Avoiding Black Swan Investments

                       

What are “black swan” events in finance and business? These are highly improbable events that occur despite all we do to prevent them. This reflects the fact that there are rarely any black swans to be found in nature.

So, we wisely keep attempting to protect ourselves against future black swan-type debacles.

We’re spending a fortune to do so. The U.S. Congress, with its propensity to spend, is great at outlays. The Dodd-Frank legislation is a perfect example of over-action and resulting unintended consequences; yet you can be certain they will not prevent the next black swan incident.

One objective of Dodd-Frank was to make banks smaller, not too big to fail. The result is that smaller banks cannot exist amidst the new regulation, and larger banks are getting ever-larger. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

The “Fat Cat” Rich?

                       

Listen to the leftist politicians and you have a conjured picture of a rich fat cat, smoking a cigar with his feet on a desk, or better still, a fishing rod in his hand.

Not so. The so-called rich are usually the ones employing you, the ones who run small and large companies, with emphasis on small. After all, anyone with income over $250,000 before taxes is now considered rich. Those over $250,000 a year income are often employers. Their jobs cover over 50 percent of the employed.

                       

The rich from one measurement to the next are not even the same individuals. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Government Clunker Achievements

 

                   

Another basic economics lesson not taught in expensive colleges has to do with the administration’s past failed efforts to revive the economy by getting in enormous debt.

                                   

To name a few: Unnecessary bank bailouts, stimulus outlays that were merely slush funds for government funds, and let’s not forget giving new car buyers a $4500 cash allowance for clunkers when buying a certain type of new car.

                       

It was not successful for many reasons I pointed out early on.

One: The government mixed an economic stimulus concept with an environmental objective, so it confused the public.

                       

Two: Cars sold in this manner meant that none would be sold normally for a couple of years after the program terminated. The public’s appetite was temporarily stimulated but then held off from future buying.

                       

Three: Because of the way clunkers were being disposed, the used car and parts markets were adversely affected.

                       

If money of this kind were used for clunker cars, what about clunker washing machines, or lawn mowers, and so on? Or government funds for buying clothes? (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Meaning of the Weak Dollar

Most folks don’t understand a weak dollar.

                   

But they’re still certain about government being able to offer them more goodies. That’s because they are often influenced by media, when it comes to political news. It’s sports and other circuses that get  much of their attention.

                   

So a weak dollar that concerns whether foreigners or foreign governments buy U.S. Treasury bonds have no importance to them.

                   

But when they have heavy inflation because the government had to literally print more and more money to balance the budget, they will notice.  (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Ignorance of Media About Oil

                   

The report whenever gasoline prices at the pump hit a new high. Immediately followed by news of record oil company prices,  is an example of ignorance and slant.

When oil prices go down, the media overlooks that news.

So the public remains ignorant of the fact that oil company profits average only 8 cents on a dollar of revenues. And that the administration is holding back new drilling and refining capability. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Consequences of Dodd-Frank’s Regulation

                   

When politicians try to legislate from their hearts and secular religious beliefs, you are certain to get a hodgepodge of unintended consequences. The Dodd-Frank legislation of 2010, on which I’ve commented many times, is a perfect illustration.

                   

One example I would like to point out because it’s happening before our eyes and it’s an event Dodd-Frank was supposed to prevent.

                   

Dodd-Frank Regulations are killing smaller banks, It’s tough enough for large banks to contend but the added costs of keeping up with regulations add to administrative costs and financial requirements that banks simply cannot afford.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

State/Local Pension Deficit Problems

                     

The public pension deficit gaps are worse than what the mainstream media mention. That’s because the projected income used for investments in them is too high at at often-assumed 7% and 8%. Actual earnings are more like 6% or less.

                     

In reality, the estimated earnings on investments to pay future public

employee pension payments ought to be equivalent to what the state or city or other local entity has to pay when it borrows to finance pension money.

                     

Therefore, the problem has, unfortunately, been hidden too long by politicians kicking the proverbial pension-deficits can down the road. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

       

Medicare and Medicaid Fraud

Medicare fraud is estimated to be well over $60 billion each year. Widespread criminal operations go mostly unchecked because of poor government oversight on varying levels. It consists of ploys such as using dead doctor reports, fake patients and non-existent treatments.

                     

The FBI says Medicaid fraud is a $10 billion annual industry. Practices also involve billing for nonexistent or unnecessary services, kickbacks and inflated costs.

                     

Therefore, how is the government going to undertake massive ObamaCare  that will entail one sixth of our entire economy?

