The Physician as CEO

Anthem is Now Elevance Health

By Jakob Emerson, beckerspayer.com

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The company formerly known as Anthem commemorated its official rebranding to Elevance Health on June 28th by ringing the opening bell at the New York Stock Exchange and beginning to trade under the new ticker symbol “ELV”. The former Anthem website now reflects the name change, which is a combination of the words elevate and advance to represent the company’s commitment to “elevating the importance of whole health and advancing health beyond healthcare for consumers.”

When it first announced the rebrand in March, the payer said Blue Cross Blue Shield health plan names would not change, though it planned to narrow the number of brands under its umbrella. The company owns BCBS plans in 14 states. On June 15, the company launched two new subsidiaries under the Elevance name: Carelon and Wellpoint.

Carelon, a healthcare services brand, will consolidate the company’s existing portfolio of capabilities and services businesses under a single name. The Wellpoint health plan brand will unify the company’s Medicare, Medicaid, and commercial health plans in select markets.

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Value v. Growth Fund Managers

Understanding Investment Styles

By Dr. David Edward Marcinko; MBA, CMPbiz-book1

A mutual or hedge fund manager’s investment style is defined by the means or strategies used to accomplish the fund’s stated objective. Most managers have a strategy they believe to be the key to maximizing risk-adjusted investment returns. For example, two equity managers may seek growth of capital or capital appreciation over the long term. The strategies they use to achieve that goal can be vastly different, however, as evidenced by their choice of securities.

Style Characteristics

Astute physician-investors are aware that there are four, main manager style characteristics: value vs. growth, top-down vs. bottom-up—which can be refined further by additional approaches. Certain statistics and information reveal a manager’s style. An investor may prefer one style or one combination over another

Approaches Vary

Style approaches can be used in tactical asset allocation. Research has shown that one style tends to outperform the other during certain periods. If investors believe they can identify when one style will outperform the other, they could overweight the favored approach. More and more fund complexes are now offering funds in each style; especially for large healthcare entities and other institutions.

Value vs. Growth

Manager autonomy and style is an important consideration.

  1. Value managers focus on a company’s assets or net worth and attempt to place a value on such assets: if their valuation is greater than the market’s valuation, the security is a candidate for ownership. Benjamin Graham, the father of value investing, believed this approach to selecting securities would eventually be recognized by the market, rewarding patient, long-term investors. In today’s service economy, value managers also attempt to value the intangible assets of a company, such as franchise value or human capital. Value managers tend to be contrarians—they buy out-of-favor stocks or stocks not widely followed or recommended by analysts. Value managers also look at the breakup value of a company (what the individual parts could be sold for). They buy cheap stocks: stocks with low P/E ratios or low price-to-book value relative to the market, and stocks of established companies that pay dividends.
  2. Growth managers look at corporate earnings and focus on improving or accelerating earnings. They look at the trend of an industry or market sector (for example, environmental technology) to see if there is future sales-growth potential. They may lean toward companies that are dominant in the industry or have a product or service that will dramatically improve their market share. Growth managers typically own stocks with higher P/E ratios than the market average; these stocks may not be out of favor, but they may have been overlooked by market analysts. Growth stocks usually are not high-income-paying stocks.

Assessment

Prior to the recent financial meltdown, growth and momentum investing was the norm. Now it is value investing. What about the future for the physician-investor?

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com 

Product DetailsProduct DetailsProduct Details

IMHO @TeamCigna Should Treat their Dentists Better!

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By Darrell Pruitt DDS

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“How Is The Market Feeling About Cigna?” Spoiler – According to Benzinga insights, the market is not optimistic about Cigna’s future. Neither am I. But then, I’m only their clients’ dentist.

Link: https://www.benzinga.com/short-sellers/22/06/27888029/how-is-the-market-feeling-about-cigna

Tomorrow is my last day as a Cigna Preferred Provider .. Never Again!

