Friday, November 29, 2013

Silver, Gold & Miners ETF Trading Strategy – Part II

It’s been over a week since our trading partner Chris Vermeulens last gold & silver report which he took a lot of heat because of his bearish outlook. Last Friday’s closing price has this sector trading precariously close to a major sell off if it’s not already started.

On a percentage bases Chris feels precious metals mining stocks as whole will be selling at a sharp discount in another week or three. ETF funds like the GDX, GDXJ and SIL have the most downside potential. The amount of emails he received from followers of those who have been buying more precious metals and gold stocks as price continues to fall was mind blowing.

Precious metals continued to fall on Monday and Tuesday of this week and selling volume should spike as protective stops will be getting run and the individuals who are underwater with a large percentage of their portfolio in the precious metals sector could start getting margin calls and cause another washout, spike low similar to what we saw in 2008.

Here is Chris' updated ETF Trading Charts with Friday’s closing prices showing technical breakdowns across the board....Read "Silver, Gold & Miners ETF Trading Strategy – Part II"



We are doing it again....This week's FREE webinar, "How to Boost Your Returns With One Secret ETF Strategy"
 


Thursday, November 28, 2013

Elliott Wave Forecast: Bull Market Nearing Interim Peak on SP500

Back on September 12th with the SP 500 at 1689 we forecasted a run in the SP 500 to 1829, a very specific number. We use Elliott Wave Theory and Analysis in part to come up with projected pivots for the SP 500 and this was our projection.

Elliott Wave Analysis is based largely on Human Behavioral patterns that repeat over and over again throughout time. It’s really crowd behavior or herd mentality as applied to the broader stock markets. This can also apply to individual stocks, precious metals and more. At the end of the day, an individual stock is worth what investors believe it is worth, and it won’t necessarily reflect what a private valuation may accord it.

With that in mind, the stock market as a basket of 500 stocks can pretty easily be patterned out and then we can apply our Elliott Wave Theory to that pattern and predict outcomes. Back in mid-September, we believed we were in a 3rd wave up of the bull market as part of what we call Primary wave 3. The primary waves are 1-5 and Primary 3 is usually the most bullish of the 5 primary waves with 2 and 4 being corrective. Well, within Primary wave 3 you have 5 major waves… and we projected that Major wave 3 would be running to about 1829.

This projection was based on the 1267 pivot for Major wave 2 of Primary Wave Pattern 3 which was a corrective wave. We then simply applied a Fibonacci ratio to the Major wave 1 and assumed that Major wave 3 would be 161% of Major 1. That brings us to about 1822-1829… and here we are a few months later heading into Thanksgiving with the SP 500 hitting 1807 and getting close to our projection.

What will happen afterwards should be a Major wave 4 correction. We expect this to be about 130 points on the shallow side of corrections, and as much as 212 points.

So the Bull Market is not over, but Major Wave Pattern 3 of Primary 3 is coming to an end as we are in a seasonally strong period for the market. We would not be shocked to see a strong January 2014 correction in the markets as part of Major wave 4.

Here is our September 14th elliott wave forecast chart we sent to our subscribers and you can see we continue now along the same path.....Read "Elliott Wave Forecast: Bull Market Nearing Interim Peak on SP500"


Tuesdays Free webinar: How to Boost Your Returns With One Secret ETF Strategy


Wednesday, November 27, 2013

Fundamentals Rendered Irrelevant by Fed Actions: Probability Based Option Trading

The fundamental backdrop behind the ramp higher in equity prices in 2013 is far from inspiring. However, fundamentals do not matter when the Federal Reserve is flooding U.S. financial markets with an ocean of freshly printed fiat dollars.

As we approach the holiday season, retail stores are usually in a position of strength. However, this year holiday sales are expected to be lower than the previous year based on analysts commentary and surveys that have been completed. This holiday season analysts are not expecting strong sales growth. However, in light of all of this U.S. stocks continue to move higher.

Earnings growth, sales growth, or strong management are irrelevant in determining price action in today’s stock market. In fact, the entire business cycle has been replaced with the quantitative easing and a Federal Reserve that is inflating two massive bubbles simultaneously.

Through artificially low interest rates largely resulting from bond buying, the Federal Reserve has created a bubble in Treasury bonds. In addition to the Treasury bubble, we are seeing wild price action in equity markets as hot money flows seek a higher return. Usually fundamentals such as earnings, earnings estimates, and profitability drive stock prices.

However, as can be here the U.S. stock market is being driven by something totally different......Read "Fundamentals Rendered Irrelevant by Fed Actions: Probability Based Option Trading"



Get our "Options Trading Test Drive Today!


Saturday, November 23, 2013

Free webinar: How to Boost Your Returns With One Secret ETF Strategy

Join our trading partner John Carter of Simpler Options this Tuesday evening, December 3rd, for his FREE webinar "How to Boost Your Returns With One Secret ETF Strategy".

It all gets started at 8:00 p.m. eastern but get registered right now as there is limited seating and Johns wildly popular webinars always fill up right away.

If you watched this weeks new video you have an idea of what we are up to. And how we are trading ETF's in such a way that the market makers can not get the upper hand on us. In this weeks class John will be taking his methods to another level. And he is sharing it ALL with you.

In this free online class John will share with you....

