This is the title of a very well-prepared video made by Hal Weitzman, Dustin Whitehead and the Booth "Capital Ideas" team, based on interviews with many of our faculty. Direct link here (Youtube)
Monday, July 22, 2013
After A Long Leave Of Absence.
I have not been able to post anything for quite a while now.
It has been extremely busy and just keeping up with the weekly newsletter has been a challenge.
Let me quote from some of the newsletters that I had written in the last few months:
On June 5, I started to close all short positions and sent this email:
:Starting to close 50% of all positions (Except WEAT & CORN)
Then we long XIV around $20.50-$21 range.
On June 9, I wrote:
From a pattern standpoint, the pull back was corrective and with our short-term momentum work hitting oversold levels I have increasing evidence that Friday’s bullish reversal represents my anticipated June minor low. I would still see this as the basis for another bounce/rally into deeper June, anticipating a retest of the May high at 1670 to best case 1700.
XIV did well and continued to go higher. However, around June 19, the indices failed to clear 1650 and the correction resumed. Our resident troll started to send abusive emails but I said the following:
The stock market is ruled by fear and greed.
We are no exception.
We are mostly out of the market except for XIV and now that the indices have broken the earlier low, the momentum has shifted to the downside. However the downside is limited to SPX 1565-70 which will be enough to generate tons of short interest before the bounce.
I expect to see another bounce soon at which point we will close our XIV.
For now, do not give in to fear and panic.
Gold and silver has reached my downside price target but the cycles have not bottomed yet.
All in all, it is fishing time, and do not give in to fear or panic nor to greed.
Have a great weekend folks.
On June 30 I wrote the following:
From a daily trade point of view, I think we have seen the bounce and the correction will continue till 1st half of July. If 1560 is taken out in SPX, the next stop is 1535 and then 1510. But I am not fully sure whether 1560 will be taken out or not and hence I am hesitant to take a short trade here.
From a weekly perspective, I am fairly certain that we will see another rally to new high of around 1710 by 1st half of August.
On July 11, I wrote:
It has been extremely busy and just keeping up with the weekly newsletter has been a challenge.
Let me quote from some of the newsletters that I had written in the last few months:
On June 5, I started to close all short positions and sent this email:
:Starting to close 50% of all positions (Except WEAT & CORN)
Then we long XIV around $20.50-$21 range.
On June 9, I wrote:
From a pattern standpoint, the pull back was corrective and with our short-term momentum work hitting oversold levels I have increasing evidence that Friday’s bullish reversal represents my anticipated June minor low. I would still see this as the basis for another bounce/rally into deeper June, anticipating a retest of the May high at 1670 to best case 1700.
XIV did well and continued to go higher. However, around June 19, the indices failed to clear 1650 and the correction resumed. Our resident troll started to send abusive emails but I said the following:
The stock market is ruled by fear and greed.
We are no exception.
We are mostly out of the market except for XIV and now that the indices have broken the earlier low, the momentum has shifted to the downside. However the downside is limited to SPX 1565-70 which will be enough to generate tons of short interest before the bounce.
I expect to see another bounce soon at which point we will close our XIV.
For now, do not give in to fear and panic.
Gold and silver has reached my downside price target but the cycles have not bottomed yet.
All in all, it is fishing time, and do not give in to fear or panic nor to greed.
Have a great weekend folks.
On June 30 I wrote the following:
Yes, the low came in early.
For those of us who cannot wait and must have something going, here are two items worth going long with:
SLB: with a sell stop at $ 74.00
XOM: with a sell stop at $ 89.60
The target for upside moved a little bit. SPX can go upto 1740.
Now the XIV is at $25.78 (I had sold 50% of XIV at a loss of about a buck), SLB is at $84.80 and XOM is at $94.83 and I have advised subscribers to book profit.
How is that for hitting the ball, Mr. Troll?
We are still waiting for the cycle bottom of gold and silver and waiting to short treasuries. We are mostly in cash and I am asking readers to raise as much cash as possible and be patient.
Do not be greedy like the Troll nor be a spineless snake.
If you want to be on the right side of the market, you can join the readership and subscribe by donating $99 per month by clicking the "Donate" button.