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A Few Simple Rules For Money Managers

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A Few Simple Rules For Money Managers

vitaly

[By Vitaliy Katsenelson CFA]

One of the biggest hazards of being a professional money manager is that you are expected to behave in a certain way: You have to come to the office every day, work long hours, slog through countless e-mails, be on top of your portfolio (that is, check performance of your securities minute by minute), watch business TV and consume news continuously, and dress well and conservatively, wearing a rope around the only part of your body that lets air get to your brain. Our colleagues judge us on how early we arrive at work and how late we stay. We do these things because society expects us to, not because they make us better investors or do any good for our clients.

Somehow we let the mindless, Henry Ford–assembly-line, 8:00 a.m. to 5:00 p.m., widgets-per-hour mentality dictate how we conduct our business thinking. Though car production benefits from rigid rules, uniforms, automation and strict working hours, in investing — the business of thinking — the assembly-line culture is counterproductive. Our clients and employers would be better off if we designed our workdays to let us perform our best.

Investing

Investing is not an idea-­per-hour profession; it more likely results in a few ideas per year. A traditional, structured working environment creates pressure to produce an output — an idea, even a forced idea. Warren Buffett once said at a Berkshire Hathaway annual meeting: “We don’t get paid for activity; we get paid for being right. As to how long we’ll wait, we’ll wait indefinitely.”

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How you get ideas is up to you. I am not a professional writer, but as a professional money manager, I learn and think best through writing. I put on my headphones, turn on opera and stare at my computer screen for hours, pecking away at the keyboard — that is how I think. You may do better by walking in the park or sitting with your legs up on the desk, staring at the ceiling.

I do my best thinking in the morning. At 3:00 in the afternoon, my brain shuts off; that is when I read my e-mails. We are all different. My best friend is a brunch person; he needs to consume six cups of coffee in the morning just to get his brain going. To be most productive, he shouldn’t go to work before 11:00 a.m.

And then there’s the business news. Serious business news that lacked sensationalism, and thus ratings, has been replaced by a new genre: business entertainment (of course, investors did not get the memo). These shows do a terrific job of filling our need to have explanations for everything, even random events that require no explanation (like daily stock movements). Most information on the business entertainment channels — Bloomberg Television, CNBC, Fox Business — has as much value for investors as daily weather forecasts have for travelers who don’t intend to go anywhere for a year. Yet many managers have CNBC, Fox or Bloomberg on while they work.

Filters

You may think you’re able to filter the noise. You cannot; it overwhelms you. So don’t fight the noise — block it. Leave the television off while the markets are open, and at the end of the day, check the business channel websites to see if there were interviews or news events that are worth watching.

Don’t check your stock quotes continuously; doing so shrinks your time horizon. As a long-term investor, you analyze a company and value the business over the next decade, but daily stock volatility will negate all that and turn you into a trader. There is nothing wrong with trading, but investors are rarely good traders.

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Numerous studies have found that humans are terrible at multitasking. We have a hard time ignoring irrelevant information and are too sensitive to new information. Focus is the antithesis of multitasking. I find that I’m most productive on an airplane. I put on my headphones and focus on reading or writing. There are no distractions — no e-mails, no Twitter, no Facebook, no instant messages, no phone calls. I get more done in the course of a four-hour flight than in two days at the office. But you don’t need to rack up frequent-flier miles to focus; just go into “off mode” a few hours a day: Kill your Internet, turn off your phone, and do what you need to do.

I bet if most of us really focused, we could cut down our workweek from five days to two. Performance would improve, our personal lives would get better, and those eventual heart attacks would be pushed back a decade or two.

Assessment

Take the rope off your neck and wear comfortable clothes to work (I often opt for jeans and a “Life is good” T-shirt). Pause and ask yourself a question: If I was not bound by the obsolete routines of the dinosaur age of assembly-line manufacturing, how would I structure my work to be the best investor I could be? Print this article, take it to your boss and tell him or her, “This is what I need to do to be the most productive 

ABOUT

Vitaliy N. Katsenelson, CFA, is Chief Investment Officer at Investment Management Associates in Denver, Colo. He is the author of Active Value Investing (Wiley 2007) and The Little Book of Sideways Markets (Wiley, 2010).  His books have been translated into eight languages.  Forbes called him – the new Benjamin Graham.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

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  Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™ Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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Investment Adviser v. Mutual Fund Manager

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“What’s the difference … and why pay fees to both?”

