decreases then we are stuck with either printing more money (the short and easy “solution”), we cut back on gov’t services, or a combination of both.

Watch out for rising interest rates and a falling dollar.  So far we have neither, but once we do this will signal a shift from the US Dollar as secure to the US dollar as a high risk.  Expect other currencies in better situtations than us to see their currencies gain value, while the major winners will be commodities and gold.

How to remember!

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I was reading an article on Dr. Gary North’s site about remembering. If you aren’t a follower of his works I highly recommend taking a look.  He can be found here. He looks at the world from the perspective of an Austrian economist and offers many great insights into the world in which we live.

Anyways, how to remember… it really is quite simple.  Anytime you want to remember something that you are reading or came across, take a moment to lecture to the wall.  Yes you read that correctly, lecture to the wall.  I’m going to give this a try everyday and let you know how it goes.  For starters the idea is that you only truly know something if you can explain it to others.  I completely agree with this.  So, imagine that you have an audience and try and explain what you just learned to them.  Once you are able to do so the odds are that you won’t forget it.  Oh and yes if you have to go back and read it again there is no harm in that and as you do this repeatedly it will become easier.

I wish I had been told this during college, but alas it isn’t too late to whip the cognitive functions around a bit.  Happy remembering!

GDP growth 3.3% annually? Up from 1.9%? Right…

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GDP cries foul!

When the numbers emerged today I was shocked. After my initial amazement sunk in I started to wonder what was “really” going on here…

My eighth grade science teacher (yes 8th grade was a long time ago) managed to prove through statistics that I and everyone else in the class didn’t exist. Fishy indeed! If I didn’t exist according to statistics, but was still sitting in the classroom with the other student and the teacher himself then one of two things were completely incorrect. One might have been an illusion (think The Matrix)… Well, we know it was the stats because I’m sitting at my computer writing this entry.

So, if we can prove something doesn’t exist through statistics, which are really just a mathematical representation of data, can we manipulate our results through statistics?

I highly doubt that the GDP is actually positive. Take a look at shadowstats.com, which undoes as much of the governmental massaging of the numbers as possible. At the moment we are actually at about a 9% annualized rate of inflation, and GDP is negative. Wait, GDP was just shown to be 3.3% annualized… again what does this all mean?

What recession?

We aren’t in a recession or at least that is the official figure. Of course we aren’t because to be in a recession requires two consecutive quarters of negative growth. Remember: We are in an election year! Interestingly according to shadowstats.com, we have had a negative GD since 2004.

I’m just skimming the surface and attempting to draw to your attention that what you see isn’t necessarily what you get. We are in a recession, and have been in a recession for quite some time now. However, the government wants us to believe that everything is okay, and that the economy will recover. My fear is that all this manipulation will lead to an even larger bust.

Look around you… are you seeing more for-sale signs of homes, more for-lease signs around town, people shopping less, more concerned about their jobs, etc…? These are not signs of economic growth, but fear.

So what?

Let’s make a prediction as these are always fun. If I’m right I get to stroke my ego a bit, and if I’m wrong… well I’m wrong.

The manipulation will continue as long as possible, but the market will prevail. Once it realizes the degree of major contraction in growth and productivity people’s sentiment will further shift as it is starting to now. Spending will dry up, credit won’t be lent, defaults will further, housing will keep falling, the US stock markets will free-fall, the dollar will resume its decline, and gold, silver, and commodities will eventually resume their bull market. Wow that is a mouthful. Might I be wrong…? Of course! If I could predict the future I would own an island and call it Gauntlett.

The election…

I’m going to go as far as to say that our markets are severely manipulated NOT by speculators, but by various government officials and policy. Going into the election with a perceived strong economy will give the incumbent’s party an edge that just might help them stay in office. We will know in November. After November the Fed won’t need to have such a loose monetary policy and might start to think about inflation and raise interest rates if the market doesn’t demand it sooner due to the risk of inflation to your savings and purchasing power. (Note: I didn’t say higher prices because what is really happening is your dollars are becoming worth less as more are put into circulation by the Fed.)

Conquering your Ego

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Investing in your ego is perilous to your bottom line.

So, why is it that when we come across a investment idea that we wait until a confirmation to act? We act after a major move, get it when everyone else already has and act like sheep. Have you ever said to yourself – “I knew that was going to happen”. Sure we all have had moments of genius, and done nothing about them.

When an idea or potential action is at its infancy we hesitate for a variety of reasons. For me personally it is the fear that I might be wrong. Well, there are things to safeguard against such fears such as stop-loss orders, options, hedges, etc… Staying paralyzed does us no good as the opportunity will pass as quickly as it came.

Jumping onto the boat or making a trade late in the game might sound like a good idea. However, one must carefully evaluate if that is true. After a major move is your initial idea still valid? Has the environment changed? What is your time horizon?

Instead our ego jumps into the picture and says don’t be left behind, or I was right then so I’m still right. Then once you are in and want to be right about the direction you choose you hope and prey, but alas it is going against you. First a couple points, and then a few more. You are almost to your stop-loss (assuming you placed one) and decide to move it down a bit more. You know you need to keep it in place, but your ego jumps in again and says you were right so hold on.

Well, the more I read and also the more I understand myself the above isn’t fantasy, but a harsh reality. We all like to be right and love to feed our ego’s. If your ego is still running full-ahead (remember Titanic) – if you are saying “what ego?” or “I don’t know what you are talking about” then I recommend reading the following:

I read it and it is a start to get my ego in check, and emotions out of the markets. If you are able to see that your ego is acting on your behalf you are one step closer to knowing your strengths and weaknesses.