Medical

Industrial Complex

 Update

**************

Senator

Rand Paul (R-KY)

Medical Price Fixing 

and 

Collusion Act

MADE LEGAL

 DYI:  Buried deep in the bill (so typical) is:

 SEC.601. QUALITY HEALTH CARE COALITION.

    (a) Application of the Federal Antitrust Laws to Health Care

Professionals Negotiating With Health Plans.--

            (1) In general.--Any health care professionals who are

        engaged in negotiations with a health plan regarding the terms

        of any contract under which the professionals provide health

        care items or services for which benefits are provided under

        such plan shall, in connection with such negotiations, be

        exempt from the Federal antitrust laws.

Further along in Sec. 601 the authors of this monstrosity decided to double down and repeal 100 year old antitrust laws specifically the Clayton Act.

(b) Definitions.--In this section, the following definitions shall

apply:

            (1) Antitrust laws.--The term ``antitrust laws''--

                    (A) has the meaning given it in subsection (a) of

                the first section of the Clayton Act (15 U.S.C. 12(a)),

                except that such term includes section 5 of the Federal

                Trade Commission Act (15 U.S.C. 45) to the extent such

                section applies to unfair methods of competition; and

                    (B) includes any State law similar to the laws

                referred to in subparagraph (A).

Then to add insult to injury the Feds are superseding State laws to once again demolish the 10^th Amendment of the Bill of Rights!

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

The gift that keeps on giving.  If this bill were to pass health care providers will gorge themselves on all of the cheap money available and go on a merger and acquisition orgy.  Prices for medical services will sky rocket as competition is rapidly eliminated starting from a base of 9% currently.  Prices could easily rise in the mid teens say around 15% EVERY YEAR!  Medicare is currently 25% of the budget this would put this cost on the path of almost doubling within Trump’s first year!

Here is the list of bribes, I mean campaign contributions Rand Paul receives.  Source Open Secrets.org

   Top 5 Industries, 2011 - 2016, Campaign Cmte

Industry                           Total            Indivs.         PACs

Retired                            $875,821     $875,821     $0

Health Professionals        $556,004     $471,504     $84,500

Republican/Conservative $467,135     $432,870     $34,265

Securities & Investment   $381,674     $362,674     $19,000

Real Estate                       $284,254     $266,754     $17,500

 DYI

   

Bubble

News

Harry Dent: Stocks Will Fall 70-90% Within 3 Years

Laying out the thesis of his new book The Sale Of A Lifetime, Dent sees punishing losses ahead for investors who do not position themselves for safety beforehand. On the positive side, he predicts those that do will have a once-in-a-generation opportunity to buy assets at incredible bargain prices once the carnage ends (and yes, for those of you wondering, he also addresses his outlook for gold):

DYI:  The above link is Peak Prosperity they have a 42 minute podcast interview with Harry Dent.

The question is, is this possible or more importantly probable?  Absolutely!  This is all possible due to the reckless Feds who have brought us 8 years plus of sub atomic low interest rates along with massive QE.  These imbalances will be worked off bringing back to earth this gargantuan bubble.  Is this probable within the next three years?  Very possible but as with any markets we never know the flight path (time and % drop) back to secular undervaluation.  All we can do is measure the market’s valuation with any degree of certainty and invest accordingly. No doubt a 70% to 90% sell off would totally invert the market from secular over valuation to secular under valuation.

Global oil glut disappearing faster than expected

DYI:  Oil prices are well known for their volatility in the short term, longer term due to dwindling reserves energy prices are in a secular bull market.  Technologies such as fracking will extend the life of oil fields but major new discoveries arrive at a snail’s pace far slower than the world's growth.

 

As long as prices rise in a slow and orderly pace our economy can adjust to those changes, however if prices spike (international tensions, war etc.) high energy costs behave as a massive deflationary tax. This will send our economy tumbling down and very possibly the U.S. stock market.

DYI’s oil indicator is negative as prices have risen from a year ago more than 75%.  Recently oil prices have dropped back a bit however our negative reading will not move back to positive until prices are less than 10% higher of the previous year or go negative.

As the headline indicates if oil prices ratchet up this would spell tough times ahead for the market especially since it is so overvalued.