By Rick Kahler MS CFP® http://www.KahlerFinancial.com

Rick Kahler MS CFPQuestions – from doctors – like these remind me that the workings of the financial services industry which I tend to take for granted but can be confusing to people outside the field.

The following analogy may help to explain.

Orchestra Analogy

Think of an orchestra. The investment adviser is the equivalent of the director/conductor and the money managers are the instrumentalists. Each one is a specialist who plays a particular type of instrument, and it takes a variety of these specialists to make up the orchestra.

Specialists

The broad specialties are the types of instruments, such as strings, brass, winds, and percussion. These are the equivalent of fund managers who specialize in asset classes like equities, bonds, real estate, commodities, and absolute returns.

Sub-Specialists

Within each specialty are a variety of subspecialists. Winds, for example, include clarinets, oboes, and saxophones—which are further divided into alto, soprano, tenor, and bass. The brass section has French horns, trumpets, and trombones. The divisions and sub-divisions go on and on. Similarly, within the various asset classes are a great many mutual fund managers who specialize in narrower subcategories.

Conductor

The task of the orchestra conductor-director is to pick, not just the best musicians, but the best mix of musicians. A group with only trumpets or every subspecialty of percussion, no matter how skilled, isn’t an orchestra. Before auditioning a single musician, the director’s first task is to clarify the purpose of the ensemble being created. A different mix of instruments will be required for a symphony, a marching band, an intimate chamber group, or a dance band. It all depends on what the audience wants.

The conductor-director needs to weigh the various musicians’ abilities against their cost and their specific specialties against the needs of the orchestra. When the right mix of players has been chosen, the director needs to pick the appropriate music, assemble the group, and rehearse. The director’s talent, experience, and leadership skills all serve to help the right players produce the right sound for their audiences.

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It takes similar coordination and skill to put together the right mix of asset classes and mutual fund managers to produce the best results for various clients, especially since there are some 17,000 mutual funds to choose from.

Fees

Just as both the orchestra director and the musicians are paid based on their skills and their work, both mutual fund managers and investment advisers are paid based on the assets they manage. Mutual fund managers earn 0.05% to 3.0%. Financial advisers earn 0.30% to 3.0%. An informed consumer could pay as low as 0.35% while an uninformed consumer could pay up to 6% a year, which would eat up most of the investment returns.

One essential responsibility for an adviser, then, is to choose mutual fund managers whose fees are low.

However, the cost of the mutual fund manager isn’t the be-all and end-all. One must also weigh performance, just as an orchestra director might pay more to get an outstanding musician who would add significant value to the performances.

Example:

For example, my firm’s overall average fee for mutual fund managers is 0.5%. We could get that as low as 0.1%, which might be impressive at first glance.

However, we would give up 0.25% to 1.00% of net return in some areas, resulting in poorer outcomes for the clients.

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Assessment

Skilled direction of an orchestra is obviously more art than science. Skilled coordination of mutual fund managers is the same. Both require knowledge, integrity, and commitment to the quality of the final product.

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Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners(TM)

What Is the OTC-QB Venture Market?

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By Staff Reporters

The OTCQB, also called “The Venture Market,” is the middle tier of the over-the-counter (OTC) market for U.S. stocks. It was created in 2010 and consists mainly of early-stage and developing U.S. and international companies that are not yet able to qualify for the OTCQX but are not as speculative as the lowest-tier Pink Sheets.

The OTCQB replaced the Financial Industry Regulatory Authority (FINRA)-operated OTC Bulletin Board (OTCBB) as the main market for trading OTC securities that report to a U.S. regulator. As it has no minimum financial standards, the OTCQB often includes shell companies, penny stocks, and small foreign issuers.

