Obamacare vs. Trumpcare: As far as the markets are concerned, a difference that makes no difference is no difference

Whether Obamacare is replaced with Trumpcare or not, the following scenario for insurance companies is probable.

First, if Obamacare is replaced with Trumpcare, insurance company stock values will take a hit in the very short run. As the sector adjusts to fewer participants, it will design different insurance products for consumers severely impacted by higher premiums. Payouts will be minimized and in the immediate to longer run, share values will rise.

Second, if Obamacare remains intact, insurance companies, who have been carrying a greater share of the costs of administering the program on their balance sheets, will see shares take a hit. Companies will continue to vacate certain markets leaving an increased number of consumers uninsured. Again, the companies will come up with alternative products while collecting higher premiums from consumers who are insensitive to price increases. In the immediate and long run, insurance company share values will rise.

In the end, beneficiaries will be those who can afford the best insurance plans while holding shares in the very companies they send premium payments to. Government would have fulfilled its primary mission: to transfer wealth from the middle class to the investor.

Posted in Democrats, Donald Trump, GOP, health care, Republicans | Tagged , , , , | Leave a comment

The Black community should marry wealth creation with utility consumption

The Black community is under-invested. Lower incomes and higher propensities to consume puts the Black community in the precarious position of paltry wealth accumulation.  The Black community also does not have significant ownership on a local level of any economic activity within a primary or even secondary economic sector. Such ownership could provide a platform for entrepreneurial development and much needed income generation within the Black community in the form of jobs or dividends.

The numbers, admittedly, paint a less than rosy picture. Based on the most recent household wealth data from the U.S. Bureau of the Census, median black household wealth is approximately $6,314. When you remove ownership of equity in a home, median net worth falls to $2,124. The national median net worth is $68,828, and after excluding equity in a house, national median net worth falls to $16,942.

Also of concern is the disparity in the ownership of financial assets, particularly equity and debt. The national median value for stocks or mutual funds owned by a household is approximately $20,000. For black households, the median value of stocks or mutual funds held is approximately $4,750. I believe that this disparity in ownership of financial assets meant that there was no cushion that Black Americans could use to dampen the impact of the 2007-2008 recession.

One cushion that Black Americans could avail themselves of is ownership of the very utility infrastructure that has been providing them, as consumers, with reliable services, and, as prospective investors, with reasonable returns on their equity.

Let me say this. I’m not offering investment advice, but as an economist, I believe that consumers should occupy the investment class as well, getting back some of the hard-earned dollars they spend on products and services. The utility sector should be no exception.

Utility shares, ironically in the positive today after another down day on Wall Street, are known to be bond-like in their behavior. In other words, they act as a haven when other equities are taking a hit in value. The opposite occurs when the market rises and investors get brave and want to dip their toes in other stocks. Utility share values may fall, but the yields their dividends provide may rise.

No investment is safe, but there are three primary characteristics about the utility sector that serve not only the consumer but the investor. The first characteristic is grid reliability. From the electricity generation plants to interstate transmission lines to local distribution, the regulatory framework requires utilities maintain the grid to standards that provide customers with electricity 24 hours a day, seven days a week.

Second, there is the rate regulation aspect of the framework. For regulated, investor-owned utilities, state public utility commissions approve a rate of return that utilities may earn on the assets that they employ to provide your electricity service. Commissions also set the rates investor-owned utilities may charge. The framework provides consumers with clarity and transparency about pricing.

Finally, there is you, the consumer. We take for granted how well we know the product entering our homes every day. In addition to the clarity and transparency of price information, consumers are intimate with the quality and reliability of the product. To paraphrase a world renown investor, we buy what we know.

The regulatory framework for investor-owned utilities strikes the balance between shareholder expectations regarding returns and consumer expectations regarding service quality.  It’s time for the Black American community to take advantage of the balancing act.

Posted in black American, energy | Tagged , , | Leave a comment

#Broadband infrastructure: So far I don’t see Congressional Republicans riding to Trump’s rescue

The markets took a beating yesterday; a one percent correction that even saw broadband stocks like Comcast (-1.09%), T-Mobile (-1.01%), and Sprint (-1.74%) take a hit. Ironically, while Verizon and AT&T were down also, (-.42% and -.75%, respectively), their decreases were smaller. I guess at first blush due to their market dominance as wireless carriers and, when compared to T-Mobile and Sprint, also have a wire-line and data business to provide revenue.