However, I do not trade very much and wait for the right opportunity with a very long term outlook. I am not a day trader nor do I care for the short term moves. I am looking forward to what is going to happen in few months, not in few days. So if you have a short term outlook, you will be wasting your time and money. If you do not have the patience and want to buy or sell always, the talking heads in TV will be a better bet. I am not looking to become a mass market newsletter writer nor am I looking to become rich by selling subscription.
Thanks for reading this post and good luck investing everyone.
For those of us who cannot wait and must have something going, here are two items worth going long with:
SLB: with a sell stop at $ 74.00
XOM: with a sell stop at $ 89.60
The target for upside moved a little bit. SPX can go upto 1740.
Now the XIV is at $25.78 (I had sold 50% of XIV at a loss of about a buck), SLB is at $84.80 and XOM is at $94.83 and I have advised subscribers to book profit.
How is that for hitting the ball, Mr. Troll?
We are still waiting for the cycle bottom of gold and silver and waiting to short treasuries. We are mostly in cash and I am asking readers to raise as much cash as possible and be patient.
Do not be greedy like the Troll nor be a spineless snake.
If you want to be on the right side of the market, you can join the readership and subscribe by donating $99 per month by clicking the "Donate" button.
However, I do not trade very much and wait for the right opportunity with a very long term outlook. I am not a day trader nor do I care for the short term moves. I am looking forward to what is going to happen in few months, not in few days. So if you have a short term outlook, you will be wasting your time and money. If you do not have the patience and want to buy or sell always, the talking heads in TV will be a better bet. I am not looking to become a mass market newsletter writer nor am I looking to become rich by selling subscription.
Thanks for reading this post and good luck investing everyone.
Same Ole; Same Ole
So what is the New York Times offering up this morning.
First, European sovereign debt continues to skyrocket to new levels -- both in absolute terms and as a percentage of GDP. Guess the bailout is working, if more debt is the goal. Meanwhile the long running recession in the Eurozone continues unabated with no end in sight.
What about the US? Economists are now busily reloading their economic forecasts, according to the NY Times this morning, to accommodate much slower economic growth in the US than they anticipated previously. The latest consensus forecast -- 1.5 percent. That's barely a pulse.
Meanwhile the same article puzzles over why this is such a jobless recovery. They should be reading my blog.
Here's what they are missing: employers do the hiring. The Times (and the Obama Administration) don't seem to get that. Along with their main cheerleader, Paul Krugman, the Times believes that government borrowing and spending is all it takes to convince someone to hire employees. After five years of this, you would think they would see the folly of their ways.
The coup de grace this morning is, of course, the NY Times' coverage of Detroit. Think of Detroit as a snapshot of the American future -- promises abandoned, hopes crushed, politicians running for cover, unions screaming for justice, and no money left in the till. NY Times can't seem to figure out how Detroit came about (especially while the auto industry's profits are soaring).
Same ole NY Times.
First, European sovereign debt continues to skyrocket to new levels -- both in absolute terms and as a percentage of GDP. Guess the bailout is working, if more debt is the goal. Meanwhile the long running recession in the Eurozone continues unabated with no end in sight.
What about the US? Economists are now busily reloading their economic forecasts, according to the NY Times this morning, to accommodate much slower economic growth in the US than they anticipated previously. The latest consensus forecast -- 1.5 percent. That's barely a pulse.
Meanwhile the same article puzzles over why this is such a jobless recovery. They should be reading my blog.
Here's what they are missing: employers do the hiring. The Times (and the Obama Administration) don't seem to get that. Along with their main cheerleader, Paul Krugman, the Times believes that government borrowing and spending is all it takes to convince someone to hire employees. After five years of this, you would think they would see the folly of their ways.
The coup de grace this morning is, of course, the NY Times' coverage of Detroit. Think of Detroit as a snapshot of the American future -- promises abandoned, hopes crushed, politicians running for cover, unions screaming for justice, and no money left in the till. NY Times can't seem to figure out how Detroit came about (especially while the auto industry's profits are soaring).
Same ole NY Times.
Saturday, July 20, 2013
Denial in Detroit
Detroit's problems are not the fault of the decline of the auto industry -- an industry that is, in fact, on a bit of a roll these days. Detroit's problems are the same problems that plague Illinois, California and the US Treasury -- promises paid for with ever increasing levels of promises and debts.
