Friday, February 15, 2013

Buffett's purchase of Heinz at a 20% premium over the market reminds us that the smart money is not looking to hit home runs these days or even for extra bases -- just good, steady returns from businesses that have been around for a while and which will probably still be around even as the economy sinks into Depression.  With this purchase he will own the bluest of blue chip companies involved in the sale and distribution of food and many other household staples. From a technical standpoint the stock had stalled almost precisely at the 60.79 target of the pattern shown.  Now it's in buyout heaven, trading at a height that could not have been predicted using Hidden Pivot calculations but which we surmise will prove to have been a bargain nonetheless.

Hard to say what has touched off the buying spree on Wall Street, but it surely couldn’t have been the sight of Obamacare's dreadnought bearing down on the U.S. economy.  Have you kept up with the news?  The details that have emerged concerning the Orwellian, badly misnamed Affordable Care Act suggest that it could easily crush the life from our already dying economy. There’s the matter of Medicaid, for one. Half of the states have taken the bait, opting to expand coverage with “free” money from Washington. And why not?  Enlarging the program will cost them nothing extra until 2016, at which point The Guvvamint will cut back on reimbursements by about 10%. So then, why have half the states opted out?  For starters, it will cost them a bundle just to administer the program – money they don’t have even if the care itself will be paid for, at least initially, with OPM.  However, an even bigger reason for saying no is that existing Medicaid programs are already pushing many states toward bankruptcy. Just ask Massachusetts, the home of Romneycare, where runaway healthcare costs are threatening to consume outlays in all other categories, including education, transportation, police, fire and judicial. Opting out would seem to be a no-brainer, but it’s not that simple. Any state that does so will effectively be shifting the financial burden of Obamacare’s Medicaid expansion onto beleaguered employers. That’s because workers are guaranteed some kind of coverage, and if the states themselves are not providing it via Medicaid, businesses will have to pick up the entire tab.  Can’t they simply pay a $2000 fine instead?  Yes, they can.  But it won’t be tax deductible like corporate dollars spent on actual care, and so the decision will be fraught for firms both big and small that