Obamacare Pain Impacting Investment Markets

Monday, 06 Jan 2014 07:37 AM

By Denis Kleinfeld

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Rep. Nancy Pelosi, D-Calif., accurately predicted that Obamacare needed to be passed in order for people to understand it. The website launch was excruciatingly painful, a foreshadowing of what was to follow.

The lesson that actions create consequences seemingly was forgotten when Obamacare was passed. It will be a lesson to be learned once again for so many who either forgot or never learned it in the first place.

This is no free ride. The cost promises to be obscenely high for everyone in the country — personally and monetarily.

The investment industry, professional money managers, analysts and pundits, along with so many others who make a living off the money of others, is touting past data to predict that the American economy is undoubtedly growing. They say that if you have been sitting on the sidelines holding cash, then it's time to jump into the markets. The investment winds this coming year may be a bit turbulent, but the financial storm has been weathered.

To be sure, there are vocal detractors from this view. I am one of them.

All the past data is basically unreliable because Obamacare was not an actual factor that figured into the statistics. Investment decisions in 2014 will be severely impacted in so many ways that are, as Pelosi so accurately put it, yet to be understood.

I am not impugning anyone's belief that Obamacare is either an admirable goal or a governmental disaster of monstrous proportions. The information that is reflected in the records from which the prior data is taken does not contain any facts or numbers as to the now-unfolding consequences of Obamacare.

Obamacare taxes, which are just being realized in the tax returns due in April, are shocking taxpayers. Although the government tax policy that merely saving taxes does not have a "substantial economic effect," everyone who pays taxes realizes that taxes are a cash outlay. In fact, taxes are the single biggest cash cost. Taxes are the major factor at the very heart of any economic analysis.

Obamacare taxes alone are going to directly and dramatically influence investment behavior. And that change of investment behavior will be severely distinct from the prior years from which the current investment data is drawn.

The indirect economic effect will be far more dramatic and far more difficult to calculate.
Businesses, for example, will need to change their business models to accommodate using more part-time employees than they did before. A change in the business model, especially one this severe, involves an alteration in the risk analysis when making investment decisions.

Fast food operations are already trimming their full-time ranks. Are human resource-dependent operations going to be companies that warrant you risking your cash to buy their shares?

Will banks and other capital lenders want to extend loans to what may be now viewed as riskier business operations?

If the banks don't make loans, then how are they going to make money for their shareholders?

The shakeout in the entire medical industry will rock the investment markets. Are investments in health insurance companies riskier? Drug companies? Medical equipment and supply companies?

If the expected numbers of doctors retire, then what will be the impact on the companies that service them?

The Obamacare economic effect has been largely ignored by the investment industry in their eagerness to keep the money from commissions and fees flowing from your bank account to theirs.

The birth of Obamacare has been controversial and tortuous. Of course, some savvy or inside group of investors will find new and profitable opportunities that will surely appear. But for most others, the investment agony has just begun.

© 2014 Moneynews. All rights reserved.

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