New Insurance Premium, Ouch

Every year in late October we get our annual notice from our health insurance provider telling us how much our monthly premium is going to go up. Last year it went up by 20%. This year’s notice came with news of an almost 12% bump. Maybe I have this wrong but while there may be uncertainty on what will happen with Obamacare not much has actually happened yet (in relation to what was promised, or threatened depending on your perspective) but the newness of the Obamacare concept is no longer with us and so I don’t think they can legitimately blame a policy that is no longer new for the gouging. It seems pretty obvious that this expense is going to continue to increase at a rate well above the reported rate of inflation. One aspect in my role on the Fire Department is that I participate in just about all of the medical calls. One normal part of the process is to ask what medications the patient is taking which can be important in treating the patient in the field and for whatever treatment the patient might receive at the hospital. The reason to bring this up is that based on my casual observation people have a lot of prescriptions that must be refilled on some regular interval. The costs of these prescriptions of course goes up as well and depending on the insurance coverage this could result in more expense for the patient. As this relates in large part to retired people living on a fixed income it underscores what most people know on some level even...

New Insurance Premium, Ouch

Every year in late October we get our annual notice from our health insurance provider telling us how much our monthly premium is going to go up. Last year it went up by 20%. This year’s notice came with news of an almost 12% bump. Maybe I have this wrong but while there may be uncertainty on what will happen with Obamacare not much has actually happened yet (in relation to what was promised, or threatened depending on your perspective) but the newness of the Obamacare concept is no longer with us and so I don’t think they can legitimately blame a policy that is no longer new for the gouging. It seems pretty obvious that this expense is going to continue to increase at a rate well above the reported rate of inflation. One aspect in my role on the Fire Department is that I participate in just about all of the medical calls. One normal part of the process is to ask what medications the patient is taking which can be important in treating the patient in the field and for whatever treatment the patient might receive at the hospital. The reason to bring this up is that based on my casual observation people have a lot of prescriptions that must be refilled on some regular interval. The costs of these prescriptions of course goes up as well and depending on the insurance coverage this could result in more expense for the patient. As this relates in large part to retired people living on a fixed income it underscores what most people know on some level even...

Sunday Morning Coffee

The Barron’s cover story was their “Big Money Poll” and I stumbled across something in there that leads to a broader question worth exploring. In there was mention that Lockheed Martin (LMT) is yielding 5.30%. That is pretty substantial for a defense contractor. Many decades ago it was typical that stocks yielded more in dividends than bonds yielded in interest payments with the logic being that the dividends were meant to be a compensation for taking on the risk of owning the common. Along the way this changed, for most stocks anyway, and we came to expect to get more yield from holding bonds, and more price stability too. The last decade has been odd for stocks. Although decade long round trips to nowhere are not unprecedented they can create a catalyst for some sort of meaningful change. After the last decade long round trip to nowhere the change was an 18 year run of spectacular returns. Perhaps the change that comes from the current decade long round trip to nowhere is a reversion to stocks yielding more than bonds–if so then really it started a couple of years ago. We are not there yet at the index level as the S&P 500 is still close to 2% which if we looked we might find is attributable to the relatively large financial sector not paying much in the way of dividends. I made a reference the other day to how many semiconductor stocks yield close to 4% and if you look around you will find many more stocks (excluding REITs and MLPs) with pretty serious yields. At the March...

Sunday Morning Coffee

The Barron’s cover story was their “Big Money Poll” and I stumbled across something in there that leads to a broader question worth exploring. In there was mention that Lockheed Martin (LMT) is yielding 5.30%. That is pretty substantial for a defense contractor. Many decades ago it was typical that stocks yielded more in dividends than bonds yielded in interest payments with the logic being that the dividends were meant to be a compensation for taking on the risk of owning the common. Along the way this changed, for most stocks anyway, and we came to expect to get more yield from holding bonds, and more price stability too. The last decade has been odd for stocks. Although decade long round trips to nowhere are not unprecedented they can create a catalyst for some sort of meaningful change. After the last decade long round trip to nowhere the change was an 18 year run of spectacular returns. Perhaps the change that comes from the current decade long round trip to nowhere is a reversion to stocks yielding more than bonds–if so then really it started a couple of years ago. We are not there yet at the index level as the S&P 500 is still close to 2% which if we looked we might find is attributable to the relatively large financial sector not paying much in the way of dividends. I made a reference the other day to how many semiconductor stocks yield close to 4% and if you look around you will find many more stocks (excluding REITs and MLPs) with pretty serious yields. At the March...

Friday Tidbits

First up is a comment or two on the current goings on in the market. The action of the past few days, and really for the month of October, has been a buying panic. This buying panic came after a selling panic in September. One of the two months (you can decide which one) is closer to what is appropriate given the total backdrop we are working in now. The bear case ties into the feeble housing and employment numbers combined with desperate action being taken by central banks in many corners of the world. The bull case ties into quite a few data points showing signs of improvements, some aspects of the earnings for the quarter looking good and a very impressive rally over the last four weeks. Take whatever side you prefer but I would point out that most of the time these types of monster moves do occur during bear markets. There is nothing that says this can’t be a bull market because it is possible that the worst is behind us, that we will never go below SPX 1200 again and that the market has turned up in advance of an economic turnaround. This is not my base case but it could be correct. We did not get as defensive as we did in 2008 but as I’ve been saying all along, on the way down you always wish you owned less and on the way up you always wish you owned more. Today would normally be the day that we begin to redeploy some cash but we recently switched custodians to a firm with...