Ironic that as these broadband stocks were taking a beating along with the rest of the market that the House Energy and Commerce Committee  yesterday listened to testimony on how to get more broadband deployed in what’s left of the 21st century. GOP members were harping on the benefits that tax credits could provide to private providers of broadband infrastructure while Democrats were skeptical as to how much incentive tax credits would provide to a private player to roll out broadband infrastructure into rural areas.

Based on yesterday’s market performance and traders opining that President Trump’s increasingly doubtful ability to get corporate tax cuts through Congress in light of a pending failure to get rid  of the Affordable Care Act has a negative impact on markets, it should be increasingly doubtful that looking to tax credits for broadband providers may be in doubt as well. Congress can’t even agree that broadband is as much an infrastructure play as building a highway to nowhere.

Should anyone have been surprised at the markets reaction to a fading “Trump trade?” Some members of the Republican Party have been balking at the idea of a trillion dollar infrastructure plan. They wanted to know how is going to pay for the plan. Ironically while some GOP members on the House commerce committee touted tax credits for broadband deployment, more of their members are cringing at the notion of additional tax expenditures after promising their constituents that they would be fiscally responsible.

Even if the GOP decided to risk increased stimulus spending, such a spending bill may not appear until 2018. Sounds like Speaker Paul Ryan would be willing to lose a couple seats in the 2018 midterms in exchange for the multiplier effects that may ripple through to 2020 from a 2018 spending plan.

Meanwhile Democrats aren’t too keen on public-private partnerships. Some Democrats made this clear during yesterday’s House commerce committee meeting and a larger bunch of their fellow Congressional Democrats are making the same noise about the Trump administration’s public-private proposals as well. Their fear: that the cash will go to corporations and not meet the needs of consumers.

Regarding infrastructure, what government action would be best? I think when it comes to broadband, the best infrastructure play would be to allow broadband providers to identify the markets they can serve best. This benefits the consumer by ensuring she receives well thought out, reliable service. A hands-off, purely private play also benefits investors because  broadband providers will be mindful of best management practices when it comes to investing firm capital.

I can’t tell you where markets will go from here, but I expect that when it comes to infrastructure, firms that do not provide public goods, like broadband, will recover faster than other infrastructure-providing firms. Broadband providers don’t need tax payer approval to provide the “tolls” on their networks necessary for generating revenues.

Posted in AT&T, broadband, broadband access provider, capital, Democrats, Donald Trump, Economy, Federal Communications Commission, Paul Ryan, regulation, stimulus, T-Mobile, taxes, U.S. Constitution, Verizon | Tagged , , , | Leave a comment

A more precise preamble to the American Constitution

“We the Investors in the United States, in Order to form a more perfect Corporation, establish Contract, Property, Tort, and Criminal Law, insure domestic Tranquility by regulating the behavior of our Wage Earners and Slaves (otherwise known as Citizens), provide for the common defense of the Investor, promote the general economic Welfare of the Investor, and secure the Blessings of Liberty to our investor classes and our Posterity, the heirs to our bonds and equity shares, do ordain and establish this Constitution of the United States.”

Posted in American society, capital, commerce, culture, democracy, entrepreneurship, free markets, government, Political Economy, Uncategorized | Tagged , , , | 1 Comment

Speaking to bad perception of broadband and infrastructure

A couple mornings ago while watching C-SPAN’s Washington Journal, a caller argued forcefully that President Donald Trump should not treat broadband as infrastructure. Infrastructure, according to the caller, included roads, bridges, airports, harbors, but not broadband. The caller didn’t go in depth in his reasoning. I gather that like most consumers, broadband is simply the way a consumer accesses the internet, a way that is faster than dial-up. That may have been the extent of his understanding.

Broadband is much more than access, but maybe it is time, for the sake of clarity, to refer to broadband as either an advanced communications network or an integral portion of an advanced communications network. Such a reference may be a bit of a mouthful, but it captures the capabilities that broadband gives you access to; a network that allows for the exchange of digitized data and provides a platform for the creation and delivery of digital services.