Detroit's problems were compounded by corrupt and incompetent politicians, which are a staple of modern big city government in the US. Citizens vote for these folks, so there is some justice in the fact that these cities are all collapsing fiscally. The absurd notion that taxing a few rich people can solve a city's problems simply matches a similar absurd notion at the national level. (Taxing a few rich people is mainly a way of having rich people move to friendlier places).
No defined benefit pension plan is ever going to survive. Social security is a defined benefit system . It won't survive either. Any system that makes future promises without any means of payment is not going to make it. Detroit is just the beginning; Chicago can't be far behind. And yes, Virginia, you will have your day in the bankruptcy court as well.
All of those defenders of defined benefit systems forgot to ask what happens when there is no money to pay the benefits. Is the great advantage of a professional investment process worth much when the system can't pay the benefits? Even bad investments by individuals in defined contributions systems would have been way better for Detroit pensioners than the outcome that is headed their way.
By the way, it is worth noting that it is not possible to be on a financial loss if you own a typical index fund. Not possible. How's that? Well, as of Thursday's close, the stock market has never been higher.
For all of the villification of Wall Street by the Obama Administration and the media, it turns out that a simple buy-and-hold strategy by ordinary investors is a ticket to wealth that has been and is available to everyone. I bet a lot of Detroiters now wish they had had the opportunity to opt out of the defined benefit system and invest their own money, their own way.
Not to mention that if you have a defined contribution plan and you die, your children can inherit the assets, something that cannot happen with defined benefit and and its twin -- social security.
Just like ObamaCare, promises are made that politicians have no intention of keeping. But, the media pretends that these promises are true. Detroit shows us the reality.
Detroit's problems were compounded by corrupt and incompetent politicians, which are a staple of modern big city government in the US. Citizens vote for these folks, so there is some justice in the fact that these cities are all collapsing fiscally. The absurd notion that taxing a few rich people can solve a city's problems simply matches a similar absurd notion at the national level. (Taxing a few rich people is mainly a way of having rich people move to friendlier places).
No defined benefit pension plan is ever going to survive. Social security is a defined benefit system . It won't survive either. Any system that makes future promises without any means of payment is not going to make it. Detroit is just the beginning; Chicago can't be far behind. And yes, Virginia, you will have your day in the bankruptcy court as well.
All of those defenders of defined benefit systems forgot to ask what happens when there is no money to pay the benefits. Is the great advantage of a professional investment process worth much when the system can't pay the benefits? Even bad investments by individuals in defined contributions systems would have been way better for Detroit pensioners than the outcome that is headed their way.
By the way, it is worth noting that it is not possible to be on a financial loss if you own a typical index fund. Not possible. How's that? Well, as of Thursday's close, the stock market has never been higher.
For all of the villification of Wall Street by the Obama Administration and the media, it turns out that a simple buy-and-hold strategy by ordinary investors is a ticket to wealth that has been and is available to everyone. I bet a lot of Detroiters now wish they had had the opportunity to opt out of the defined benefit system and invest their own money, their own way.
Not to mention that if you have a defined contribution plan and you die, your children can inherit the assets, something that cannot happen with defined benefit and and its twin -- social security.
Just like ObamaCare, promises are made that politicians have no intention of keeping. But, the media pretends that these promises are true. Detroit shows us the reality.
Friday, July 19, 2013
Health Insurance and Labor Supply
I just ran across an interesting paper, "Public Health Insurance, Labor Supply, and Employment Lock" by Craig Garthwaite, Tal Gross and my Booth colleague Matthew Notowidigdo.
They study an interesting event
They call the phenomenon "employment lock." This is different from "job lock," people with preexisting conditions who stay with jobs they didn't want in order to keep health insurance. "Employment lock" is the choice by healthy people to work at all in order to get insurance, or put in academic prose, "strong work disincentives from public health insurance that are unrelated to strict income-based eligibility limits."
The converse is a new danger for the ACA
However, less employment is not necessarily a good thing either. These are childless adults. How are they supporting themselves if they don't work? Can it possibly be optimal for them to just sit around the house? We surely don't want to compare employer-provided health insurance with highly subsidized individual insurance for the unemployed-- that's a subsidy to leisure and obviously skewing the scales.
