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
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.
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
There are no summertime blues for the stock market, at least not yet. The S&P 500 may have briefly dipped back below 1,400 today (annoyingly after the video below was recorded) but the rally has delivered 10 per cent returns since shares bottomed out at the start of June.
Can it last? History is not kind to rallies which start in the summer: what starts in the summer tends to end in the summer.
The chart below highlights four summer rallies since 1970, defined as consecutive monthly gains in June, July and August, to the first of the next month. Change the definition slightly and there were also summer rallies in 2003, 2006 and 2009, but the story remains identical. Read more
An investor given perfect foresight of how the world’s economy’s would perform after the credit crunch began five years ago today would still struggle to predict some of the most important market action.
Today’s Short View video explores some of the surprises of the last half-decade. The biggest surprise of the next five years would be if we ended up without a Japanese-style lost decade – and the result would be disastrous for bondholders positioned for ongoing economic gloom.
The newspaper version of Short View discusses the shifting patterns created by the changed bond/equity correlations and the hunt for yield.
Here are charts showing the world’s asset returns over the past five, fearful years: Read more
♫ Summer’s here, and the time is right, for watching the Olympics ♫
Okay, it doesn’t quite scan, but it has the advantage of being true. Trading floor TV sets have been retuned from CNBC to the live Olympic coverage, and sighs go up at big moments in the Games, rather than big trading moves (the snapping of Cuban Lazaro Borges’ pole in the pole vault this morning, for example).
This all matters to investors. Trading volumes were already low as investors sat on the sidelines, but the combination of holidays and Olympics means even fewer than usual are focused on the equity markets – and that can be bad news, as the chart shows. Read more
It’s PMI day again, and the news so far is once again terrible for Europe. The manufacturing purchasing managers’ indices are one of the best set of indicators of what is going on in the economy, because they are so much more timely than GDP figures.
The data produced by Markit for the eurozone are awful. Greece goes from bad to worse, and even the motor of the eurozone – Germany – is struggling badly, with manufacturing output and new orders falling at the fastest since April 2009, shortly after the recovery began.
This matters for equities. Consider these two charts: Read more
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This blog is about asset allocation at the global level. It is an ongoing attempt to explain why investors and markets behave the way they do.
John Authers officially takes the "Long View", while James Mackintosh takes the "Short View" when it comes to investment decisions. In practice both of us end up taking both long- and short-term views, and occasionally disagreeing with each other; all comments and disagreements are very welcome.
James Mackintosh is the Financial Times' Investment Editor, writing and presenting the daily Short View column and video. In 16 years at the FT his posts have included comment editor, motor industry editor and hedge funds correspondent, as well as spells in the Parliamentary lobby and Paris. He was the first reporter hired for FT.com, joining two weeks before it launched.
James has a degree in philosophy and psychology from the University of Oxford, where he spent two further years in post-graduate study of philosophy. If he wasn't here, he'd be skiing.
John Authers is the Financial Times' Senior Investment Columnist, writing the Saturday Long View and a regular Monday column. In a 22-year career at the FT, his previous posts have included global head of the Lex column, investment editor, US markets editor, Mexico City bureau chief and US banking correspondent. His latest book is The Fearful Rise of Markets.
John has a degree in Philosophy, Politics and Economics from the University of Oxford, and an MBA from Columbia University. Perhaps more interestingly, he captained the highest scoring team in the history of University Challenge while at Oxford, and also once sung in Pavarotti's backing choir.