The year was 2003. My former wife and I were living in Nevada and expecting a child. Problem was, we were without health insurance and were faced with paying for the baby’s delivery and a subsequent hospital stay.
As a former health care senior administrator responsible for several medical centers in the Midwest, I figured I could exert influence to ensure that our bill was manageable. So a few days before my wife was admitted while in the throes of labor, I took the initiative and asked a Nurse Manager whether he could provide an itemized estimate of our hospital bill. Open-mouthed in disbelief at my question, he was clearly lost for words.
As an advocate for free market competition in the healthcare industry, I am astounded that a price list is not provided prior to medical services being rendered. Pricing is something that every consumer deserves to know in light of the fact that more than one-sixth of the U.S. economy is devoted to healthcare spending, a percentage that continues to rise every year. The ramifications of this are severe: higher costs for health insurance (even under the Affordable Care Act, a.k.a Obamacare), the perilous state of our nation’s flimsy safety net and our long-term fiscal woes.
Rand Paul, Republican Senator from Kentucky and a Presidential Candidate, says in his new book ‘Taking A Stand: Moving Beyond Partisan Politics to Unite America’, the problem with Obamacare, and even the old system, is that when insurance or government pays for the first dollar of healthcare, the consumer doesn’t care about the price and neither does the physician; without a market, the price keeps going up.
Paul, who is a board-certified Ophthalmologist, believes that consumer choice is the key to transforming today’s broken healthcare system into one that truly places the patient first. He bristles at the lack of thoughtful consideration on the part of political leaders with respect to a solution. He advocates a model that combines tax-free health savings for routine visits with a catastrophic insurance plan for serious health issues. Doing this, he says, would force healthcare providers to compete on price and quality care: two fundamental elements in a high-quality healthcare system. “
I have an embarassing confession to make……..
Due to my meager earnings these past three years, I officially meet the government’s threshold for poverty. Yep, you read that correctly: pure-on 100% original Made in America poverty.
Talk about being hard to swallow, after having been a middle-to-upper income earner almost all my life.
The main catalyst for my present circumstance was a divorce which left me with clothes and bare essentials. It’s been very humiliating at times because people do judge you. I never imagined waiting for a public bus while enduring weather extremes, couch surfing at the homes of strangers, or trolling networking events for free food.
For me, this face-plant-in-the-mud period of my life has delivered untold wisdom and perspective about the ugly financial truths that face so many Americans. I continue to be intrigued by the number of people I encounter daily who are deep in the trench of silent dispair, including small business owners, college students, baby boomers and even former top-level executives. In my opinion, none of this has to do with a lack of willingness to work hard or a desire to succeed. Rather, I believe it’s largely the result of systemic forces like unsustainable wages, public mandates, rising housing and food costs, and onerous government regulations that are quietly chipping away at our economic freedoms.
But despite my recent experiences, I remain an avowed advocate of free market capitalism. More on that in a bit. “
The Federal Reserve concluded their two-day meeting on Thursday, announcing that rates will remain unchanged. Traders and investors were not expecting a rate increase, so the announcement was no surprise. Although for some time now the Fed has been hinting at starting on a path of increasing rates, Thursday’s announcement actually shows they are not likely to start this anytime soon, with more excuses ‘not to raise’ being added to the list.
The Fed has been talking a big game this past year of getting interest rates back to more normal levels, since they have been near zero since December of 2008 (almost seven years ago!). Therefore, it was previously thought that by the end of 2015, the Fed would start raising rates and that this September meeting – or at the very latest, December – would be the start of rate increases.
But as I have previously noted, the Fed has everything to lose and not much to gain by raising rates. Their preferred measure of inflation is still low, below their 2% target level, and the economic ‘recovery’ has continued to look pretty weak. So if they raise rates, they risk crashing the economy in the near-term and getting all of the blame. Leaving rates low will cause asset inflation, or maybe even price inflation eventually, but this won’t happen until much later, at which time those things can be blamed on a host of other factors.
While the Fed likes to say they are data-dependent, pretending they are completely objective, it is obvious their decisions on interest rates are completely discretionary and largely arbitrary. With unemployment now at 5.1%, we were supposed to have had rising interest rates long ago, but the Fed abandoned those guideposts, and it became clear they didn’t want to raise rates yet.
