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3.26.2017 - Financial Intelligence Report Bookmark

Insurance
 
There’s some things that I know well enough to be considered in the class of expert. There’s some things that I know less about than your average 5 year old. We’re all similar in that.  There’s things you know so well you take for granted doing it, or teaching it, and other things that confound and confuse you.
 
This entire “healthcare/insurance” thing is one that completely and honestly boggles my mind.  For instance, let me  use this as an example....

I have insurance on my cars. If someone runs into me at a stoplight, the bodywork gets paid for. There was an “unforeseen” event, in this case an accident and the “insurance” kicks in and fixes the issue. We have one higher end vehicle, it’s a very late model Lexus. The Insurance on that car, with all the bells and whistles of comp and collision, uninsured motorists, etc. etc....costs us about 100 dollars per month.
 
Now here’s the catch. If I don’t maintain that car and I blow the engine because I let the oil get too low or what have you...my insurance does...NOTHING. The insurance is there to cover unexpected events such as an accident. It is NOT there for maintenance. It doesn’t kick in if I need new tires. It couldn’t care less if my water pump goes blammo.  It is insurance and it’s cheap.
 
Now on the other hand we have what we commonly call Health insurance and this “stuff” has been a bit confusing to me for years on end. Here’s why... are we buying “insurance” as in the case of my auto insurance above, where if something goes bad it kicks in, or are we buying an “extended service contract” like you can buy for your auto’s and extend the manufacturer’s bumper to bumper warranty,  and calling it “healthcare?”  I don’t think they’re the same thing at all, and frankly shouldn’t be.
 
I will never forget when our first son was born. After the doctors, the surgeon for the “C” section, the 2 day stay in the hospital, all the nursing, ultra sounds,  etc etc...we got a bill for 12 dollars and 3 cents. It was for the Phone. Everything else was paid in full by the insurance company. I was frankly in shock. I fully expected to pay a ton of money for all this “stuff” and they paid it all.
 
Yet here’s my question/problem.   Was our son an accident? Nope, planned and hoped for. So if my wife and I plan for a couple years to bring a life into the world, this is not an unexpected event when it happens. Yet we find it normal that the Insurance company should pay for it.  To me, that’s not insurance. That’s more like a health/maintenance plan, or what have you.
 
Websters online dictionary now features a section of definitions for people just learning the English language. Under Insurance the definition reads:  an agreement in which a person makes regular payments to a company and the company promises to pay money if the person is injured or dies, or to pay money equal to the value of something (such as a house or car) if it is damaged, lost, or stolen.
 
So it is obvious to me that we’re maybe defining  Insurance the wrong way, and I also tend to think that part of our problem is that we seem to want the “collective” to pay for our maintenance instead of our “injuries”. 
 
I know just enough to be dangerous and as I said at the outset of this letter, I’m pretty ignorant about the how’s and why’s of all this. But it seems to me that the reason that so called “insurance” is so insanely expensive is because we’re using it for maintenance instead of its initial job of getting you through an unexpected event like a broken leg, or a hernia surgery.
 
Let me use  the kid thing again. As you know...babies need a ton of check ups in the first couple years. There’s the “check ups” and then there’s the shots, etc. Each and every time we went, we’d hand over the card and the insurance co. would pay most if not all the costs. Yet again I think to myself...When we had this kid, we knew there would be lots of doctor visits. Why does “insurance” pay for those check ups where all you’re doing is getting the kid weighed and measured?  That’s considerably different than rushing the little guy to the ER because he’s turning blue or something.
 
You can and probably will call me an old deluded non PC dinosaur, but... Insurance means that people pay to be covered against unpredictable expenses. Requiring insurance companies to include free preventive care and contraceptives in policies is not insurance. Consumers are not insuring against unpredictable expenses, but purchasing prepaid health plans. Allowing people to insure against major expenses while paying for routine care out of pocket would encourage shopping around and would lower the cost of health care, as well as the cost of insurance.
 
But this “thing” forced down our throats by Obama and a crooked Supreme Court took logic and common sense out of the picture. In the past, you could buy “catastrophic” insurance for “cheap” and pay out of pocket for your ordinary doctors visits, etc.   That way if you got blindsided by something that you couldn’t pay for, such as a stroke, or what have you, the catastrophic insurance would kick in.  But Obama care made it ...illegal. Yes, illegal.
 
What currently passes for health insurance in America is really just prepaid health care - on a kind of all-you-can-consume buffet card. The system is a series of cost-shifting schemes stitched together by various special interests. There is no price transparency. The resulting overconsumption makes premiums skyrocket, and health resources get misallocated relative to genuine wants and needs.
 