LINK: https://www.otcmarkets.com/files/OTCQB%20Fact%20Sheet%20for%20U.S.%20Companies.pdf

Key Takeaways

  • The OTCQB is the mid-tier OTC equity market, which lists primarily early-stage and developing companies in the U.S. and international markets.
  • OTCQB companies must meet certain minimum reporting standards, pass a bid test, and undergo annual verification.
  • The other OTC tiers are the highest quality OTCQX, and the most speculative Pink Sheets.

CITE: https://www.r2library.com/Resource/Title/082610254

READ MORE: https://www.investopedia.com/terms/o/otcqb.asp

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PODCAST: What Hospital CEOs Should Do?

TOP 4 PRESUMPTIONS!

BY ERIC BRICKER, MD

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UPDATE: The Markets, SS COLAS, EY, and Monkey-Pox?

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Markets: Stocks sagged for the second straight day, with technology chip stocks taking some of the biggest blows. A new consumer report showed that Americans are not confident in the economy, but are confident that inflation will be remain for the next year.

A Social Security official earlier this month said he expects a COLA bump of about 8%, based on the current inflationary trends. But if inflation continues at its current pace — the cost of goods and services in May accelerated to 8.6% — seniors could receive a COLA hike of 10.8% in early 2023, according to a new analysis from the non-partisan Committee for a Responsible Federal Budget. If inflation grinds to a halt over the final months of 2022, seniors would receive a COLA increase of 7.3%, the group predicted. 

Ernst and Young (EY), one of the world’s largest auditing firms, has agreed to pay a $100 million SEC fine after admitting hundreds of its accountants have cheated on their ethics exams between 2017 and 2021.

US health officials ramped up their fight against the Monkeypox outbreak, expanding the group eligible to get vaccines and deploying more doses and testing capabilities.

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Education, Degrees, Start-Ups, Entrepreneurs and IPOs?

FOR TOP MANAGERS AND BODs

By Dr. Jeffery Funk

Did you know that far more MBAs and bachelor-degree holders were among top managers and board of directors among startups filing for IPOs between 1990 and 2018 than were other degree holders?

About 55% of them had an MBA for their highest degree vs. 20% for bachelors, 7% for PhD, 3% for MD, 12% for MS, and 3% for JD. The high percentage of MBAs and bachelor-degree holders reflects the move away from #science-based #technologies such as semiconductors, and electronic, communications, and medical equipment that once dominated Silicon Valley (hence the name), and towards Internet commerce, content, and services over last 25 years.

In fact, most PhDs among top managers and board of directors at IPO time studied life sciences and were employed in #biotech #startups, a sector that continues to thrive. Creating successful science-based startups in other sectors continues to be a big challenge, one that may be partially overcome by #AI in near future.

As for which #universities train these people, Harvard, Stanford, Berkeley and MIT had the most graduates in many categories, representing almost 20% of PhDs for instance.

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PODCAST: Healthcare I.T. Interoperability Rankings

By Eric Bricker MD

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PODCAST: https://www.youtube.com/watch?v=yQSY957s_GY

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What is Financial and Accounting DELTA?

By Staff Reporters

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What is Delta?

FINANCE: Delta is a risk sensitivity measure used in assessing derivatives. It is one of the many measures that are denoted by a Greek letter. The series of risk measures that use such letters are fittingly referred to as the Greeks. They are often also called risk measures, hedge parameters, or risk sensitivities.

ACCOUNTING: Delta is the ratio of the change in price of an option to the change in price of the underlying asset. Also called the hedge ratio; For a call option on a stock, a delta of 0.50 means that for every $1.00 that the stock goes up, the option price rises by $0.50.

STOCK MARKET: Where:

  • S – the stock price
  • K – the strike price
  • r – the risk-free rate
  • q – the annual dividend yield
  • τ – time until expiration
  • σ – the volatility

CITE: https://www.r2library.com/Resource/Title/082610254

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On Business Entrepreneurial Ownership

No Self-Indulgent Path to Success

repeat

No Self-Indulgent Path to Success

By Rick Kahler CFP® 

http://www.MedicalExecutivePost.com

“Most of my friends assume that business owners spend their money and time on cocaine and hookers.”

