Wednesday, August 24, 2016

Obama-care Obfuscates Health Care Coverage With Insurance

You want insurance, you don’t buy it when your house is burning down. If you’re sick with health care issues, this would not be the time to shop for health insurance, there is none that you can afford. A majority of the people are in tune with how health insurance works, you buy coverage before you need it. If you are sick and can’t pay your bills, whatever the government gives you is not health insurance, is government medical coverage. Insurance is for people who are not sick. Get sick and you can wish you had insurance; the trouble is you’re a day late and a dollar short.

Obamacare is called “insurance,” but it is really government subsidized health care. The insurance aspect is not there. You want the coverage after the fact. Fire Insurance is not sold the day after the fire. So in essence, the people responsible enough to want coverage before they have a problem, now have to pay for those that were too cheap to pay for what they may have needed later in life.

How long can this work? My grown son has to have insurance, and he doesn’t need it, most kids will pay a doctor $300 total in a time span of 30 years, not $2,000 a year. Trump can kill this albatross. Obamacare is not health insurance; it is health care program destine to destroy private plans by destroying them with unfair government practices that make it unprofitable for the private sector to operate. You cannot sell insurance if someone else says that you have to cover those that didn’t buy before they needed it. The governments plan of redefining insurance does not make the concept better, it destroys it.

Of course we will never figure this out until the last health care insurer goes out of business. The neat thing about it is that it is a way for government to double each taxpayers tax assessment without raising taxes. And you can bet that the extra money collected isn't going for health care.

Monday, August 15, 2016

Lunatic Congressional Financing

The average citizen thinks that Congressmen have an intimate knowledge of government financing. That’s a totally wrong assumption. Picture a black box with an opening on the left and one on the right. Insert one tax dollar into the left slot and low and behold two dollars drop out of the right hand side. Nobody in Congress knows what the internal machinery of the box includes, but it works. The amount they can spend on the budget is twice what they get in tax collections.

There is a not so small black box called the national debt. It doubles in size every 10 years, but it’s no big deal, there has never been a problem with it. Since it’s just a bunch of numbers, it’s size lies in the virtual world of mathematics. You couldn’t trip over it even if you wanted to.

Then remember the archaic banking practice of saving money for retirement? You’d give the bank a dollar and 12 years later get back your dollar and another one as interest. There was no black box, you doubled your money in 12 years. It was called “Compound Interest,” the Eighth Wonder of the World.

In today’s world, you put a dollar in the bank and in some countries, you’ll get back 95 cents a year later. So if you examine the basics of banks loaning depositor’s dollars, that is fading into oblivion. All the bank does anymore is regulate transactions between different parties.

The thing to remember during the Congressional emergency of 2008 that lead to all of the quantitative easing, if the banks had failed, the US Government would have had no financial infrastructure to borrow from.

The problem today is this, there is absolutely no reason to save money, there is every reason to spend it. With that reasoning, there is no new money left in the banks for the government to borrow. Plus those retiring, are withdrawing the money deposited into the banks over the last 50 years. What the government is losing on the national debt on the back end from redemptions, is not being made up for on the front end.

Of course the financial markets seem to think everything is just great. You can draw all sorts of graphs on the bond market, but when interest rates approach zero you enter an undefined world that changes the perspective of how people view money.

What we do know is this. The government borrowed about 24 trillion dollars and has spent every penny of it. Congress knows they can’t pay the interest on the amount borrowed (the national debt) if rates were to rise to 8%. The banks have no more real money for the government to borrow. The Treasury and the Federal Reserve are printing dollars. T-bills are being presented for redemption and the Federal Reserve is purchasing every bill presented. This is what keeps the interest rates low. If there is no buyer, rates go up until there is a buyer.

What we have here is a situation that is artificial. As rates approach zero, the definition of a bond deteriorates. At zero it has no meaning. You can borrow for free. Low rates imply low risk, when in actuality, most of these new government homeowner borrowers couldn’t come up with 5 percent down, to close the deal. Loan qualification tests are now meaningless. Negative interest rate bonds are laughable. The trouble is, there are many people out there that think we are in a viable market. At some point people will realize that the emperor has no clothes, and then the game will then be over.

Carry the logic a step further. Scenario one, when people realize they are worthless, they will try to sell them for half price. On a one-year bond, that implies an interest rate of 50 percent. Of course that will never happen, the Fed will buy all bonds. Scenario two, the government will print 17 trillion dollars (electronically) and pay off the debt. That would be the effect, but in reality, they would print dollars to pay for all government payments to the citizens (Social Security, Welfare, etc). This would allow them to continue to “borrow” (Print) and kick the can down the road. The sad thing is, we are already there.

My only question, can we ever get back to a reasonable interest rate for savings? I am afraid the answer is no. Hyperinflation solves all of these problems by making new ones you wish you’d never met.

The great thing about credit cards, if a Starbucks Latte is $4,000 you don't have to plunk down or count out 40 100 dollar bills just for a cup of coffee. Kind of makes you smile for all the wrong reasons, go figure.

Tuesday, August 09, 2016

The Great Depression 2006 vs Doom and Gloom

I've been writing this blog for quite a while. People in the remarks section tend to think that I am hunkered down in a basement investing in nothing, while waiting for the Great Depression to pass and then make a killing.

If that is what you think, you are sadly mistaken. This blog is about pointing out the misinformation out there. Especially from government. There was no great recession of 2007 until just recently, Obama verified it, 9 years after the fact.

If you can comprehend that we are in a Great Depression, we have the financial information to make a killing. We have some stocks paying over 4 percent dividends. We have rental real estate in some parts of the country that will return 20% with a lot of hard work. Precious metals are a good place to park spare cash. The investor can make just as much money in a rising stock market as in a falling one. The trouble is, it is against human nature to short a stock.

There are stock and bond options out there that are thinly traded. A $100 option contract in the last crash on October 20 1987 returned $86,000. I was greedy and had to settle for $43,000 two days later. You have to purchase options when nobody thinks it has a snowballs chance in hell, that is when the price is right. If I was to tell another person my option strategy, it would double my cost of options. Most options expire worthless, so I don’t need to throw away twice as much money for being your friend. The real key is to establish a position in good times waiting for the inevitable.

The only real place my wife and I have stopped investing in, is the Treasury Bill market. We use to make $10,000 a year on rolling over 3-month T-Bills. Why would you give our government $140k and savor your chops over $700 in interest income? I don’t know anyone who is dumb enough to invest in Treasuries, but whoever they are, they deserve to lose every penny invested. The thing that bothers me on this point, is that I don’t think I have ever met anyone that stupid. The government is covering something up here. Of course we could call it the greatest robbery of the elderly's interest savings to have every been conceived.

So what do we have here? A Great Depression. Am I in a hole waiting for it to blow over? Hell no. If you know where you are, financially, you have options; if you don’t know where you are at, you have none.

Is this blog about doom and gloom? My answer, no. It’s about knowing what is happening and making money off of it. Money is a tool, used wisely, you can carpenter many things. The real question that time will tell, are you a good carpenter? May you have the time to become a good one, remember that experience is not a one day class,.