By definition, an advanced communications network falls into today’s dictionary definition. Webster’s New World Dictionary defines infrastructure as “basic installations and facilities, as roads, power plants, transportation and communications systems, etc.” A closer look at the installations and facilities listed in the definition shows a commonality between them; that these facilities were designed to move things through the conduits of commerce.

Roads and transportation systems facilitate the movement of cars, trucks, trains, and airplanes which in turn are carrying passengers and freight. Power plants are generating electricity and that electricity is transmitted within and across states and finally distributed to local customers via the electric grid. Communications networks are transporting data in various forms including graphics, text, video, and voice. All these items are transported with the expectation of compensation to the owners of these various networks.

In 1996, Congress recognized the future economic impact of broadband and advanced telecommunications services when it added Section 1302 to the Communications Act. Section 1302 calls for the Federal Communications Commission to promote the deployment of advanced telecommunications capability to all Americans. The internet, still in its infancy, was seen as the new medium for economic growth and Congress, in a rare display of wisdom, found that broadband access and the internet should be left to grow and innovate without onerous regulations.

And while Congress did not have a clue as to what services would eventually be sold on this platform, it was persuaded by the industry’s vision of the future and the development over the prior two decades of internet protocol and the world wide web, that broadband had a promising future.

That future is here. Broadband access allows consumers and businesses to upload, transmit, and exchange knowledge in the data marketplace. The participants in this space are growing, expanding past traditional search products offered by Yahoo! and Google to now include social media and social networks such as Facebook, LinkedIn, and Twitter.

Broadband access providers are themselves becoming expert in mining, storing, and selling data. Unfortunately for these providers, they are being hamstrung by unfair privacy rules based on ancient, 20th century telephone rules and they would best be served by a streamlined privacy regulation regime based on Federal Trade Commission rules. The only “crime” these providers have committed is that also provide consumers with access to the internet.

But for the original question, is broadband considered infrastructure? Yes, it is. Broadband access facilities are an important part of the advanced communications networks that tie data providers together. To say that broadband is not infrastructure and thus run the risk of not supporting the deployment of additional facilities would be bad public policy.

Posted in broadband, wireless, video, big data | Tagged , | Leave a comment

How do I take care of myself when government says I shouldn’t?

Yesterday I saw Nancy Pelosi on television giving the press her response to Republican efforts to significantly amend the Affordable Care Act. I zoned out as she attempted to describe the benefits some Americans would lose should the Republicans have their way with health care finance.

I say health care finance because the messages from the left and right of the issue say little about actual health and wellness. To some individuals, health and wellness are their wealth and they invest in ensuring that wealth is not eroded by lack of exercise, lack of preventative initiatives, lack of good food. They invest time, money, and other resources to mitigate against the possibility of falling into bad health.

I can’t say that I’ve spent a lifetime practicing good behavior. Poor eating habits led to weight gain which led to high blood pressure. Many of us put ourselves at risk of a heart attack, stroke, or death while creating a demand on the medical and pharmaceutical industries to treat us. In the end these are the behaviors that drive up the cost of a doctor visit, x-rays, and drugs. These are also the behaviors that drive down wages, where individuals have to stay home as a result of illness and their reduced productivity leads to reduced compensation.

Not all illnesses or medical events can be prevented. You can’t predict car accidents or accidents at work. You can’t predict being shot during a robbery and sustaining life changing injuries as a result. You should be able to buy insurance for these catastrophic events just as you would for your automobile.

You should also be able to pay for health services out-of-pocket like any other services without some backlash predicated on a value judgment that somehow you are a bad person for not joining a network where your contribution goes to aiding those who did not take care of themselves the way you did.

Democrats don’t care to hear about that sort of freedom. Taking care of you is the underlying theme of their political packages. With healthcare, they are able to minimize the amount of tax dollars it would take to provide you with health insurance by passing on the bulk of premiums and deductibles to you while insurance companies enjoy the benefits of having you on their rolls.

