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Life Health > Health Insurance

Bad News

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The news I read over the past few days was not good … as in, bad.  

JP Morgan Chase may have hidden missteps with its $2 billion, $5 billion or $7 billion trading bet (depending on who is estimating). While the money lost was money that apparently belonged to Chase, the “hidden” part is what’s bad. The company still made something like $5 billion for the quarter, but maybe that could have been more like $8 billion, a much better number for shareholders. Maybe the elected officials should get their heads out of you-know-where and unrepeal (unrepeal is a new word, invented by me, that could be put to good use in Washington, D.C.) the parts of Glass Steagall that it repealed in 1999. Let banks be banks and investment companies be investment companies. 

Among other things, Obamacare has another mandate — one not yet brought to the Supremes, or perhaps to any court — about employers. In this one, employers provide health insurance to workers or they pay penalties. Depending on your viewpoint, this could be called the Health Agent Relief Mandate (HARM), since health insurance agents could benefit from selling more policies. Or it may be an attempt to make the federal government the CEO of every company in the land — meaning some companies may not be able to afford to pay the penalty. (This one is not yet called a tax, since there’s no court action yet.)   To the extent that government — federal, state or local — controls what everyday decisions businesses (and citizens) make, such as forcing employers to provide certain benefits, we become more like all the other countries of the world, places where it’s hard to start a business (licensing and permits can eat up small fortunes and take months to years) and/or create a new product. The Apple iPad was not created in India, China or Europe. Microsoft did not begin its software revolution in France or Russia. Henry Ford did not start Ford in Mexico.  

Tens of thousands of doctors (didn’t the AMA endorse Obamacare?) are upset with the “mother may I” aspects of the new Affordable Care Act (which, for some participants, may not be affordable at all). Some sources say 50% of doctors are threatening to stop practicing medicine; others quote figures of one-third or one-quarter. Another threat: doctors say they may stop taking Medicare assignments. This seems to be more of the individual rights and determination argument in the preceding paragraph and suggests U.S. legislators may have lost their way.  

Penn State University removed the halo from Joe Paterno’s mural. The history of ignored criminal and immoral behavior by one of Paterno’s assistant coaches emphasizes the thought that many of our universities are football programs surrounded by seemingly less important attempts at education — the money from football and athletic programs may be the crack cocaine of American higher education. Yet institutions that stress academics over athletics are the ones that seem to have the largest endowment funds, the most budget money and the nicest campuses. It’s like life, isn’t it? The football star may go on to fame and glory, but it is likely his money may be spent foolishly. He may wind up in his middle years signing autographs at gun and knife shows. With colleges and sports careers, smarter may be better. I might argue that Penn State provides an outstanding education, but the appearance seems otherwise. 

Barclay’s, the famous and innovative British bank, has allegedly been “fixing” the Libor rate, an inter-bank rate that is used to set debt worldwide, e.g. Libor plus 1%, LIBOR plus 3%, etc. This seems more of the hubris by the big guns of Wall Street (even Fleet Street) — “we are the sophisticated financiers of the world economy and we can do as we please.” This attitude didn’t work well for Lehman Brothers.

A Harvard study apparently shows the SEC tends to use its enforcement powers mostly against relatively small advisors for small violations— things like the individual or firm not having published ethics rules, etc. — and that it follows this go-after-the-small-guy practice by a wide margin. Those who studied the study concluded that it was easier for the SEC to attack small guys instead of big firms. As for the big investment firms, when they get caught doing something, there may be fines and wrist-slaps for the company, but, typically, there are no fines or suspensions for individual executives. The reporters felt this may have been because SEC examiners had their eyes on their next jobs, which might be — you guessed it — with big firms. It might also be that big firms are able to mount good legal defenses.    

As to the good guys, Warren Buffett is less happy about the economy and about Europe. PIMCO’s Bill Gross is also not happy, but he’s famously often unhappy. Honestly, I can’t remember him being optimistic, although he must have been once or twice, yes? On the other hand, the New York Times seems guardedly optimistic about the United States, as do two advisors (like me, portfolio nuts) whom I respect.

The news items here are troublesome because they all involve morality or individual rights. While I am 98% optimistic — I enjoy life and am grateful that I am able to participate in a great country and in my chosen career — I have my negative moments, and the news this week has been bad.  

Please focus on the positive and read the news, but maybe not too often.

For more from Richard Hoe, see:


Surviving Shaky Markets

We’re Number One


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