Why

 America Needs

Term Limits

Rep. Maxine Waters:  Trump must be impeached because Putin Invaded Korea

She meant "Crimea" you might say. Don't be so sure. Members should be given a blank map whenever they talk with presumed authority about anywhere abroad. They should be forced to find the place they are about to start talking about before the microphone is switched on. If they can't, they shouldn't. 

DYI: This is from Ron Paul’s institute show casing many of our representatives and high lighting the desperate need for term limits.  The above headline speaks for itself.

DYI

Bubble

News

Insider Warning: Top execs are selling Stocks at Record-breaking Speed

As major stock market indices continue to climb, the trading activity of top U.S. executives and bankers suggest that the end may be near. According to security filing analysis by the Wall Street Journal, since the election nearly three months ago, insiders have sold off a staggering $100 million in shares. Is this just a coincidence, or are they preparing for something the rest of us don’t know about?

 What Average Investors Don’t See

Stocks might be hitting record highs, but there’s a reason why the Wall Street power players know it’s too good to be true. In terms of price-to-sales, stocks are more overvalued today than they were before the crash of 2008 and the crash of 2000.

The Central Banks Face Unwelcome Realities: Their Policies Boosted Wealth Inequality and Failed to Generate "Growth"

What's happening beneath the happy-happy surface is that the returns on expanding credit are diminishing rapidly. The Fed's QE "free money for financiers" never did "trickle down" to the bottom 95%, and the enormous expansion of bank credit is no longer driving corporate profits higher.

 
Whatever the causes, the reality is that the positive results of credit expansion have reached the top of the S-curve and are now declining. Expanding credit, via central bank monetary policy or private-sector bank credit, is no longer boosting profits or wages.

Markets Smell a Rat as Central Banks Dither

Markets are suspecting that central banks are in the process of exiting this fabulous multi-year party quietly, and that on the way out they won’t refill the booze and dope, leaving the besotted revelers to their own devices. That thought isn’t sitting very well with these revelers. 

In the US, 10-year Treasury prices have also fallen and the 10-year yield has surged by over a full percentage point since last summer. Unlike the central banks in Japan and Europe, the Fed is on a path of raising rates and is also thinking out loud about unwinding its big-fat balance sheet by shedding some of its Treasuries or mortgage backed securities or both. 

So it would make sense for US yields to rise. But why are yields in the bailiwicks of the other central banks so jumpy? Because markets smell a rat – as central banks, despite ceaseless jabbering, appear to be sitting on their hands after years of iron-fisted market domination. 

But markets have gotten so used to central-bank booze and dope that they “cannot believe” it will ever really end.

 Censorship & Propaganda

News

Bad Idea Or The Worst Idea? Having The FTC Regulate 'Fake News'

Over the last few months, we've talked about the weird obsession some people upset by the results of the election have had with the concept of "fake news." We warned that focusing on "fake news" as a problem was not just silly and pointless, but that it would quickly morph into calls for censorship. And, even worse, that censorship power would be in the hands of whoever got to define what "fake news" was. Thus, it was little surprise to see China and Iran quickly start using "fake news" as an excuse to crack down on dissent online. 

And, as always seems to be the case with "fake news," there's the whole "eye of the beholder" problem. That is, whoever gets to define what fake news is... can do an awful lot of damage. Our own President has now taken to calling CNN "fake news" -- when it's really just news he doesn't like, or with a slant he doesn't like. Do we really want to give the FTC -- whose commissioners are appointed by the President -- the power to take down news for being "fake?"

 DYI:  There are two separate issues present with the first and second paragraph. 

One:  I completely agree there is no place for the FTC or any other alphabet soup government agency regulating the news media. Period! 

Two:  CNN has been caught so many times using “crises actors” in order to drive the government narrative or to pump up a news story to create great optics.   When Trump or about 80% plus of Americans call the main stream press as fake it is with good reason.  It is now to the point of absurdity.

Two examples of outright propaganda: 

One: 9-11-2001 when the second plane was “absorbed” into the South Tower and almost came out the other side.  Obviously camera trickery was used to deceive the public of an airliner crashing into the building.  Any journalist with only a rudiment amount of engineering – or just plain old common horse sense would know immediately what was being shown is fraudulent.  When citizens questioned this obvious fakery the mainstream press was quick to label as conspiracy types furthering the governments official –faked - conclusions.

