Wednesday, October 23, 2024

Price Gouging

 Price Gouging


Healthcare insurance has become the perfect storm for price gouging. Like many gainfully employed hard-working Americans, I was shocked (but not surprised) to see my healthcare premiums spike up again, this time +15% year-over-year. Over the past 5 years this cost has doubled. How could this be? Isn't annual inflation 2.5%? Don't economies of scale typically LOWER prices? Hmmm.

Price gouging flourishes under unique economic circumstances, which typically right themselves in a free market; ie if one seller is gouging, then other sellers lower their prices to capture market share. Price gouging almost universally is short-lived. Unless it is engineered.

The danger arises when the market is manipulated by health insurance companies, healthcare providers, and politicians to engineer unfair economic incentives and laws. No one does this better than California, although Massachusetts is a close second. Not surprisingly, these are two of the five states still clinging to the individual mandate.

The individual mandate has been arguably the single most destructive pieces of legislation in history, mandating the purchase of services at a price set by health insurance monopolies in cahoots with government punishable by the IRS. Think about that one.

Access to healthcare is best provided by an open marketplace with multiple competitors vying for your business. By definition, the vast majority of medical services are commoditized services which have been established for decades; provider to patient, no middle man required should be the norm. Simple enough. The gouging begins when access itself is simultaneously squeezed from both ends (it sounds like an uncomfortable medical procedure, and it is.)

First, dollars flow from health insurance companies to politicians who restrict access to the market by defining which health insurance companies "own" certain counties or areas. ie They choose who can compete. Next, the politicians squeeze the constituents by mandating that they HAVE to use said insurance company in certain areas. Finally, the politicians appease the base by using taxpayer resources (read money) to subsidize as many people (not necessarily citizens) as possible.

"Free" is the most expensive word in the English language. When considered a "right" in the context of the healthcare system, high delivery costs are laundered through the hospital, clinic, physician, pharma, and admin systems to name a few. So a routine procedure at the ER which on its face value may cost $100, is ultimately billed out in the $10,000s+. That bill is then thrown into the "insurer pool" like a Baby Ruth on a hot summer day. Gouge the pool!

Monterey, CA is a great example of this price gouging gone amok, but there are hundreds of counties across the country in the same boat. A smaller and smaller pool of full-price payers gets gouged every year because they have no voice; the reality is our local Congressmen Jimmy Panetta happily helped engineer the current system. Residents of counties all across the country facing similar corruption have the same tough choices; vote with your feet out of your home towns or "grin and bear it" every year for the RICO shakedown. Most are just hoping to live long enough to age into Medicare. 

Meanwhile health insurance companies, the true constituents of Congress, continue to pay off the politicians, who are "outraged" by the high cost of healthcare insurance and simply expand the taxpayer umbrella to a larger and larger pool who pay close to nothing for top notch healthcare which encourages all sorts of gaming the system. It is an interesting racket; notch up the premiums every year, subsidize more of the population, gouge the middle class. 

Ending the price gouging corruption is simple; open every marketplace to real competition amongst insurers, publish costs for every service, and eliminate the individual mandate. The free market will solve this problem, and in fact INCREASE the quality of healthcare for everyone as completion drives out losers and promotes winners. This country needs to be in the business of the best outcomes, not beholden to engineered price gouging.

Wednesday, September 25, 2024

Golden Years

 Golden Years


These are not the "Golden Years" of which many Americans have dreamed. Over the past 3.5 years inflation has destroyed ~45% of purchasing power. Proof? In January 2021 gold was fetching approximately $1850 per troy ounce. Yesterday we reached yet another all-time high in the noble metal, closing the day at $2686. So in less than 4 years almost HALF of your purchasing power has been wiped out.

Why does this matter? It provides concrete evidence that there has been wholesale destruction to the purchasing power of the American dollar. The prices in the grocery store, gas pump, and doctor's office are all real, and they hurt. Gold is a great litmus test because governments cannot create it, unlike fiat money like the US dollar. Much has been written of gold on this blog and how it is a physical form of truth.