    •     A Powerful Simple Strategy for Trading Options on ETFs

    •     The SAFE Levels to Take Trades

    •     How to Minimize Your Risk

    •     The Very Best ETFs to use

    •     Which ETFs You Have to Avoid Like the Plague

           And much more...

Simply click here and visit the registration page, fill in your info and you'll be registered for Tuesdays FREE webinar.

See you on Tuesday,
The Stock Market Club


Watch "How to Boost Your Returns With One Secret ETF Strategy"

 


Thursday, November 21, 2013

U.S. Dollar Index ETF UUP Trading Strategy

We all know quantitative easing devalues the Dollar but contrary to that general statement it looks as though we could see the dollar index continue to rise for a few more weeks. If we analyze the chart of the Dollar ETF (UUP) it is clear that the short term momentum has turned up. The break above the down trend line and recent bounce off support bodes well for the dollar index.

The bull flag chart pattern that has formed in the past month has a measured move price target of roughly $22.30. The level also happens to be a key pivot point on the chart along with high volume resistance. I expect the dollar to continue to work its way higher over the next week or two with $22.30 being the line in the sand where sellers will jump on price and drive it back down, or at minimum force price to consolidate for a few days.

US Dollar ETF Trading Strategy – Daily Chart Analysis

ETF Trading Strategy


Chris Vermeulen – www.Gold & Oil Guy.com - Free Trading Ideas


Our new video: Why Market Makers Can’t Screw you with ETFs


Tuesday, November 19, 2013

Nine Reasons Why You Should Trade Options on ETFs

Our trading partner John Carter of Simpler Options is back with another great video. And as usual it's a total game changer. One of my favorite aspects of John's new video lesson is that he shows us how we can take advantage of trading ETF's. And since the market makers can't control the movement in these tickers...well, simply put..... they can't screw with us!



While there is many "highly capitalized" fund managers using Johns methods these trading techniques still work great for traders with small accounts. This makes it easy for the retail investor to level the playing field. Yet another reason trading ETF's using options has become the favorite of so many home gamers and professional fund managers alike.

Never traded options? Stop shying away from this type of trading. John is going to make this very easy to understand and you'll be able to put this to work on your own favorite ETF's in your favorite sector.

So go ahead and click here to watch John's free video "The Secret Life of ETF Options" 

After watching the video please feel free to leave a comment, we want to hear what you think of John's methods.


Ray @ The Stock Market Club



Watch "Nine Reasons Why You Should Trade Options on ETFs"

Friday, November 15, 2013

Option Probabilities Spell Possible Trouble for Treasury’s

Our trading partner J.W. Jones is coming at us today with a great post on where he sees the Treasury ETF TLT headed. Great guidance for where the market at large just might be headed.....

The incredible rally in equities in 2013 has begun to stir concern among many that the stock market is now in a bubble. We have entered the euphoric stage of this bull market and equity prices cannot and will not go lower according to some talking heads in the financial punditry.

While chatter is starting to heat up that equities are in a bubble, the real bubble seems to be ignored for the most part. The larger, more concerning bubble is in the Treasury marketplace where the Federal Reserve continues to print money to purchase treasury bonds to help keep interest rates artificially low.

Instead of debating the bubbles in Treasury’s versus equities, or trying to predict when the bubble in either asset class may pop, I want to focus on the near term for price action expectations in longer dated Treasury bonds.

Here is a weekly chart of the Treasury ETF TLT which is supposed to reflect the price action and yield generation of a portfolio of 20+ year duration Treasury bonds issued by the U.S. federal government.....Read "Option Probabilities Spell Possible Trouble for Treasury’s" 



"Wall Streets Best Kept Secret....Now you are in the loop"

 


ExxonMobil - The Surprising Big Chart Picture

While our trading partner Adam Hewsion was reviewing his energy portfolio this week, he stopped and looked at the chart for Exxon Mobile (NYSE:XOM). He immediately noticed major resistance coming in at the $95 level. Can Exxon break through this major resistance level and take off to the upside?

He measured from the resistance at $95 all the way down to the low in July of 2010, the difference is around $35. If he then added $35 to the breakout point, it takes us to his target zone of $130 per share for Exxon. Now remember, the market must move over the $95 level for this to happen.

Just Click Here to take a look at Adam's chart work and details for a potential ExxonMobil trade.


Subscribe to all of Adam's Blog Post


Thursday, November 14, 2013

Gold is Poised to Rebound Aggressively, Will You Be on Board?

The last time there was a buying opportunity this good in gold was during the financial crisis of 2008. During that year, gold lost 27.7%, only to shoot up 166% over the next three years (from $712.50/oz to $1,895.50/oz). How high it will rebound this time is anyone's guess, but one thing's for sure – you'll kick yourself if you're not on board.

Don't wait for $2,000 gold before you get in – act now to make the most of the raging bull market.

The 2014 Investing Guide from Casey Research tells you all about ways to leverage gold – from bullion to stocks to ETFs and more.

Click here to get it ABSOLUTELY FREE today.


Tuesday, November 12, 2013

Don't Get Left Behind....PowerStocks is LIVE!

Our trading partner and legendary trading mentor Todd Mitchell just reopened his PowerStock 2.0 Mentoring Program for the last time this year. He’s doing things with stock trading that most people have never even heard of.

