Health Care

A friend forwarded me an email with amusing cartoons about the “Golden Years” and appended at the end of all the email was the following poem (author unknown):

A row of bottles on my shelf
Caused me to analyze myself.
One yellow pill I have to pop
Goes to my heart so it won't stop.
A little white one that I take
Goes to my hands so they won't shake.
The blue ones that I use a lot
Tell me I'm happy when I'm not.
The purple pill goes to my brain
And tells me that I have no pain.
The capsules tell me not to wheeze
Or cough or choke or even sneeze..
The red ones, smallest of them all
Go to my blood so I won't fall.
The orange ones, very big and bright
Prevent my leg cramps in the night.
Such an array of brilliant pills
Helping to cure all kinds of ills.
But what I'd really like to know
Is what tells each one where to go!

Funny and yet scary thoughts at the same time. I certainly don’t want to have to be popping all those pills just to keep going.

As medical advances come up with all kinds of drugs and medication which permits us to live longer, the question we are all forced to face is whether or not the ends justify the means. How much of a burden are we leaving to the next generation as the cost of healthcare sky-rockets and tax the Medicare and Medicaid systems?

As the United States push forward to adopt a more universal health coverage, it is inevitable that the quality of care will drop off unless the government is able to fund the added costs. It is like a triangle with one of its angles representing “Scope”, the second angle representing “Quality of Care” and the third angle representing “Costs”. By expanding the “Scope” angle to bring more people into the healthcare system, the “Quality of Care” angle will tighten, unless, of course the “Costs” angle is expanded at the same time.

In order to keep the costs down so that more people can benefit from the universal health coverage without an increased tax burden on everyone, Americans will have to be taught how to take better care of themselves. It is not an impossible task – a popular TV show has demonstrated to the world that it is possible for even the grossly obese to lose weight and become healthy enough to get off their blood pressure, diabetic and other medication.

Millions of dollars are spent every year to encourage smokers to quit and to dissuade young people from taking up the habit. What we need is a similar push to get people off their couches and to start exercising and to rid themselves of eating habits that are detrimental to their long term health. Schools should have compulsory “healthy living” classes so that the next generation grows up armed with all the knowledge they need to stay away from poor eating habits and bad diets. Parents can set the example for their children to follow by adopting a more active lifestyle, getting their kids away from computers and video games and onto the playing fields, or their bicycles or scooters, and onto the path of a better and healthier life.

Despite the very vocal objections, cities have successfully banned smoking in public places, pubs and restaurants, realizing that an unhealthy public is a drain on the cities’ resources. They need to take similarly drastic actions to force restaurants to serve healthier food as the city authorities themselves strive to provide more parks, facilities and occasions for their residents to get moving. To fund these new healthy-living programs, they should implement a “Fat Tax” and make it applicable across the board for all sales of food / drinks that are high in empty cholesterol and fat.

Lifestyle changes are the hardest but the most effective way to trim health-care costs.

Herd Mentality

In every age, culture and religion, people have a tendency to follow the crowd in the hope that somewhere at the front of the line is a leader who knows what he/she is doing.

When I was a lot younger, my older brother would suggest that we try walking along a busy avenue while pointing our fingers up at the sky or the side of a building as a prank. He was convinced that in no time at all we would have a crowd of on-lookers who would stop to stare at the same spot that we were pointing at.

If there are enough people in a crowd moving in a certain direction, the sheer force of the number of bodies going in that direction would move everything else along with it. This phenomenon of “momentum” and “critical mass” is understood by everyone who handles or has studied marketing. That is how market moves – up or down.

When enough people believed that the good times were rolling, there was an endless stream of investment, capital, credit, development, and spending, and everyone made money from their investments and felt good about it although not everyone managed to cash in on their paper profits. Few dared or wanted to challenge the status quo or the riskier bets that could upset the apple cart. Those that dared to suggest that greed has overtaken good-sense were quickly ostracized and ridiculed. After all, it is hard to imagine that so many people could be wrong at the same time.

When the size of hedge funds became significant (we’re talking about billions of dollars in some of the hedge funds) and when they, along with short-sellers and day-traders, began placing bets against the likes of Lehman and other publicly traded institutions, the sheer magnitude of their combined actions wiped out billions from the market valuations of their targets.

When corporations started to outsource jobs as a cost cutting measure, sending the jobs to cheaper off-shore locations while laying off American employees, others followed just to be cost-competitive, forgetting that by delivering better services and products and creating awareness that they help maintain US jobs, they can ‘turn the tide’ and effectively compete for the minds and wallets of Americans.

My rant here is not just about the herd mentality or the number of people going down the same path. My point is that there are not enough independent thinkers. There are not enough people who take the time to understand or to simply ask the questions: who, what, where, why, when, and, more-importantly, what-if?

