My Sunday Washington Post Business Section column is out. This morning, we look objectively at Obamacare — not the politics of it, but the investing aspect.

Its called: On Investing: The Obamacare portfolio.

My conclusion? If you were an objective observer of the legislation when it passed, and then again when the Supreme Court ruled on it, there was lots of money to be made. If you were a lizard-brained political wanker, you left plenty of easy money on the table:

“Indeed, emotional investing is rarely successful. Anyone with an intense emotional interest ignores data and facts that disagree with their views. The brain’s tendency to more easily forget that which we disagree with also works to fool these folks. Cognitive bias is a source of systematic errors to investors of all political persuasions – and it leads to under-performance.”

Here’s the advice I would have given Ted Cruz if we sat down after the ACA was first passed:

• The nation was going to create up to 50 million new health-care consumers;

• Demand for medical services and equipment was likely to rise;

• Innovative pharmaceuticals, procedures and techniques would also see increased demand;

• Hospitals would no longer be on the hook for free emergency room services, as they have for almost 3 decades.>

The Washington Post included a chart of XLV, as well as lots of more ideas for Senator Cruz.




On Investing: The Obamacare portfolio
Barry Ritholtz
Washington Post, October 6 2013  

Category: Apprenticed Investor, Politics, Psychology, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

12 Responses to “ObamaCare: Investing Advice for Senator Ted Cruz”

  1. > Here’s the advice I would have given Ted Cruz if we sat down after the ACA was first passed

    You may as well have been talking to a door knob . . .

  2. rd says:

    Interesting column about Obamacare here by John Mauldin, the bulk of which is actually a conversation with a Cleveland Clinic doctor:

    A stat that blew me away is that the Cleveland Clinic BILLS $18 billion but only COLLECTS $6 billion and this is one of the most efficient and patient-focused US health care institutions. That is a huge discrepancy with as much wiggle room for negotiation as buying a wood carving in a third-world bazaar. It makes the MSRP for a new car look dead-on. There are huge opportunities here for insurance companies and third-parties to provide real and accurate data on actual costs versus pie-in-the-sky pricing requests from the medical industry providers. I don’t think it will be possible to get real costs under control under there is much more clear and transparent cost and price information available.

    • Mauldin’s errors on this subject — Jack Rivkin called the Cleveland Clinic “perennially overstaffed” — is what actually led to my column this week.

      And EVERY hospital has wild overbilling — its a result, in no small part, to “The Emergency Medical Treatment and Active Labor Act” (EMTALA) signed into law by Ronald Reagan. It mandated that “Hospitals provide care to anyone needing emergency healthcare treatment regardless of citizenship, legal status or ability to pay.”

      Mauldin is wrong . . .

      • intlacct says:

        “Mauldin is wrong . . .”


        Mauldin sort of brags about being correct on the language of the ACA resulting in a shift to part time workers but a) they can purchase affordable care thru the exchanges and b) that would be easily remedied if we simply did what every other civilized country has done: draw a little line through the numeral ’65′ in the Medicare legislation and indicate that it applies to any age.

        Interesting his revelations about his kids illnesses. Type 1 diabetes – mama mia that is a pre-existing condition. My prediction is that, in spite of his dad’s misgivings, Mauldin Jr will be lining up for that entitlement lickety split.

        At some point Americans are going to have to get their minds around the immorality of the current system. It is barbaric and shameful.

  3. bonzo says:

    Putting on my big macro goggles, the real implication of ACA is that the United States is doubling down on the healthcare industrial-complex to generate needed demand (aka makework) in the decade to come, as opposed to the military, prison, and education industrial-complexes. I have lukewarm support for this. My preference is always for pure R&D (robotics, genetic engineering, nanotechnology) as the solution for insufficient demand, since pure R&D is what gives the biggest bang for the buck in the long run. However, even after factoring in all the low-level techs and janitors to keep the labs clean, R&D probably can’t generate as many moderate-skilled jobs as healthcare and that’s what we need right now. Also, even though 90% of healthcare is useless or even harmful, there’s still 10% that does some good, plus the only people harmed by healthcare are fools who let themselves go under the knife unnecessarily. Whereas the military and prison industrial complexes produce massive collateral damage in order to generate jobs.

    I still don’t understand why the Democrats passed this law in such a way as to outrage people. Basically, I see the ACA as raising my tax rates a few percentage points, which was going to happen anyway because those rates were too low, especially the capital gains rate. But, like most Americans, the rise from 15% to 20% on capital gains doesn’t really bug me, whereas being forced to buy insurance (I’ve been self-insuring up to now) makes me furious, even though the dollar impact will be less in years where I have big capital gains. Perfectly irrational, and yet I’m far more rational about money than most people.


    BR: Honestly, I havent the slightest idea what you are talking about

  4. I agree 100% with your take. Back in Dec 2009, that was the premise of my 2010 Outlook: “A Tale of Two Economies”. http://www.philstockworld.com/2009/12/27/2010-outlook-a-tale-of-two-economies/

    Not to make a commercial out of it but, as I said at the time:

    “Now we have taken a great step towards mandating that a portion of their meager wages goes towards health care and, in doing so, we have created 40M new patients for our wonderful medical industry to exploit.”

    As you said, very simple stuff and we went on to pick about a dozen names we thought would benefit, but we went with IHI rather than XLV on the index side. It was such a simple premise and we kept on it of course over the years, especially in Pharmboy’s Reports.

    Now it seems to me the simple trade is betting on how far the market will fall as we get closer and closer to doomsday.

    What say you?

  5. RC says:

    Mauldin is a text book example of what Barry’s point in the article – Investing and Politics dont mix.
    Mauldin writes verbose drivel which can be summed as – Obama is bad for economy, Nothing good will happen until Obama is in power!!!
    Meanwhile the S&P went from a low of 666 to 1700. I wonder who pays him for his “advice”, you could probably do better by asking the Republican National Committee :-)

  6. S Brennan says:

    Dunno Barry, I think you got this one wrong;

    50 million more consumers of “health insurance” NOT healthcare…there’s a difference.

    You should go onto the NY State exchange, read the deductibles, then see how many doctors are EXCLUDED, if it’s anything like my state, you’ll find that high deductible, extremely thin “in plan” coverage and no payments for out of plan and no contribution to the deductible for “out of plan” usage. I’d add, that now that I have viewed the plans, it’s clear “preexisting condition” will be replaced by “out of plan”as the denial of payment methodology of choice….and we are back to square one.

    And those few, and poorly regarded doctors and clinics “in plan” are so beholden to the insurance companies for business they could never have otherwise, they operate as agents for the insurance company. If you don’t have a problem with a CLEAR “conflict of interest”…well, let’s just say, I hope you do not advocate for your clients the way you advocate for those that will be exposed to this bill.

    It will however stop consumers from purchasing drugs from Canada, for me that’s $80/3 mos to $600/ 3 mos, or $23.33/ month vs $200.00 one drug alone.

    So since this bill affects largely low income workers and those who work contracts, look for money to be pulled out of the economy and into Pharma & “Health Insurance”.

    To me, it sounds like another bailout for bad actors.

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