Again I don’t have all the answers, I’m really not versed in this topic enough, other than to say it is most clearly broken, and needs fixing. What I do know is that at my age, my Insurance Co. shouldn’t have to pay for contraceptives, maternity care, and a host of other junk they’re made to afford to me.
 
The “show” that played out over the last few days concerning the Healthcare bill seemed like a lot of  fluff and puff over something that looks to me like it won’t work either.  It’s time for a true “repeal” and a replace with common sense. Wouldn’t that be a novel idea.
 
The Market...
 
The old saying is...timing is everything. That’s ultimately true in the market. A couple weeks back, we bought one put option on the DIA’s, just in case the market didn’t like Trumps speech to Congress. Well they did like it, they loved it and the market gained 300 points the next day.
 
Naturally my little DIA put was cut in half the next day, and I could have sold it then, but decided to hold it and “see”. But I didn’t have much time, it was a March option. I had just two weeks for the market to fall back below my strike price. Well it wanted to get there, as the market drifted all the way back down and erased those entire 300 points. But it wasn’t falling any further and time was ticking.
 
 Sure enough it expired last Friday worthless. I lost a dollar ninety per share on the contract.  Yet just one week later, had I bought April instead, I’d have been up  three bucks by 3 PM on Friday.  Timing...it’s everything.
 
That was just a single stock bet, with a small wager. But what about the big picture?  We’re in an eight year bull run, with stocks very extended. We’re in a time where the “soft data” and the hard data is at odds. The hard data shows a slowing economy. So, let’s suppose you’ve never invested before and a family member passed away and left you 50 grand today. What would you do with it?
 
Is it a good idea to deploy that money in the markets after they’ve already run for 8+ years, and PE’s are at nosebleed levels? History says “no” that’s not a good idea. History says only a hand full of other runs have lasted this long over the last 120 years. So History says you’re probably closer to buying into a top than buying into a market that’s going to reward you.
 
I understand the idea that if Trump can get a big tax cut program passed, it will make stocks look good again...for a while. I get that. If you’re a big company that has paid millions in tax at say a 30% rate, if he cuts your liability to 23% you have just “made” ( kept) a ton of money and your stock might jump on that. I get it.
 
But then what? Okay so they put in the tax cut and stocks jumped...are they going to continue up? On what? What would be left? Are companies going to use those new tax dollars to open new plants and hire more folks, or are they going to use it to buy up their own stock? 
 
Timing is everything. We just got our first 1% correction in 108 days. We haven’t had a 10% correction in years. At some point you know that it “has to”. So when is it? Next week? June? December?
 
Look at the madness on Friday. At 3:15 pm the DOW was down 103 points as it looked like the bill wasn’t going to pass. Instead, word came down that Trump PULLED the bill. From DOWN 103, the DOW was 6 points from Green by 3: 40 and the S&P actually went green.  Instantly the narrative had changed. Instead of “bill doesn’t pass, bad news” they decided “bill pulled, means they can work on Tax reform quicker”.  Amazing isn’t it?
 
We are in such uncharted water that we might as well be on another planet. We just saw the infighting concerning the Obamacare bill. We have already hit the debt ceiling and already Chucky Shummer is saying that if Trump doesn’t back off of the wall, and defunding Planned Parenthood, he’s going to rally his Democrat warriors to block any debt increase. Is that possible? Big possible, look at how they fight Trump at every single turn. According to the main stream media and the Democrats just about every person (Trump included) is a Russian agent guilty of treason.

We’ve got enough money via tax season coming in to last us maybe to July. Then by late July...some Government departments are going to have to close shop if the ceiling isn’t raised. Most people are saying “This is no big deal we’ve raised it like 50 times in the past”. Well that’s true. But it’s always been raised while one of the Elitists puppets have been President. This time a true enemy of the one world government folks is in office. Could they use the debt ceiling to try and cripple him? You bet.
 
Then of course we have North Korea. I was doing a radio interview with my friend Phil Mikan out of Connecticut the other day and I told him, I truly believe we’re going to attack N. Korea and take out his military and leadership. While they’ve always been sabre rattling noise makers, each day they get closer and closer to building the missiles that can deliver their nukes. I think Tillerson’s statement that the time for diplomacy is over, and 15 years of talks has failed...is a prelude to “we’re going in”.
 
Add all that up and boy does this market have a huge wall of worry to climb. Obama care, debt ceiling, a Nuclear and now missile capable N.K., soggy economic  “hard data”, and a host of other things makes this a pretty tense time in market land. Proceed with caution. 

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