This jaw-dropping quote came from a young man I was talking with recently about money, investing, and running a business. I was shocked; this was a money script I had never heard.I asked if he was serious. He was. I asked if any of the friends with this belief were raised by a parent who owned a business. He thought for a moment and said, “No, not one.”

This conversation reminded me of a government employee who once told me, “Any person who succeeds in business had to do so illegally by embracing corruption and dishonesty.” He, too, was serious.

I was dumbfounded by both of these encounters. My experience of being raised by parents who owned a small business, and then going into business for myself, was quite different from these perceptions.

My father started his own business when I was four years old. I witnessed him working long hours. I remember the times when business was so bad he would have to borrow money to pay the bills and keep the doors open. Later in life I learned his business rarely made a profit and was just able to pay his salary.

He never shared with his employees how tight money was. When I went to work for him as a teenager, I remember listening to the talk around the water cooler. They all assumed he made far more money than what I knew was true.

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In the years since, I have discovered many misperceptions about people who own real estate, are in business, or who have accumulated wealth.

The first misperception is that someone who owns real estate or a business has actually accumulated wealth. My 40 years of experience in financial planning has taught me that many, if not most, business owners would make more money working for someone else. And real estate owners accumulate wealth slowly. Most of them, myself included, struggle through some lean years with short or even negative cash flow until they finally pay off their mortgages.

Certainly, real estate or business owners who  persevere over the long term can become wealthy. Being wealthy, according to various studies, is defined as having a minimum net worth of somewhere between five million and twenty million dollars.

About 80% of millionaires own their own businesses. They put in long hours, often in careers they love enough so that work becomes play. The average business owner puts in about 70 hours a week. They are five times more likely than non-business owners to be “always available” via e-mail, four times more likely to work nights, and three times more likely to be in the office or store on weekends.

This is the way one successful business owner described it: “Our company will celebrate its 50th anniversary next year. Probably the first 30 years were spent working 70-100 hour weeks at below minimum wage and dumping every extra penny back into the business. I would say it’s only been the last 10 years that we have begun to reap the financial rewards that we spent 40 years striving to attain, still working 60-70 hour weeks. I acknowledge our work habits may in part be a result of being stubborn Norwegians that don’t think anyone else can do things right, but most successful small business owners I know have pretty much dedicated their life to become successful.”

Assessment

This focus and work ethic are what it takes to succeed at business ownership. It’s not a mindset that includes blowing money and time on cocaine and hookers.

Conclusion

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Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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What is “Prudence” in Finance and Investment Management?

ON “PRUDENCE” IN FINANCE AND INVESTMENT MANAGEMENT
Courtesy: http://www.CertifiedMedicalPlanner.org

CMP logo

TERMS & DEFINITIONS FOR PHYSICIANS AND ALL INVESTORS:

PRUDENT BUYER: The efficient purchaser of market balance between value and cost.

PRUDENT MAN RULE: An 1830 court case stating that a person in a fiduciary capacity (a trustee, executor, custodian, etc) must conduct him/herself faithfully and exercise sound judgment when investing monies under care. “He is to observe how men of prudence, discretion and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent distribution of their funds, considering the probable income as well as the probable safety of the capital to be invested.” Allows for mutual funds and variable annuities.

PRUDENT INVESTOR RULE: A fiduciary is required to conduct him/herself faithfully and exercise sound judgment when investing monies and take measured and reasonable investment risks in return for potential future rewards. Allows for mutual funds, stocks, bonds, variable annuities asset allocation & Modern Portfolio Theory.

CITATION: https://www.r2library.com/Resource/Title/0826102549

Product Details

UNIFORM PRUDENT INVESTOR ACT: https://medicalexecutivepost.com/2011/02/18/the-uniform-prudent-investor-act-versus-fiduciary-accountability/

EDITOR’S NOTE: We interviewed noted authority Ben Aikin AIF® on this topic more than a decade ago. He was ahead of his time regarding fiduciary accountability and we appreciate his insights.