Two:  2019 will mark the 50^th anniversary of Neil Armstrong setting foot on the make believe moon at area 6 about 90 minutes North West of Las Vegas, Nevada.  Six landings within four years ALL during the Nixon administration giving the impression of an easy accomplishment.  So much so the last faked landing TV viewers were complaining that reruns of I Love Lucy were interrupted by the news media.  Even today neither the U.S. nor any other country has the technology to conquer the moon with astronauts.  Be as that may be, a massive psychological operation to bolster a failing administration.  Along with contractors who committed fraud in the multi – billion dollar range against the American people.  This would not have been possible without willing participation of the top brass of the main stream press CBS, NBC, ABC, New York Times, Washington Post and the Los Angles Times.  I must admit as far as fake news - propaganda this is the gold standard as today many still believe Neil Armstrong landed on the moon.

Fake news or propaganda has been with us since WWI and remains to this day.  The internet with citizen journalist and newly formed media outlets are breaking the government’s monopolistic ability to drive the political narrative.  This is why the main stream press with their government masters is so vocal in their attempt to clamp down on the newly formed entities.

  DYI

Is the Trump Rally Warranted?

Hopes, dreams, aspirations, and animal spirits are what drive the market over the short term making predictions a fool’s endeavor.  However predicting returns over the long term (more than seven years) for dollars invested today or stocks held at this level going forward predicting can be done with enough accuracy for financial planning.  The reason for this optimism markets over long periods of time will regress either up or down gravitating to their mean.  Simple algebra is required along with historical data to draw from forming a very close estimation for future returns.  For those of you who freak out at any level of math not to worry as moneychimp.com has an interactive calculator to do all of the work for you.

Ok so where to we stand now?  As of 2-03-17 the S&P 500 is at 2297 with a dividend yield of 1.99% and a Shiller PE¹⁰ at 28.47 times earnings.  Put the data into moneychip.com’s calculator and accepted their historical 5% (before inflation) historical earnings growth and drum roll please…the 10 year annualized estimated total return is 1.56%!  The market will be 100 points below 10 years from now!  WOW!  What a barn burner!  This return is before fees, commissions, trading impact costs, and the 800 pound gorilla – INFLATION.

Let’s break down the tyranny of costs:

(1.)       Commissions: Hopefully all of you are using no load mutual funds or if buying individual stocks are using a discount trading house.  I’ll assume there are no up front fees.  However money managers at mutual funds will have to pay commissions on their trades on your behalf that will reduce your return by the amount paid.  I’ll be very conservative and assume that an actively managed fund manager is not a gun slinger dancing in and out of the market at a moments notice or better still you are using an index fund dropping commission costs substantially.

Cost 0.1%

(2.)       Fees - Expense ratio:  Fancy language for what percentage the mutual fund is going to charge you.  This can range greatly from 0.05% (Vanguard’s S&P 500 index fund) and many as high as 2.0% along with a scattering at 2.5% or higher.  Staying conservative I’ll assume everyone has the average mutual fund expense ratio of 1.25%

Cost 1.25%

(3.)       Trading Impact Costs:  Every time a money manger begins to sell or buy into a stock or bond he will drive up or down the price by his own doing.  This has happened due the immense size of the funds as he majority of funds are in the multi billion dollar range.  Even index funds will suffer from this but at a far lesser degree as they deal with monies entering or exiting the fund.  Active managers who aggressively move in and out of stocks (or bonds) unwittingly generate this drag on performance increasing the odds for index funds beating their performance over rolling 5, 7 and especially 10 year returns.  Simply put the tyranny of lesser costs compounds in the favor of index funds.

Cost 0.50%

(4.)       Inflation:  The 800 pound gorilla brought to you by our central bank and chronic deficit spending reducing our future purchasing power all based on the misguided believe (propaganda) you can achieve something for nothing.  I’ll leave that discussion for another post.  The Federal Reserve is hell bent on delivering 2% inflation but as we all know the books are cooked so if they say 2% it is more likely 3% right along the average since 1913.

