Cash

February 20, 2017

Cash:

The public markets so far this year have been as kind to us, as this part of 2016 was unkind.  This doesn’t mean much though, as 2016 turned out to be a decent year in the public markets.

We like Mark Hulbert’s musings on the public financial markets, as he generally offers observations based on history and solid analysis, rather than attempting to divine what may happen next.  In late December, he wrote a column suggesting that we should lament the length of time it has taken the Dow to reach 20,000.

In the article, Hulbert offered that if the domestic stock market had risen at the same rate in the 21^st century as it had in the 20^th century, the DJIA would be above 24,000.  At some point of course, the DJIA will hit 100,000.  If the DJIA has an annualized return of 2%, Dow 100,000 shows up in 2098.  If on the other hand, the DJIA has an annualized return of 6%, Dow 100,000 shows up in 2044, less than 30 years from now.

You can find the entire article at http://www.marketwatch.com/story/why-dow-20k-is-the-mark-of-an-underachieving-market-2016-12-15.

In business news, Coke said its profit fell 55% as global sales volume dipped, and the company took charges related to exiting the manufacture and distribution of its drinks.  The company will redeploy proceeds into marketing.  According to CB Insights, VC firms put $3.1 billion into a record 279 cybersecurity startups in 2016, as security breaches continue to make the news and cause concern.

In economic news, the BLS issued its JOLT report, or Job Openings and Labor Turnover Survey.  It showed that as of the end of December, there were 5.5 million job openings in the U.S.  During December, 5 million people lost jobs, and 5.3 million found new jobs.  There are currently about 152 million non-farm private sector employees, meaning that there are 3.6 job openings for every 100 employees.

The employment challenges seem to have more to do with location, training, preparedness, and other factors, than anything else.  According to the BLS, continuing jobless claims are near 2 million.

The labor force participation rate, according to the BLS, stands at 62.9%, at or near the 63% mark where it has parked since October 2013.  The participation rate high point came in the late 90’s, peaking at 67.2%.  What’s remarkable though, is not the decline in the participation rate.  That’s a function of everything from the macro and micro economies to personal choice.

What’s remarkable is that while the population of the U.S. continues to grow, our economy continues to find jobs for people.  Some background.  In 1790, the U.S. population was 4 million.  It hit 50 million in 1880, 100 million about 1919, 150 million in the late ‘40’s, 200 million before 1970, and 300 million before 2005.  During this stretch of the last half of the 20^th century, we continued to put people to work.

What’s even more interesting is which companies have been doing the hiring.  More on this later, but it’s not the Fortune 1000.  It’s those privately held firms with fewer than 500 employees who have been doing the bulk of the hiring.

So what happens when doctors only take cash?  Art Villa, of Helena, Montana, found he needed a knee replacement.  The hospital near his home charged $40,000, not including the anesthesiologist, physical therapy, or the rehab stay. 

During his research, he found the Surgery Center of Oklahoma, founded by Keith Smith and Steve Lantier in Oklahoma City in 1997.  The entire facility is cash based.  It accepts no insurance or third party reimbursement from any vendor or provider of any kind.  Villa’s knee replacement was $19,000, which all-in price included airfare to Oklahoma City, physical therapy, meds, and other costs.

You can read the entire story at http://time.com/4649914/why-the-doctor-takes-only-cash/.

Health care in the U.S. appears to be the best in the world.  Health care financing however, is a bit messier.  Since there appears to be little clarity regarding health care financing, we expect all cash health care financing to continue to be a viable option for many.

Quote of the week:

“There is no illness that is not exacerbated by stress.”

                                                                                             Allan Lokos