candleman

Grantham: Overvalued Markets Due for an Adjustment

"Keep your eye on the doughnut and not on the hole."

"Our own" April 1930 rebound High occurred in October 2007. We are now on the way to "our own" July 1932 Low.

Once that is understood, everything falls into place.

Dollar Hits New Lows, and That's Not All Good

The Rally was a Rally - not a "recovery," just an upside correction in a major underlying bear market which has been in effect since October 2007 and has a long way yet to go. Silver and Gold are close to turning the corner, if indeed they have not already done so. The DX, likewise, is close to bottoming and turning up, and may have already done so - and the Industrials, the S&P's, the NASDAQs, and the Russell 2000. The coast is becoming clearer every day for a massive, thunderous, monstrously destructive Down wave which will not end until the Dow is at 4500-4000. www.candlewave.com

What Will Fuel the Next Market Rally?

Among the Indexes - the Dow Industrials, the S&P 500, 100, 400, and 600, the NASDAQ 100 and Composite, and the Russell 2000 - only the Dow Transports has failed to top its August high. While perhaps not technically a "Dow Non-Confirmation," should we take the disparity as a negative sign for the economy?

Why This Rally Will Continue

Let's slice through the rationalizations and cut straight to the bottom line: "When the front cover of Newsweek says that the recovery will be sluggish, it is safe to say that everyone knows the recovery will be sluggish..." That is precisely correct: "Everyone knows that the recovery will be sluggish." However, in accordance with Paul Macrae Montgomery's "Magazine Cover Indicator," when "everyone knows" something to be true, usually the exact reverse is the case. On that basis, "the recovery will NOT be sluggish."

However, there is a fatal flaw in "everyone's" underlying presumption that "the recovery will be..." The future tense of the verbal form "will be" is inappropriate in the present circumstance.. There is no more "will be." The odds are that the recovery is past.

Health Care Proposal

I agree with John and with Derryl. The core of my agreement lies in Derryl's first paragraph, quoting John. It is so superbly put.

Part of the problem was seeded many decades ago, and continues with increasing fervor: the recognition of "rights" which had never been recognized as such before. Recognition of a newly-discovered "right" in someone usually results in the diminution of someone else's already established rights, whether established in the Constitution or in Court interpretations thereof over time. One example may be the newly-discovered "right" to lifetime health care, preferably at someone else's expense.

Health care, as a concept, should be reconsidered as a "death deferral" system rather than as a "death prevention" system.

Surely, there must be direct input by the patient and by the doctor in the choice of treatment; and the patient's assets must be at risk as well as his health. Let us, therefore, create a specific patient "asset" which will be put at risk: At birth, each person would be awarded a federal Medical Care Account of X number of dollars. Persons now living would be awarded a Medical Care Account in an amount in accordance with his or her age and sex, developed with the input of actuarial tables. The cost of each prescription medicine and of each medical procedure during the patient's lifetime would constitute a deduction from the remaining balance in the patient's individual Medical Care Account. The patient would have the right to add to his or her individual Medical Care Account by insurance which he (or perhaps his employer) could buy separately with private funds.

It seems to me that a system such as this would impel a very close working relationship between doctor and patient in the selection of prescription medicines and medical procedures. Very close, indeed.

We all know of individuals who abuse the Medicare system by insisting on receiving whatever is new, or fashionable, or simply because the medicine or procedure is available - without direct cost to the patient. There must be a direct cost applicable to the patient if he or she still desires to travel that route.

One of a physician's greatest costs is that of malpractice insurance. Radical changes must be made, as part of any health insurance "reform" legislation, to relieve the burden, not just that of the cost of insurance itself but with respect to malpractice liability per se.

As John and Derryl say, there must be exceptions built into any new system whereby catastrophic physical conditions or illnesses would be taken care of. We are not, after all, an unfeeling People.

On the radio this morning, an interesting comment was made by a well-spoken 23-year-old with an unspecified disability. He was born in the US, lives here now, but has lived in Europe for several years. He spoke of the intensely adverse comments made by Continental Europeans about the alleged immoral deficiencies in the American health care system. He reminded them, he said, that the Continental European experience and history is very different from our own, in that they evolved from a background of absolute monarchy (which devolved into strongly-centralized State power, largely Socialistic in nature), while we here in the US have evolved from a background of individualism, self-reliance, and helping each other.

I think that the young man's point was beautifully taken. Our national spirit of individualism still pervades everything we do. It is pervading the great argumentation about the new health care proposal right now. On the one hand, we have the "Continental Europeans" in Congress who would bend our system closer to their own instinctive background; while on the other hand we see (and hear) the spirit of the "Wild West" and the self-reliant individualism and mutual help which accompanied it, still deeply embedded in our bones, rising in rebellion against the very concept of more governmental control over our lives.

I'm reminded, in passing, of the Amish people, who are astounding examples of that spirit. I remember photos and videotapes, taken only within the last few years, of young Amish men operating chain saws to clear roadways and people's yards of fallen trees after a major storm, and riding in trucks and cars to get there - all in contravention of their own strong aversion to using power tools and of riding in cars and trucks. But they willingly put those convictions aside and made a difference when it mattered. I still marvel at their spirit. This is America at its best. This is what mutual help is all about, without reliance upon Government.

So these argumentations which are going on now in the "Town Meetings" are not superficial at all. They do not amount to mere "distinctions without a difference." They are, at root, an argument between two cultures: that of Paris on the one hand, and that of Casper, Wyoming on the other.

What do you think about the concept of an individual Medical Care Account?