An old friend, Ted Kikoler, once told me what I believe is the actual answer to humankind’s constant quest for happiness. His theory was later confirmed to me by Leo, a short Argentine man living with his tall Dutch wife near the top of a large mountain in northern Patagonia. After moving to the area, I began hearing from my various new acquaintances about Leo, “the happiest man in the world,” leading me to search him out like a wannabe acolyte seeking a guru.
“David,” Leo told me over a cup of mate, the first of many we would share over the months I lived there, “I know rich men who are always miserable, and poor men who are happy every day, so it seems to me that money has nothing to do with it.”
So, what does make a person happy?
While I won’t go into a lengthy explanation here and now, the answer is simplicity itself: energy is happiness.
Thus, what energizes you is what makes you happy. (Proving that notion in the negative, lethargy is a primary sign of depression.)
These thoughts came to me this morning when I rose at the crack of dawn and fell quickly into a routine. Glass of water, cuppa coffee, flicking the laptop on. Then, recognizing the routine for what it was, routine, I pulled on the reins and hit the reset button.
Putting the laptop aside, I ate a quick breakfast, then headed out to the woods here in the highly taxed but otherwise agreeable New England home town of Casey Research. There, while providing an unexpected but enthusiastically welcomed breakfast buffet for flocks of mosquitoes and black flies, I set to work on a trail I had started a couple of months ago but haven’t gotten around to finishing. And so, for an hour in the morning quietude, I heaved boulders, dug trenches, maneuvered stones into steps, and ultimately extended the trail by all of about five feet over rough terrain.
Stepping back, covered in dirt from head to toe, flying predators circling my head like planes over O’Hare, I reflected how my little progress in taming nature followed a human tradition stretching back eons. Satisfied that I had given as good as I got, I headed back to the house with a snap in my dirty steps.
Growing older, it is natural that we wear deeper and deeper grooves in our life pattern, doing much the same things in much the same way, day after day, week after week, year after year. Recognizing the predictable, the mind goes on automatic pilot and dullness sets in.
One of Ted’s suggestions for staying alive (as in living life to its fullest) is to deliberately break the pattern of your life. Instead of driving to work today, ride your bicycle, even though it takes an extra hour. Instead of using your right hand to brush your teeth tonight, use your left. Even something as simple as that causes the brain to come alive as it figures out how to adjust.
I could go on, and some day will, but there is other news afoot, and I have rambled enough for one morning.
Stuff in the Fan
I hesitate to comment too frequently on short-term market actions. However, given that Friday saw a significant sell-off in the DJIA, and the sell-off continues this Monday morning, a comment or two are called for.
As we have previously mentioned, perhaps to the point of being tiresome, the structural imbalances in the economy that brought us to this place remain largely unaddressed. And many of those imbalances, for example government deficits, grow exponentially worse.
While I don’t think it’s a good idea to actively look for bad news, there is so much of the stuff lurking about that taking any more than a step or two in any direction causes you to bump into it.
For example, this morning our own Chris Wood sent along an item from The Wall Street Journal that puts the lie to the idea that the banks are on the mend or that the government is effectively coping with the situation. An excerpt…
Banks in the U.S. that failed in the past two years were in far worse shape than those that collapsed during the industry’s last crisis, a looming problem for the government agency charged with insuring deposits.
At three of the five banks that failed Friday, increasing the total to 77 so far this year, the financial hit to the agency’s deposit-insurance fund is expected by the Federal Deposit Insurance Corp. to be about 50% of their assets.
The biggest hit on a percentage basis is coming from Community Bank of Nevada, a Las Vegas bank with $1.52 billion in assets and an estimated cost of $781.5 million. The failure of Colonial Bank, a unit of Colonial BancGroup Inc. that was sold to BB&T Corp., will cost $2.8 billion, or 11% of the Montgomery, Ala., bank’s assets.
For the 102 banks that have collapsed in the past two years, the FDIC’s estimated cost averaged 25% of assets. That is up from the 19% rate between 1989 and 1995, when 747 financial institutions were closed by regulators, according to the FDIC.
The agency’s insurance fund already has dipped to $13 billion, with more than 300 battered banks and thrifts still on an undisclosed FDIC list of problem institutions.
One problem is that so many banks took risks when the economy was booming, and are seeing their capital dissipate with alarming speed.