The healthcare sector has been benefiting with the NYSE Healthcare Index reporting a 6.9% rising in the sectors value between this writing and November 9, 2016. I expect them to keep benefiting as demand for their services will continue to increase as the population ages. Also, if they continue to be innovative, they will be able to serve a growing population of patients at lower costs and greater profit.

Can government make healthcare more affordable? The problem is that the government has never defined what “affordable” is supposed to mean. Do we mean doctor visits and hospital stays increasing at a certain percentage per year? Do we mean a cap on drug price increase? Do we mean total projected healthcare costs as a percentage of median household budgets? Affordable is never defined.

I’d rather negotiate with the market as an individual. Along with my healthcare provider, I can determine what I need, get information on how much it will cost to fulfill that need, and seek out financing alternatives that help me achieve my goals when current income or my budget falls short. All government is doing is forcing the consumers’ hands as to which financial vehicle they should be using, and it’s obvious that Washington wants consumers to use insurance companies.

Posted in consumers, Economy, government, health care, healthcare, Political Economy | Tagged , , | 1 Comment

Investing in reliability benefits shareholders and ratepayers alike

Growing up in the U.S. Virgin Islands, I could give you some tales about the reliability of our electricity grid. Blackouts were monthly, unannounced, unexpected. They could last through the night and when power came back on, one kept their fingers tightly crossed that the relief would last more than five minutes. To this day, brownouts and blackouts are still a problem. Consumers face exorbitant rates in excess of thirty cents per kilowatt hour and compounding the expense is the use of oil as the primary fuel source for generating electricity.  Throw in the occasional hurricane and hilly terrain and our challenges are further increased.

Having lived in the States for 37 years, I am now spoiled. The hours-long monthly blackouts I experienced back home have been replaced with temporary outages occurring every couple years.. This reliability in service is a result of public policy that requires a certain level of quality service delivery combined with billions of dollars of investment by the utility industry in a resilient electricity grid.

And that investment in America’s national grid has been hefty. In 2016, investor-owned utilities invested $52.8 billion in transmission and distribution facilities.  Because the business of generating, transmitting, and distributing electricity is very capital intensive, investment in the electric grid has always been costly. 21st century demands on the grid are changing it from a one-way service delivery system to a multi-directional service delivery platform.

The grid is becoming “smart”, allowing customers to use mobile broadband to manage energy consumption. These upgrades to the grid will require adding digital technologies like smart meters. Seventy million smart meters were projected to be installed by the end of 2016.

Alternative generating fuels such as solar and wind are being incorporated into the modern grid. In Florida, state law requires investor-owned utilities meet state-mandated conservation goals including the incorporation of various demand-side management programs, energy efficiency programs, and alternative fuel sources like solar.

The two-way exchange of information and, in the case of net metered ratepayers, electricity means that the once stodgy electric company is becoming a data company. Like its sister firms in the broadband and internet information sector, the modern utility can collect information that could be used in the future to design innovative services for ratepayers based on past consumer behavior. The stodgy days of the 20th century are gone.

Regulators should consider these changes in the electric utility industry when making decisions on utility revenue requirements and rates. Capital expended by utilities to accommodate alternative fuel sources, facilitate demand management, and keep the grid up and running 24 hours a day, seven days a week should be recovered by rates that contribute to capital while providing a grid that contributes to the well-being of the consumer.

Posted in consumer welfare, consumers, Economy, energy, Uncategorized | Tagged | Leave a comment

For minority communities,increased broadband deployment should be about production

I just finished reading through some of the testimony presented earlier today during a hearing before the U.S. Senate’s subcommittee on technology, communications, innovation, and the internet. The subcommittee’s focus this morning was on the economic value of spectrum, the airwaves that mobile devices and wireless networks access in order to send and receive data, text, and voice messages.

I was particularly interested in any testimony on unlicensed spectrum. Where access to the airwaves is secured via a license from the Federal Communications Commission, the wireless services provider or device maker uses certain frequencies in exchange for promising to transmit at those frequencies and at a certain level of power so not to interfere with another broadcaster. Television and radio broadcasters and wireless phone companies like Verizon fall into this licensed box.

In other cases, the use of unlicensed access to the airwaves, or spectrum, would best serve the needs of a service provider or consumer. As a consumer, you are familiar with a number of these devices. They include your cordless phone; key fobs for your car; your wireless keyboard.