America needs to move away from a policy of "Tax, Spend, and Regulate" to one promoting creation; ideally this country facilitates growth by a meritocracy of ideas stabilized by the rule of law.  We want the best engineers, scientists, physicians, entrepreneurs, and leaders. The problem with policy failure is that accountability takes at least 4 years at the national level. By that time chaos can reign, but there is hope for creators.

One surefire way to reduce what I consider to be the bane of society, inflation, is to increase productivity. Increasing productivity is a function of treating creators and their capital, both mental and fiscal, well. If that is not an outcome in the coming months, then prepare for gold's luster to shine even brighter. Expect the US dollar to further weaken with increased debt not supported by increased productivity.

Many of society's problems can be both addressed and solved by unleashing the power of productivity. Enable creators to operate in free markets to create solutions. Removing over-regulation facilitates outcomes in the best interest of society because it is the very members of the society who will make economic choices in their own best interests. Choice is the cornerstone of freedom and democracy. 

Ideally capital flows where it is best utilized and not via a laundering system which charges an exorbitant toll to deliver diminishing funds; consider the overhead in the existing income redistribution model. How many hundreds of billions are collected simply to hand out hundreds of millions? Less of the middleman is better for the middle class and nearly everyone else too.  

For the majority of Americans the answers are both simple and obvious; we know what is broken, we know how to fix it, and we know who is accountable. The challenge is can we still get a fair shake at the voting booth to elect leaders who can implement the will of the people? Does the rule of law still exist? Will an unelected shadow cabal run this country? These are the challenges of our Golden Years.


Friday, April 19, 2024

Circling the Wagons

Circling the Wagons

 
Investors are increasingly choosing to circle the wagons as it becomes apparent that the Federal Reserve will not be making multiple interest rate cuts this year, indeed this author predicts the next move is up.
 
As earning season kicks off, early indications show that misses are punished with death and even solid beats can result in a selloff. Why? Growth is paramount, and any indication of weakness is an excuse to sell.
 
Hyperinflation is starting to cause significant cracks in the economy, notably in the energy and food sectors where high prices are causing many Americans to make hard choices. Those unwilling or unable to take on a second or third job to makes end meet are particularly vulnerable.
 
For now, the stock market has stalled out and investors are looking toward the coming earning season to parse out winners and losers and adjust their portfolios accordingly. Sharp swings in share prices should present those with a longer time horizon with meaningful buying opportunities.
 
Historically, the adage has been to "Sell in May and Go Away" for the past 100+ years. Seasonality combined with a jittery consumer battling hyperinflation may lend significant credence to this old philosophy. When it is hard to see the upside, and you face danger on multiple fronts. sometimes it makes sense to circle the wagons.
 
 

Wednesday, April 17, 2024

Risky Business

Risky Business

 
In the classic movie Risky Business Tom Cruise's character Joel Goodsen says, in a slightly edited version, "Sooner or later, a man has to say 'What the heck, and make his move!'" The Federal Reserve is stuck in neutral as "transitory" inflation over the past 38 months has PROVEN to be "sticky." The Fed needs to make their move.

With the Truflation© index now well over 50% in the past 3 years, it is difficult to understand WHY the Federal Reserve has not continued to hike rates. Gas alone in California is up over 75% from Jan 21 until today! The other components of the index are also all markedly higher. The value of the dollar is collapsing all around us, yet no one in Washington, DC seems to care.

When the Federal Reserve does not do its job, literally billions of people around the world suffer. This is the impact of having the world's reserve currency, great responsibility. NOT making decisions based on data visible by everyone at the pump, grocery store, landlord's office, health insurance premium stub, or at the bursar is a dereliction of duty.
 
The Federal Reserve has a both a fiscal and moral responsibility to maintain a stable currency. It is failing terribly at this, as evidenced by massive price instability. Historically, price instability has proven to be disastrous. The domino effects of price instability often result in the toppling of nations.

Resolution to the inflation crisis can be straight-forward and transparent, raising interest rates until Truflation© falls and prices stabilize, or it can be exceedingly painful by doing nothing and watching while multiple demand shocks hit the economy. Hopefully elected leaders choose a sustainable future starting first with price stability.


Monday, April 15, 2024

The Big Squeeze

The Big Squeeze

 
Chin up patriots, that most heinous annual civic duty is upon us! This solemn April 15th Tax Day, chronologically the year 2024, sure feels financially and socially like Orwell's 1984.

