A friend toils on the workman's compensation side of medicine. He's been doing it for nearly three decades.
For the unfamiliar WC is all about work-related injuries. When people are injured on the job their employer usually pays for work-related medical care. And a claim gets filed with the state and insurers.
Each state has its own regulations and each state is different. But it's big business that involves essentially the public trough, a place where many sup, perhaps not the least of whom are PI or personal injury attorneys.
Drive into or out of just about any airport in America and you'll see the billboards. On the rare chance you miss them there, check out late night infomercials and talk radio. Vultures can smell decay.
My friend though he owns three clinics is a mom-and-popper in a declining mon-and-popper industry that's being swallowed whole by big conglomerates. Just like Costco and Walmart in retail to farming and pharmacies like CVS and Walgreens to you name it, the genie is out of the neighborhood bottle.
It's a big, cold, indifferent business despite the marketing. Vultures can also smell money. But we'll leave that for another time.
Besides worker-related injuries most of these clinics do other tasks like pre-employment physical exams and drug screens and even urgent care to a degree. In some ways they are far more sensitive to changes in the economic landscape than all the economists with all their econometric minutiae together.
Pre-employment physicals have to do with jobs. And the number fluctuates not only with the seasons but the times. Even drugs screens are a decent economic indicator. A positive test usually results in a non-hire, especially in harder times like now.
But before the recession when the economy was percolating things were so tight employers were hiring applicants with positive tests. They needed bodies. In short it's a cycle.
The other neat feature is one gets to talk to lots of business owners, large and small. It's an informal survey, a snapshot, but it's much closer to where the surf and the sand unite than econometric models.
During good times work-related injuries usually increase. And foot traffic, not unlike, say, retail, tends to decrease during slower periods. It probably makes too much common sense for the cognoscenti.
And besides it's much more difficult for them and MSM to manipulate.
Some people, God bless 'em, you just got to love.
Bill McNabb, the CEO of Vanguard Group, is one of them. In a WSJ Opinion piece today after listing a litany of uncertainties vexing economic recovery--"regulatory policy, uncertainty about monetary policy, uncertainty about foreign policy, uncertainty about U.S. fiscal policy and the national debt," concludes his piece with this paragraph:
The good news is that if reform is enacted, and the costly pall of uncertainty is lifted, the U.S. economy has the potential to bounce back, creating the growth and jobs that are so badly needed. I am confident that our leaders in Washington can make it happen.
That's a lot of uncertainty to begin with. And you gotta love the qualifiers. Such uncertainty he goes on to say Vanguard estimates " has created a $261 billion drag on the U.S. economy."
He could've been a bit more sanguine and rounded up the number at $260 billion.
Every time Congress fails to resolve one of these issues, McNabb claims his firm receives a variety of questions like how it affects their retirements to should they just put their money in a mattress.
Anyone care to hazard how McNabb answers this last one?
Here's one of the hidden costs that increase the cost of health care bureaucrats and politicians don't want to tell you about: pushy attorneys, a legal system out of control and time demands, to name a few.
Of note is this comes from a Canadian practitioner, not some so-called greedy American doctor, where the health care system is supposed to be like my old girlfriend--so good and so fine.
http://boards.medscape.com/forums?128@708.Di81agmIflw@.2a3555a6!comment=1&cat=All
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It's time to tell them what we want. We hate to keep bringing up the airport mess, but it's relevant. One of the basic characteristics of humans is they will expand their power to the maximum given the leaway.
Over the years the more power you give up to politicians and bureaucrats, the more they will seek to maximize that power by a factor of three. Forget party labels; that's all political BS. One of the anti-fiscal responsibility arguments centers on the political party BS. It's a sham.
Both of these groups are about one thing--self-perpetuation.
http://www.wallstreetinsightsandindictments.com/2013/04/the-tbtf-act-just-revived-the-spirit-of-glass-steagall/
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One side of the boat is starting to fill up.
The name of the vessel could easily be: "Could Persist For Years." That's becoming the mantra it appears for more and more money mangers quoted in financial pages. The reference is to Ben Bernanke and the Fed's next-to-zero interest rate scheme.
And a scheme is what it is, though in the British vernacular the terms carries less questionable baggage. We prefer the good old American usage, as in up to tomfoolery.
Much of this sentiment comes from the belief there's no inflation, a point of view that could turn out to be one of the biggest lies ever told. But we'll leave that for later. If the golden rule is those who hold the gold make the rules, the same holds for the CPI.
Check out chained CPI. It might be playing at a venue near you soon if certain people get their way. Without getting into a rant, the chained CPI is like the air traffic controller mess. You deserve it if you stand for it.
Dividends historically have played a large part in total return, more so at some times than others. We like dividends as well as the next fella. What we don't like is the double taxation, a government scheme in the best American usage of the term.
