The health care legislation that President Obama signed on Tuesday has extremely important implications for all investors. The fact is government will be taking a much larger share of the money you earn through working and investments, even though there were some politicians who claimed this plan would actually save money.

Writing for The New York Times, Douglas Holtz-Eakin, a budget wonk who has studied law for the American Action Forum, says, "In reality, if you strip out all the gimmicks... the health care reform legislation would raise, not lower, federal deficits, by $562 billion."

We are all going to be paying a lot more in taxes to fund this bill. Massively increasing the federal government's role in health care will not be free.

The new taxes come at a time when investing is already much more difficult than it was 15 or 20 years ago. Gone are the days of 10% certificates of deposit. There are no more  7%  AAA rated municipal bonds trading at par. Do you remember 5% passbook savings accounts? Do you remember financial plans that assumed double digit equity returns?

No, investing today is much tougher. The default options like certificates of deposit just don't pay very well today. And if you procrastinate about investing and just put your dollars in a money market fund, you're likely to get a rate that is scarcely higher than 0%.

None of the above is meant to be a political statement about "Obamacare." The Naked Portfolio Manager is apolitical. But the important point for all Americans is that the new law will make it harder to save and accumulate money for retirement, college education, vacation homes, and the American dream.

...Which is why making really good decisions about how to invest is even more important today than it was before the bill became law. So who do you know who needs to read The Naked Portfolio Manager?

Labels: health care, Obama

President Obama's plan to deliver a talk to school students today has triggered yet another controversy. According to The New York Times, many parents opposed his speech, saying they didn't want the President to "indoctinate their children" with his "socialist ideas."

Brett Curtis, an engineer in Pearland, Texas, said he is keeping his three children home, according to the Times article. "I dont want our schools turned over to some socialist movement," Curtis said. Although the talk has been on the schedule for weeks, conservative talk show hosts began fuming about it just last week. On "The Rush Limbaugh Show," conservative political commentator Mark Steyn accused Obama of creating a "cult of personality" and compared him to Saddam Hussien. Jim Greer, the Republican Party Chairman in Florida, said he was "appalled" Obama was using taxpayer dollars to further his "socialist ideaology."

Could Greer, Steyn and Curtis please grow up? Let's let the President talk to the children. If he makes the mistake of using the talk to "spread his socialist agenda," we can address that later. What we need to teach our children is they need to critically examine what they are told themselves, even if it comes from a high authority - even the President of the United States.

Thinking and decision-making are skills that can be learned, and the President's talk gives a great opportunity to teach children about these skills. Teacher's can use Obama's talk to stimulate conversation about the great policy debates of the day, to teach our children to think criticallly, and to respectfully challenge what they are told by high authority figures.

Labels: Education, Obama, Question Authority, thinking mistakes

I was amazed to read in The New York Times Saturday that President Obama is crediting the stimulus package with the slowing rate of job loss that was reported by the Bureau of Labor Statistics. For the month of July, employers eliminated 247,000 jobs. This is much less than the 741,000 jobs scrapped in January. Speaking in the Rose Garden, the President said his administration had "rescued our economy from catastrophe."

Did the stimulus package really cause the rate of job loss to slow? Well, it's possible. But it's also possible job loss would have slowed without spending billions of dollars on the stimulus package. After all, when corporate America cuts jobs, they cut the least essential people first. After a few rounds of job cutting, you are left with mission essential people that you just can't get rid if you want to continue to operate. So maybe this is why the rate of job loss slowed.

Or it could be that corporate America has been doing so much belt tightening over the past year that profits are starting to turn up and there is less pressure on managers to reduce headcount.

My point is there are many possible explanations for the slowing of the job loss rate. It's way too early to credit the stimulus plan for causing this. For the administration to take credit at this time shows a lack of critical thinking.

What if the job loss numbers had skyrocketed last month to over a million? Would the President be in the Rose Garden saying, "The stimulus plan has failed and I have taken the country in the wrong direction."? Of course not!

In fairness to the Democrats, critical thinking seemed to be in short supply during the previous administration as well. Confirmation bias is a thinking error in which the decision-maker searches only for facts and ideas that support his preconceived ideas and ignores facts and evidence to the contrary. Many people think George W. Bush fell victim to this same type of thinking in his decision to go into Iraq.

In a "60 Minutes" interview, former CIA Director George Tenet said that on September, 12th 2001, Richard Pearl, the Chairman of the Defense Policy Board Advisory Committee, told him Iraq would have to pay for their role in the 9-11 attacks. Tenet said he was shocked, and made it clear there was no evidence that Iraq had anything to do with Al Qaeda. Some think Bush ignored reports and data suggesting Iraq was not involved with the 9-11 attacks and did not have weapons of mass destruction, preferring to look only at the intelligence that supported going to war.



With so much at stake, why don't our elected officials think better?

Decision-Making Best Practice #10: Challenge your beliefs. Search fo other explanations and never except the first idea without searching for alternative explanation.

Labels: Bush, confirmation bias, Obama