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.]

The Economy is Bad – So Beware!!

Yes, we already know the economy is in a poor shape – we hear or read about jobs lost or shops and factories closing with a frightening frequency. Based on what is counted alone, unemployment has reached 8.1 percent in February 2009 and the trend is not encouraging. A total of 12.5 million people are unemployed, an increase of 5.0 million in the last twelve months alone (source: US Dept of Labor - http://www.bls.gov/news.release/empsit.nr0.htm).

We are so inundated by the endless streams of bad news that some among us would like to tune it out altogether, especially if it has not impacted us in a direct way. We’d go crazy with fear if we gave in to the media’s relentless drive to get the same bad news across every day. We cling on to every bit of good news we can, hopeful that things will eventually turn around.

The point of this note is not to give you more bad news on the economy. It is to warn you and to have you warn those around you of the many scams that are proliferating via email. Recently, I’ve come across an incident where the scam artists even used regular mail to send out a very genuine-looking-fake-check with a letter encouraging the intended victims to actually take it to their bank and deposit it. The clear giveaway, of course, was the condition that the victims not tell anyone about it before the whole transaction was complete. I would likely have brushed it off if I had not come across another incident where a retiree I know lost money to a different variation of the same con game.

The recession does not mean that the con artists, the scammers and the opportunists are going to give up and walk away. To the contrary, they are taking full advantage of the situation and putting their best game forward to milk the unwary. What is worse is that they are employing hooks that will pull in those who genuinely need help the most.

Think of it – when times are good, and you have a job, you are less likely to fall for the “work-at-home” schemes or “you’ve won a foreign lottery” claims.

When you are out of a job, an email or a flyer telling you that you can earn a few hundred dollars a week sitting in-front of your computer, you’ll be more than a tad tempted to take a look and see what it is all about. It is exactly what the con artists are relying on – your willingness to take a chance.

When you are no longer able to or when you no longer have work, you’ll understand what it means to be afraid – of living with no health insurance, of not having food on the table, of not being able to pay the rent, and, worst of all, of having to tell your loved ones of the very things you had never imagined you would have to say to them. In your desperation, you might just try anything and you’re a clear target for the con artists to prey on.

When banks were paying a fair interest on deposits and corporations were distributing dividends to their shareholders, the elderly could live off the income from their investments and not worry about eating into the capital they have set aside. Until the banks and corporations return to health, every elderly person is revisiting their retirement plans, funds, and income and scrimping to avoid that horrible possibility of being destitute before their days on earth are done. They are the easiest of victims and a gold mine for the con artists.

Take a few minutes and talk to siblings, your friends, your parent and your grandparents about such tricks now – it is your duty! If you care at all about their well-being and about their financial security, now is the time to do it. You may not be able to do anything about improving what they have set aside for their silver or golden years but you can, at the very least, do something to protect their nest-egg.

Remember, they may not be as well informed as you are about the treacherous tricks that exist today. The older generation grew up in an age where the tools to reach the masses with the same con schemes were not as readily available. Today, a 1-800 number can be routed to anywhere in the world to a genuinely sounding ‘account officer’ in a country where laws do not exist to put such con men away.

If ever there is a time for everyone to be more vigilant, it is now.

When The Going Gets Tough, The Tough Goes Shopping

It is probably shocking that I should cite (read “promote”) this oft quoted, sassy saying at a time when unbridled spending leveraged on paper gains in asset values appears to be the root cause of what ails our economy. We are in the throes of a big hangover after an all night party, an orgy of booze and whatever else that had added to the fun when it all happening, but, when the clock rang in the new day, has turned out to be yet another case of misbegotten self-deception and ignorance of the consequences of our uncaring actions.

Congress has just passed a $787 billion package of economic stimulus and the President will be signing it into law later today. It is great that something is being done but the reality is that however big it appears to be on paper, it is not quite enough and, echoing the sentiments of the more pessimistic economists, will only help stave off the onset of an economic depression. Extended unemployment benefits is only a temporary relief, barely enough to cover the true cost of living of those who have lost jobs involuntarily. Those who were self-employed do not even have the benefit of unemployment insurance. What we need in addition to job creation is job preservation. We should not keep infusing more blood into the patient if we don’t take the necessary steps to stop the bleeding.

I've been passing on the same message to my friends and acquaintances who have 'recession proof'' jobs and who have been wise to avoid the many ills that led to this recession - go out and spend some money. Forget about buying gold or putting your money away in an offshore account to protect your wealth. If the US and World economies do not recover, there is nowhere truly safe for one to disappear to. What we have seen in terms of collateral damage around the world as a direct or indirect reaction to the problems facing the US demonstrates the tight integration of the world’s economies. We may be living in different countries but we are not isolated from each other’s ills.

