photo by francisco diez

Written by Dave Young, President of Paragon

This seems to be the question of the day.

If you listen to the talk shows on the right they are convinced that this bill is going to cause the market to tank. If you listen to the left… they are convinced that health care reform is going to be their greatest accomplishment since Social Security and Medicare. (Never mind that “accomplishment” created a 50 trillion future deficit that has not been funded and will have to be paid by future generations.)

At any rate, forecasts abound.

John Kenneth Galbraith wisely said, “We have two classes of forecasters:  Those who don’t know – and those who don’t know they don’t know. After listening to forecasts from some really smart people over the past 24 years, I’ve concluded that no one has a clue what is going to happen in the future. There are just too many variables. The only thing that is constant is that the markets will do whatever they have to in order to prove the majority of investors wrong.

My take away from the passage of the heath care legislation is that since no one really knows what is in it (including those who passed it) no one really know how it will affect the market.

It’s too big, too complex and there are too many variables. It won’t begin to be implemented until after the 2012 elections (conveniently). By then, it may be repealed and significantly modified if Republicans regain a majority.

Who knows?

My guess is that it won’t have much effect on the market in the near term. In the longer term, the heath care reform should have the same negative effect on the economy as their other efforts; ie. increasing taxes, more regulation and the cost of a stimulus that doesn’t stimulate.

All of their fun and games won’t kill our economy but will definitely slow it down in the long-term.

Our free market economy will grow — albeit slower than normal. All of this “stuff” they keep throwing at us has the same effect as throwing a wet blanket over our economy. It still advances, but at a slower pace than it otherwise would.

Once again, the scenario above supports why we are so passionate about active money management versus passive management. Passive management strategies just sit there and follow the market – for better or for worse. Our active management strategies allow us to adapt and adjust our portfolio to whatever the market gives us to work with. That flexibility has been the key to much of our past success.

What do you think? Feel free to leave comments.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.