When we left Baltimore on Friday, the Dow was still going up. Gold was still going down.

The Fed was still hinting it would begin tapering its bond-buying program (QE) soon… or maybe not.

The economy was still recovering… or maybe it wasn’t.

And the Red Sox were still favored to win the World Series.

We woke up Sunday morning in New York with a copy of the New York Times at our door. What caught our eye in the paper was the sad saga of “Obamacare.”

The Affordable Care Act, to give it its official name, seems to set off emotional outbursts. Conservatives are agin’ it. Liberals are for it. And the New York Times, journal of record for the liberal intelligentsia, is so livid at Republicans and conservatives for opposing it, the Old Gray Lady can’t think straight.

On Saturday night, we had a conversation with a Yankees fan:

“What’s the matter with Republicans, anyway?” she asked, as if we might have an insight. “They look like idiots trying to shut down the government over Obamacare. The health-care system in this country is terrible. At least Obama is trying to come up with a better system.”

“I don’t know what’s wrong with Republicans, in general,” we replied. “But they’re not necessarily wrong to oppose Obamacare. And shutting down the government is not necessarily a bad thing.”

We began to explain our why. But it was hopeless. Our interlocutor was convinced that the public’s health could be improved by earnest politicians and policymakers… and that anyone who tried to stop them was just a mossbacked troublemaker.

Ripping Off the Young

The Times’ editorial on Sunday took the same position.

Yes, some private companies were forced to cancel their insurance programs. But the voluntary arrangements made between buyers and sellers of insurance were of little interest. Because the insurance policies now prohibited by Obamacare were “not worth keeping.”

How did it know?

“Some had deductibles as high as $10,000,” the Times reported.

What’s wrong with a high deductible? It is just the plan most people should have, in our opinion. Because it protects against health calamities, but leaves most of the purchasing power (and decision making) in your own hands.

It also discourages you from going to the doctor too often or taking too many drugs. Health care is like everything else. A little of it is probably a good thing. A lot of it is disastrous… expensive… and sometimes deadly.

The Times goes on to tell us that old people will come out ahead under Obamacare, but that health insurance premiums “will likely go up for younger, healthier patients.”

Right. Rip off young people!

But who cares what we think? Not the Times or the Obama administration! They know best about what kind of health care we need – and everything else. And since they have the NSA, the FBI, the IRS, the CIA, the SEC the TSA… and the whole panoply of gun-toting enforcers behind them… what THEY want is what WE get.

Bully Tactics

Can you really improve people’s health by bullying them around?

Funny how one thought leads to another, whether you want it to or not.

We have been wondering about the use of force and violence in the modern world. Does it pay? we ask, even when it is used to “fight terrorism?”

Our answer: Maybe not.

As we all know, terrorism is such a threat to Western civilization and our way of life that we’re willing to spend at least a trillion dollars a year (including the Pentagon budget) to protect ourselves.

We send out unmanned aircraft to kill people we’ve never met… or even heard of. And we give the spooks at the NSA and elsewhere billions of dollars (they won’t tell us how much) and let them hire thousands of employees (they won’t tell us how many) and let them do pretty much whatever they damn well please (they won’t tell us what).

But guess what. It doesn’t work. Why not?

Stay tuned…

Regards,

Bill

Market Insight:
Alarm Bells

From the desk of Chris Hunter, Editor-in-Chief, Bonner & Partners

A recent Barron’s big-money poll revealed that an astonishing 89% of managers are bullish on large-cap US stocks.

So, it should come as no big surprise that investors are bidding up US stock prices at a feverish pace. It’s a market of nearly all buyers and nearly no sellers!

Naturally, this is pushing up valuations too.

Credit Suisse notes that, on a price-to-book basis (calculated as stock price divided by total assets minus intangible assets and liabilities), US non-financial stocks now trade at a 45% premium to their global peers. This is highest premium in 12 years. It’s also well above the average 30% premium US stocks have enjoyed through history.

It’s not the only valuation measure that should be setting off alarm bells in contrarian investors’ minds.

The total market capitalization of the US stock market now stands at 112% of GDP. This is higher than 96% of readings since World War II.

It’s also significantly higher than the same reading in Germany (44%), in China (41%) and in Japan (62%).

And all of this comes against the backdrop of the weakest US economy on record… and the largest central bank intervention in the markets.

Is it time to abandon caution and join the crowd?

Maybe – if you fancy your chances in the game of “greater fool.” Just don’t count on buying low and selling high.