“Compared to the savings-and-loan crisis, banks these days have gotten much bigger and the economy has gotten much bigger,” said Bob Patten, an analyst at Morgan Keegan & Co. “This crisis won’t eclipse the last one in size, but the costs to the FDIC are showing the amount of leverage they really had on their books.”
… As the number of bank failures escalates, FDIC officials have been trying to find investors and buyers for terminally ill financial institutions, increasingly by agreeing to shield acquirers from certain losses on assets of the failed bank.
The FDIC and BB&T entered into a loss-share transaction on approximately $15 billion of the $22 billion in Colonial assets bought by the Winston-Salem, N.C., bank. FDIC Chairman Sheila C. Bair said in a statement that losses from Friday’s failures “are lower than had been projected.”
Joe Bel Brumo, writing in The Wall Street Journal
Note that bit about the government “agreeing to shield acquirers from certain losses on assets of the failed bank.” This sort of guarantee has become a popular backdoor way for the government to deal with various elements of this crisis, without the more overt method of writing a check to cover losses or, heavens forbid, actually letting the equity holders bear the brunt for having made a bad investment in a poorly run bank.
Instead, the government jiggers things to hand off the good assets of a bad bank to one of their buddies, while agreeing to shift the liability for the poor assets onto the backs of taxpayers – with the IOU due and payable at some point down the road.
Likewise, today, the Fed announced that it was extending its backstop and bailout for commercial real estate and similar enterprises with underlying assets crumbling under unmanageable levels of debt.
Aug. 17 (Bloomberg) — The Federal Reserve extended by three to six months an emergency program aimed at restarting credit markets, a move that may cushion the commercial real-estate industry from rising defaults and falling prices.
The Term Asset-Backed Securities Loan Facility, with a capacity of as much as $1 trillion, will expire June 30 for newly issued commercial mortgage-backed securities, instead of Dec. 31, the Fed and U.S. Treasury said today in a statement in Washington. For other asset-backed securities and CMBS sold before Jan. 1, the plan was extended three months to March 31.
Property values have fallen 35 percent since peaking in October 2007, according to Moody’s Investors Service. That’s making it tough for owners to refinance almost $165 billion of mortgages for skyscrapers, shopping malls and hotels this year. The Fed is “paying very close attention,” Chairman Ben S. Bernanke said in congressional testimony last month.
While financial-market conditions “have improved considerably in recent months,” the markets for ABS and CMBS “are still impaired and seem likely to remain so for some time,” the Fed and Treasury said.
Increasingly, it seems, we are not alone in our steady pessimism about how long it will take for this crisis be resolved. Bud Conrad, chief economist of this operation, sent over the annual report from the Bank for International Settlements today, along with a snippet summing up their view of the outlook for the economy. Here’s that snippet…
So far, the crisis has developed in five more or less distinct stages of varying intensity, starting with the subprime mortgage-related turmoil between June 2007 and mid-March 2008 (Graph II.1). Following this first stage, during which the primary focus was on funding liquidity, bank losses and writedowns continued to accumulate as the cyclical deterioration slowly translated into renewed asset price weakness. As a result, in the second stage of the crisis, from March to mid-September 2008, funding problems morphed into concerns about solvency, giving rise to the risk of outright bank failures. One such failure, the demise of Lehman Brothers on 15 September, triggered the third and most intense stage of the crisis: a global loss of confidence, arrested only after unprecedented and broad-based policy intervention. Stage four, from late October 2008 to mid-March 2009, saw markets adjust to an increasingly gloomy global growth outlook amid uncertainties over the effects of ongoing government intervention in markets and the economy. Stage five, beginning in mid-March 2009, has been marked by signs that markets are starting to show some optimism in the face of still largely negative macroeconomic and financial news, even as true normalisation – the end of the crisis – still appears some way off.
You can read the full report, and see the chart in better detail, here… http://www.bis.org/publ/arpdf/ar2009e2.pdf
While it is still far too early to say whether we are seeing the beginning of the next stage down, when true capitulation sets in, the facts on the ground suggest it’s coming sooner rather than later. This is bad news only if you are sitting on a portfolio of overvalued stocks, but good news if you’re keeping a close eye on excellent companies with an intention to buy them on the cheap.