True, some of us already have too many distractions and responsibilities to handle and, for good or bad, we hope that someone in a leadership position actually knows the answers and they are good ones. After all, that is what the ‘leaders’ have been paid or elected to do. We simply can’t do everything ourselves and we have little choice but to trust in the professionals to do their job. That having been said, I can’t think of a good reason why we are not asking the right questions or what prohibits us from asking those very simple questions.

Alas, some in the news media have stopped asking the necessary questions while others have lost their independence and ability to challenge the elected officials, the powerful, the rich and the popular thinking. For this reason, I applaud the New York Times and other web-enabled news media for allowing the masses and the thinking people to voice their feelings and to comment on various issues and topics of concern that we are faced with everyday so that “We the People” are heard. This new form of expression is at once liberating and empowering. While contributors and columnists continue to express their opinions and thoughts, their writing is enriched by the counterpoints and thoughts of their readers from around the world.

Popular thinking is an incredible force that one has to reckon with on a daily basis. What is popular may not be what is right - it is simply what the majority believes in at a given point in time – and as it is with all things, can change. I’ve always maintained that in many cases, the only difference between right and wrong is the belief of the majority over that of the minority. In a society where more people are left-handed, the right-handed ones would be considered as ‘goofy’.

Hang up on the ‘herd mentality’ and start asking questions.

A Market on the Rebound?

The stock market has been on the rise. Yippee!

On March 9, the Dow (DJIA) hit a new low, closing at 6,547 – its lowest mark in a long, long time. Less than a month later, the same index hit an intra-day high of 8,075 on April 2. Hurrah! Hurrah! We’re up by over 23% since we hit that low.

We all heave a sigh of relief. Better days must be ahead, surely…?!?! Or are they?

Should we abandon all caution and start betting whatever’s left of the family home and the kitchen sink into new investments in the stock market and hope to recoup some of what we had lost in the downturn which began over a year ago? Should we take the risk now in order to be early to the game – after all, the early bird catches the worm?

Like you, I have been tempted. I like to be optimistic but I am hesitant. I’m not sure if the extended market uptick of late is based on solid evidence of improving performance or if it is the beginning of another round of “irrational exuberance”?

The trouble with looking at stock indices as a guide for how well the economy is doing (or is projected to be doing) is that the stock markets take into account forward looking estimates which are purely conjectures – assumptions based on other assumptions which in turn are based on further assumptions.

Lest we forget, faulty assumptions were essentially what brought about the dramatic economic downturn. There were too many untested and unrealistic assumptions:

- The assumption that bankers and builders took, that home prices can continue its spectacular rise although the take home pay of the average worker has stayed flat or that it has decreased in real terms or that job growth has been dismal.

- The assumption commodities traders took, that crude oil and gasoline prices can hit new highs everyday with no impact to the end products or services costs and the consumers’ ability to consume.

- The assumption that credit default swap insurers took, that the risks attached to mortgaged based securities are more hinged on the issuing party’s credit rating rather than the ability of the consumer to service the underlying mortgages.

- The assumption that executives at various corporations took, when they sent all kinds of jobs overseas to improve their bottom line (and to get a bigger profit based incentive bonus), never considering the impact that the loss of jobs en masse have on the ability of Americans to consume those very same products or services they produce.

- The assumption that the authorities took, that regulations are unnecessary and that the markets will regulate themselves as the market players will act wisely.

We were all too seduced by the idea of fast money and instant wealth that we lost sight of the risks and consequences of faulty assumptions and the need to understand and manage them.

Despite the outcry and objections of some, the government has (wisely or unwisely) poured in trillions to stave off economic disaster and to bolster confidence. The players are coming back into the market and credit is ‘loosening up’ but that does not mean that the economy is well. It will take time to heal.

Credit is only useful if consumers have the means or ability to borrow and that depends on their capacity to repay which in turn depends on their income, which in most cases, depends on them having jobs.

Similarly, corporations will borrow to invest in production capacity only if they believe that there will be a demand on their goods or services and that again will depend on consumers having the capacity to spend which again depends on whether they have jobs.

Until you hear that new jobs are being created and the employment trend is on the upswing, don’t believe everything you see or hear about the market on the rebound. The job creation effect of the multiple stimulus packages will take time to make its way through the system before the economic recovery can be on a steady path.

Keep your eyes open and your ears pinned to the ground to watch out for significant projects and events that create a demand for workers or raw materials. When you do, that will be the time to put your money into investments that will benefit from the positive impact.

In the meantime, if you “play” the market as an individual, know for sure that you are putting your money at risk, betting blindly that the index will go one way or the other. It is like rolling the dice and hoping for the best.

I guess I’ll never be filthy rich because I am inherently not a speculator. It is OK with me. I sleep better at night not having to worry about the bad assumptions or the risks.

[Addendum: The above was posted on April 2. On April 3, the Bureau of Labor Statistics reported that unemployment climbed to 8.5% in March (up from 8.1% in February) with the US economy shedding another 663,000 jobs in the month. The Bureau also adjusted the January newly unemployed numbers from from 655,000 to 741,000.]