In the 2019 fiscal budget, the Department of Veterans Affairs received more than $200 billion in spending. That's a 6 percent increase over last year and counts as the largest amount ever received by the VA. The money will go a long way in implementing an array of much-needed reforms.

 

There will be $400 million earmarked for preventing opioid abuse. As you might imagine, veterans are a high-risk group since opioids are used extensively in treating wartime casualties.

 

An additional $1.1 billion will jump-start the overhaul of the VA's electronic health records, while $1.75 billion will go to implementing the VA Mission Act. That money will revamp and re-write the veteran's community care programs, which allows for an entire array of new health care choices for the veteran. This will boost the vet's ability to access private health care at taxpayers' expenses.

 

On the education front, the Veterans Benefits and Transition Act will help to right some past wrongs inflicted on Post-9/11 GI bill users. Last year, there was a series of technology glitches at the Department of Veterans Affairs that resulted in delayed and inaccurate payments for many thousands of vets attending college.

 

In many cases, the government was not paying the tuition costs, or if they were, the payments were delayed. GI students were being hit from all sides. Schools were charging them late fees, preventing them from access to campus facilities, or were not allowing them to register for their next semester.

 

As vets scrambled to pay the tuition shortfalls, money for mortgage and rents were in short supply causing even more late fees to accrue.  Some schools were urging veterans to take out loans to cover future tuition costs. It was a mess. The new act puts an end to these practices and demands that schools cease and desist if they want to continue to enroll students who are using the GI Bill.

 

As for the late payments the vets incurred, the new Forever GI Bill Housing Payment Fulfillment Act is holding the VA accountable for fixing these past payment snafus. The act creates a team of experts to oversee these reimbursements and report back to Congress on their progress every 90 days.

 

There are many more initiatives, from helping homeless vets to finding jobs to transitioning returning soldiers into civilian life, but you get the point. As for me personally, until recently, I stayed well clear of the VA. The harrowing stories I read and heard about the bureaucracy, slovenly and overcrowded facilities and atrocious health-care services kept me far away from seeking their help.

 

However, times are changing and so has my attitude of late. There is some talk of actually turning over the health care of veterans to the private sector if things don't improve within the VA. I decided to experiment and visit my local VA medical center for a physical.

 

I was blown away by the level of competence and professionalism I encountered. From the doctor who examined me, Dr. John Hickey at the Pittsfield Outpatient Clinic, to the nurse who took my blood pressure, to the receptionist, and everyone in between, the service and care was equivalent to, if not better than anything I have experienced in the private sector.

 

My appointments were sent via phone and messaging. My health records are securely stored, new information is automatically updated in their electronic systems and my next appointment scheduled and recorded. And it is not just the VA Medical Center. My local VA representative returns phone calls within a day and answers emails within hours. In my opinion, there is a new "can do" attitude from top to bottom in the VA. 

 

So, it is time to give credit where credit is due. Helping the veterans was one of the president's campaign promises. Bravo, Mr. President for a job well done. Keep up the good work.

 

The stock market is once again approaching historical highs. Unemployment is at multi-year lows. Interest rates and inflation, if not at record lows, are close to it. The president claims we are enjoying the strongest economy in our nation's history. Is that true?

 

The short answer, according to a recent study by Bloomberg, would be no, not even close. They went back over the course of the last 43 years and measured the nation's economy under three Democratic and four Republican presidents. They found that in all but one case both the economic and financial performance of the U.S. was better than it is now.

 

Bloomberg used 14 different gauges to measure a wide range of economic activity.

 

Everything, from manufacturing jobs to the value of the greenback versus other currencies, was included. All the traditional variables such as GDP, unemployment, wages productivity, etc., were also analyzed.

 

It turns out that the economy under the last seven presidents saw the greatest improvement under President Bill Clinton between 1993 to 2001. Ranking No. 2 was Barack Obama. President Obama, readers may recall, took office in 2009 during the worst recession since the 1930s. By the time he departed in 2017, he handed Donald Trump an economy that saw the second-best performance of all seven presidents.

 

Ronald Reagan only ranked No. 3, followed by George H.W. Bush, Jimmy Carter then George W. Bush (who presided over the largest financial crisis in 80 years). President Trump settles in at the No. 6 place, not quite as bad as George W., but clearly lagging Jimmy Carter.

 

Even though it is early days, with a little less than two years left in his presidency, Trump's economy is below average in 12 of the 14 measures. He can claim the lowest unemployment rate since the 1960s, however, and the strongest growth in manufacturing jobs since 1997.

 

From a politically partisan point of view, Trump's sixth-place score would leave you wondering why he claims he is responsible for "the strongest economy in the history of our nation." But this has happened before. Just about every president claims credit for a good economy. They might as well, since bad economies are always blamed on them as well no matter the facts. And the fact is that presidents have little to do with the state of the economy.

 

All economies run in cycles. Recessions occur from a variety of factors both here and abroad. Central bank policies have much more to do with how the economy fairs at any given time than the election of a president. Presidents will always be one small piece of the public policy picture. And public policy is only a tiny piece of the forces that buffer, change, and mold today's complex economies.