Multiple wars being financed by the United States, zero sovereign border security save that offered by the cartels, and a Congress which is really, really good at its primary function...spending money...has resulted in economic calamity.

The result? Crippling inflation is at 40-year highs resulting in the US Dollar having lost some 50% (you read that correctly) of its purchasing power since Joe Biden took the Oath of Office on that chilly morning in January 2021 watched by thousands through Concertina wire in our Nation’s Capital.

American citizen taxpayers are being squeezed out of their own country; consider, every 100 days now another $1,000,000,000,000 is being added to the National Debt!

Without significant increases in productivity, the US Dollar will careen towards zero value; put another way, when everything is free, nothing has value. The REAL “Green New Deal” is the collapse of the US Dollar because baby, this “green” has no value.

Socially, if ever there was a group of unrepresented, unspoken for, downtrodden, ridiculed, huddling masses it is surely composed of US taxpayers. April 15th should be a National No Tax Day; the effects would be immediate and staggering.

A Tax Holiday would result in annual productivity spikes which would defy comprehension and immediately trigger a Nobel nomination in economics. Imagine a world where citizens didn’t have to pay their own government to launder money!

The one upside to paying “your fair share,” is that at least we can still pay in U.S. Dollars, instead of something of real value like say gold, bitcoin, or real estate. Thankfully the words “This note is legal tender for all debts, private and public.” is still WRITTEN on U.S. currency. Be VERY concerned when the US Government no longer accepts US Dollars.


Sunday, March 17, 2024

Happy St. Patrick's Day

 Happy St. Patrick's Day


Happy St. Patrick's Day financial farmers! There are few cultures so naturally blessed with song, word, and dance than the Irish. The best investments are those that we can enjoy. If you're in the mood for some traditional Irish song along with your Guinness beer today check out The Harris Bros: https://youtu.be/6jfx7D10etE

Friday, March 15, 2024

Ides of March

Ides of March

 
2,068 years ago Julius Caesar was assassinated in the Theatre of Pompey, ending the Roman Republic and starting the Roman Empire. The death of Julius Caesar led to the collapse of the Roman Republic and the ascension of his adopted heir Octavian who in 27 BC avenged Caesar's death. Octavian ultimately became Augustus Caesar and launched what would become the Roman Empire.
 
Pax Romana, or Roman Peace, in this new Roman Empire lasted some 200 years across what was then the known world including large swaths of the Mediterranean, Northern Europe, and Northern Africa. It was at this time that Roman Citizenship afforded one unprecedented safety and security; a Roman Citizen could walk the known world with the assurance of the Roman Empire behind him. This citizenship status was one of the greatest benefits Romans enjoyed and allowed trade, commerce, and civilization to spread unimpeded for thousands of miles in all directions from Rome.
 
In a world today where few people know the birthdates of their own grandparents, it is striking how the pull of history reminds us to the day of an event over 2,000 years ago, with only the birth of Jesus as a more profound and exact historical recording. Indeed, the scale of the respective Caesars' power was such that time was altered to incorporate their legacy into months of the year; July & August.
 
 

Tuesday, March 12, 2024

Truflation© Exceeds 50%

Truflation© Exceeds 50%

 
No hyperbole man, Truflation© on a cumulative basis since the start of the Joe Biden Administration in January 2021 now EXCEEDS 50%!
 
Truflation©, as per its definition, is a basket of goods that consumers actually "touch" on a daily basis and are required for living in a modern society. This basket includes five elements: Food, Housing, Gas, Education, and Health Insurance
 
The five pillars of Truflation© have now cumulatively exceeded a 50% increase since January 2021. In essence, consumers have LOST over 50% of their buying power in real terms. The effects have been particularly devastating for young working American families on the hook for supporting a large portion of entitlement programs, many of which it is unlikely they will ever benefit from personally.
 
What is a financial farmer to do? Well it is no coincidence that the price of gold, the stock market, real estate, and crypto to name a few assets are UP over 50% since January 2021. Fiat paper money like the USD has literally been "heading for the hills" almost as fast as it is being printed. Investor cash has sought refuge in physical commodities, ownership stakes in companies, and good old fashion dirt.