For instance, in The Casey Report we are watching a regional energy provider that has posted year-over-year gains in net profit of over 47% but is still selling for close to half of its book value. Which means you are buying a dollar’s worth of assets for 50 cents. With each passing day, the market is bringing the share price of this giveaway stock closer to our buy point, after which we fully expect to be rewarded with 50% or better gains… almost regardless of what the stock market does thereafter.
While many investors fail to realize it, this remains a buyer’s market – meaning you can take your time, pick your battles, and call your own shots. There are good times ahead, at least for the attentive.
About the Casey Risk-Free Trials
From time to time, you’ll note that I reference one or more publications, and often include a link to a promotional page or a simple order form with the recommendation that you give this publication or that a try.
While that may seem to be blatantly commercial, and I guess it is, it is also sincere. We offer these risk-free trials on virtually all of our publications as standard practice – because it gives you a chance to get to experience each of our publications, with the comfort of knowing that you can get 100% of your money back if you realize during the 3-month trial period that it’s not right for you.
Thus, for example, you can try The Casey Report today, check out the regional energy producer just mentioned, as well as all of our current recommendations – then enjoy the letter for the next three months – and still get all your money back if it doesn’t meet your expectations.
Likewise, if you have an interest in high-octane junior resource companies, you can try the International Speculator, our oldest publication and definitely the best in class for the sector. Again, if it doesn’t impress you with the research or, more to the point, make you money, then cancel after three months and get your money back.
Please understand, we won’t be offended if you later cancel, as we are willing – even eager – to take that risk. That’s because we are confident you’ll find our research well worth every penny you pay.
With the prices of most of our services going up significantly at the end of the month, there’s never been a better time to take us up on a risk-free trial subscription to one – or even all of our various publications (through a membership in our Casey’s Club) – as that allows you to beat the price increases and lock in your lower rate for as long as you remain an active subscriber.
Something to think about.
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Whatever you do, don’t wait until after August 31, 2009, as that is when the price increases kick in.
As you may have discerned from previous editions of this service, I’m not very impressed so far with the new push for universal healthcare. While it will surprise some of my libertarian friends (and partners), I am not reflexively opposed to the idea. Given the government is going to continually extort a high percentage of my income no matter what I say or do, I would rather that money go to something more generally beneficial and healthful than, say, waging war on primitive nations.
Which brings me to a heartfelt email I received this morning from Steven, a subscriber and correspondent, urging me to read President Obama’s New York Times op-ed on why the nation needs healthcare. Steven thought so highly of the president’s words that he suggested that I, and everyone else on the list, should forward it on to everyone we know. As you, dear readers, include just about everyone I know, I am doing so here.
While I am leaving the president’s words untouched, I will interject an observation here and there, in boldface type.
Ladies and Gentlemen, the President of the United States…
August 16, 2009
Why We Need Health Care Reform
By BARACK OBAMA
OUR nation is now engaged in a great debate about the future of health care in America. And over the past few weeks, much of the media attention has been focused on the loudest voices. What we haven’t heard are the voices of the millions upon millions of Americans who quietly struggle every day with a system that often works better for the health-insurance companies than it does for them.
These are people like Lori Hitchcock, whom I met in New Hampshire last week. Lori is currently self-employed and trying to start a business, but because she has hepatitis C, she cannot find an insurance company that will cover her. Another woman testified that an insurance company would not cover illnesses related to her internal organs because of an accident she had when she was 5 years old. A man lost his health coverage in the middle of chemotherapy because the insurance company discovered that he had gallstones, which he hadn’t known about when he applied for his policy. Because his treatment was delayed, he died.
[One of the standard techniques of rhetoric is to make your case using heart-wrenching stories, even if they are exceptions to the rule.]
I hear more and more stories like these every single day, and it is why we are acting so urgently to pass health-insurance reform this year. I don’t have to explain to the nearly 46 million Americans who don’t have health insurance how important this is. But it’s just as important for Americans who do have health insurance.
[The President is truthful in that he hears more and more stories like these every day, but that’s only because his team is actively searching them out. I certainly understand that having health care is important if you don’t have it, but why is it just as important for me and the other 300 million Americans who already have it? Now my interest is piqued.]
There are four main ways the reform we’re proposing will provide more stability and security to every American.
