Obamacare, Oil, and Twitter-

As the year winds down towards 2014, the biggest story over the last few weeks has been the introduction of the new Federal Health Insurance exchanges to the country and how few people have been able to use the new web site to enroll for coverage.   I read a venture capitalist blog where the software community is absolutely incredulous that a great majority of the site was not open-sourced to help save the government money.  It is amazing the cost of the site is now being projected at nearly $600 million and it still does not function correctly.

 

There are quite a few Republicans who think the various execution problems, and you could probably add other kinds of issues as well, are going to be the gift that keeps on giving as the 2014 mid-term elections approach a year from now.  Last night's surprisingly close governor election in Virgina and the re-election of Chris Christie in New Jersey will provide more ammunition to strategists who believe the health care debacle is just what 'the doctor ordered' for Republicans to strengthen their control in the House of Representatives and even take back the Senate.  The problems with these exchanges may have only just begun as web site bugs and "glitches" may soon take a backseat to real life issues like doctor and network availability, dropped coverages, and last but not least, price.

 

President Obama is discovering what many people in the business community have long know, and that is execution and implementation is much harder to deliver than sales speeches and puffed up ideas.  General George Patton was a big believer in violent and ruthless execution delivered swiftly.  I am sure many democrats would take a working web site by the end of November and would breathe a big sigh of relief at the very thought of no more complaints about the exchanges.  I suspect that is not going to be in the cards.  

 
Twitter will make it's public company debut with the long awaited and much publicized IPO tomorrow.  I would expect it will soar and be valued at over $20 billion.  Elsewhere in a different part of the equities market, the large integrated oil companies reported their earnings over the last few weeks and generally speaking, production growth has been muted while downstream margins have compressed quite significantly. The largest companies are taking different approaches to dealing with the current environment, with some selling assets, while others continue to invest heavily.  Institutional investors have delivered a firm message to big oil in that they want the capital expenditures to slow down if they are not going to yield more production growth.  Return on capital is back in vogue, at least as far as investors in big oil are concerned.

 

In Europe, many refineries are closing as profitability is very difficult to achieve.  All over Europe, energy and electricity costs are very high, in fact I saw a report where the average household in England spends nearly 10% of their monthly revenue on energy and electricity.  Many are starting to question the effectiveness of alternative energy programs and the high taxes on traditional carbon based production.  The leaders in Europe have to be looking at the energy sector and wondering how they are going to get competitive in the midst of the current political environment.

The NBA season started last week and the NFL is entering the part of the season when, "the games to remember are played in November."  Oops, that was college football.  Anyway, at this time of the year in basketball, many teams are just learning how to play with their new teammates.  Of course, interestingly enough, you could say probably the same thing at the end of the year as well.  Hope you enjoy the games everyone!

Finally, next Thursday, November 14, 2013, I am presenting a webinar at 11:00 PST to the Opal Financial Group- here is the link if you are interested in attending- http://www.opalgroup.net/webinars.php

I hope you have a great week and thank you for reading the blog!

Y H & C Investments, Yale Bock, and the family of Yale Bock own positions in securities mentioned in the blog post. Investing in stocks can lead to the complete loss of your capital. As always, on any company mentioned here, past performance is not a guarantee of future returns. Investing involves risk of losses on invested capital. One should research any investment and make sure it is suitable with your objectives, risk tolerance, risk profile liquidity considerations, tax situation, and anything else pertinent to your financial situation. Also, the CFA credential in no way implies investment returns will be superior for any charter holder.