Again it's a question of whom do you believe. During the tech stock mania, those stocks represented a big percentage of the S&P 500 value. Same case when energy stocks soared.
Somehow these things usually find their way back to the mean.
I was driving back from Las Vegas the day the Vioxx storm hit Merck, the giant drug maker.
At the time my partner and I had an office in Henderson, a burgeoning LV suburb, and our home base in Newport Beach. My partner had an extensive background in real estate and insurance, once having his own real estate school and multiple RE offices, before deciding to downsize and simplify life.
We split the blood, sweat and toil right down the middle at the firms. He handled the RE and I did the equity and commodity side. The bottom of the LV housing market had yet to drop. Three of our clients earlier requested a meeting to discuss timing.
All had leveraged multiple real state deals, buying up large numbers of houses to rent for the positive cash flow and later dump into strength. Variable interest rates were low and home prices were rising faster than Usain Bolt runs a 100 meters. It was a sweet, money-making deal.
A few years later things started to change. Prices were going up so fast that all of a sudden cash flows turned negative on any new deals. The low hanging fruit was all but gone. Our clients requested another meeting again to discuss timing. This time we urged them to TP&H. Take all profits and hide. And after some lively exchanges over two days, that's what they did.
For the next several months prices continued up and we caught some hell. Then one evening the Fat Lady's limousine quietly rolled into the City of Lights.
The first thing we did when we returned to the office the afternoon of the Vioxx news is start looking at Merck puts, not to buy but to sell. We knew the stock was in deep, but it would most likely survive. Remember there are no absolutes. Sometimes most likely is the best you're going to get.
Pharmaceutical research was hardly new to me. Merck had once been a $90 number with an outstanding research crew. The MSM focused, as is their want, on the short-term drama, the heart attacks and the sensational side. The bigger issue was would Merck survive and in what form and what was their defense?
Several years ago a colleague got sued by his ex-live-girl friend. It was about the money. He hired a noted female attorney. Both sides remained intractable. Three days before the case was going to trial he settled. When I asked why over lunch one day, he told me they had negotiated a lesser, known amount, even though he didn't want to give her a nickel. The trial was set for the Palm Springs area.
Then he added: "I got one of the best female attorneys around telling me the jury will probably be nine women, all housewives, and three men. She'll take the stand, start crying, talk about your wealth, and then the number if she wins is open-ended. Do you want to risk it."
Some time later he laughingly told me he got off easy. We knew Merck wasn't going to get off easy. But selling puts with a decent premium at the right time, like those houses a few years later, to get the stock possibly put to us in the high 20s and low 30s even if they cut out the dividend looked like a good risk-reward scenario.
One of the attorneys who successfully argued Merck's case at the time is now CEO. Not too long ago he persuaded the former successful head of research during Merck's glory days to come out of retirement.
Merck's like most of us, got some problems. But from where we sit, they got a lot more things going for them.
And for the sake of full disclosure, we still own some of that stock.
If there's an ounce of contrarian blood in you, take a look at FCX and NEM, two equities that are about as unwanted as rain at a picnic. Both are near their 52 week lows. Both are in the mining and metals business, two sectors about as unwelcome as a case of the aviary flu at a chicken farm.
See YUM for the correlation there.
There's a reason for rain and there's a reason for unwanted. Meteorologists are the original hedge crowd: 30% chance of rain, sleet or indigestion after that huge Thanksgiving feast.
Meteorology has some science behind it. Key word some. Unwanted equities frequently have some science behind their status, too, the numbers. In this case, the global GDP numbers for starters. Right now they resemble my first love without make-up. I always had a thing for less attractive attractive ladies. You just know 'em when you see 'em.
We just wrote a piece about Sallie Mae's bond offering recall, saying risk outweighed reward.
Another story in today's WSJ suggests the market is raising rates ahead of the Fed--as is usually the case--concerns mortgage securities backed by loans without government guarantees.
Once upon a time it was a huge market. It's a market the government hopes to rekindle for obvious reasons, not the least of which is confidence in the whole damn mortgage system.
In January premiums on deals sold as low as "0.97 percentage point for a yield of less than 2%." Like these Sallie Mae bonds, investors seem to be shying away from mortgage backed securities as more are hitting the market.
Now those mortgage securities are yielding nearly 2.6%, 1.75% premium above the interest rate benchmark. Concern centers on higher interest rates down the road. Refinancing of these mortgages has decelerated significantly. Investors don't want to get squeezed in an interest rate hike.
How much farther down the road, well, according to another story today, Bernanke and crew are already dipping their big toe into what effect an interest rate hike would have on those TBTF banks.
Stay tuned. In boxing we have a saying: it's the one you don't see that does the damage.
http://online.wsj.com/article/SB10001424127887323335404578445210965385442.html?mod=ITP_moneyandinvesting_2