Watch this presentation!

There’s a reason why multimillion dollar market makers, professional Wall Street traders, and fund managers come to Todd to help them improve their trading! And for a limited time, you too can benefit from this one of a kind mentoring program!

But you’ve got to act fast because people are piling in, and he will be closing enrollment down within the next couple of days. This is not hype, he can only handle a limited number of people in a mentoring program like this, are you going to be one of them?

Click here for all the Details

See you in the markets,

The Stock Market Club

P.S. Let me tell you, if you’re struggling, or not making the amount of money you think you should be, there’s nothing better than to be mentored by someone who really knows what they’re talking about. And best of all, he’s making himself personally available to you, and you get his unprecedented 1-Year, 100% Money Back Performance Guarantee.



Monday, November 11, 2013

Crisis Investing in Action

By Nick Giambruno, Senior Editor, International Man

Stocks in Cyprus Are Down 98%—Time to Start Edging In?

Readers who have been with us for a while know that I've been hinting at the project Doug Casey and I have been working on in Cyprus for a while now. It's a project that dovetails perfectly with Doug's unique expertise. Now is the time to reveal what we have been up to.
Nick Giambruno: Doug, you are one of the foremost authorities in the world on the topic of crisis investing. Tell us about your background on this topic and the potential for life-changing gains it offers for those who have the intestinal fortitude to speculate in crisis markets.

Doug Casey: After my second book, Crisis Investing, [buy it here on Amazon.com] came out in 1979, I started publishing a newsletter. I used the Chinese symbol for crisis as the logo.

It is actually a combination of two symbols: the symbol for danger and the symbol for opportunity. The danger is what everybody sees; the opportunity is never quite so obvious as the danger, but it's always there.


Speculating in crisis markets is the ultimate way to be a contrarian, which means buying when nobody else wants to buy.

It is true, as a general rule, that you want to "make the trend your friend." But there always comes an inflection point when trends change because a market becomes either greatly overvalued or greatly undervalued. And when any market is down by 90% or more, you've got to reflexively look at it, no matter how bad the news is, and see if it's a place where you want to put some speculative capital.

Nick: Massive fortunes have been made throughout history with crisis investing. Was Baron Rothschild right when he said the time to buy is when blood is in the streets?

Doug: That's a very famous aphorism, of course. It was supposedly occasioned by the Battle of Waterloo, when he was buying British securities while the issue was in doubt. He was able to pull off that coup because he made sure that he got the information as to whether Wellington beat Napoleon a day before anybody else did. He recognized that Europe was in a period of tremendous crisis; Napoleon, after all, was actually kind of a proto-Hitler.

But a key point here is that a successful speculator capitalizes on politically caused distortions in the market.
If we lived in a completely free-market world—one without government interventions like taxes, regulations, inflation, war, persecutions, and the like—it would be impossible to speculate, in the sense I'm using the word.

But we don't live in a free-market world, so there are lots of good, speculative opportunities that, in effect, let you turn a lemon into lemonade.

And a good speculative opportunity is both high potential and low risk—not high potential and high risk. Most people don't understand that.

Nick: That brings to mind the Russian oligarchs, who became oligarchs in the first place because they did some crisis investing, i.e., they bought when the blood was in the streets and picked up some of the crown jewels of the Russian economy for literally pennies on the dollar. Are similar opportunities a possibility today in other countries?

Doug: It's interesting with the oligarchs because in the Soviet Union, everybody got certificates, which were traded for shares in businesses that were being privatized. The average person had no idea what they were or how to value them. The people who became oligarchs were able to buy them up for a couple of pennies on the dollar, taking advantage of the negative public hysteria following the collapse of the Soviet Union.
So this is a recurring theme—buying when the blood is in the streets. It's what speculation is all about: namely, taking advantage of politically caused distortions in the marketplace, or taking advantage of the aberrations of mass psychology.

Nick: Exactly—and that was the main reason why you and I were recently in Cyprus. We were there to see if that recent crisis presented a contrarian opportunity.

We all know what happened with the bank deposit confiscations and the capital controls, and most people would think you'd have to be crazy to put money into such an environment. Tell us how Cyprus fits into the theme of crisis investing.

Doug: What drew my attention to it was the fact that the Cyprus stock market is down 98% from its all-time high in October 2007. That's like a bell ringing at the bottom of the market. So I thought it was critical to go and get boots on the ground to see what the story really was.

It's down about as much as any market index has been in history, which makes it a unique opportunity. In any case, it was worth seeing whether or not it's really only worth 2% of what it was at its peak.

I'm not saying that we are absolutely at the bottom. I'm just saying that now is the time to pay close attention because when any market is down 90%, you're obligated to go and investigate.

Whether you buy when it is down 98% or you wait for it to be down 99%—which amounts to another 50% drop—is perhaps like looking a gift horse in the mouth.

Nick: Let's talk about the intrinsic value of Cyprus throughout history that comes from its geography—being at the crossroads of Asia, the Middle East, Africa, and Europe. Does the collapse in the paper Ponzi scheme banking system diminish Cyprus's natural value, or do you think it creates some interesting speculative opportunities?

