Friday, November 14, 2014

GruberGate

Don Boudreaux, arguably one of the country's best economic thinkers, summarizes the implications of Jonathan Gruber's disdain for the intelligence of the American people. Here's an excerpt, but be sure to read the whole thing:

Jonathan Gruber simply admits that the very process that people on the left romanticize and celebrate – democratic politics – isn’t what it’s cracked up to be. Of course, libertarians and public-choice scholars say the same. The difference between the Jonathan Grubers of the world and the Russ Robertses and Bryan Caplans of the world is that the former believe that politics is still commendable as long as good, smart people (such as Gruber) are performing deceptions necessary to trick voters into supporting policies that good, smart people somehow divine are best for the masses, while the latter believe that the very need to deceive rationally ignorant (indeed, rationally irrational) voters is itself a major flaw in politics – a flaw that makes politics far less reliable and admirable than competitive, private markets.

In a nutshell, GruberGate reminds us why we would be better off with less government, and a greater reliance on free markets, especially in regards to healthcare.

17 comments:

Lawyer in NJ said...

All it really proves is that supposedly really smart people can simultaneously demonstrate a complete lack of social intelligence. (See Gardner, Howard)

Again, let's not forget that it's a Republican plan...until...it wasn't...

Tom Hackleman said...

Gruber flatters hinself thinking he fooled "stupid Americans". The only people fooled were Democrats and the press. No Republican voted for Obamacare and polls show most Americans never liked it.

amritsari said...

I don't understand how a free market in healthcare will solve the problem of pre-existing conditions ??

Benjamin Cole said...

I just wish the right-wing would use the same gimlet eyes when examing our runaway and "national security" spending.

Reason magazine called the $1.5 trillion (lifetime expense) F-35 fighter jet a waste, and US News called it a "toy" and a lobbyists' plane.

The US spends $1 trillion a year on DoD, VA, DHS and black budget...in real terms "defense" spending has doubled since 9/11 and we face no military threats.

Since 9/11 more than 180,000 Americans have been murdered by terrorists---they were called drunk drivers.

But with the new GOP majority, there is chants for more "defense spending."

Can a third-party win in America? I hope so.

randy said...

Stunning video...

Related - reviewing our company health renewal with our agent today. We have one employee that has a kid in the hospital at least every other week. He advised paying her a few dollars more each month in return for sending her son to ACA. (Truth be told she can get the Platinum plan for cheaper than her cost for our plan.) Then we can go on a "self funded" plan because we won't have any health risks. He claims everyone is doing this now. Point being - ACA will end up with patients that primarily get huge subsidies, or are too costly for existing corporate plans. Surprise.

William said...

The Bullishness Continues to Grow

I just turned 73 years and have closely observed investment cycles for 40+ years. After living through 3 cycles one begins to get a feel for where one is in these recurring events. Over the past 6 years we have ALMOST seen it all. Now we are in the fourth and final phase: which is characterized by optimism turning to enthusiasm; when a "buy and hold" strategy returns; when stocks are no longer a great value but go up simply because they have been going up; when greed finally triumphs over fear. This week brings more evidence:

American Association of Individual Investors

Bullish....57.9%
up...5.2
Neutral....22.8%
down...9.5
Bearish....19.3%
up...4.3

Long-Term Average:
Bullish:...38.9%
Neutral:...30.7%
Bearish:...0.4%

Let me remind you that for this series, Bullishness rarely rose above 35% in 2009, 2010, 2011 into 2012.

Lipper US Investment Fund Flows

Weekly 11/12/2014

Equity Fund Inflows $10.7 Bil;

Taxable Bond Fund Inflows $5 Bil

xETFs - Equity Fund Outflows -$1.9 Bil;
Taxable Bond Fund Inflows $3.8 Bil

Weekly 11/05/2014

Equity Fund Inflows $15.4 Bil;

Taxable Bond Fund Inflows $6.3 Bil

xETFs - Equity Fund Inflows $323 Mil;
Taxable Bond Fund Inflows $5.6 Bil

Weekly 10/29/2014

Equity Fund Inflows $8.8 Bil;

Taxable Bond Fund Inflows $6.4 Bil

xETFs - Equity Fund Outflows -$947 Mil;
Taxable Bond Fund Inflows $3.9 Bil

Weekly 10/22/2014

Equity Fund Outflows -$8.2 Bil;

Taxable Bond Fund Inflows $6.2 Bil

xETFs - Equity Fund Inflows $1.1 Bil;
Taxable Bond Fund Inflows $1.1 Bil

Weekly 10/15/2014

Equity Fund Inflows $2.8 Bil;

Taxable Bond Fund Inflows $5 Bil

xETFs - Equity Fund Outflows -$1.5 Bil;
Taxable Bond Fund Inflows $3.3 Bil

If one ever needed proof that most investors sell low and buy high, it has been found by observing this series the past 6 years. Throughout 2009, 2010, 2011 and up until April 2012, there was NET selling of equity funds to the tune of $90 billion and NET buying of bond funds in the amount of $150 billion. Now with the S&P 500 over 2000, there was $35 billion thrown into equity funds over the past 3 weeks.
---------------------------------

Personally, I was on margin from October 2008 until last May and even now am 98% long equities in all accounts including IRAs. Stupid by most opinions, I know. But I feel most comfortable when there is great pessimism toward equities - it's actually safest to invest then. That is not the case now so it is time for me to raise cash.

