The Federal Reserve Begins To Reverse Course

The Fed listened, and now we wait. Armchair economists, armchair portfolio managers, armchair policy wonks, etc: we all wait for a complicated set of results.

Reuters story here: click here.

Good luck to them, you have already read the commentary here. Here are the highlights (or lowlights, this isn’t financial advice, dyor).

Financial asset prices have presumed low interest rates, today and in the future. That is no longer valid.

Riskier assets have appreciated the most. Since interest rates are low, “There Is No Alternative (TINA).” Whether or not there is a reallocation of assets is now the key (scroll down, this will affect the glue that is the cornerstone, the result of what has been explained here. Note that this is going to be true, irrespective of the earnings of “Company X.” I have frequently noted, via example, that the Bank of Japan (and other national pension providers) does not care one lick about whether or not NFLX underperforms or outperforms its earnings estimates. Not one. That is not the way that global asset allocation works, and the pool of money they control dwarfs your single mutual fund holding. It not a blip on the screen, it’s not a speck of dust on the screen either. CNBC spending 10 minutes on this, and you watching, is because their agenda is eyeballs over everything else.

Higher cost of borrowing will not only affect consumers, but companies as well. Companies have borrowed money to buy back their own stock, and this has been very powerful.

Inflation hasn’t been transitory, and the Ukraine situation isn’t helping.

These are facts, all of them indisputable.

While we have no crystal ball, our easy prediction is that these bullet points will not resolve themselves easily.

I’ll Need To Tread Carefully Here

The Committee For A Responsible Budget posted this article, titled “Reducing Medicare Advantage Overpayments (click here).”

On one hand:

Medicare Advantage (and all health insurance) carriers are taking a notable amount of risk if your healthcare requirements are enormous, and the reason is that you have an annual out-of-pocket maximum limit. If you meet this, then the carrier is required to 100%, and it will not matter if your costs are $1 billion, you get the point.

The extra services are there, in part, to reduce your need for healthcare services because you are in better health.

On the other hand:

If a carrier states that you are in poor health, it gets paid more $ from the federal government for your situation.

If the plan has a higher star rating, it can get more $ per policyholder.

It is very difficult to prove that the carrier is not correct, so the obvious incentive exists to wrongly overstate the severity of your health situation.

Carriers and healthcare service providers can be the same owner, and so the motivation is to save money for you…and themselves, to increase profits.

I had a simple solution, no one is listening and it is my opinion only: eliminate upcoding entirely, and if a carrier is found to be guilty of systematic upcoding, moth ball the carrier forever.

Checking Your Medigap Rate Can Be Valuable

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