Why do I preach the need to spend to the more fortunate ones who have planned and saved for a rainy day? The smart ones spend counter-cyclically - work and save when jobs are plentiful and the pay is good, buy when things are cheap and demand is weak (you get the best picks). If you don’t do your part to help, you may someday conclude that you are not that smart after all.

Here are some suggestions on what you might do that can help the economy recover:

- Go out to dinner. If you can, invite someone you know who have lost a job - it will cheer them up and keep the restaurants running and a long line of direct and indirect jobs going. For one thing, these jobs cannot be outsourced to a foreign country.

- Go on a vacation at a domestic resort. Ski, bathe in the sun, kayak, ride a bike, etc. These industries employ the highest ratio of workers to customers. Keeping jobs going is easier than having to 'create' new jobs. You won’t be getting a tax credit for this under the stimulus package but do it anyway.

- Go shopping. Buy the pair of running shoes you have been meaning to but have not had the time because you were busy working. Buy that tie-dyed T-shirt or hand-made costume jewelry that you’ve always wanted from the local artists. Buy from your local farmers and grocers. While you are at it, give a go at haggling over the price – you’ll be pleasantly surprised if you do ask. You’ll enjoy the whole experience and you’ll be back for more – your ego needs to know that you can do better the next time. If possible, favor the small businesses - they are generally higher in the employee to customer ratio than the big chains. Don't fret over whether the item you buy is 100% local - bringing the item to your local store employs many, many people. Think of the jobs involved in the shipping and warehousing process. Even the task of displaying them on shelves and taking your money at the checkout desk involve people. A big portion of what you pay for any item goes towards these value-added services.

- Trade in you gas guzzling SUVs for the more eco-friendly vehicles - it does not have to be a hybrid that go 50 mpg. You'll be saving the earth and keeping yet another long line of jobs going - from the people in the assembly lines to the salesmen and to the garages that service your cars. Take advantage of the tax incentives in the stimulus package. You'll be treated like gold and you'll get deals that you could not have dreamed of during the boom years. Besides, you'll be better prepared for when oil and gas prices shoots up again.

It takes someone with the right combination of brains and guts to take the right actions. Now is the time for the tough to go shopping.

When the economy is on the road to recovery, you can revert to saving and putting money aside for the next ‘rainy day’. Be smart.

Invest Wisely

It may be a surprise to you if I were to tell you that we (you and I) make investment decisions daily – we don’t have to be a player in the stock market to make investment decisions.

Don’t believe me? Just think of what you had to do today.

Most likely, you woke up to the sound of your alarm clock – that reliable bedside gadget that greets you each morning with a loud jarring noise or, preferably, with some soothing sounds to ease you into your day. It was a tiny but necessary investment and, in addition to the cash you had to spend, you probably had to invest some time to test the ring tones on a number of alarm clocks before you found the one that you liked.

Having rubbed the last bit of sleep from your eyes, you headed for the showers and invested time in prepping your body for the day. You took care of your oral health, the way your hair looks, and, if you like to deepen the mystique, the ‘je ne sais quoi’ or the ‘something in the air’ about you, your daily routine ended with your dabbing on some cologne, after shave or eau de toilette.

Your decision on the clothes you wore was likely influenced by your knowledge of the type of meetings or occasions you have on your schedule for the day. If a meeting or an occasion was important enough, you would choose to put on an outfit with matching accessories – an ensemble that would make a statement - for which you had invested a handsome amount of money and set aside for just such events.

I think you get the drift. We are always investing – consciously or subconsciously – and if we think of our daily actions as such, we would most likely be smarter about our choices because we would be forced to think about the payback.

Investing in a healthy, balanced daily diet will yield us years of good health and fewer visits to the doctors for all kinds of preventable ills. Investing in our continuing education and awareness of the changes in the world around us will keep us one step ahead of our competitors and prepare us for the challenges ahead. Investing time with family, friends, colleagues and social networks (religious, professional, etc.) will enrich our lives together and our ability to interact and react, and to accept each other, warts and all. Investing in cleaning up and keeping our environment healthy will allow us and future generations to live and breathe on this earth for many, many more years. Investing in teaching love and respect for ourselves and for others who are less fortunate and in need of a helping hand will help counter the actions of those who chose to teach fear, hate and bigotry, perpetuating wars and needless killing.

If we learned anything in 2008, it is clear that we cannot afford to sit idly and quietly, and hope that the near collapse of the financial, insurance, auto and other industries due to weakened controls and accountability will not happen again. As investors in the many companies that the government has bailed out (whether or not we were for it), we have a duty to require of those in whom we have put our trust to give a clear accounting of their actions and results. Our economy, our country and our future depend on us being wise investors.