First, if you don’t have health insurance, you will have a choice of high-quality, affordable coverage for yourself and your family — coverage that will stay with you whether you move, change your job or lose your job.
[Fantastic. Where do I sign up?]
Second, reform will finally bring skyrocketing health care costs under control, which will mean real savings for families, businesses and our government. We’ll cut hundreds of billions of dollars in waste and inefficiency in federal health programs like Medicare and Medicaid and in unwarranted subsidies to insurance companies that do nothing to improve care and everything to improve their profits.
[I’m on board! How could I not be? But could you tell me a bit more about how you are going to cut costs? I mean, there’s the whole Post Office, Amtrak, Fannie Mae (et al), and, now that you mention it, Medicare and Medicaid debacles – all of which have in common that they are government run and financial disasters. Some people say that’s because bureaucrats, unlike employees in the private sector, have no skin in the game and therefore no real incentive to balance costs against benefits. But I am sure they are being churlish. As for the insurance companies, boo, hiss – terrible greedy corporations! (At least, according to the latest polls. Pile it on!)]
Third, by making Medicare more efficient, we’ll be able to ensure that more tax dollars go directly to caring for seniors instead of enriching insurance companies. This will not only help provide today’s seniors with the benefits they’ve been promised; it will also ensure the long-term health of Medicare for tomorrow’s seniors. And our reforms will also reduce the amount our seniors pay for their prescription drugs.
[You go, big O! That big voting block of senior citizens needs all the reassurance it can get… and a nice touch promising more subsidies for prescription drugs. But could you provide just a bit more detail on the whole “being more efficient” thing? I like the follow-on kick to the shins of the insurance companies. Then again, if they’re so bad, why don’t we just outlaw the bastards?]
Lastly, reform will provide every American with some basic consumer protections that will finally hold insurance companies accountable. A 2007 national survey actually shows that insurance companies discriminated against more than 12 million Americans in the previous three years because they had a pre-existing illness or condition. The companies either refused to cover the person, refused to cover a specific illness or condition or charged a higher premium.
[Hold the fort! You mean all this time, with all the government regulation of the insurance companies, we haven’t been holding them accountable? Time for action!
And, look at those numbers, disgraceful. Over three full years, 12 million Americans were “discriminated” against because they had a pre-existing condition! That’s four million people a year out of 300 million, denied coverage or asked for a higher premium because of a preexisting condition. Despicable. Since we’re at it, I think old people shouldn’t pay any more than young people. Why, that’s discrimination!]
We will put an end to these practices. Our reform will prohibit insurance companies from denying coverage because of your medical history. Nor will they be allowed to drop your coverage if you get sick. They will not be able to water down your coverage when you need it most. They will no longer be able to place some arbitrary cap on the amount of coverage you can receive in a given year or in a lifetime. And we will place a limit on how much you can be charged for out-of-pocket expenses. No one in America should go broke because they get sick.
[If I’m not mistaken, I guess this means that insurance companies will either go out of business or have to charge everyone much higher premiums. But from what I hear, there will be a lower-cost government alternative – so I guess I can sign up for that, right?]
Most important, we will require insurance companies to cover routine checkups, preventive care and screening tests like mammograms and colonoscopies. There’s no reason that we shouldn’t be catching diseases like breast cancer and prostate cancer on the front end. It makes sense, it saves lives and it can also save money.
[I am liking the sound of this new healthcare program more and more by the minute. And let’s be sure to cover chiropractors and holistic health providers as well.]
This is what reform is about. If you don’t have health insurance, you will finally have quality, affordable options once we pass reform. If you have health insurance, we will make sure that no insurance company or government bureaucrat gets between you and the care you need. If you like your doctor, you can keep your doctor. If you like your health care plan, you can keep your health care plan. You will not be waiting in any lines. This is not about putting the government in charge of your health insurance. I don’t believe anyone should be in charge of your health care decisions but you and your doctor — not government bureaucrats, not insurance companies.
[That last paragraph is like the grand finale at a fireworks show, a veritable explosion of good stuff. Why, this is just a dream come true! (Or is it just a dream? I’m not 100% sure yet, because I haven’t seen any details on how this can all be provided. Who’s going to pay for it? Where’s the money going to come from? I am sure that’s coming next…)]
The long and vigorous debate about health care that’s been taking place over the past few months is a good thing. It’s what America’s all about.