Cost 3.0%

That all adds up to 4.85% as compared to our estimated return of 1.56%.  So…4.85% minus 1.56% equals negative 3.29%.  State and local government workers have the old style retirement plans.  This is why government pensions are underfunded as most mangers have made a return assumption of 8%!  This will only get worse as the market valuations remain at nose bleed levels and then to add insult to an already deplorable situation as the market sells off 45% to 60%.  A major pension crisis is here now and is going to get worse over the next 10 to 15 years!  Those who are self funding using such plans as 401k’s, IRA’s, etc. are in the same boat as well.  There is now a pension crisis that is only going to exacerbate in the years ahead.

This is why our model portfolio has zero stocks due to massive overvaluation of the market propelling returns after costs negative.  It is simple as that.  So when everyone is losing their heads with the Trump rally don’t go and lose yours.  This rally is a good time to reduce your holdings of common stocks.

  Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 2/1/17

Active Allocation Bands (excluding cash) 0% to 60%

75% - Cash -Short Term Bond Index - VBIRX

20% -Gold- Precious Metals & Mining - VGPMX

 5% -Lt. Bonds- Long Term Bond Index - VBLTX

 0% -Stocks- Total Stock Market Index - VTSAX

[See Disclaimer]

 This blog site is not a registered financial advisor, broker or securities dealer and The Dividend Yield Investor is not responsible for what you do with your money.

This site strives for the highest standards of accuracy; however ERRORS AND OMISSIONS ARE ACCEPTED!

The Dividend Yield Investor is a blog site for entertainment and educational purposes ONLY.

The Dividend Yield Investor shall not be held liable for any loss and/or damages from the information herein.

Use this site at your own risk.

DYI

  

The

Dictator’s Club

UN Agenda 2030:

A Recipe for Global Socialism

"If you love liberty, self-government, free markets, or the U.S. Constitution, you will be wishing that the UN would leave you behind."

The Agenda 

Perhaps the single most striking feature of Agenda 2030 is the practically undisguised road map to global socialism and corporatism/fascism, as countless analysts have pointed out. To begin with, consider the agenda’s Goal 10, which calls on the UN, national governments, and every person on Earth to “reduce inequality within and among countries.” To do that, the agreement continues, will “only be possible if wealth is shared and income inequality is addressed.” 

As the UN document also makes clear, national socialism to “combat inequality” domestically is not enough — international socialism is needed to battle inequality even “among” countries. “By 2030, ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources,” the document demands. In simpler terms, Western taxpayers should prepare to be fleeced so that their wealth can be redistributed internationally as their own economies are cut down to size by Big Government. Of course, as has been the case for generations, most of the wealth extracted from the productive sector will be redistributed to the UN and Third World regimes — not the victims of those regimes, impoverished largely through domestic socialist/totalitarian policies imposed by the same corrupt regimes to be propped up with more Western aid under Agenda 2030. 

Powerful Promoters

It all sounded so wonderful to some of the world’s most brutal dictators that they could hardly contain their glee. “This agenda promises a brave new world, a new world which we have to consciously construct, a new world that calls for the creation of a new global citizen,” gushed Marxist dictator Robert Mugabe, the genocidal mass-murderer enslaving Zimbabwe who also serves as chairman of the African Union. “I want to believe that we are up to this task that we have voluntarily and collectively committed ourselves to. Our success, and in particular the promise of a new world that awaits us, depends upon this commitment.” He also promised to vigorously impose the UN Agenda 2030 on the starving and impoverished victims his regime lords over with Agenda 2030-style policies. The communist Castro regime vowed to work with socialist Venezuelan strongman Nicolas Maduro and other tyrants to impose the UN goals on their victims, too — all with financing from Western taxpayers.   

The brutal tyrants ruling Communist China, meanwhile, have also been enthusiastic cheerleaders for the UN goals — goals that the regime boasted it played a “crucial role” in developing. The Chinese autocracy, infamous for forced abortions, censorship, religious and political persecution, the “one-child policy,” terrible pollution, kangaroo courts, and of course, murdering more human beings than any other entity in all of human history, used its vast, global propaganda machine to celebrate Agenda 2030.

