The market, medical mergers and Bitcoin: What to make of their effects on economy?

Dec. 15--The local economy has wrestled with elevated home prices, the pressures of college loan debts and medical industry moves amid a shaky Affordable Care Act outlook.

Along with all that, comes the frenzy surrounding Bitcoin futures.

For perspective, we contacted Bruce McCain, chief investment strategist with Key Private Bank. His answers were edited for length.

Q. What is top of mind for you about what investors should know about the stock market?

A. We hear more than anything, "Where are we in the cycle?"

When you've won too many times, you have an uneasy feeling. Looking at the landscape, we are late in the cycle -- seventh or eighth inning -- but we could go extra innings.

Q. How rough will a correction be?

A. Five percent to 10 percent corrections are fairly common historically, although we have seen few of them recently.

A 10 percent to 15 percent correction often accompanies a fairly serious worry; 15 percent to 20 percent corrections are very rare.

Given the generally positive economic and earnings, any correction should not exceed a modest 5 percent to 10 percent pullback.

Q. Will real estate prices in this region keep climbing?

A. Obviously, a lot of people want to live on the coast and still a lot of people are exiting California where prices are higher. That's certainly part of residential prices in surrounding states and in Idaho. Until that dynamic ends, higher prices will be the norm.

There's also the affordable end of the spectrum, for millennials starting out, but that stock of inventory isn't what it needs to be.

Valuation always seems high until it gets higher. But in these markets, rental prices also move up, so it's still more attractive to buy.

Q. How is the amount of student loan debt in the economy affecting things?

A. We've made progress with real estate loans but no question student loans have delayed entry of millennials into the real estate market. Plus, they saw their parents lose money on real estate.

The generation is more mobile, and urban settings are preferred more than suburban. But as they move up in lifetime earnings and start families we are starting to see more interest in regular purchases and that will increase over time.

But the student lending issue, particularly for those not finding well-paying jobs, has slowed what they can do on the real estate side.

Q. Let's talk about medical mergers.

We saw the recent acquisition of Tacoma-based Northwest Physicians Network by DaVita Medical Group, which then turned around and sold it to United HealthGroup's Optum.

Do you think we will see more of these consolidations next year, and are uncertainties in regard to the Affordable Care Act to blame?

A. A lot of it is the ACA.

Businesses are under pressure to take costs out when not seeing strong growth. We saw a surge of activity with the start of the ACA. ... Now medical firms are scrambling to take costs out of the system.

The costs are projected to go up for most health plans, and people will use less and there's continued pressure on medical firms.

Q. Why is there such a fervor over Bitcoin?

A. In the initial stage in particular, the big appeal was secrecy. Then, as more people came into it, they were intrigued by the fact it was something new.

Then there was a stampede, then the final stages of running with the rest of the crowd sucks more and more people in. ... When the collapse comes, that's the end of it.

Q. How will the fervor over Bitcoin affect average people's personal economies? Does it have enough ripple effect to extend to a broader market audience than those investing in it now?

A. Bitcoin has been more a curiosity than a serious investment interest for most of our clients.

Although clients are always curious about anything that runs up as quickly as Bitcoin has, they are always a little leery of anything they do not understand.

Bitcoin has less tangible reality than other investments for most of our clients.

Q. Are fears of something as severe as a depression within the next year off base? Are there factors in play now that could be triggers not for a depression, but a pretty hard downturn?

A. Whereas recessions occur with roughly four to 10 years in between, major depressions have typically had about 30 to 40 years or so between occurrences, (with the last one in) 2007.

The odds are, therefore, that the next depression is some time off.

Typically, too, the recessions that follow deep depressions tend to be shorter and less severe than other recessions.

Thus, the next recession may be much more mild than usual.

Debbie Cockrell: 253-597-8364, @Debbie_Cockrell

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