Doug: Cyprus not only presents a tremendous speculative opportunity, but it is also quite instructive.
The banking sector there got quite out of control; it's similar to what has happened to the banking sector in other countries, like Iceland and Ireland in the recent past. But it's also predictive of what's very likely going to happen to larger banking systems in the near future.

Essentially, Cyprus became a favorite place for people of many nationalities—particularly, Russians—to put money that they wanted to diversify offshore.

The banks became overwhelmed with large amounts of money that dwarfed their capital. When a bank takes money in, it's got to find something to do with that money, and when the local economy couldn't absorb much of it, they became quite reckless.

Since most Cypriots are Greek-speakers, they naturally looked to Athens and wound up buying a lot of Greek government bonds, partly for patriotic reasons and partly because the yields were higher than elsewhere.

Once the Greek government bonds went south, it wiped out the capital base of the Cypriot banks that had purchased them. The Cypriot government was not in a financial position to bail them out, so instead they had what is called a bail-in, where large depositors took a haircut.

Nick: So, what kinds of speculative opportunities have been created from this crisis?

Doug: In all chaotic situations, in all true crisis situations, the baby gets thrown out with the bathwater. Everybody has decided that they don't want to have anything to do with a stock market whose index is down 98%.

But the fact of the matter is that there are sound, productive, and well-run businesses that are listed on the Cyprus Stock Exchange that got caught up in the maelstrom. There are businesses that will continue to produce earnings and pay dividends.

As Damon Runyon famously said, "The race is not always to the swift, nor the battle to the strong, but that's the way to bet."

The country has some unique advantages going for it. Cyprus is a place where Warren Buffett would be looking if the market weren't so tiny. It's also quite illiquid now because most people who needed to sell have already done so, but almost everybody is still too afraid to buy.

That said, I think it's time to start edging in.

We also looked at opportunities the crisis has created in the real estate market.

Nick: We should be clear that we are not necessarily talking about investing here. This is a long-term speculation. Can you elaborate on the differences?

Doug: I think it is critical to use words accurately and precisely, so that we know exactly what we are talking about. "Investing" is about allocating capital so that it can be used productively and produce more capital. "Speculating" is different. As I said before, speculating is about capitalizing on politically caused distortions in the marketplace.

One way this is pertinent to Cyprus is the fact that this is the first time the bail-in model was used and a government didn't step in to make depositors whole. That wiped out billions of euros and depressed the prices of financial assets.

People often confuse speculators with traders, who try to scalp a couple of basis points over a short period of time. What we are doing with Cyprus is not a trade. This is a speculation, and a good speculation can take a considerable amount of time to work itself out.

Nick: In order to take advantage of these opportunities and speculate on this market, one realistically needs to have a Cypriot brokerage account.

It's a testament to the chilling effects of FATCA and other US regulations that the vast majority of financial institutions in Cyprus, which are extremely desperate for cash, won't even consider dealing with American citizens.

And if Cypriot financial institutions won't deal with American clients, who will? Do you think the chilling effects of FATCA really amount to de facto capital controls for Americans?

Doug: Yes. US citizens have had draconian reporting requirements on what they do with their money abroad for years. But the new FATCA law has taken it to a new level.

Essentially, what it does is impose severe compliance burdens on foreign financial institutions that take an American client. It really makes the foreign banks, brokers, and other financial institutions unpaid employees of the US government.

This is expensive, legally onerous, and actually ethically questionable as far as their relationship with their clients. So, for this reason, there are very few non-US financial institutions anywhere that are still willing to take US customers. It's increasingly hard, and in some cases impossible, for an American now to get money out of the country, simply because nobody is going to take it.

I think as the global economic crisis that started in 2007 gets worse—and there is every reason to believe it's going to get worse, since we're just in the eye of the storm at the moment—these regulations will become even more onerous, and are likely to spread from the US to other countries.

So the takeaway from this is that your most important form of diversification in the world today is not diversification across investment classes—although that's very important. It's political diversification, so that all of your assets aren't under the control of one political entity, one government.

Here's how you can get in…

The opportunity for contrarians in Cyprus is great, but it's hugely important to analyze and evaluate all of the options. Doug and Nick's recent trip gave them great insights into the real economic situation in Cyprus and the companies located there. After getting their boots on the ground, Doug and Nick found quite a few pigs with copious amounts of lipstick applied… and a few shining gems, too—quality Cypriot stocks trading for tremendous crisis-driven bargains.

You don't need to take a trip to Cyprus yourself to get the lay of the land. Doug and Nick have written a special report titled Crisis Investing in Cyprus detailing their trip and offering the top investment picks they found on the Cyprus Stock Exchange. In it, you'll find detailed information of the best way to access these amazing opportunities from your living room, the real story on the ground, and much more.

The two of them also found a solution to the brokerage dilemma—they investigated every single brokerage on the island and found one willing to open accounts for American citizens remotely and without the need to visit the country.

All the details and on-the-ground contacts are in their report, which shows you exactly how to access the opportunities on the Cyprus Stock Exchange from your computer.

Crisis Investing in Cyprus is a crucial tool for taking the destructive actions of a desperate government and turning them on their head… and to your advantage.

For a limited time, you can get the report with a savings of 50% off the retail price of $199. That's just $99 for a huge speculative opportunity, penned by Doug Casey—the man who literally wrote the book on crisis investing. To get in on these opportunities, act now before the price discount is no longer offered.