Hans said...

Actually, I happen to agree with the brilliant Professor from MIT.

After all, electing, Akbar the Great, for two term does suggest that the American public is rather stupid.

Ben Jamin, how about some spending reduction on the welfare side of things..The War on Poverty is now 5 trillion dollars old.

Scott Grannis said...

Re: free market solutions for pre-existing conditions. Here are several:

http://blog.independent.org/2012/09/17/better-solutions-for-pre-existing-conditions/

There is always the high-risk pool solution as well, sponsored by individual states.

In addition, charities might step in to fill the gap for those with severe problems that aren't covered by other solutions.

Scott Grannis said...

Re: free market solutions for pre-existing conditions. Here are several:

http://blog.independent.org/2012/09/17/better-solutions-for-pre-existing-conditions/

There is always the high-risk pool solution as well, sponsored by individual states.

In addition, charities might step in to fill the gap for those with severe problems that aren't covered by other solutions.

Benjamin Cole said...

Hans---I am for cutting social programs. Hard and deep. I am also for cutting the $10 trillion the US will spend on "national security" in the next 10 years. Hard and deep.

Steve Fulton said...

Scott-people don't want to admit it, but the American people are the most generous in the world when it comes to charity and helping the less fortunate. Liberals issue with most charitable organizations is that they demand some modicum of responsible behavior for support. It would be a massive positive if all Federal social programs were simply cancelled.
How are you doing by the way??

Scott Grannis said...

Steve, you are right. The federal government ought to get out of the business of charity. Charity should be undertaken by the private sector, as it always did until the Great Society. The private sector can administer charity much better than the government can, and there is no lack of resources. We are indeed the most charitable nation in the world.

As for me, I'm doing very, very well. Would love to get together with you and share more details.

steve said...

william, I've been in the financial services field for over 30 yrs as self employed $ mgr and now "retired" managing my own portfolio. I have NEVER seen anyone remotely successful in timing stocks. you make it sound easy. while I agree in theory with your discussion, in practice and application, it's a totally different matter. are you suggesting you bought ON MARGIN during the S*&Tstorm of late 2008 and held through summer 2010? bluntly, I don't believe it and even it you did, why would you?

William said...

@ Steve

Yes, I unwittingly went into it fall of 2008 fully invested in equities and the only way to successfully recover was to go on margin. And I ended up in the emergency room with an acute anxiety attack with a high blood pressure because of all the worry. But the doctor gave me a 2 mg pill of Lorazepam which removed the anxiety in 20 minutes as he said. I stopped watching the news, read a lot of books, went on vacation and simply took the Lorazepam each evening around 7 pm Sunday through Thursday.

Fortunately in late in October Warren Buffett wrote an Op Ed in the WSJ saying that he had sold his personal holdings of Treasury bonds and was 90% invested in equities and would add more if the market went lower. I thought I was in good company. I only had to control my emotions.

But this was not my first experience with being heavily invested in a bear market. I thought the bear market was near its end in May 2002 and also went on margin but it took a horrible downturn in July for which I could hardly sleep. That time I developed Shingles due to the stress. But the S&P 500 bottomed in August and the Nasdaq in September of 2002. So I had some previous experience with market stress and anxiety. But 2008 - 2009 was much worse!! Trust me.

There are some folk who are not programmed like other people. Warren Buffet has spoke of the personality quirk that he has. I simply don't have the "herd instinct" that most folks have. In fact, I instinctively don't like being with the "crowd" in my investments. It makes me uncomfortable. I am a major contrarian.

BUT please let's be clear, I am not calling a market top at this time. Personally, I am simply going to raise about 20% cash in the next week or so. I will still be 80% long. I agree with Scott Grannis that this market can go on a couple more years - but not without a correction ;~) But having gone into the 2008 bear market 100% long, I don't want to repeat that mistake. As you can now understand.

William said...

@ Steve -

I have been posting on this blog since 2009 and I have often shown the AAII data and the Lipper Data and commented upon it. I have been consistently bullish. I have previously written about being on margin and my intention to reduce the margin which I did by half in the spring of 2013 and again last spring.

Like you I have shared freely my views as I did yesterday. We'll see how it turns out.

steve said...

william, just for the record, I don't disagree with your conclusions but don't trade stocks. too hard. bond market way easier.

Hans said...

Ben Jamin, "Hans---I am for cutting social programs. Hard and deep. I am also for cutting the $10 trillion the US will spend on "national security" in the next 10 years. Hard and deep."

I wish you would include those words when you launch your assaults on the defense industry.

Oh remember, France and GB did this in the thirties and begot another great war.