DON'T CALL EMS FOR THE ACA UNTIL CONSIDERING THE EMH

Feckless Piker (FP): Say Oddvark, did you get anything good for Christmas this year?

Oddvark Contremundo (OC): Yeah, I got a case of my favorite Irish whiskey.

FP: That’s great, why the glum look on your face?

OC: I’m worried about the future.

FP: Have you gotten another eviction notice from the county? Those rotten do-gooder bureaucrats won’t let a man breathe. I’ll help you move your shopping carts and canvas tomorrow.

OC: No, it’s not that. I’m just afraid I’m not going to live up to my potential. The newspapers I pick out of the booths at the Mickey-D say there are clouds on the horizon.

FP: Potential—that train left the station a long time ago. Old timers like you and me; we gotta keep mindful of the present. Gotta make sure our SNAP card paperwork is in on time; take care to clean up our scrap metal before taking it to the reclamation center; make sure those clerks down at the Liquor Emporium honor those competitors ads, shit like that. We gotta concentrate on doing what it takes to get by and having a few laughs in the time we have left. We can’t afford to get too tangled up in the future.

OC: That may be, but there may not be any demand for our scraps if 17% of the nation’s economy goes into the toilet next year.

FP: What makes you think 17% of our economy is going into the toilet next year?

OC: Why, the headlines in the Wankers & Bankers Journal say that healthcare sector amounts to 17% of the nation’s economy. The WBJ’s op-ed page has predicted that problems associated with the Affordable Care Act are going to do lasting damage to the health care system and may weaken other industries in the process.

FP: Oddvark, what are you doing reading the Wankers & Bankers Journal? You don’t even have a bank account.

OC: I like to check the price of aluminum and copper so we won’t get ripped off too badly by those sharpies down at the scrap yard.

FP: Well that’s damn good thinking Oddvark—I didn’t think you had that much grey matter left.

OC: I got a few tricks left up my sleeve.

FP: You know, gathering information from the WBJ in order to inform your haggling with the scrap yard brokers is a prime example of what is known as the efficient market hypothesis (EMH). This financial principle asserts that financial market asset pricing, at any given time, efficiently reflects all information available to the market. I think this well-known principle may be the key to relieving your worries about the coming year.

OC: That sounds to me like a theory that applies to stock prices. What does it have to do with the collapse of health care?

FP: It doesn’t have anything directly to do with the collapse of health care. However, it is one method to test the validity of the dire predictions for that sector of the economy.

OC: How so?

FP: I take a peek at the WBJ myself from time to time. I like to check the current prices for my imaginary portfolio—the one that would be real if I hadn’t of dropped my entire nest egg on that nag in the fifth at Hialeah back in ’85. Anyway, it seems to me that much of the negative information surrounding the Affordable Care Act has been revealed to the marketplace. Yet, I just saw today that the economy is projected to grow over 4% in the fourth quarter of 2013. Furthermore, both the Dow Jones and the S&P 500 continue a long rally that has achieved all-time record high prices. In addition to that, home sales are gaining momentum and auto sales have been robust throughout 2013. The Federal Reserve recently announced tapering of the bond purchasing program known as Quantitative Easing. Equity markets reacted positively to this news—taking it as a sign that the Fed has confidence in near future growth strong enough to replace the massive monetary infusions the Fed deemed necessary to bolster a weak economy. Finally, many of the employment statistics coming out of the Labor Dept. in the last few months have been significantly stronger than those posted in the interim succeeding the market crash and credit freeze of 2007/2008.

OC: I still don’t see what any of that has to do with health care.

FP: If the health care sector of the economy were in serious trouble due to any of the shortcomings of the Affordable Care Act, it would be very unlikely that we would be seeing such positive news coming from the general economy. In the event 17% of the economy was in jeopardy, the efficient market hypothesis would predict that information would be efficiently processed by the marketplace and would be reflected in substantially lower asset prices and weaker demand for major investments in housing, autos and durable goods (also up substantially in November). Historically, all of these markets have been efficient in discounting “bad news”.

OC: So, everything’s OK with the health care system?

FP: I wouldn’t go that far. I think there is a lot of political noise in the information pipeline that muddies the waters significantly. Remember that “all the world’s a stage” and the competing political propaganda machines never tire of script revision. However, sophisticated analysis and statistics increasingly inform financial market decisions. When combined with the careful personal financial evaluation that often accompanies large investment decisions (home, auto, retirement, etc.) made by millions of individuals, families and small businesses, the efficient market hypothesis might provide us with as close an approximation to a crystal ball as we are likely to experience.

OC: What about health care?

FP: Oh to be sure there are many improvements that can be made to the Affordable Care Act and to the health care system in general. Perhaps the ACA will ultimately be replaced, if someone can develop a better solution and convince the body politic to take another chance. Neither health care nor the national economy is out of the woods yet. I would just argue that you might sleep easier if you read those WBJ editorials in context with the broader economic and political landscape.

OC: Thanks Feckless, I feel a little better already. I’m not out of the woods yet either and I’m not going to be if I can keep dodging those community watch people. How about joining be for a nip or two of that Irish? You know, just for medicinal purposes.

FP: I don’t mind if I do. Let’s drink a toast to the nation’s health—may our collective actions speak louder than the media’s words.