I'm paying $47,800 to a company I'm shorting

United Healthcare charges me $47,800 a year for family health insurance.

Family of five. My copay is still $80, and I am also actively short UnitedHealthcare and have been for a while now. 

Every time the ticker pops up on my screen I scream "die already" at it, and they send me the bill anyway.

That is the K-shaped economy in one sentence. I am the customer getting squeezed AND the trader betting against the squeezer.

I almost went to Costco last night.

The plan in my head was a Costco membership, a high-deductible plan for catastrophic stuff, and a phone call to Amazon Healthcare for anything in between. Amazon Healthcare, what could possibly go wrong. At $47,800 a year I'm starting to amuse myself with the idea.

Anyway. The CPI print came out this morning hotter than expected, 3.8% year-over-year, the hottest since May of 2023. 

Headline rose 0.6% month-over-month, the expectation was already high, and we beat it.

We've got a problem. 

What is the Fed going to do with the problem, raise rates? 

Of course they can't raise rates, there's a war going on, the economy is probably crap right now and you wouldn't know it, because half the country is doing fine and the other half is paying $47,800 for health insurance and almost going to Costco at midnight.

A K-shaped economy has definitive winners and definitive losers. The majority is in the loser handle. That's where I am most days, and I run a trading firm.

Yesterday I wrote that the Fed's next move was more likely to be a hike than a cut. The CME FedWatch tool was already pricing it seven months out, and most of the financial media was still arguing about when the cuts would start.

A few years back when one of my kids got cut up out on the island, I glued him back together with suture glue, basically Krazy Glue for kids. You do not go to the hospital on the island. You go in for stitches and you end up losing an arm, so you handle it yourself.

That's the same instinct people are bringing to their healthcare costs right now, and Costco is somehow part of the solution. By the way, Costco got sued by Lululemon for making better pants at lower prices, and Costco will have Alo in two years. My kids dragged me into the Alo store last week and I did not buy a single thing.

Here is the broader trade. 

The Fed pushed asset prices higher last year, that fed into consumption, consumption fed into inflation, inflation just hit 3.8%, and now the Fed is sitting there with no tool to use because of the war. 

The bond market is starting to price what comes next. Long rates are not moving the way you would expect if cuts were coming, they are moving the way hikes look.

Anyway. Look at the bill on your kitchen counter. Then look at the asset prices on your screen. I dare you to tell me those are the same economy.

To your success,

Don Kaufman