Most of all, low-income single people face extraordinarily high marginal tax rates and other disincentives to work. So, an artificial incentive to work in order to get health insurance may offset some of the otherwise irresistible incentives not to work. (A good calculation for Casey Mulligan!)
And whether the people are in the end better off working or staying home and receiving larger subsidies, the government and taxpayers are clearly worse off, as the people and their employers are not paying taxes any more.
In sum, academic caution aside, inducing a million childless adults to leave legal employment doesn't look like a good thing to me.
The evidence is pretty cool. Here are some pictures lifted from the paper.
They study an interesting event
... In 2005, Tennessee discontinued its expansion of TennCare, the state’s Medicaid system. ... Approximately 170,000 adults (roughly 4 percent of the state’s non-elderly, adult population) abruptly lost public health insurance coverage over a three-month period.The result was
a large and immediate labor supply increase....we find an immediate increase in job search behavior and a steady rise in both employment and health insurance coverage.
They call the phenomenon "employment lock." This is different from "job lock," people with preexisting conditions who stay with jobs they didn't want in order to keep health insurance. "Employment lock" is the choice by healthy people to work at all in order to get insurance, or put in academic prose, "strong work disincentives from public health insurance that are unrelated to strict income-based eligibility limits."
The converse is a new danger for the ACA
Additionally, our estimates may provide useful guidance regarding the likely labor supply impacts of the ACA...They are quick to point out that this is not necessarily a bad thing."the effects do not necessarily imply a welfare loss for individuals choosing to leave the labor force after receiving access to non-employer provided health insurance." If people only work at a job they hate in order to get health insurance, then people may be better off not working. The policy world often just assumes more employment is always a great thing, which isn't true.
If such individuals could instead acquire affordable health insurance apart from their employer, many of them would exit the labor force entirely. As a result of employment lock, policies that expand access to health insurance apart from employers (such as the ACA) may have large labor market effects
... Using CPS data, we estimate that between 840,000 and 1.5 million childless adults in the US currently earn less than 200 percent of the poverty line, have employer-provided insurance, and are not eligible for public health insurance.Applying our labor supply estimates directly to this population, we predict a decline in employment of between 530,000 and 940,000 in response to this group of individuals being made newly eligible for free or heavily subsidized health insurance.
However, less employment is not necessarily a good thing either. These are childless adults. How are they supporting themselves if they don't work? Can it possibly be optimal for them to just sit around the house? We surely don't want to compare employer-provided health insurance with highly subsidized individual insurance for the unemployed-- that's a subsidy to leisure and obviously skewing the scales.
Most of all, low-income single people face extraordinarily high marginal tax rates and other disincentives to work. So, an artificial incentive to work in order to get health insurance may offset some of the otherwise irresistible incentives not to work. (A good calculation for Casey Mulligan!)
And whether the people are in the end better off working or staying home and receiving larger subsidies, the government and taxpayers are clearly worse off, as the people and their employers are not paying taxes any more.
In sum, academic caution aside, inducing a million childless adults to leave legal employment doesn't look like a good thing to me.
The evidence is pretty cool. Here are some pictures lifted from the paper.
Wednesday, July 17, 2013
A Ray of Hope? Hospitals Post Prices
I was intrigued by news stories of an Oklahoma hospital posting prices for surgery -- prices far below those offered by its competitors. Here is the article and the surprisingly low price list. Several competitors felt the pressure to slash and post prices.
A fascinating tidbit: "Surgery Center of Oklahoma does accept private insurance, but the center does not accept Medicaid or Medicare. Dr. Smith said federal Medicare regulation would not allow for their online price menu. They have avoided government regulation and control in that area by choosing not to accept Medicaid or Medicare payments." Well, so much for the idea that regulations encourage competition and lower prices.
This is a ray of hope -- that the sort of competitive free market health care I envisioned in "After the ACA" can emerge as people abandon the complete dysfunctionality of the highly regulated system.
I had seen the emergence of "concierge medicine," and cash and carry doctors, who step off the highly regulated insurance and government treadmill. But if you get really sick, you need a hospital. And traveling abroad isn't always an option. So the emergence of US cash and carry hospitals is interesting and encouraging.