 For now, at least, the world and the White House are all pretending that the SDGs are binding on Americans, too. However, the U.S. Senate was not consulted, as the Constitution requires for all treaties. And even if the Senate were to ratify it, the federal government cannot grant itself new anti-constitutional powers merely by approving a treaty. Therefore, the agreement has no force in the United States. But as UN Agenda 21 showed clearly, that does not mean that the Obama administration, and possibly future presidents, would not attempt to push it forward anyway. The American people, therefore, must demand through their elected representatives that the UN power grab be stopped.

 DYI:  When you start studying these so called conspiracies as in the case of the U.N. you end up finding that the situation is far worse than imagined.  Here we have an organization that has been billed as a savior to mankind established after the ravages of WWII.  Only to quickly change into a one world government agenda riddled with socialist dictators designed to fleece the common man or woman of the world.  One of the greatest aspects of the internet the word is spreading about this failed institution with the ability to punch threw the main stream press’ propaganda machine.  The best prescription for America is to pull out of the U.N. along with selling off their building and having the facility developed into condos, hotel, and apartments to help alleviate the housing shortage in New York City.

I wonder if there is someone in the Trump administration that knows a thing or two about real estate?

DYI

Bubble

News

An Omen of Global Collapse

In the absence of a gold standard, the modern economy runs largely on credit. The Daily Reckoning’s Richard Duncan argues for example that credit must increase 2% to avoid recession.
And St. Angelo thinks the contraction represents “the popping of the massive inflationary asset bubble” that began inflating after 1971. That, curiously enough, is the year Nixon closed the gold window and ended Bretton Woods.
Then on Aug. 1, 2014, they reached their peak of $12.03 trillion. But then they started dropping. And by Oct, 28, 2016, they fell to $11.06 trillion.The trend, starting in 1971, has now gone into reverse. Look:

This contraction is still in the early stages. But that can change, quick as a wink: “Deflation can take place at great speed, feeding on itself as fear of losses in investments propels the public to liquidate investments as quickly as possible.”

Ron Paul Warns: "Second Financial Bubble Going To Burst Soon...

 Even Trump Can't Stop It"

By all appearances notes SHTFPlan.com's Mac Slavo, President Trump is doing his damnedest to turn around the economy, revitalize jobs and bring back prosperity. But the larger trends are already in place; the cycle is turning, and the bust cannot be put off forever.

Unfortunately, it looks like Trump may be blamed for a financial crisis that he didn’t cause. Analysts, including notably Brandon Smith, may be correct in pinpointing the attempt to use the new and highly controversial president as a scapegoat for the dirty work of the bankers. 

Paul noted that he thinks U.S. policy has created a “failed system” in the country.  

“All empires end and we’re the empire. It’s going to end and it’s going to be for economic reasons…we’re going to fail because we’re working within a failed system…this is a monetary problem…a spending problem…it’s going to be financial,” 

Paul emphatically claimed, once again stating the collapse of America is imminent. “We have something arriving worse than 2008, 2009, much worse…It was the fault of the Federal Reserve,” Paul said, adding, the Keynesian economic model contributed greatly to the first bubble burst. Paul said the left will blame Trump for it like the right did to Obama, but he says it’s bigger than the office of the president, and blames the federal reserve and the previous 17 years of governmental spending.

Why Our System is Broken:  Cheap Credit is King 

DYI

Excellent article as to why the Federal Reserve needs to be abolished 

Cheap credit--newly issued money that can be borrowed at low rates of interest--is presented as the savior of our economic system, but in reality, it's why our system is broken. The conventional economic pitch goes like this: cheap credit enables consumers to buy more goods and services (and since the system needs growth or it implodes, that's good). 

The first thing we observe is those closest to the central bank credit spigot get the lowest rates and nearly unlimited lines of credit. J.Q. Citizen may be thrilled to get a 4% annual-rate mortgage, but the mega-millionaire closer to the credit spigot can borrow 10 times as much as J.Q. can, and at half the rate of interest. 

In other words, cash isn't king in this perverse system: cheap credit is king. Those with access to cheap unlimited credit can scoop up all the productive assets, greatly increasing their wealth--and they can buy the political class, too, with campaign contributions and donations to false-front foundations. 

This is why our system is broken: cheap credit has enabled the rich to become immensely richer while producing nothing of value--no additional goods or services have been produced by these financier skims. 

