ACA Gravy Train

ACA Gravy Train

In the annuals of history, there has naught been a bigger Gravy Train than the passing of the "Affordable Care Act" on March 23rd, 2010. It is a day that will live in infamy.  Imbued with the power of nation-states by the Sun King Barrack Hussein Obama, health insurers were granted pass-through monopolies.

Consider the charts above of the four largest remaining publicly traded health insurance companies. Almost to the day of ACA passage there has been a meteoric rise in their respective share prices. How is this possible? Amazing care? Deft management? Sweeping reform? Oh no dear readers, these companies have the implicit power to charge whatever the market will bear...and if you can't afford it, the government will pay your premium, but if you can afford it and DO NOT pay, then you can go to jail (the government of course determines "affordability.") Got that? 

So while Chicago burns this summer (both figuratively and literally), its most famous son, who vowed that "the South Side of Chicago is my Martha's Vineyard," is inking yet another lucrative media deal at his estate in...Martha's Vineyard.

The hypocrisy is as thick as our vast oil reserves that can't be pumped. In terms of corruption and maleficence perpetrated on the American people, the ACA ranks high. Consider the fallacy of mandating purchases, at any price, from private companies with geographic monopolies, of a product you may or may not use, but you are required to buy less face the loss of your freedom. Preposterous.

If there's one thing we've learned at ILAF though, crazy pays. Consider all the innovation in the tech space over the past decade. Or in EVs. Or in just about EVERY industry. The only thing healthcare seems to have innovated is consolidation, increased premiums, and higher share prices. Now that dear readers is true innovation! 

Bear Market Hell

 Bear Market Hell

Today marks the beginning of the Bear Market Hell. Although this country has endured much over the past 2 years, today we are embarking on something totally new...and painful. What was once the land of milk and honey has become one of soaring inflation, government disfunction, and most sadly the killing of thousands of innocent Ukrainian lives as we are on the cusp of WWIII. In the shadows lurks the bear.

A bear market is historically defined as a 20% or more fall from the market's highs, and in this instance we are refereeing the all-important NASDAQ market which has become the barometer for world innovation and advancement. It has badly stubbled, and we are now in a full-on Bear Market.

Bear Markets are brutal for investors who own long position in stocks because the equity in many ways becomes a value trap, ie the asset withers away on a daily basis, even though it might be supported by reasonable price-to-earnings ratios, a solid dividend, and a leading market position none of that really matters in a Bear Market. The only thing that matters in a Bear Market is survival. Fear is everywhere.

Assume we'll be in the bear's dark cave for some time, as there is no end in sight for the current fiscal policy, energy regulations, or leadership failures. We're stuck. Investors with long-term views, think decades, can find increasingly good deals out there. In fact, those old curmudgeons Warren Buffett and Charlie Munger LOVE the opportunities a Bear Market presents; much suffering, plenty of misery, and a huge serving of stocks-on-the-cheap. They feast fear.

What to do, what to do? With little hope on the economic policy front, little chance of domestic energy being reignited, and a war looking more like a siege, investors need to be wary of committing assets. Cash has become king again, and investors can survey the field of battle for carrion like vultures for purchases.

It is hard to believe we're not headed for a recession now. The benchmarks have spoken their truth, and investors are finally listening. "Nature, time, and patience are the great healers," but hopefully voters are the fourth great healer this November.

Financial farmers need to be patient here. Long-term capital can be deployed with care on great brands broken low. Stagflation has also risen its ugly head, so beware of companies that can't (or won't) pass along price increases. We may have 8 months of pain ahead with markets whipsawing back-and-forth until new leadership takes power. Until then, a siege mentality is appropriate (and warranted.) 

Crimea 2.0

 Crimea 2.0

Eight short years ago we were just wrapping up the Winter Olympics when Russia invaded Ukraine and seized the Crimea. President Obama did nothing. The milquetoast response of "sanctions" were roundly brushed off by the Russians. The situation in the Ukraine today feels like Crimea 2.0. Does the European Union, NATO, or the United States have the backbone to prevent war? Probably not.

Investors ignore situations like this at their own peril; students of history are well aware of how the Balkans helped launch World War I with the assassination of Archduke Ferdinand. This catalyst caused a domino effect nearly 100 years ago. It isn't a far conjecture to see the chess board set-up quickly in 2022 as an early decisive move seems eminent. Frankly, it baffles the mind of this Western pro-democracy supporter of how the entirety of Western Europe and the United States is yet caught on their heels yet again as a Russian Military force effectively dictates the battlespace.