Dr. David Edward Marcinko MBA CMP®

[Editor-in-Chief]

INTERVIEW: https://medicalexecutivepost.com/2009/03/01/an-interview-with-bennett-aikin-aif/

FIDUCIARY OATH: http://www.thefiduciarystandard.org/wp-content/uploads/2015/02/fiduciaryoath_individual.pdf

Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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Business Plan for Creatives … and Doctors!

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A Detailed Plan for Medical Professionals

By Dr. David Edward Marcinko MBA CMP

http://www.CertifiedMedicalPlanner.org

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MBA Business Plan CAPSTONE Outline

PODCAST Transcript: Podcast

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, urls and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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Product DetailsProduct Details

  [Foreword Dr. Hashem MD PhD] *** [Foreword Dr. Silva MD MBA]

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ENTREPRENEURIAL MANAGEMENT EFFICIENCY: “Slowly I Turned … Step by Step … Inch by Inch”

By Staff Writers

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Venture capitalists who are in a rut should stop talking about how hard it is to raise a $100 million fund. Instead, raise a $5 million fund.

Rather, they should stop trying to invest $5 million at a time (with an 18-month window before going public). A better strategy is to start doing smaller investments with longer time horizons.

CITE: https://www.r2library.com/Resource/Title/082610254

Just like chili, low and slow is the way to maximum flavor.

READ: https://tinyurl.com/2ewwvz2c

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U.S. Supreme Court Sides with Doctors Challenging Opioid Convictions

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By Nate Raymond

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(Reuters) – The U.S. Supreme Court just made it harder for prosecutors to win convictions of doctors accused of running “pill mills” and excessively prescribing opioids and other addictive drugs by requiring the government to prove that defendants knew their prescriptions had no legitimate medical purpose.

READ FULL STORY: https://www.msn.com/en-us/news/us/u-s-supreme-court-sides-with-doctors-challenging-opioid-convictions/ar-AAYUg31?cvid=c26cb4159770466e984575227031e724

Related: https://medicalexecutivepost.com/2012/02/26/medical-uses-of-abused-drugs/

FAKE Rx: https://medicalexecutivepost.com/2022/05/10/fake-prescription-drug-rx-example/

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REPORT: Digital Health Technology

By Staff Reporters and MCOL

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Digital Health Tech Report – 5 Key Findings

 •  48% of hospitals don’t have a strong digital health strategy.
 •  90% believe a strong digital health strategy is critical to improving outcomes, increasing productivity, and enhancing clinician satisfaction.
 •  55% receive more than 11 vendor calls and emails from digital health solution vendors per week.
 •  95% say it’s challenging to narrow down the list of digital health solutions to evaluate.
 •  25% are “very confident” that, after selecting a new digital health solution, it’s truly the best one for their unique needs.

Source: Panda Health, April 2022

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HEALTH TECH: Technology Giants?

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Dr. Bertalan Meskó, MD PhD

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The Medical Futurist

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  • Google in healthcare: The search giant has repeatedly successfully transferred its in-depth knowledge of algorithms in the field of medicine, particularly since it acquired DeepMind.
  • Apple in healthcare: Apple will keep on working on expanding the health features of its devices, Apple Watch and iPhones included.
  • Microsoft in healthcare: Microsoft’s cloud solutions provide integrated capabilities that make it easier to improve the healthcare experience.
  • Amazon in healthcare: Amazon will make further use of its vast knowledge of online shopping trends and behavior and will keep on providing what people need, from medicine to wearables.
  • IBM in healthcare: IBM has a lot to offer in federated learning, blockchain, and quantum computing
  • Nvidia in healthcare: NVIDIA seems incredibly focused on its approach to healthcare. We can expect NVIDIA to be a leader in the use of artificial intelligence in healthcare
  • Facebook in healthcare: The Metaverse developed by Facebook/Meta has incredible potential to revolutionize healthcare.

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UPDATE: Market Predictions and the Global Economy?