You want to fix the economic system, reduce political bribery and reduce rising income inequality? Shut off the cheap unlimited credit spigot to banks, financiers and corporations.  

If everyone with good credit had to pay 6% to borrow money, regardless of their position in the wealth-power pyramid, perverse incentives for parasitic skimming would take a major hit.

 DYI

Monthly

Updates

Margin of Safety!

Central Concept of Investment for the purchase of Common Stocks.

"The danger to investors lies in concentrating their purchases in the upper levels of the market..."

Stocks compared to bonds:

Earnings Yield Coverage Ratio - [EYC Ratio]

EYC Ratio = [ (1/PE10) x 100] x 1.1] / Bond Rate

1.75 plus: Safe for large lump sums & DCA

1.30 plus: Safe for DCA

1.29 or less: Mid-Point - Hold stocks and purchase bonds.

1.00 or less: Sell stocks - rebalance portfolio - Re-think stock/bond allocation.

Current EYC Ratio: 1.00

As of 2-1-17
Updated Monthly

PE10 as report by Multpl.com

Bond Rate is the rate as reported by

Vanguard Long-Term Investment-Grade Fund Investor Shares (VWESX)

DCA is Dollar Cost Averaging.
Lump Sum any amount greater than yearly salary.

PE10  .........28.24
Bond Rate...3.89%

Over a ten-year period the typical excess of stock earnings power over bond interest may aggregate 4/3 of the price paid. This figure is sufficient to provide a very real margin of safety--which, under favorable conditions, will prevent or minimize a loss......If the purchases are made at the average level of the market over a span of years, the prices paid should carry with them assurance of an adequate margin of safety.  The danger to investors lies in concentrating their purchases in the upper levels of the market.....

Common Sense Investing:
The Papers of Benjamin Graham
Benjamin Graham

% Allocation Formula

2-1-17
Updated Monthly

% Allocation = 100 – [100 x (Current PE10 – Avg. PE10 / 2)]  /  (Avg.PE10 x 2 – Avg. PE10 / 2)

Current PE10.....28.24

Avg. PE10.........16.72

% Stock Allocation 21% 

Logic behind this approach:

--As the stock market becomes more expensive, a conservative investor's stock allocation should go down. The rationale recognizes the reduced expected future returns for stocks, and the increasing risk. 

--The formula acknowledges the increased likelihood of the market falling from current levels based on historical valuation levels and regression to the median, rather than from volatility. Many agree this is the key to value investing.  

Please note there is controversy regarding the divisor (Avg. PE10).  The average since 1881 as reported by Multpl.com is 16.70.  However, Larry Swedroe and others believe that using a revised Shiller P/E mean of 19.6 , the number since 1960 ( a 53-year period), reflects more modern accounting procedures.

DYI adheres to the long view where over time the legacy (prior 1959) values will be absorbed into the average.  Also it can be said with just as much vigor the last 20 years corporate America has been noted for accounting irregularities.  So....If you use the higher or lower number, or average them, you will be within the guide posts of value.      

  

DYI

Secular Market Top - Since January 2000

+  72.8% Dow       

+208.7% Transports 

+136.0% Utilities

+55.1%  S&P 500

+38.0%  Nasdaq

+52.9%  30yr Treasury Bond

+317.3% Gold

+106.3% Oil
  +59.7% Swiss Franc's

    

From High to Low

+317.3% Gold

+208.7% Transports

+136.0% Utilities

+106.3% Oil
+  72.8% Dow

+  59.7% Swiss Franc's 

+  52.9% 30yr Treasury Bond  
+  55.1% S&P 500 

+  38.0% Nasdaq

December 1999 Shiller PE10 was 44.19                 2-1-17 is 28.24

August 2000 S&P 500 dividend yield was 1.11%  2-1-17 is 2.01%

It is easily seen that in the year 2000 the Nasdaq was horribly overvalued and gold was on the give away table, such lopsided returns 17 years later!

Also of interest the stodgy 30 year Treasury bond has outperformed the S&P 500 and Nasdaq since the year 2000.  The modern portfolio crowd back in the year 2000 would find this a very low probability outcome.  Value player's, due to extreme valuations, would have recognized this as the most likely outcome (close to a no-brainer!).