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Trust Department Quarterly Newsletter 3rd Quarter 2009
Health Care – A Moral Commitment? Twenty-two thousand Americans die each year because they lack health insurance. Roughly 46 million Americans are living without health insurance. The U.S. is the only developed nation where medical bankruptcies occur. All other industrialized countries guarantee health care for everybody. The European and Canadian plans basically provide healthcare for everybody, which is paid for by everybody. One foreign health minister questions “You Americans are so clever. Why haven’t you figured that out?” So Congress under pressure of the Obama administration is being mandated to “figure it out.” The Senate Democrats have a plan. The House Democrats have a plan. The House Republicans have a plan. And Chairman Max Baucaus of the Senate Finance Committee has his plan. None of these plans promote a socialized medical plan like Canada’s where all healthcare providers are employees of the government. Most of the plans do mandate that all people have medical coverage, which is the ultimate goal. Only the House Democrat plan mandates that employers are required to provide insurance. But then not everyone is employed. So who pays for this group? Other countries have taxes such as a larger tax on cigarettes and/or gasoline that are targeted to healthcare or a national sales tax that is at least in part directed to the cost of health insurance. A national sales tax would have everybody paying the cost of healthcare. The major hurdle to healthcare reform is who is going to be covered. In other countries it is quite simple. Everyone is covered under the same plan. However, these plans in some cases don’t cover everything and in different countries provide different benefits. This is why in England those who can afford “better” coverage buy supplemental insurance. Americans who already have coverage are not willing to accept a mandated plan such as the Canadians or English have, as it may reduce or limit the access we have to medical care. When those at the top of the decision making process, which are our congressmen (who according to Obama are covered by the best healthcare plan available), are not willing to lower their benefit it’s only understandable that those other than the 46 million who currently don’t have insurance are suspicious of what the government is putting forth. Most of the plans that are being proposed by Congress include expanding Medicare to include a number of people that are some percentage above the poverty line in earnings. So the question would seem to be if we already have a socialized medical program for those over 65 why don’t we expand that to include everybody, including those under Medicaid. Both Medicare and Medicaid are already financially strapped. Therefore, in order to pay for medical reform in this country a national sales tax could be initiated. Thereby we would have healthcare for everybody that is paid for by everybody. For those who are able to and are desirous of coverage better than what the Medicare benefits will provide additional supplemental insurance would be available through now existing companies. Estate Tax Reform Before our next newsletter, which will be out after the fourth quarter of 2009, Congress will have to deal with the estate tax rules. Currently each individual has a $3.5 million estate tax exemption that is available before there is any tax imposed. As the current law exists in 2010 if Congress does nothing the estate tax will cease to exist. It is our feeling that Congress will be dealing with this before they recess for the year and that we most likely will have an exemption somewhere between $3.5 and $5 million per person that will be indexed for inflation going forward. We will keep you posted with the new rules when they become available. The Stock Market The stock market continued its strong increase that we saw in the last half of the second quarter. Each of the Dow Jones and S & P is up 14.9% for the third quarter of 2009. When we look back to the bottom of the market, which was on or about March 9 of this year we have seen over 50% recovery in the S & P and just less than 50% in the Dow Jones. Needless to say this is a very significant recovery in an economy that is still suffering from a decimated housing industry, an auto industry with two out of the three majors in bankruptcy, and an unemployment rate that continues to push towards 10%. The areas of the market that have shown the greatest increase during the year of 2009 are technology and industrial materials. These were two areas that were down significantly during 2008. We have also seen a rather significant recovery in the financial area with that being up roughly 18%. Financials were the largest loser during the year of 2008. The consumer discretionary sector has also shown a large rebound during the year of 2009. The outlook for the upcoming Christmas season is that sales most likely will be around the same level as they were in 2008 as people are still being more conservative in their spending habits. We do look for somewhat of a downturn in the market during the month of October with a further rebound by year end. The Bond Market The Federal Reserve still has not made any changes in the discount rate and therefore, interest rates remain low. We actually saw a decline of approximately .25% in interest rates available on the 10-year and 30-year treasury bonds. We have also seen mortgage rates again drop under the 5% level for 30-year terms. Although we do not foresee interest rates going up dramatically we do anticipate the interest rates on a 10-year treasury to be somewhere between 4% and 4.5% during the year 2010. Quote for the Day “In today’s regulatory environment it is virtually impossible to violate rules. It is impossible for a violation to go undetected, certainly not for a considerable period of time.” Would you believe this is attributed to Bernard Madoff? |
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