 

The internet boom that coincided with the Clinton years had its origins decades before Clinton was ever elected. The Financial Crisis of the Bush era can be partially traced to President Clinton's jettisoning of the Glass-Steagall Act. Oil booms and busts, geopolitical turmoil and so much more are a result of policies by ours and other governments dating back to as early as World War II.

 

Why should a president get blamed (or take credit) for where the economy is at a certain stage when the seeds of growth or decline were planted long before he took office? Nonetheless, when 2020 rolls around, the same old myths will resurface, and voters will once again vote a president in or out based on what the economy is doing at that moment. That's the world we live in.

 

Investors remain cautiously optimistic that the wall of worry that has been plaguing us for months may now be crumbling. That's no sure thing, but at least we did have some good news this week.

 

While most investors were not expecting a repeat of last month's partial government shut-down, it was still a relief to see that issue put to bed on Friday. The president reluctantly signed the budget bill that Congress passed over his objections.

 

Granted, the president did not get his wall, although now he is threatening to get the funding by declaring a national emergency on our southern border. Whether there is or is not such an emergency, by declaring one, he bypasses Congress. That will establish a dangerous precedent for future presidents who may be frustrated with the constitution's checks and balances among the three bodies of government.

 

Another president could use that same tactic to circumvent Congress in order to secure his or her own objectives. Nancy Pelosi, the Democrat speaker of the House, has already indicated that, for example, that same tactic could be used in the future to restrict or even outlaw guns in this country. It could be used to balance the budget, or set term limits in Congress, or any number of things that a frustrated president might wish for.

 

But enough politics. As I have written many times in the past few months, the markets remain China-dependent. Earlier in the week, markets swooned when reports surfaced that some of the structural issues within the Chinese economy that we want changed have become a sticking point in negotiations.  A few days later, the president said he "may consider" postponing the March 1 deadline, if there was progress on the trade talks.

 

Almost every other day, some administration official or another makes a positive (or negative) comment that sets the markets in a tizzy. Words such as "reluctant" or "constructive" can send the Dow up or down 200 points in the blink of an eye. From my point of view, it's all-day trading and won't impact the longer-term outcome of the markets.

 

I have been predicting from the outset of Trump's trade war, that there will be a resolution and a compromise on these issues between the U.S. and China. No, it won't be on the market's time table or terms. I believe it will be a series of incremental agreements on one or two issues at a time.

 

It also happens that it is a fortuitous period of time for the United States to address these decades-old issues. Not only is the Chinese economy faltering on several fronts, but China is also in the midst of a multi-year program of becoming a consumer-driven, rather than an export-driven, economy. As such, reducing exports and increasing imports dovetails with their own economic objectives through 2025. However, altering trade deficits and surpluses is the relatively easy part of the trade discussions.

 

The intellectual property debate is something that will require a substantial change within China and can't be done with a brush of the pen (or keyboard). Clearly, one of China's major objectives is to become the world's leader in technology advancements. If that means stealing our secrets in any way they can, then they will do it. Not only is this a clear and present danger to our own economy, but also has enormous ramifications for our military and national defense.

 

Next week, the trade talks move back to Washington. As such, we can expect a series of "leaks" as the days go by, which should guarantee more volatility on a daily basis. As for the supposedly "important" stuff like earnings, economic growth, employment, etc., all of it remains relegated to second or third place as the talks progress.

 

As the markets climb, there are more and more calls by strategists for another one of those 6-7 percent pull-backs (that could easily turn into a 14-15 percent decline on the back of all this computer trading). I have an interesting notion. What if the news is really good on the China front and, after a brief spike up, markets use the occasion to "sell on the news"? That would be the most inconvenient thing that could occur to the greatest number of people. That's what the markets usually do.

 

For the second year in a row, President Donald Trump called on Congress to do something about the escalating drug prices in America. The president is doggedly pursuing this campaign promise in the face of an army of special interest groups and big drug companies. Hurrah for you, Mr. President.

 

In his State of the Union address he said:

 

He wants our legislators to "deliver fairness and price transparency for American patients. We should also require drug companies, insurance companies, and hospitals to disclose real prices to foster competition and bring down costs."

 

Given that drug pricing is a complicated area and there have been various proposals and recommendations proposed, I will focus on just a few at a time. One of the president's proposed actions would reduce drug prices by allowing pharmaceutical companies to offer discounted prices to Medicare and Medicaid directly, bypassing the middlemen, called pharmacy benefit managers (or PBMs). Historically, these PBMs have been useful to insurance companies and large employers. They make their money by negotiating behind-the-scenes deals with Big Pharma acquiring discounts, called "rebates," for their big clients on certain "approved" prescription drugs.

 

These rebates are targeted to name-brand drugs that are covered by Medicare and Medicaid. Since this is a well-known system of back-scratching, drug companies simply hike prices high enough each year to cover these "rebates." This year, for example, despite the president's call to hold down prices, 60 drug companies increased prices on more than 300 products, and we are only in February of the new year.

