Second Half Of The Year Setting Up For A Colossal Fall

I just got out of a three hour marathon on Obamacare.

Ladies. Gentlemen. This does not look good.

We’re looking at an across the board tax increase on all existing health plans of 8-10% before cost trend. Medical trend has been running at a hot and steady 8-10% annually by itself.

So right now, before we even start factoring in things like losses from disruption or penalties for non-compliance (which can be incurred by any number of things at the administrative level in a corporation), companies in the US running an insured plan through one of the medical carriers is bound to see a 16-20% increase in the cost of their health plan. Minimum.

How much of that can even be passed along to employees (which they are bound to try)?

I don’t see anyone who’s going to escape this. Large corporations tend to self fund their benefits, so they will continue to see whatever their costs are – but everyone gets hit a little bit. And since the base of small businesses in the country are about to get railed, how do you think that will affect the business climate in this country? Being big doesn’t help you if your consumers are getting clobbered. Hell, it actually guarantees you get some of the pain.

I can tell you right now I will not be running long into the second half of this year. Between this, the pension gap funding window closing, and all the typical stupidity you expect to see throughout the summer anyway…you’re mad if you don’t have a sizable cash position by the end of May.

This is me warning you. Consider yourself warned.

So the company I presently work for decided to invite a group to come in and give a presentation on investment and retirement. More than a little in gest, I signed up.

Three hours of material spread over two days into this, I can say conclusively…wow, we haven’t learned a damn thing.

It’s all the same shit folks. Modern portfolio theory, asset allocation models, long drawn out talks about teeter totters…the only difference is that now they’ve added casual notes about systemic risk to their 90’s designed slide trying to push me into buying Greek equities.

Hahaha, that was the best part – when the presenter was telling the room that Greek equities were up 50%+ this year.

“You’ll miss out on the big upside if you’re just in American equities.”

Yeah, I think you’ve got a little way to go still…

Ah well – it’s not like the average person should be buying anything more than a mutual fund or index anyway. Just press that 401K allocation and worry about the taxes.

I am becoming increasingly cautious as this rally is now sustained on the backs of defunct maritime shippers, the airline industry, and pharmaceuticals. Most of this trash would never be permitted to find its way into my holdings.

As summer sets in, the theme will settle on a single discord: disappointment.

The other day, I had a family gathering about 100 miles away. Along the trip, I counted almost 300 acres of land for sale at “NEW LOWER PRICES”. This is what I saw along my way; I didn’t go out looking.

There is a shadow inventory overhanging this market, and the chord that is holding it up is made of the ability of an aging Baby Boomer generation to tolerate pain and discomfort – two things which that group of whining malcontents has never been particularly prone to enduring.

And Europe continues to circle the drain in a slow bleed. You can stop looking for the inflection point, where suddenly everything starts to become increasingly easier and growth picks up. Thanks to binging on positive carry trades for two decades the system has been made recalcitrant and calcified. The arteries are hardened and strain for blood flow.

Thanks to my maneuvers in the Fall, I’m up 21% since November. Yet, more than half of this is contained in just two positions forcing higher by large margins – CCJ and BAS. It could all vanish in a hurry.

This is why I pushed to raise 30% cash recently, although my exposure to CCJ and BAS remains extreme. I have faith in these two positions; they will continue to benefit and outperform remarkably over the next few years. But the swings will be gut churning and disruptive.

Factoring in EUO, my net artificial cash position is closer to 40%. If we crater, EUO is going to spike (more than it has been). I’m also treating BXG like a cash position, as there is an all cash offer (even though I’m hoping/expecting the deal to fall through). That puts me at ~45% cash.

I’m almost ready for the fireworks to get started.

This is definitely amusing, watching the North Korean leadership try and play tit for tat, essentially against themselves. This is the kind of bravado that can only be fostered living in a hole in the ground. What do they think is going to happen?

The old lines of warfare have been killed out, largely thanks to the financial industry. Unprecedented levels of cooperation and mutual interests have been aligned over the last sixty years. Those aren’t going to just erase themselves.

The roots of NAFTA have sprouted a magnificent tree that is even now holding the countries together. Does North Korea think China has its back in a war against the South? South Korea and the US are far more important to China than North Korea is. I would venture that North Korea is actually a liability for China.

If markets seem unusually calm at North Korean warmongering, it’s probably because North Korea will get their clocks cleaned if they pick this fight. Any effective war against the US by the part of China would send that country screaming into a depression. They’ve come too far to see it all get ruined by old world communists.

But hey, let’s call North Korea’s bluff and find out.

I’m sitting here peering icily at the small black box clutched innocently enough between the index finger and thumb in my left hand. Casual twists of my wrist muscles causes the light to bend and bolden its unpolished dark surface while causing the lettering to vanish and return in controlled intervals.

I just finished the ‘enviable’ task of tearing my solid state drive out of my computer and as I look down maliciously at this small, seemly box, the monitor out of the corner of my eye demands attention; that I will be giving it just as soon as I finish these words.

A thousand plagues on the creator of this walking misery. What villain bestowed on us such blessings of speed and comfort, at the “small” price that but just twice a year, the entire operating system of our machine will immolate into a ball of cinders.

Don’t tell me to turn off the auto write features of Windows, for I would surely rebuke you with stern and hate filled words.

AND ALL MY RAGE BEATH NOW DIRECTED AT MICROSOFT, THOSE FIENDS WHO KNOW NOT HOW TO DIRECT THEIR SOFTWARE NOT TO CARELESSLY WRITE A THOUSAND TIMES OVER PRECIOUS SPACE STRIKING IT INTO OBLIVION. YES THEY DESERVE TO DIE, AND I HOPE THEY BURN IN HELL.

Part 1

Part 2

I’m consolidating this on one page for you to look over this weekend.

I’d love to tell you how I’ll never hurt you again like this – breaking up the play date and all because of work – but that would by a lie…