By Staff Reporters

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  • Predictions: The stock market could surge 7% this week as quarter-end re-balancing leads to a buying spree in equities, according to JPMorgan. The bank expects re-balancing trades to favor equities after a year-to-date decline of nearly 20%. “Next week’s re-balance is important since equity markets were down significantly over the past month, quarter and six-month time periods.”
  • Markets: With the S&P having plunged nearly 18% this year, expect W. Buffett to preach the value of value stocks (aka steady, non-flashy public companies). By one measure, they’re on track to beat growth stocks by the widest margin in more than two decades, according to the WSJ.
  • Global economy: Russia defaulted on its foreign-currency sovereign debt for the first time since the Bolshevik Revolution in 1918 after failing to pay bondholders $100 million worth of interest by the end of a 30-day grace period. The default marks the beginning of a complex legal journey for bondholders, but it’s not expected to have any major consequences for the Russian economy, which has already been battered by Western sanctions.

CITE: https://www.r2library.com/Resource/Title/0826102549

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Financial-Tech [Entrepreneurial Start-Ups] Falling

By Staff Reporters

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DEFINITION: Financial technology (abbreviated fintech or FinTech) is the technology and innovation that aims to compete with traditional financial methods in the delivery of financial services. Artificial intelligence, Blockchain, Cloud computing, and big Data are regarded as the “ABCD” (four key areas) of FinTech. The Fintech industry is an emerging industry that uses technology to improve activities in finance. The use of smartphones for mobile banking, investing, borrowing services, and cryptocurrency are examples of technologies aiming to make financial services more accessible to the general public.

Financial technology companies consist of both startups and established financial institutions and technology companies trying to replace or enhance the usage of financial services provided by existing financial companies.

CITE: https://www.r2library.com/Resource/Title/082610254

A subset of fintech companies that focus on the insurance industry are collectively known as insurtech or insuretech

READ: https://tinyurl.com/yrx2kxy4

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The Next Big [Investment] Thing?

Or, NOT!

By Rick Kahler CFP®

How do you spot the investment opportunity that will become the next Apple, Facebook, or Microsoft? Certainly they are out there. Someone is going to discover them and be set for life, so why shouldn’t it be you?

Here’s why it shouldn’t

As with all Registered Investment Advisors, the amount of money I manage for clients is publicly disclosed information that anyone with an Internet connection can find.

Because of that, I am seen as the gatekeeper of a source of funding for every under funded business opportunity that is sure to become the next Apple. I get to see a lot of proposals. Many have promise at first glance. But the promise usually fades the more I dig into the proposal, ask questions, and do the math.

After hours and hours of investigation, every few years I see that one proposal that looks really good. One that calls to me to invest, that really has the promise of being a winner. When all the stars and the planets align, I know I now have a 90% chance of not making a dime on the venture.

That’s why I have learned to save my time and my money when I am approached with “the next big thing.” I just don’t have time to investigate every project and cull hundreds of opportunities down to the one that has a 10% chance of succeeding. I see it as looking for the proverbial needle in the haystack. Certainly, there’s a needle in there somewhere. But examining every piece of hay in order to find it has a significant monetary cost.

To succeed, I would need a lot of time, even more money, and exponentially more intuition and intellect. Not to mention a fair amount of luck. The probability that I will go bankrupt before I ever find the needle is staggering.

Most of the “next big things” are discovered by driven entrepreneurs who bank everything they have on an idea and find the financing to shoestring it together. It usually isn’t the armchair investor who cashes in.

My experience

Over my 40 years of real estate and investment experience, I have seen people lose millions investing in lumber mills, emu farms, highly leveraged real estate, futures contracts, day trading, restaurants, multi-level-marketing companies, rare earth minerals, Iraqi currency, and the newest ones—marijuana farms and crypto-currencies.

As a result, for my money and the money of my clients, I’ll play the odds for success by saying “no” to every opportunity that comes across my desk. I don’t take the time to investigate them. I don’t read the offering circulars. I don’t attend presentations. The answer is “no” to the great odds of losing my money and “yes” to the staggering odds of keeping money growing conservatively for me and for my clients.

What do I say “yes” to? I say yes to investing in mutual funds that own or loan money to 12,000 successful companies around the globe and thousands of real estate properties. I say yes to well-diversified portfolios. I say yes to proven investment strategies with 25-year track records. I say yes to having enough cash reserves to fund two to five years of retirement income.