When I hear about innovation in wireless, I think about what can be done in the unlicensed spectrum space. Unless Oprah Winfrey and Robert Johnson are going to team up and raise funds to build a cell phone company, I don’t see much play for blacks in mobile broadband communications. As we see the internet of things continually emerge, where more devices are connected not only to the internet but to each other, I believe we’ll see more devices being designed and put into the market along with an increase in the intellectual property that supports them.

Also, I’m concerned about the generation of value necessary for attracting wireless facilities into minority neighborhoods. The discussion has centered to much on delivering wireless facilities into minority neighborhoods so that minorities can consume more offerings on the internet. That’s all well and good because deploying facilities into minority neighborhoods provides opportunities to access educational, medical, health, and financial content.

But in my opinion, where minorities can develop content or other valuable data for sale originating in their communities, then broadband companies will have increased incentives to locate there. Also, the intellectual property developed in those neighborhoods as a result of the valuable data and knowledge being generated increases household economic values and in turn attracts additional economic development. The internet of things and the internet of me calls for a knowledge economy that puts production on the same level as consumption. We can and should have both.

Posted in apps, big data, broadband, Federal Communications Commission, Internet, Political Economy, spectrum | Tagged , , , | Leave a comment

American government was never designed to help blacks

The emotional responses by black Americans to media’s depiction of Donald Trump is getting annoying. Black Americans drank a lot of the symbolism in the Obama Kool-Aid in the last eight years, so much so that using a portrait of the 44th president and the former first family as a social media profile picture is the norm for many on Facebook.

Besides the symbolism of a man of color winning an American presidential election, not much happened in terms of wealth creation and capital acquisition for blacks during his tenure. In a June 2016 report, the Pew Research Council noted the following:

“Analyses of federal government data by the Pew Research Center find that blacks on average are at least twice as likely as whites to be poor or to be unemployed. Households headed by a black person earn on average little more than half of what the average white households earns. And in terms of their median net worth, white households are about 13 times as wealthy as black households – a gap that has grown wider since the Great Recession.”

Pew went on to note that black households are twice as likely to be poor than white households, and even with a shrinking educational gap, whites with college degrees continue to out earn blacks with similar educational credentials. For black households with a bachelor degree, the median income is approximately $83,000 compared with similarly educated white households coming in at approximately $106,000.

Of greater interest to me is the wealth gap, which, again, widened under President Obama’s term. In 2013, according to government data cited by Pew, the median wealth for white households came in at $144,000, thirteen times the amount of median wealth held by blacks. When you control for educational differences, the sheepskin hanging on the wall or sitting on a shelf gathering dust becomes increasingly worthless. Where white households headed by a bachelor’s degree holder have median wealth of $301,000, black households headed by a bachelor’s degree holder have median wealth of $26,000.

CNN, citing the 2016 Assets and Opportunities Scorecard, lists the usual suspects for the wealth gap, including discrimination in the labor markets, lower wages paid to blacks versus those paid to whites, stagnant wages in urban centers where cost of living is increasing, and a lower proportion of blacks owning homes versus whites. The usual solutions are listed as well, including stronger anti-discrimination laws, increased consumer protections from predatory lenders, and tax reform.

Given that these recommendations came near the end of the Obama administration, I have to ask whether these ideas were tried and if so, did they work? Mr Obama’s emphasis on a “middle class and out” economic strategy saw his administration in the early years attack the foreclosure crisis. That was nice, if you owned a home and given that fewer blacks than whites own homes, I don’t see how this policy was a positive for blacks.

Quite frankly, pushing or keeping people in the credit markets so that they can buy money in order to purchase a home that doesn’t pay them anything at the end of the month borders on insidious, but that is another discussion.

When it came to tax reform, Mr Obama emphasized raising taxes on the wealthy with nary a mention of lowering taxes on the poor or lower middle class. And while the Dodd-Frank Act spawned the federal consumer financial services protection bureau, blacks, I don’t see how that agency could positively impact a significant portion of people who were not even in the credit markets to begin with.

In short, the Obama administration failed blacks, but if it consoles all the Donald Trump haters, I don’t expect any different from the current Administration.