Click here for more details.


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Sunday, November 10, 2013

Earn More Profit out of Every Trade with our "Paid Pullback Strategy"

Ok Stock Market Club readers....it’s time for a little tough love today. You alright with that? We are willing to bet that all the stock trading strategies you’re using aren’t producing the type of results you had hoped for. Honestly, are they? Sure, you thought it would. So called gurus told you how well those strategies performed, and if you tried it, you’d be rich beyond you’re wildest dreams.

But it was a lie. Not totally, no, because some stock trading strategies do work. But those strategies that are producing consistent results are few and far between.

So you’ll be happy to know that our trading partner Doc Severson has found that “needle in a haystack” and is sharing it with us today. I just finished watching his trading presentation and I’m confident it will make a big difference in the way you trade.

And unlike what you might expect for a strategy like this, you get complete access for absolutely no cost whatsoever. This presentation will only be available for a short time, and will be taken down without notice. To gain access, you must watch this now.

Good trading, we'll see you in the markets!
The Stock Market Club


7 Pre Screening Criteria Critically Important to Only Trading Stocks Most Likely to Get Institutional Support


Is America the Next Big Contender in LNG Exports?

By Russia Today, News Network

Just a few years ago, pundits claimed that the US would be a major LNG importer—now they're saying the US will be a major exporter. The truth, says Casey Chief Energy Investment Strategist Marin Katusa in an RT interview, lies somewhere in between. Compared to its global competitors, says Marin, "America is a bit behind the eight ball, so to become a major player, they have to start getting their act together."



This interview was recorded at the Casey Research Summit in October. You can hear much more about where the US might be going in the eye-opening panel discussion from the Summit, "The Myth of American Energy Independence," with Marin and high caliber guests from the uranium and oil & gas sectors, including former US Secretary of Energy Spencer Abraham and Lady Barbara Judge, chairman emeritus of the US Atomic Energy Authority.

Hear these and more than 30 other speakers discuss the most pressing topics investors and free-market advocates face today, such as: Where to find reliable yield in a volatile market… how to protect yourself (and your assets) from ever greater government intrusion… the 5 top tech trends you should watch (and they may not be what you think)… and much more. You can listen to every presentation, every panel discussion, every workshop from the comfort of your home or car—on CD and MP3.

Learn More Here.


Finding Explosive Stocks....How to Narrow Down 7,000 Possible Stock Candidates to Less Than 12 in Only 15 Seconds!


Thursday, November 7, 2013

Who is Picking Stocks for These Fund Managers?

When successful fund managers make it a daily practice to sit down and review the trades and trading techniques of this staff of traders.....you have to wonder why.

But I’ve gotta say, after watching this presentation on how to select the highest probability stocks for the strongest expansion moves – now I know why these guys have been the “go to” people behind several Wall Street pros and million dollar market makers. So why would you try this alone...they don't! But, you want to know the best part? They’ve just created a free video giving away their entire stock selection strategy.

Trust me, this is really good stuff!

Unfortunately, this video [2nd in a three part series] will only be up for a couple of days.

So stop everything you’re doing and watch it before you miss out.

Good trading!
The Stock Market Club

P.S. Inside this rare presentation, you not only get their proprietary stock selection strategy for narrowing down over 7,000 candidates to just under a dozen in 15 seconds – they’re also blowing the whistle on a dirty Wall Street secret that’s intentionally designed to keep you in the dark.

Click Here....to watch this presentation right away!




Wednesday, November 6, 2013

Jonathan Tepper on Obamacare

By John Mauldin



The Affordable Care Act is the single most contentious political action of my lifetime since the Vietnam War. It touches everyone in one way or another, and often in profoundly personal ways. Some see it is a godsend and others as an arrow aimed directly at the heart of the American experiment. Some will experience healthcare that is now available for themselves and their families for the first time, while others will experience the loss of a system that had served them well. The story in the Wall Street Journal this week of the cancer survivor Edie Littlefield Sundby, who lost her doctors and affordable care in the middle of a true life-and-death battle, is poignant. It turns out that not only can she not buy insurance that will cross state lines, she cannot buy insurance in California that will cross county lines!

As I highlighted a few weeks ago, the US system is dysfunctional, yet the potential for positive change is rather spectacularly illustrated by work done by Dr. Jeff Brenner in Camden, New Jersey. Basically, he found that 1% of the patients in Camden were responsible for 30% of hospitalization costs. Sometimes called super utilizers, high utilizers, or frequent fliers, these patients have complex medical conditions and often lack social services such as transportation or knowledge about how to use the health system most effectively. By some estimates, 5% of these patients account for more than 60% of all healthcare costs. This is a system that is so dysfunctional that it does not even work for those who are getting the care! There are scores of such opportunities throughout the healthcare system to reduce costs and improve services, so I write not of a bleak healthcare future, just a profoundly changing one.

Peggy Noonan writes compellingly today about the problematical rollout of Obamacare.

They said if you liked your insurance you could keep your insurance – but that's not true. It was never true! They said if you liked your doctor you could keep your doctor – but that's not true. It was never true! They said they would cover everyone who needed it, and instead people who had coverage are losing it – millions of them! They said they would make insurance less expensive – but it's more expensive! Premium shock, deductible shock. They said don't worry, your health information will be secure, but instead the whole setup looks like a hacker's holiday. Bad guys are apparently already going for your private information.