The Fed has added another factor they can use to delay further rate increases: global economic and financial developments. The WSJ has a tool that compares the Fed’s latest statement with their last one in June, so we can see they have now added the following lines (in italics):
“Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term. The Committee continues to see risks to the outlook for economic activity and the labor market as nearly balanced, but is monitoring developments abroad.”
It’s becoming increasingly popular for Millennials to save their money instead of increasing their debt. This generation, while engendering the start-up boom, is simultaneously spending and saving wisely. This powerful shift in financial consciousness is partly a response to the devastating burden of student loans. With projected retirement at 65 becoming increasingly unattainable for Baby Boomers, Millenials understand this caution and know that a key factor here is one’s early creation of a meaningful personal savings account. I know, because I’m a Millennial myself and my entire financial strategy revolves around how much I can save each month.
I read about a younger couple who have cut their spending down so they can put away 71% of their income each month. I’m proud to say I’ve created a savings plan of about 55% a month, and it’s VERY do-able. Can you imagine saving an extra $500 a month? What would that mean for your overall savings plan? Here are a handful of ways to save/earn an extra $500 a month – or more – and increase your overall savings.
1. Don’t buy a drink at dinner. I won’t tell you to not go out to eat, although I can advise that getting food delivered or ordering take-out can save 15-20% off the price of a sit-down restaurant bill. Buying a drink at dinner can cost you close to the price of your meal. Most sit-down restaurants offer a cocktail menu ranging from $7-12 a drink, except during Happy Hour. So after two beers or two glasses of wine, you have run up a $14 pre-tax beverage bill, yet you hardly even have a buzz on
Now that the dust has settled somewhat after Monday’s incredible market rout, it is helpful for investors to take stock of where we are in terms of equities, bonds, gold and other asset classes and to look at what to expect for the future and how to best position our portfolios.
Stocks undoubtedly had a wild ride over the past couple weeks. The S&P 500 is now down over 6% for the past month, even after clawing back about half of its severe losses from Monday. Year-to-date, the S&P is still down 4%, faring better than the Dow Jones Industrial Average which is down over 7% YTD, but worse than the Nasdaq composite which is still slightly positive for the year.
Gold has been the big out-performer over the last month, up over 3%. Compared to stocks, which are down over 6% in the same period, gold has outperformed by nearly 10% over the past month! As Anthem Blanchard, CEO of Anthem Vault, states:
“Given that gold has been the best performing major asset class in August, it is pretty amusing to see all of the negative reports.”
It certainly has been interesting to see the media continue to be so negative on gold, even as investors are obviously ignoring the pundits. Historically, negative media reports are actually a good contrary indicator for gold which may be forming a solid bottom. The out-performance of gold during this past month also confirms gold’s ability to act as a hedge or dampener to a portfolio which is why it is helpful to always have a small portion of gold as insurance.
The global stock market sell-off continued on Monday with a vengeance as Asian markets plunged, followed by one of the worst one-day sell-offs in U.S. market history. The Dow ended down nearly 600 points or just over 3.5%, but at the opening of trading, it was down nearly 1,100 points! While investors and market participants can never know all of the reasons for the sell-off, there is an underlying theme to the global market rout that will continue to play an outsized role in the coming months: central banks.
Monday’s turmoil was certainly severe, and although it doesn’t make the cut for some of the worst days in stock market history, that didn’t stop some from taking to Twitter with #BlackMonday trending (for comparison, on the Black Monday of 1987, the Dow lost nearly 23% in one day.) Monday’s drop put many indices in or near ‘a correction’ which is usually regarded as being 10% off their highs.
The first question on everyone’s lips is “Why?” or “What started it?” but that is like asking “Which straw was it that broke the camel’s back?” However, it is true that the U.S. was taking cues from China’s markets with the Shanghai composite index down 8.5% the previous night, the biggest drop since the beginning of the last crisis in 2007. China’s stock market bubble continues to deflate because the government has either decided not to, or is unable to, prop up the markets, this being something we have covered here in the past. Feeding the China decline was their government’s surprise announcement to devalue the yuan a couple of weeks ago, prompting fears their economy’s growth is slowing.
More important than trying to discern the snowflake that caused the avalanche is to assess why and how markets came into such a fragile state that they could be caught off guard. After all, the decline was incredibly sharp and fast, and yet it wasn’t due to a comparable world event shock such as 9-11. I personally believe investors had previously been lulled to sleep by low interest rates, easy money, and a warm feeling that the Fed and other central bankers around the world have things under control.