But let’s make sure that we talk with one another, and not over one another. We are bound to disagree, but let’s disagree over issues that are real, and not wild misrepresentations that bear no resemblance to anything that anyone has actually proposed. This is a complicated and critical issue, and it deserves a serious debate.
[Agreed. But in order to have a debate, some details are required, yes?]
Despite what we’ve seen on television, I believe that serious debate is taking place at kitchen tables all across America. In the past few years, I’ve received countless letters and questions about health care. Some people are in favor of reform, and others have concerns. But almost everyone understands that something must be done. Almost everyone knows that we must start holding insurance companies accountable and give Americans a greater sense of stability and security when it comes to their health care.
[Yes, yes – insurance companies are bad and Americans should have great health care at low cost. Got it. Now can we get on to some of the details. Maybe just a sentence or two, please?]
I am confident that when all is said and done, we can forge the consensus we need to achieve this goal. We are already closer to achieving health-insurance reform than we have ever been. We have the American Nurses Association and the American Medical Association on board, because our nation’s nurses and doctors know firsthand how badly we need reform. We have broad agreement in Congress on about 80 percent of what we’re trying to do. And we have an agreement from the drug companies to make prescription drugs more affordable for seniors. The AARP supports this policy, and agrees with us that reform must happen this year.
[I think, Mr. President, that you might be gilding the lily here a bit. From what I’ve read, different groups support different bits and pieces of what’s been tossed out there, but there is hardly a broad agreement on anything.]
In the coming weeks, the cynics and the naysayers will continue to exploit fear and concerns for political gain. But for all the scare tactics out there, what’s truly scary — truly risky — is the prospect of doing nothing. If we maintain the status quo, we will continue to see 14,000 Americans lose their health insurance every day. Premiums will continue to skyrocket. Our deficit will continue to grow. And insurance companies will continue to profit by discriminating against sick people.
[Those damned naysayers, exploiting fear for political gains. Can’t they see that 14,000 Americans lose their insurance every day, premiums will skyrocket, the deficit will continue to grow, and insurance companies will continue discriminating against sick people? Wow, that sounds pretty scary to me. Wait, I thought it was the other guy who was using scare tactics?]
That is not a future I want for my children, or for yours. And that is not a future I want for the United States of America.
In the end, this isn’t about politics. This is about people’s lives and livelihoods. This is about people’s businesses. This is about America’s future, and whether we will be able to look back years from now and say that this was the moment when we made the changes we needed, and gave our children a better life. I believe we can, and I believe we will.
In all sincerity, I wish the president and his allies would propose a program that actually made sense. Starting with massive cuts in taxes and regulations – in the size of government itself. That would allow the country’s businesses to become hyper-competitive in global markets, and individuals to be able to keep much more of what they earn and therefore to be able to afford proper insurance. At that point, if some of the remaining tax revenues were used to provide baseline insurance made available to the truly indigent – who could argue?
But reading the president’s op-ed, written no doubt by the best political writers (your) money can buy, I’m reminded of a good old-fashioned “chicken in every pot” stump speech.
It all sounds so wonderful. But the devil, of course, is in the details. It makes no sense to usher in universal healthcare if it is poorly conceived, or conceived in such as way as to satisfy various political back-scratching without regard to the efficiency or sustainability of the thing. Medicare might be a great idea, but that it has run amok and is headed for insolvency makes it hard to hold up as a guiding light.
This all gets back to the notion of positive rights. Yes, I would like every American to have a roof over their head and three square meals a day. Actually, I would like that to be true for everyone in the entire world. But there are certain immutable laws of economics that can’t be ignored. Starting with “There’s no such thing as a free lunch.”
The only way you can give away free health care, or free chickens, for that matter, is if you either own it in the first place, or you take it away from someone else.
Or, to quote Margaret Thatcher, “The only problem with socialism is that, sooner or later, you run out of other’s people money.”
There is probably a way to provide health care coverage to the uncovered, but it’s not by adding to the ridiculous tax burdens we already bear. And it will require a serious cutback – not a massive expansion – in government spending elsewhere.
Most of all, it requires that the government stops playing make-believe.
And with that, dear reader, I must dash.
Until tomorrow, thanks for reading and for subscribing to a Casey Research service.