And now there are reports the insurance companies are taking advantage of the chaos of the program, and its many dislocations, to hike premiums. Meaning the law was written in such a way that insurance companies profit on it.

Today the Manhattan Institute released a report that shows that insurance premiums are going up an average of 41% in 49 states, although there are seven "blue" states where the costs go down. Go figure. New York sees a drop of 40%. The analysis of the HHS numbers shows Obamacare will increase underlying insurance rates for younger men by an average of 97 to 99 percent, and for younger women by an average of 55 to 62 percent. Worst off is North Carolina, which will see individual market rates triple for women and quadruple for men. Older people acquire a large advantage over younger people in the insurance cost game.

And the rest of the world looks on and wonders what we are thinking. And how can we manage to do this so badly? Not just the roll-out – I mean, they don't understand our whole healthcare system. This weekend my Code Red coauthor, Jonathan Tepper, sent out a note that not only illustrates the confusion and dismay in much of the world about US healthcare policies but also gives us a true Outside the Box lesson in how not to design a healthcare system.

Jonathan is quite special. He speaks about five languages fluently with no accents and is a former Rhodes scholar, a wicked smart economist, and a good writer; and he seemingly works around the clock. While Jonathan is a US citizen, he is quintessentially European, having grown up in Europe, with much of his early life spent in Madrid, at a drug rehab center that his parents founded and directed. He mentions with a smile that his playmates as a young boy were drug addicts. His view of the US has a definite European flavor to it, and as you read this, think about it coming from the pen of a conservative European economist (there are a few!).

I left in the 19 links Jonathan provides as the sources for his thoughts, for those interested in a further deep-dive exploration. It will be interesting to see the comments, all of which I make a point of reading, by the way. If you can take the time to write to me, the least I can do is read.

I started this note in Cleveland, where I finished up a daylong health check-up with Dr. Mike Roizen, which went better than I had hoped. I asked frontline employees all day what they thought of the new healthcare law. I was not hearing happy thoughts, as many are concerned about their jobs. And then I dropped by to see my 96-year-old mother on the way home, and we talked about her healthcare. "I have not seen a doctor for a long time, but it's OK. I think all they do today is just make guesses anyway," she remarked – the state of healthcare from the point of view of the elderly.

The focus tonight is the future of healthcare. Dr. Mike West, CEO of Biotime, is in Dallas for a layover between flights, and we will catch up on the state of stem cell research and on my personal genome, which he arranged to get done – but more on that in a few weeks.

It is odd. We have made such progress on so many technological fronts, and the price of new tech keeps going down – except in healthcare. But then, politicians and lobbyists are involved, which I guess is part of Jonathan Tepper's point.

Have a great week and get some exercise, eat healthy, and invest wisely, because you are going to live a lot longer than you thought.
Your watching my apartment construction completion date keep slipping analyst,
John Mauldin, Editor
Outside the Box subscribers@mauldineconomics.com

 

Jonathan Tepper on Obamacare

Dear friends,
Please pardon this long email, but after reading endless drivel on Obamacare, I needed to write this.
I'm afraid almost all discussions on the left and right regarding the Affordable Care Act (ACA) miss some very basic things. So I hope this email will explain a few economic ideas and put them into perspective for you, whether you're on the left or right and whether you like Obamacare or not.

Before I do that, though, let me say that I'm a raging capitalist and I'm in favor of universal healthcare coverage. I'm indifferent as to having either (1) a 100% government-guaranteed single payer system or (2) a 100% private solution where the government guarantees that the poor are fully covered. Each has its pros and cons. For countries like Spain and the UK, a single-payer national system works. (I've lived in both countries almost all my life, and their healthcare systems work. The only time I've ever paid $250 for an aspirin was in a US hospital.) On the other hand, private solutions work very well for Singapore and Switzerland. So one model is purely public, and it works; and the other is purely private, and it works. There is a lot of demand for healthcare, so you have to ration medical care via price or quantity. That's basic economics. It is for voters and politicians to decide what they prefer. I'm indifferent to the solution, as long as it is well thought out and implemented and in fact provides universal coverage. The problem is that the ACA takes the worst elements of public and private and fails to provide universal coverage for millions of people. 

Now, let's look beyond good intentions and see how the ACA works in practice.

The main egregious problem with the ACA is that it increases concentration in the insurance and medical markets. It forces consumers to buy into oligopolistic and monopolistic marketplaces. Insurance and medical companies stocks have all gone up since Obamacare passed. (They've gone up twice as much as the S&P this year.) What these companies are all telling us is that the act is good for their business and good for their margins.