                     

Politicians tell you only how this fraud-infested system saves money. We now know the opposite is true, even without massive fraud. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Education Has Been a Dismal Disaster for All Levels of Students.

The primary purpose of education is to teach a student to think, not to merely graduate and collect a degree.

                     

By that standard, all current independent research and surveys have come to one conclusion. Education in the U.S. at all levels, from elementary school to high school, through college, has been a complete, dismal disaster for the students.

                     

It has done extremely well for the “educators” who have given the "education" term a new meaning. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Added Health Care Costs Due to Plaintiff Lawsuits

                     

The cost of health insurance is a subject intentionally glossed over because about 90% of lawyer political contributions go to the Democrat party.

                     

Yet, the cost of malpractice insurance and the need for tort reform, represents a major area for health insurance reform. It has not been directly addressed by ObamaCare, under which MDs can still be sued for malpractice.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Government Costs

  

                     

Government has a disadvantage in cutting costs. Politics finds it easier to hire than to fire. Voters you fire will not vote for you again. Politics finds it easier to overpay. Especially when government jobs are unionized.

                     

Has any government ever run efficiently? The Post Office is just one example. Also consider our experience with Medicaid and Medicare. How they have botched efficiency and costs of ObamaCare.

                     

If the cost of Medicaid and Medicare have gotten so far out of hand, beyond their original projections, how can we believe the health care savings fantasies of the future? (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

The Fed’ and Inflation

                     

The Federal Reserve Bank policy  after the turn of the 21st Century,  has always shown some fear of deflation, the kind that engulfed Japan for over the past twenty-odd years. So the Fed always has had an inflation bias.

                     

But why was deflation acceptable in the second half of the 19th Century when the U. S. operated and expanded under the gold standard? Prices trended down for decades. The financial panics the U. S. experienced were relatively short.

                     

And why must we have 2% or 3% inflation as a norm? That can hurt middle class savings over time? To make it worse, an International Monetary Fund economist has suggested a target inflationary rate of 4%, to make it easier to fight recessions by adjusting interest rates. He deems today’s rates too low to be used as a recession-fighting tool.

                     

But even 2% inflation is a cruel tax. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

The Problem of Doctor Shortages

                     

Amid the talk about ObamaCare is the fact we already have a shortage of doctors, particularly in primary care. This gets worse every year. Moreover, shortages occur most rapidly where the government keeps restricting MD income and adds to workloads.

                     

While ObamaCare planning has doctors still subject to any alleged tort malfeasance.

                     

Massachusetts, for example, covers 97% of its residents with enforced coverage, but it does not have enough doctors to accommodate the added insured put into the system. The average wait time to see a primary care MD is from 36 to 50 days. Yet, the state happens to have more  doctors than others.

                                        

Furthermore, the shortage is expected to get worse throughout the country, as doctor income is pressured downward, while workloads go up.

                     

Doctors start careers in heavy debt and it is becoming more and more impossible for them to recoup that burden with present political thinking.

                     

Universal health care planning loses lots of its common sense regarding doctor employment. Without enough competent doctors, the best planning is useless. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Inevitable Doctor Shortages

   

Finding a doctor under ObamaCare will not be as easy as passing a law offering universal health insurance. You have to pay them a decent wage for the skills they have. In fact, a large percentage of American doctors taking early retirement.

                     

About 1,500,000 Canadians don’t have or cannot easily find a primary care physician. Because of a shortage in medical staff in Norwood, Ontario, in one instance, a TV video showed a town clerk pulling names of lucky winners to see a doctor in a lottery. Losers had to wait.

                     

That’s only one reason many sick Canadians have come to America for surgery. Canadian officials call much of what we may consider essential surgery as “elective.”

                     

Before we emulate Canada’s or that of the British, or any other universal health coverage version, remember health coverage does not automatically mean health care. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)   

The U.S. Climb To Debt Disaster

   

                 

Under the Maastricht Treaty, leading to the European monetary union, budget deficits were limited to 3% of gross domestic product (GDP) and total debt was restricted to 60% of GDP.

                 

However,Greece consistently cheated. France and Germany and others also broke the Treaty agreement in this regard.

                 

Ben Bernanke, the past head of the Federal Reserve Bank in the U. S., had said that total debt of 2% and 3% of gross domestic product (GDP) is sustainable, but we are now past that level. (The extraordinary Fannie Mae and Freddie Mae debt are not even in the federal budget.)

So why are we not headed down the same road to disaster  as is Europe (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)