The vast majority of black Americans will argue that government must come to their aid; that they are entitled because of the centuries of discrimination and racial violence spawned from slavery. Since government condoned these atrocities, the argument is a strong one.

On the other hand, blacks ignore the historic goal of American government. From the 15th century when European monarchs issued charters to individuals and trading companies to explore and colonize the western hemisphere, government’s primary duty has been to monopolize an area’s resources and ensure those resources could be extracted for the monarchy and the investors who financed exploration.

Blacks, brought here as human capital to be employed at no cost, today hold almost no capital and are denied access to it. Unlike their white counterparts who were granted homesteads in order to populate the west, capital was never directed toward blacks for the purpose of economic empowerment and self-determination. One hundred fifty-two years after their release from physical bondage, blacks are still buffeting in slavery’s wake.

This is part of the reason why a small number of blacks view Barack Obama’s presidency as a failed one. He made no attempt to direct substantial and significant capital toward blacks. Such a redistribution may have jumped started a real initiative to close the wealth gap. If there was an opportunity during the 44th administration, it is now lost with the 45th.

The only option I see for blacks is to abandon the current rules, systems, and institutions that guide wealth accumulation in the United States. I’ll explore that option in another post.

Posted in Barack Obama, black American, capital, democracy, Donald Trump, economics, Economy, government, labor, middle class, Political Economy, poverty, race | Tagged , , , | Leave a comment

The Democrats continue signaling their anti-liberty ways

Tom Perez should be on his way to the airport now, having secured the chairmanship of the Democratic National Committee in an election here in Atlanta. Mr Perez, the former U.S. secretary of labor under former president Barack Obama, beat back challenger Keith Ellison by a vote of 235 to 200.

I listened to some of Mr Perez’s speech. The only thing that stood out was his call to the Democratic Party to make Donald Trump a one term president. Democrats have been in fighting mode since 20 January, vowing to push back against the man who out-gunned them in the rural, fly over states of a forgotten America.

When I think of Democrats these days, I think of two main groups. Both groups occupy urban areas.

One group is white, educated, employed, sipping lattes, and think they can make a better world by recycling garbage, digging compost gardens, putting roof top solar panels on top of their sub-urban homes, and constantly repeating the word “innovation” anytime one of their classmates develop the umpteenth up that can tell the world where everyone is hanging out for coffee.

The second group is made up of blacks and Latinos. They make less money than whites as a group. They are not as educated and have higher unemployment rates. They are thought of as likely candidates for social assistance even though statistics show the largest recipients of social services are white. You won’t see many blacks and Latinos with rooftop solar (it’s too expensive), and while both groups disproportionately make greater use of social media, employment in Silicon Valley or being known as developers of apps is near nil.

Both groups have one thing in common. They have no problem restricting the financial liberties of the majority of Americans via tax hikes. Subsidies and credits for solar projects come out of taxpayer dollars. Social welfare spending, whether on social security, food stamps, or multiple job training programs, are also financed by tax payer dollars. Let’s not mention tax credits that support the Affordable Care Act, or fees that are passed on to telephone subscribers to fund universal service access to landline, mobile, and broadband access services.

The middle class find themselves stuck between these two interests. Paying higher costs of living to support the dividend yields of affluent Democrats while paying the higher taxes that support rooftop solar and food stamps; all this while struggling to come up with $400 emergency money.

Democrats and their promise to deliver an “everything under the sun” society at our financial expense dampens our individual abilities to “just be.” These promises come with restrictions on the behavior of citizens who subscribe to government programs i.e., income verification, residency requirements, marital status, employment search requirements, etc., as well as financial restrictions on citizens paying higher taxes without access to write-offs.

I don’t see their business model as providing Americans with a better society, at least from a citizens view. From a statist view, entangling citizens into a matrix of restrictive rules and onerous taxes in exchange for benefits is how the State expands, with benefits in the form of taxes flowing from citizens to the State’s employees, including program heads, appointed and elected officials; and bond holders who finance the State’s deficits.

The relationship is unbalanced, but Democrats don’t seem to care.

Posted in democracy, Democrats | Tagged , , | Leave a comment