Before the ACA, the US health insurance market was extremely uncompetitive, as this article in the NY Times notes:

As a general rule, the larger, more densely populated states have the most choice — and even the biggest insurer controls only a minority share of the market. According to statistics from the American Medical Association, the leading insurance provider in California covers 24 percent of the population, while in New York the figure is 26 percent and in Florida, 30 percent.
But there are nine states where a single insurer covers 70 percent or more of the people. In Hawaii, one insurer covers 78 percent. In Alabama, it’s 83 percent. And in at least 17 other states one insurer covers at least half the population.
Some members of the Senate Finance Committee, which is taking a lead on health care legislation, come from states where the insurance market is highly concentrated. The Democratic chairman, Senator Max Baucus, is from Montana, where 75 percent of people are covered by one major insurer, Blue Cross Blue Shield of Montana. For Senator Charles E. Grassley, Republican of Iowa, the figure is 71 percent, by Wellmark. For Senator Olympia Snowe, Republican of Maine, it’s 78 percent, by WellPoint.
“For many Americans, the idea that they have a choice of health plans is about as mythical as unicorns,” said Jacob Hacker, professor of political science at Yale University.
In theory, the ACA could have improved things, and many supporters think it does through exchanges. Unfortunately, it didn't. Under the Affordable Care Act there will be far fewer choices and less competition. Don't take my word for it; read this NY Times article.

Of the roughly 2,500 counties served by the federal exchanges, more than half, or 58 percent, have plans offered by just one or two insurance carriers, according to an analysis by The Times of county-level data provided by the Department of Health and Human Services. In about 530 counties, only a single insurer is participating. 
This is truly staggering, when you consider it. Citizens will now be forced to buy insurance from oligopolies and in many cases monopolies. They're not getting healthcare from the government; they're being forced to buy from private companies that have pricing power and market dominance. Insurance companies are still exempt from anti-trust supervision. This would never happen in other industries. You don't need to know anything besides basic economics to understand that oligopolies and monopolies are bad for consumers. Consider having to pay for phone services from one or two phone providers. (Wait, we already had that, and Ma Bell was broken up...)

Medical companies are also exempt from fair pricing laws. If you go to a hospital, you'll get a different price depending on whether you're uninsured or Medicaid pays for you or your insurance pays for you. You can't drive into a gas station and be charged an arbitrary cost after you've filled your car, but you can be charged an arbitrary number by a hospital. (Imagine: a black, a WASP, and a Jew go to a gas station, and they all get different prices. Wait, we got rid of that injustice too...) In theory, the ACA fixes fair pricing laws, but it doesn't apply to most hospitals. See "Federal health law falls short of a goal" in the Boston Globe.

In the 21st century, states still control and regulate insurance, which means fragmentation, very high barriers to entry, and local oligopolies. It is insane that the Federal government regulates banks at a national level via the Federal Reserve and the FDIC but allows insurers to have local market dominance. (The law that allows this is the 1945 McCarran-Ferguson Act.) If you're curious about how insurance companies are oligopolies, read here. And read this‪ … and this.‪

You can ship and sell Coca Cola across state lines, but you can't sell insurance across state lines. Some argue that you could get one lax insurance regulator in North Dakota, and then insurance companies would all set up shop there and start selling across state lines. That has an easy solution: have one national regulator and let insurance companies compete across state lines.

Not only is there a lack of competition among insurers, there is a lack of competition among hospitals. This has happened because antitrust policy has been so inadequate for so long in the health sector. See "Health Care Needs Stronger Market Forces" in Forbes. (Here is a more in-depth paper, if you're curious.)

The problems that arise from a lack of competition are rife on the pharmaceutical and medical side as well. Obamacare will do almost nothing to change that. See "How a Cabal Keeps Generics Scarce" in the NY Times. It should come as no surprise that medical and pharma companies helped draft the ACA. Who said Congress won't turn a few tricks for the right price? See "ObamaCare's Secret History" in the WSJ.

In theory, the ACA will control costs and won't let insurance companies and hospitals gouge us, but these types of regulations haven't worked in the past. Howard Dean is a doctor and a Democrat. His very thoughtful views on how pricing regulations haven't worked are presented here. If you think costs will fall and insurers won't profit, I've got a bridge to sell you in Brooklyn. The law is complex, badly written, and will be gamed. See "The Coming Clash over Insurers’ Compliance with Obamacare" from the Independent Institute and "HHS Releases Final Medical Loss Ratio Regulations" in the WSJ.

I highly recommend you read Matt Taibbi's chapter on Obamacare in his book Griftopia. The book is highly worth buying and reading. It is informative, entertaining, and extremely infuriating. Your blood will boil after you read it. Taibbi establishes the point that the Affordable Care Act will screw Americans. This case is also made by the Institute of Economic Affairs, in "The scourge of Obamacare."

In the United States, one of the most protuberant and harmful political myths — one shared by subscribers to almost all political persuasions — is the odd, naive idea that big business and big government are permanent antagonists. As a historical and empirical matter, of course, nothing could be further from the truth, a reality thrown into sharp relief by the political machinations underlying Obamacare. The new law is fundamentally anti-competitive and anti-small business, riddled with onerous regulations and handouts to favoured corporations. As usual, the relationship between big business and big government is not one of rivalry, but of symbiosis, routing genuine free markets in favour of collusion.

The ACA won't cover everyone, and it will force people seeking coverage to buy from monopolists. Many people will get subsidies for their new insurance policies, and many people who didn't have coverage will now have coverage. This is great news. However, it would be hard to design a worse system if you tried. There are simpler ways by which we could have covered everyone without forcing people to participate in private oligopolies and monopolies.