Readers: I'm back from a short vacation (national gliding contest), sorry for the silence.
A fascinating tidbit: "Surgery Center of Oklahoma does accept private insurance, but the center does not accept Medicaid or Medicare. Dr. Smith said federal Medicare regulation would not allow for their online price menu. They have avoided government regulation and control in that area by choosing not to accept Medicaid or Medicare payments." Well, so much for the idea that regulations encourage competition and lower prices.
This is a ray of hope -- that the sort of competitive free market health care I envisioned in "After the ACA" can emerge as people abandon the complete dysfunctionality of the highly regulated system.
I had seen the emergence of "concierge medicine," and cash and carry doctors, who step off the highly regulated insurance and government treadmill. But if you get really sick, you need a hospital. And traveling abroad isn't always an option. So the emergence of US cash and carry hospitals is interesting and encouraging.
This innovation clearly undermines the regulated system. A healthy young person knowing there are doctors who post reasonable prices and take cash, and now similarly reasonable cash and carry surgery, might be well advised to pay the Obamacare tax and skip out of the whole system. A bit of savings or a catastrophe only policy is enough.
But before you cheer that Obamacare will die of its own weight, look hard at the other side. The government needs everyone in the system, especially the relatively healthy and solvent customers of this hospital. It also needs hospitals and doctors to take medicare patients. The emergence of a two-track system is a financial and political disaster. So, how long can it last before the government bans it? Other countries have banned private practice to support their government health systems. Ours will likely go down fighting, and this is the obvious move. In addition, the hospitals that don't want to compete have strong political power to shut this down, and will make the same cherry-picking complaints that airlines and phone companies used to keep their protections in place. It will not survive easily.
The 1970s Without the Inflation
We are now entering a long term period of economic stagnation that is reminiscent of the 1970s. The only real difference is that inflation is subdued today. The term "stagflation" came to prominence as a description of the 70s economy, as inflation soared toward the end of the the 1970s. Ronald Reagan rescued us from all of that after his election in 1980. How soon we forget.
Inflation, of course, is only temporarily subdued. The only way to retire our absurd debt levels is to inflate our way out of them. That's coming.
For now, we live in world of never-ending promises of things that cannot possibly come to pass -- medicare, social security, ObamaCare, state and local pension funds. All of these things will run out of funding within the lifetime of those now reaching adulthood. As politicians dream of even more things to promise the citizenry, the funding for the existing promises is rapidly drying up.
Meanwhile, a dwindling percentage of Americans are actually working these days. While records are being set every day in the percentage of Americans on welfare, on food stamps, on disability, the percentage of the economy devoted to the free market is shrinking.
The culture is following suit. Think of the last time that you watched a television show where the bad guy wasn't a businessman or woman -- polluting the environment, stealing from unwitting investors, or fleecing someone in a novel way. Who are the media heroes? -- the government or the non-profit world (or media).
Making a profit is viewed with suspicion in our modern American culture. Unfortunately, that means creating wealth and hiring folks is tainted with the same brush. There is a certain consistency here, since working for a living is losing its hold on the American lifestyle.
Inflation, of course, is only temporarily subdued. The only way to retire our absurd debt levels is to inflate our way out of them. That's coming.
For now, we live in world of never-ending promises of things that cannot possibly come to pass -- medicare, social security, ObamaCare, state and local pension funds. All of these things will run out of funding within the lifetime of those now reaching adulthood. As politicians dream of even more things to promise the citizenry, the funding for the existing promises is rapidly drying up.
Meanwhile, a dwindling percentage of Americans are actually working these days. While records are being set every day in the percentage of Americans on welfare, on food stamps, on disability, the percentage of the economy devoted to the free market is shrinking.
The culture is following suit. Think of the last time that you watched a television show where the bad guy wasn't a businessman or woman -- polluting the environment, stealing from unwitting investors, or fleecing someone in a novel way. Who are the media heroes? -- the government or the non-profit world (or media).
Making a profit is viewed with suspicion in our modern American culture. Unfortunately, that means creating wealth and hiring folks is tainted with the same brush. There is a certain consistency here, since working for a living is losing its hold on the American lifestyle.
Subscribe to:
Posts (Atom)