In an attempt to find a silver lining to the Obamacare decision, it’s worth noting that the Supreme Court’s unfortunate decision doesn’t change our main challenge in healthcare.
Third-party payer was our biggest problem before Obamacare was enacted, and third-party payer remains our biggest problem now that Obamacare is being implemented.
Rickards, hedge fund manager and the author of the must read Currency war, delivers some rather harsh comments regarding the derivatives world. Ban derivatives….From USN.
Myth No. 3: Bank management has derivatives risks under control using mathematical models that capture the complex interaction of factors embedded in derivatives trades. This view is laughable on its face given the continual series of notorious derivatives fiascoes from Long-Term Capital Management to AIG to J.P. Morgan and many others.
Yet, this myth is pernicious at a deeper level because many bank managers actually believe it. They have constructed elaborate management tools based on empirically false assumptions about the frequency and severity of bad events and the correlations among them. Risk managers sometimes acknowledge these limitations but then say their tools are “better than nothing.” This is false too. Bad tools are not better than nothing. They lead to bad investments with the taxpayers picking up the losses every time things go wrong. It would be more honest to admit what we don’t know and limit derivatives until the state of the art improves.
PIMCO shares some thoughts on how to construct your portfolio in this “new” normal.
- Asset classes are likely to be affected by the situation in Europe and, more broadly, by high debt levels in developed countries. The related political debate about austerity vs. growth is also critical.
- Fixed income investors should note whether countries control their own currencies and can monetize their debts. Those that can may be greater inflation risks. Those that cannot may be greater credit risks.
- These factors are contributing to market volatility and lower returns, which in turn are challenging investor expectations about asset classes.
- We encourage investors to broaden their opportunity sets, for example, looking more closely at emerging market government bonds. They also may consider assets such as real estate and commodities, which may partially replace traditional domestic equities.
Guest post by Lance Robert of Streettalklive.
At the end of last year we began discussing the issues of the excessively optimistic views of the mainstream media and analysts, who were confusing a skew in the seasonal data caused by an unseasonably warm winter and global Central Bank interventions with an organic economic recovery.(See the report “Pollyanna Meets the Economy” for a primer - free membership required) The problem with maintaining an “optimistic bias”, which attracts readers and viewers for media driven outlets, is that it fogs the lens of logical thinking. The recent releases of consumer sentiment and retail sales are clearly a story of an economy that, while statistically growing, remains in recession for Main Street America.
Personal consumption expenditures drive a little more than 70% of economic growth in the U.S. as shown in the first chart below. Therefore, it is no surprise that watching consumer confidence, retails sales, personal savings rate and changes in credit can tell you a lot about the real state of the consumer and the likely impact on the economy in the future.