One of the biggest problems in the US are medical costs. We spend far more than any other country, almost twice the OECD average. This problem will not be fixed by Obamacare and indeed will only get worse due to the spiralling of price increases between insurance companies and hospitals, given the lack of competition.


Source

Furthermore, as you can see from this interactive table, we spend trillions of dollars more than other countries do, yet we don't achieve better outcomes.

Chile, Hong Kong, and Singapore, for example, spend one fourth what we do and achieve better outcomes and longer lifespans. So spending more money isn't a solution. In fact, imagine what we could do if we cut our healthcare spending in half. We'd free up over a trillion dollars for other things. That's what economists call consumer surplus. Even in crazy Washington, where congressmen think money grows on trees, a trillion is a large number.

In America one subject that is taboo is healthcare before death. Almost all healthcare costs are incurred in the last twelve months of people's lives. Modern medicine tends to delay natural death rather than extend healthy life. That is why doctors consume less healthcare than the average person. They understand what medicine can do and can't do. I highly recommend reading this article in the WSJ. Ask any doctor, and they'll confirm this.

In a 2003 article, Joseph J. Gallo and others looked at what physicians want when it comes to end-of-life decisions. In a survey of 765 doctors, they found that 64% had created an advanced directive — specifying what steps should and should not be taken to save their lives should they become incapacitated. That compares to only about 20% for the general public. (As one might expect, older doctors are more likely than younger doctors to have made "arrangements," as shown in a study by Paula Lester and others.)
Why such a large gap between the decisions of doctors and patients? The case of CPR is instructive. A study by Susan Diem and others of how CPR is portrayed on TV found that it was successful in 75% of the cases and that 67% of the TV patients went home. In reality, a 2010 study of more than 95,000 cases of CPR found that only 8% of patients survived for more than one month. Of these, only about 3% could lead a mostly normal life.

Furthermore, 5% of patients create 50% of costs. These costs are all in the last days of life. See this article in Forbes.

Dr. Susan Dale Block, Chair and Director of Psychosocial Oncology and Palliative Care at the Dana Farber Cancer Institute and Brigham and Women’s Health Care, recently shared some data with her colleagues. In the Archives of Internal Medicine, a study asked if a better quality of death takes place when per capital cost rise. In lay terms (because trying to explain the data and methodology requires about 100 IQ points that I don’t have) the study found that the less money spent in this time period, the better the death experience is for the patient.

It seems that no matter how much money you use during that last year/month, if the person is sick enough, the effort makes things worse. A lot of the money being spent is not only not helping, it is making that patient endure more bad experiences on a daily basis. The patient’s quality of life is being sacrificed by increasing the cost of death.

We will all die. There is no way around that. Until we have an adult conversation about how we die and recognize that we spend too much on medicine we don't need, we won't reduce our costs.

Sorry for such a long email. These are a few brief thoughts on the key issues that the press neglects to mention. I'd have to write a book to discuss all the relevant issues. I've provided more links in the postscript to my email if you're curious about the problems of oligopoly, market concentration, and local regulation in the US insurance and healthcare sectors.

While the US lines the pockets of insurance companies, I'll be enjoying the socialized medical system in the UK. My guess is that Obamacare has been made purposefully grotesque in order to make people clamor for a single-payer system. I'm sure the US will eventually get one. Personally, I think congressmen and women are too stupid and venal to do anything good. Until then, we'll have to wait for the ACA to derail before we see any genuine reform.

Best,
Jonathan
P.S. If you're curious about the problems of insurance, medicine, and oligopolies, you can read further.

Regional monopolies

The American Medical Association’s bi-annual survey of the nation’s health insurance marketplace, released Tuesday, found 60 percent of the nation’s metro areas where two insurers had a combined share of 70 percent or more of the market. That’s up from 53 percent two years ago.
Dominant insurer market share
Hospital oligopolies
Increase in premiums under Obamacare
Worst outcomes for mix of public and private
Local competition
Out of control oligopolies — how they're blowing up our medical budget
Statistics on oligopolies
Health Care for America Now! (HCAN) released a report in May that uses data provided by the American Medical Association to demonstrate that 94% — more than 9 out of 10 — of the country's insurance markets meet the Justice Department definition of "highly concentrated," in relation to the potential for anti-trust action. So extreme is the level of consolidation, that HCAN has sent a letter [Note: PDF file] to the Justice Department's Antitrust Division, asking it to investigate the state of the health insurance marketplace.
The rest of the report's findings are every bit as striking:
• In the past 13 years, more than 400 corporate mergers have involved health insurers, and the small number of companies that now dominate local markets haven’t delivered on promises of increased efficiency.
• Shrinking competition has allowed the remaining firms to charge higher fees, and premiums have gone up more than 87 percent, on average, over the past six years.
• Meanwhile, profits at ten of the country’s largest publicly traded health insurance companies rose 428% from 2000 to 2007, from $2.4 billion to $12.9 billion.
• Consolidation of market share among a smaller number of insurers disproportionately disadvantages rural and lower population states. In Hawaii, Rhode Island, Alaska, Vermont, Alabama, Maine, Montana, Wyoming, Arkansas, and Iowa, the two largest health insurers control at least 80 percent of the statewide market.

Fragmented regulation insurance. Also here. And here.

Commerce clause and restraints of trade
 
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