Daily Archives: August 15, 2012

James Mackintosh

Britain is in a double-dip recession, but it isn’t all doom and gloom. Figures out this morning show the country has, for the first time on record, seen unemployment fall during a recession.

This makes a nice change from the so-called recovery since the last recession ended in 2009, when the unemployed saw precious little relief. Read more

James Mackintosh

Republican Mitt Romney’s pick of Paul Ryan as running mate for November’s US presidential election has catapulted Medicare to the top of the agenda (along with his budget plan).

Already the attack ads have boiled down the essence of the campaign: Ryan wants to push granny off a cliff by handing Medicare budgets to states and turning the medical support for the elderly into a voucher scheme. The Romney response is to attack “Obamacare”, pointing out the scale of cuts to Medicare made by the president in order to fund a wider healthcare scheme.

As usual in politics, neither is addressing the real question: why is American healthcare such poor value for money?

This is best shown by just one amazing statistic: the US government spends a bigger chunk of GDP on health than the British government – which gets a nationwide  healthcare system for it. Americans only get care for the elderly (Medicare) and the poor (Medicaid). Read more

James Mackintosh

The eurozone may be doing a bit better than expected, but its economy is still weak in the extreme. Today’s Short View discusses the prospects for equities and the likelihood that  eurozone shares beat US shares.

Lex thinks an improved economic outlook should be bad for shares, as equities are more sensitive to future discount rates (ie higher bond yields) than to the prospects of higher revenue.

And research by the London Business School has demonstrated there is no correlation between the performance of an economy and share prices over the past century and a bit.

But both of these miss the idea of what future prospects are already priced in, something extremely hard to measure. What matters is what people expect, and how it changes. If investors are braced for recession and instead get dismal growth, shares should rise – as we saw towards the end of last year. Read more