I have been shamelessly avoiding writing about the Affordable Care Act, better known as Obamacare, because it was both inherently too political and economically too nebulous to really get my hands around. Apart from noting that it would inevitably create additional headwinds to growth and job creation—which isn’t a value judgment, but an economic fact—I haven’t weighed in on the law itself. An opinion on the law has to be a value judgment between competing goods, a relative cost-benefit analysis that everyone has to do for himself or herself.

Now, however, we’re at a place where the law itself is not at issue, but the implementation is, and that is having (and will continue to have) economic and market implications that we should be aware of.

http://www.youtube.com/watch?v=xRIhIbwhwNg 

Watch Brad's interview on Bloomberg TV here, where he responds to the question, "Will the rally continue?"

I took down a tree over the weekend, using a handsaw, branch cutters, and a ladder. I had to do it piecemeal, one branch at a time, as it was right next to my house. That’s a lot of work, and I was sweating hard by the time I got down to the main trunk and had dragged the rest of the tree to the back yard. Yesterday, when I was cutting down the remains for disposal, the weather was a lot colder. A sweater, a fleece, and gloves weren’t keeping me warm. It was a big shift from one day to the next—but hey, I live in New England.

The change in the market weather hasn’t been nearly as quick, but it has been even more pronounced. Taking a look at the market over the past couple of months, it’s clear that the narrative has changed, which probably portends continued strong performance.

That headline should give you a hint about the contents of this post. Now that we’re well into earnings season, I thought I’d take a look at how we’re doing and what that might mean going forward.

First, a bit of context. Earnings estimates, being estimates, change over time—usually downward. Dr. Ed Yardeni, a terrific economist and market analyst, regularly presents charts like the one below on his blog. You can find the original here.)

The real news from yesterday is, of course, that the Boston Red Sox won the World Series at Fenway for the first time since 1918. Nothing else even comes close. End of post.

I’ve written before about the potential problems lurking in the financial system. LIBOR, for example, was something I started covering last year. Looking at the papers today, though, even I am surprised by the sheer number—not to mention magnitude—of the problems that are showing up.

In just one of today’s papers, the Wall Street Journal, we have the following articles:

• A1 – “SAC to Plead Guilty to Securities Fraud”
• C1 – “Rabobank Is Fined, CEO Is Out in Libor Settlement”
• C1 – “Troubles for J.P. Morgan in Its Effort to Settle”
• C3 – “Currency-Trading Probe Gains Momentum”
• C4 – “NASDAQ Glitch Prompts Trading Halt in Some Markets”
• C16 – “European Banks Trapped in Legal Limbo”

One of the stories in today’s Wall Street Journal describes how a number of U.S. cities are coming to terms with their inability to pay their obligations. Earlier articles in the WSJ and elsewhere gave some details—specifically, in years when investments did better than expected, many cities took the excess returns to add to payments, making the cookie jar smaller when the inevitable underperforming years came. They had confused the short term with the long term.

I get the same kind of question, in a different form, when I speak with investors. Should we invest in the stock market? Well, I say, what is your time frame? Over the long term, you absolutely have to invest in the market. Over the short term, you might be best off not doing so. Is this a one-time investment or a continuing stream of investments? How old are you? And so on.

This morning, I had the chance to talk with the lead fixed income (bond) portfolio manager from one of the largest Chinese mutual fund companies. Arranging the call was a bit difficult, what with the difference in time zones and our travel schedules (which is probably a metaphor for something or other), but the conversation turned out to be well worth the effort. As an aside, we really do live in a miraculous age, where you can talk to someone on the other side of the planet.

While rushing between planes yesterday, I had a good conversation with one of our advisors, who was preparing a talk for his clients about whether the recovery is real. Specifically, he was concerned about the fact that money velocity is so low.