The most likely result will be further solidification of Ukrainian sovereign land into the Russian Federation. If recent history is any indicator, neither the rhetoric or economic sanctions proposed by Western Europe or the United States will have any stopping power. The Ukraine may in its entirety fall under Russian control. There is a strong possibility given the spineless response from the West that Ukraine could even be taken without a shot. Why? Simply put, Western Europe needs Russia more than Russia needs Western Europe; Russia supplies over a third of all power to Western Europe in the form of its natural gas and oil pipelines. This does not bode well for Ukraine.

Obviously this possible invasion is a serious problem for democracy in Ukraine, but it also further establishes a terrible precedent of a U.S. and Western Europe malaise and unpreparedness. Neither are good traits agains a Russia that is clearly capable of immediate action. Investors take note; the Russian Federation is proudly wearing their laurels as we sit on ours. Besides the clear violation of Ukrainian sovereignty, the very real possibility of further unimpeded annexation exists, all the while the West conducts meetings on what to do that should have occurred years ago.

Raising some cash here probably isn't a bad idea, and it is hard to believe that both the energy and gold markets won't express their concerns. Natural gas in particular looks like it is held in the crosshairs.  Watch this situation closely, obscure maneuvers in far-off lands often ultimately have dire global results. Putin knows he's playing chess with a pigeon, and Xi will feel emboldened to take Taiwan after the Olympics this year as his "Gold Medal" on the world stage if the West does nothing (again) in Ukraine.

Complete & Utter Repudiation

     The American voters have spoken, and they have completely and utterly repudiated the Obama and Clinton big government ideology of a nanny state infringing on personal rights, choices, and decisions. This is a victory for the Republic as a whole as history will soon begin to illustrate. In the coming weeks and months changes to the tax code, Supreme Court, and health care industry will have far-reaching and liberating effects for Americans of all walks and stages of life.

     From an investment standpoint, a Trump presidency offers the opportunity for large corporations to repatriate several trillion dollars back into the United States at a proposed flat tax rate, lowering of the corporate tax rate to 15%, lower of personal income tax rates for Middle Class Americans, restructuring trade deals, rebuilding the infrastructure of roads, bridges, and transportation hubs. In addition, both biotech and the defense industries stand to benefit as the free flow of capital returns to innovation. These are several of the many proposed economic improvements that the Trump ticket has focused on during his campagin. 

     The net effect to average Middle Class American should be an increase in real wages, job security, national security, opening of educational opportunities, and rebuilding of the core physical infrastructure and health care systems. Long live the Republic.

Russia Seizes the Crimea

With the highest medal count in the Olympics already realized, the Russian Federation took one more leap for the gold today seizing the Crimea after the effective collapse of the Ukrainian government. All of this occurred on the watch of an obviously unprepared Western Europe and a milquetoast U.S. Administration.

Investors ignore situations like this at their own peril; students of history are well aware of how the Balkans helped launch World War I with the assassination of Archduke Ferdinand. This catalyst caused a domino effect nearly 100 years ago. It isn't a far conjecture to see the chess board set-up quickly in 2014 as an early decisive move has already been made. Frankly, it baffles the mind of this Western pro-democracry supporter of how the entirety of Western Europe and the United States could have been caught completely on their heels as a Russian Military force in excess of 15,000 troops effectively invaded an established democracy and seized power. 

The most likely result will be the solidification of the Crimea into the Russian Federation along with other pro-Russian areas of the Ukraine where ultimately only pockets of unsupported pro-Western Ukrainians will remain. If recent history is any indicator, neither the rhetoric or economic sanctions proposed by Western Europe or the United States will have any stopping power and Ukraine may in its entirety fall under Russian control. There is a good possibility given the response from the West that Ukraine could be taken without a shot. Why? Simply put, Western Europe needs Russia more than Russia needs Western Europe; Russia supplies over a third of all power to Western Europe in the form of its natural gas and oil pipelines.  This does not bode well for Ukraine.

Obviously this invasion is a serious problem for democracy in Ukraine, but it also further establishes a terrible precedent of U.S. and Western Europe weakness and unpreparedness. Neither are good traits against a Russia that is clearly capable of immediate action. Investors take note; the Russian Federation is proudly wearing their laurels as we sit on ours. Besides the clear violation of Ukrainian sovereignty, the very real possibility of further unimpeded annexation exists, all the while the West conducts meetings on what to do that should have occurred months ago. Raising some cash here probably isn't a bad idea, and it is hard be believe that both the oil and gold markets won't pop on Monday. If anything is going to take some steam out the recent bull market, I suspect this is the start. I'm very curious to see what China will do in reaction to this invasion of a democracy by the Russian Federation. Watch this situation closely, obscure maneuvers in far-off lands often ultimately have dire global results.