 

Trump wants these discounts, instead, to flow directly to the consumer at the pharmacy counter, rather than the pockets of the PBMs. Since drugs paid through the Medicare system account for 30 percent or more of the country's retail drug spending, this would result in a sea of change to the prescription drug market.

 

This change would especially benefit those of us with really high prescription drug costs. The rebate system, you see, is usually focused on competitive drugs, such as two opposing blood pressure medicines. The really expensive drugs usually have no competition and therefore fall out of the rebate system.

 

I have a client, for example, with a fairly rare condition, who pays well over $100,000 a year for one drug. Under the current system, his deductible and co-insurance are sky high, because there are no rebates available to him. He pays the list price for his medication and is required to pay a percentage of the drug's cost himself. He could save as much as 30 percent on his drug costs.

 

For many of us, however, there would be a downside. Since insurers would no longer be able to apply the rebate money, they receive from PBMs to lower overall insurance premiums, the typical Medicare patient could see premiums go up by as much as $5 or more a month.  Some experts think that about one-third of Medicare drug plans will benefit from the change, while two-thirds may not.

 

Another group to benefit would be those who suffer from the "doughnut hole" In Medicare Part D, which covers drug cost. These expenses can escalate until they reach what is called the "catastrophic phase" where out-of-pocket expenses tops $5,100. At that level, the government steps in and will assist in paying most of the bill. Lowering drug costs will reduce prices and provide some relief to we who suffer from the prescription donut hole on a yearly basis.

 

Although the Democrats have identified drug pricing as an area they would also like to attack, their solutions differ. In an almost knee-jerk fashion in today's partisan politics, anything one side proposes is immediately shot down by the other side.

 

"The Trump administration's rebate proposal puts the majority of Medicare beneficiaries at risk of higher premiums and total out-of-pocket costs and puts the American taxpayer on the hook for hundreds of billions of dollars," says Nancy Pelosi, the Democrat's speaker of the House.

 

It remains to be seen if the Democrats can come up with something better. In the meantime, one proposal I thought made a lot of sense was Trump's proposed change to Medicare B pricing. He wants a much larger set of drugs to be priced no higher than they are in foreign countries like Japan or nations in Europe. He also proposed that the secretary of Housing and Human Services (HHS) be allowed to negotiate prices and permit U.S. residents to purchase medicines directly from other countries.

 

Despite the partisan rhetoric, there seems to be some willingness to work together. Given the president's lead on drug pricing, I believe it is one area where we could see Congress and the White House come to terms and pass something useful and acceptable for all of us. Wouldn't that be great?

 

Profit-taking is a natural and expected part of the stock market. That's why no one should be surprised that this week we are witnessing a period of consolidation. It is actually a good thing.

 

Given that most investors need a reason to explain any market declines, this week's announcement that President Trump is postponing his meeting with Xi, his Chinese counterpart, was both a surprise and a disappointment. It shouldn't be.

 

Over the last few months, I have tried to reduce investors' expectations of an easy, one-shot, Chinese break-through on the trade front. The postponement is actually a positive, in the sense that both sides are taking the negotiations seriously. There is just too much to negotiate, which is why I expect that the March 1 deadline to institute additional tariffs will again be postponed.

 

Part of the problem is the president's insistence that he be the one to make most, if not all, of the decisions on the China front. That is difficult to do when his attention has been focused on getting his Wall money, fending off investigation after investigation, shutting down the government (or not), and feuding with Nancy Pelosi and Chuck Schumer.

 

There just isn't enough time in the day. To accomplish all of the above and move forward to solve an array of issues that have evolved over decades of trade with the world's second-largest economy is asking the impossible. I have to hand it to Trump for even attempting to renegotiate our long-standing China trade issues. No other president before him has tried.

 

As such, investors should take a more realistic view of what can and cannot be done between now and March. But try telling that to the machines that drive most of the daily trading. All they need is the word "postponement" and the selling begins. 

 

Last week readers might recall that I expected this pullback.

 

"We have seen some good gains, however. So, I would expect to see a period of consolidation in the weeks ahead. Any dips in the market would be an opportunity to buy, not sell."

 

My target was 2,715 on the S&P 500 Index. We hit that level and a bit beyond before profit-taking began on Wednesday. Regardless of the reason, stocks were over-bought, in need of consolidation, and the China news provided the excuse. 

 

I said last week that if you had sold out of the markets during the downdraft we experienced in the last quarter of 2018, you now have an opportunity to get back in the market. I am sure you will be wondering at what level. Short-term timing advice is purely a guesstimate. From a technical point of view, the S&P 500 Index could drop another 50 points easily from here to 2,646.

 

It could go lower, but I wouldn't worry about it. You see, all it would take is an encouraging tweet by the president to trigger a buying frenzy among the machines. Investors, please ignore the day-to-day noise. The economy, earnings and employment are still growing. The Fed is no longer tightening and that's all you need to know.