Quote of the month: “Money is a guarantee that we may have what we want in the future. Though we need nothing at the moment it insures the possibility of satisfying a new desire when it arises.”
About 10 days ago, Vladimir Putin directed the Russian Army to essentially invade Crimea, which is a clear violation of International Law. Now there is more here than meets the eye and there is fear that the Russian Army, directed by Putin, will press further into the Ukraine and simply take possession on a piece by piece basis of the entire Ukraine. Crimea was annexed into Russia a few days ago.
In response to this act by Russia and Putin, our President sanctioned some specific political figures in the Russian Government, which is a weak response at best. Putin then turns around and “sanctions” political figures here in D.C. It reminds me of two females in a hair pulling competition.
I remember during the 2012 Presidential election process, during one of the debates, Mitt Romney and President Obama got into a discussion about Russia and specifically Putin. I also very much remember Romney stating that Russia was a threat to the international community and that our current foreign policy was weak on this issue. Romney was mocked in the mainstream media and was accused of believing we still lived in the “cold war” era. Well, here we are with what I believe is the first tactical move on the part of the Russians to begin taking back parts of what was the old USSR.
We, the United States, cannot sit back and watch this happen. We need to take definitive action to stop any further movement by the Russians to take places like Kiev and others away from those sovereign countries. The Russian economy is primarily built on it vast reserves of fossil fuels, like oil and natural gas. The United States, along with its European Allies can essentially cripple the Russian economy by doing some very simple things. The first step was done last week, when Obama, with the stroke of a pen, put the oil and gas moguls in Russia on their respective heels by adding Bank Rossiya, the bank that provides all, or most all, of the business services to the Russian Oil and Gas companies, to “the list of specifically designated nationals”. This means they cannot do business with any United States or most all European banking institutions. For the “layman” (namely you and me), banks conduct transactions with each other throughout the world with transactions, transfers, lending, etc. If you eliminate a bank’s ability to “transact” business, particularly when 90% of those transactions are for what is essentially all of the Gas, Oil, and Energy companies in Russia, you “kill” the bank. By killing the bank, that does not necessarily mean you “kill” its clientele, but is sure does make it extraordinarily difficult to “transact” business. Bank Russiya’s specialty is facilitating business with the Oil, Gas, and Energy companies in Russia. Take away the facilitator and you severely damage those businesses, who are Putin’s inner circle.
This “sanction” will not last forever and though it hurts the Russian economy, additional actions need to be taken as well. Eventually, the oil and gas industry in Russia will circumvent the sanctions and in the long run, they will have no effect. One possible way to really cripple the Russians from an economical point of view is to begin importing natural gas to the European Union from the United States. Thirty-five percent of the natural gas that is used in Europe is received from Russia. The United States has significant surplus of this resource and importing to the E.U. would not only hurt the Russians, but also help U.S. companies and the economy (seems to be a no brainer to me). I’m certain that U.S. companies would leap at the chance to sell to this marketplace. These are not moves that can be done erratically, but they do need to slowly tighten the screws until Putin and the Russian leadership “feel the pain”, like they did back in the Reagan Presidential years and the fall of the USSR.
Ah, and now we, again, get to my favorite subject.
Before we embark on this months update on the implementation of the ACA, I want to again point out that there is absolutely no desire from me to see this law fail. I received several emails last month accusing me of this act, I’m merely pointing out the facts at hand. Don’t shoot the messenger.
We are currently at 30+ changes to the ACA, by executive order, and counting. The latest surprise is one that relates to another extension on private insurers until 2016. As I’ve stated in the past, most private pay health insurance is mandated at the state level. In addition, the state insurance departments define what is and what is not acceptable for consumers in that state. To simply change and extend the requirement of insurers to comply with the ACA, until 2016, is a clear message that the administration does not understand the basic fundamentals of how individual health insurance is managed at the state level.
Most every insurer has already eliminated non-compliant health plans and brought into compliance their particular health plans that are currently in existence. The result of his action has been the termination of health plan coverage to millions of Americans (that is a fact). To simply go back and try to undo that process is a clear misunderstanding of the individual marketplace. The ACA created massive changes to the individual marketplace for health insurance and in most cases, it took two full years for the insurance industry to fully understand how to comply with the standards and then apply those standards to individual health insurance policies. The same process goes for businesses that provide coverage for employees. Time is spent fulfilling the law and its specifications, you cannot simply “wake up” one day and say, “well, let’s delay that for another 18 – 24 months”, that is if you understand all of the inner workings at both the insurance company and state insurance department levels.
These changes cannot simply be “undone”. Had the law been actually read before it was passed, perhaps we would not be flying by the seat of our pants during the implementation. It is factually becoming very “sterilized”. Combine that with some of the factual figures for enrollment that have been coming out and it looks like we’ve added about 1.8 million people to the ranks of the “insured”. Though I believe this is a good thing, we are very far from the 55 million people who remain uninsured. Now before you take the time to correct these figures in an email to me, check the GAO, that’s where the figures come from. Yes, there are approximately 5.5 million people signed up, but we have no idea how many have paid (a fact I find unbelievable). There are literally millions of people who have been forced onto the ACA because their individual coverage has been terminated, so they do not count as “new enrollees”. There are companies like, IBM, AT&T, Time Warner, Walgreens, and others, that are moving Retirees to the ACA, they do not count. Additionally, we need YOUNG people in the ACA to make it work, but major corporations are moving the highest risk employees to the ACA, making the gap for sustainability in the program larger than it already is. Where does all this data leave us, your guess is as good as mine, but I see bailouts coming, subsidies happening and you can certainly guess who is going to pay for it all…
I was trying to determine what advisory items we could discuss this month. I’m always careful about that, because my monthly newsletter is normally not used as a tool to get clients. Nonetheless, people constantly ask me to put a small advice section in each month and so I’m going to start accommodating that request for 2014.
For those of you that have been riding this wave for the last 4.5 years, it may be time to think about safety. My granddad always used to tell me that “pigs get fat and hogs get slaughtered”. If you are in retirement or within ten years of said event, then it makes sense to start looking for ways to preserve your assets. There are several asset classes that can still reflect market gains, while protecting the dollars you have. Additionally, and over the past year or two, several insurance products have come to the marketplace that are worth a look. If this process interests you, please email me and we can have a discussion.
That’s all for this month…
As always, my very best to you and your families.