When I was in my early teens, I had a plain looking poster that had an image of an apple with a good chunk bitten off the top right corner. Beneath the picture were the words “Today is the First Day of the Rest of Your Life”. It conjures up the image of Adam and Eve taking a bite from the fruit of the tree of knowledge of good and evil and forever lost their innocence. I think that sums it up nicely – what we chose to do today will have a bearing on the rest of our lives and the lives of those around us.

As we head into the New Year, it is my hope that we can and we will think of our decisions and actions as investments in the future and that we will do so wisely. We all had a bite of that bitter fruit in 2008 and we are no longer innocent.

To B or Not To B

High on everyone’s minds these days is the question of whether or not the government should bailout (the "B" in the title of this piece) the big three US auto-manufacturers. Everyone has some sort of an opinion, and arguments have been put forth from both sides of the aisles as to what is good and what is necessary and what is fair.

It amazes me that some opinion leaders would summarily dismiss bailing out the automakers without offering any alternative suggestions at all; opting to cling to the purest capitalistic dogmas (let them fail and go into bankruptcy) and ignoring the social responsibility that we have towards one another, especially in such difficult times.

Without a doubt, a bailout composed purely of injecting cash into the US auto-manufacturers will not work other than as a temporary fix to stem the bleeding. The single biggest factor behind the current crisis they are facing is the sharp drop in demand for new automobiles. This is evidenced by an escalating number of new vehicles sitting in inventory - you can see the gleaming new vehicles in the ports and in the parking lots of automakers - and the dismal sales numbers reported by all auto manufacturers, including the foreign owned ones. We don't hear of the foreign automakers going to Congress for a bailout only because they are foreign owned, not because they are not hurting, probably just as badly.

The decline in demand stems from problems we are experiencing around the country where significant job cuts are being announced almost on a daily basis. Until there is a turnaround in the economy and the spate of bad news and worrisome layoffs ends, the auto industry has little hope of surviving (even if it were to enter into an orderly bankruptcy) if help is not forthcoming. The danger that we face as a nation is that the livelihood of countless numbers of families that are tied to the auto industry directly and indirectly will be lost.

While cost cuts can be achieved through restructuring, stimulating demand for new cars in a drawn out economic recession is a whole different ball game. Consumers who would be in the market for a new car under normal circumstances will, in these uncertain times, defer the purchase till they see some silver lining on the economic horizon. Further complicating the problem is the hesitation of banks and financial institutions to provide credit or to lend money – consumers needing a new vehicle are hamstrung by the new and higher credit score requirements they need to show in order to get a loan.

Even with the proposed bailout money, production will have to be cut significantly till the excess inventory of unsold cars is absorbed by a recovery in demand and, like it or not, further production cuts will mean more lost jobs.

A better option may be for the government to issue vouchers to subsidize the purchase of vehicles – with conditions attached of course, including for example, a requirement that the new vehicles must be manufactured in the US and must meet certain gas-mileage standards. If the subsidy is attractive enough, there will be a renewed demand and the industry will have the breathing room they need to retool and renegotiate costs to be more competitive.

Divide the proposed bailout of $14 billion by whatever makes sense as the subsidy value of each voucher and you get the answer to how many new, US made vehicles that can be sold as a result of the stimulus. Just as an example, at $5,000 per voucher, it could generate a demand for 2.8 million new vehicle sales. Using the rule of thumb that a new vehicle loses 20% in value the minute it leaves the car dealer’s lot, the subsidy should be capped at 20% of the price of the vehicle so that any temptation to abuse the system by using the vouchers to buy new vehicles and reselling them at a profit is eliminated.

With the assurance of a resurgence in demand for new vehicles, banks and financial institutions that are currently hesitant to lend to the US auto-manufacturers will be more willing to step back into their role as lenders.

The vouchers would also benefit consumers as they will need less credit to complete the purchase and the risk exposure for the lending institutions will be equally reduced as a result. Of course, not all taxpayers will be able to benefit from the vouchers unless they are in the market for a new vehicle and are prepared to pay for the remaining price of the vehicle that the vouchers do not cover. In the broader picture, everyone will benefit from the fact that more people remain employed and they, in turn, will consume goods and services that will keep more people employed. We are all inter-connected – what goes around comes around.

Part of the cost of the vouchers can be borne by the auto-manufacturers and dealers themselves – they already are offering the kitchen sink to lure potential buyers into their showrooms. They have nothing to lose by participating in a scheme designed to keep them afloat.

Until the new administration can start to put into place whatever package they have planned to stimulate job growth and spending, it is hard to see how else the auto-industry can recover. The vouchers are effectively still a bailout but a more palatable one, helping not just the US auto-manufacturers but taxpayers who are prepared fork out the money to buy a new vehicle.

It is time to think ‘outside-of-the-box’ and to come up with more intelligent solutions.

Challenging? Yes. Impossible? No.

This is America. This is the land of ideas and creative thinking.