Boring

I know, it’s not very sexy, is it? In fact, the way I invest my money and the money of those who have entrusted their investments to me is downright boring.

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https://www.crcpress.com/Comprehensive-Financial-Planning-Strategies-for-Doctors-and-Advisors-Best/Marcinko-Hetico/p/book/9781482240283

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Assessment

So here is my hot tip when it comes to finding investment opportunities to secure your future: forget about the “next big thing.” Instead, stay with the “next boring thing.” The odds are overwhelming that this will make you a long-term winner.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements.

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Ransomware Simplified?

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By Darrell K. Pruitt DDS

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“We’re now truly in the era of ransomware as pure extortion without the encryption –
Why screw around with cryptography and keys when just stealing the info is good enough”

Jessica Lyons Hardcastle

{The Register, June 25, 2022]

READ: https://www.theregister.com/2022/06/25/ransomware_gangs_extortion_feature/

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What is Techno SCAM-BAITING?

BY ANONYMOUS

SPONSOR: http://www.CertifiedMedicalPlanner.org

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Scam-Baiting Behind the Scenes

The most basic form of scambaiting sets out to waste a scammer’s time. At a minimum, scambaiters attempt to make scammers answer countless questions or perform pointless and random tasks. By keeping a scammer busy, scambaiters claim they’re preventing the scammer from defrauding a real victim.

Scambaiting may also be conducted with a specific purpose in mind. Sometimes scambaiters attempt to obtain an offender’s bank account information, for instance, which they then report to a financial institution. But there are other, less benevolent motives in the scambaiting community.

Thousands of scambaiters are organised on the 419eater forum, which describes itself as the “largest scambaiting community on earth”, with over 1.7 million forum threads. The forum was first established in 2003 to tackle the growing issue of 419 emails – a scam that promises people huge sums of cash in return for a small upfront fee.

419eater provides a particularly interesting case study because members are incentivised and rewarded for their scambaits through a unique system of icons, regarded as trophies, that they can obtain in their profile’s signature lines.

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Romance Scam : Find Out How We Uncovered This Chinese Scam

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MORE: https://www.theguardian.com/technology/2021/oct/03/who-scams-the-scammers-meet-the-amateur-scambaiters-taking-on-the-crooks?utm_source=pocket-newtab

Healthcare: https://www.scamwatch.gov.au/types-of-scams/buying-or-selling/health-medical-products

Medical Insurance: https://www.reddit.com/r/scambait/comments/jsgffx/just_got_a_scam_call_to_sign_me_up_for_bogus/

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SUPREME COURT: Rules Against HHS Drug Pricing [340-B] Program

By Health Capital Consultants, LLC

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U.S. Supreme Court Rules Against HHS in 340B Case

On June 15, 2022, the U.S. Supreme Court released its decision regarding the cuts made by the Department of Health and Human Services (HHS) to the 340B Drug Pricing Program, finding that HHS acted outside its statutory authority in changing reimbursement rates for one group of hospitals without first surveying them on their costs.

The 340B Drug Pricing Program allows hospitals and clinics that treat low-income, medically underserved patients to purchase certain “specified covered outpatient drugs” at discounted prices. (Read more…)

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ECONOMICS: What is the “Golden Rule” Savings Rate?

And … the Solow capital motion growth model?

[By staff reporters]

In economics, the Golden Rule savings rate is the rate of savings which maximizes steady state level or growth of consumption, as for example in the Solow growth model.

Although the concept can be found earlier in John von Neumann and Maurice Allais‘s works, the term is generally attributed to Edmund Phelps who wrote in 1961 that the golden rule “do unto others as you would have them do unto you” could be applied inter-generationally inside the model to arrive at some form of “optimum“, or put simply “do unto future generations as we hope previous generations did unto us.”

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The Solow growth model

In the Solow growth model, a steady state savings rate of 100% implies that all income is going to investment capital for future production, implying a steady state consumption level of zero. A savings rate of 0% implies that no new investment capital is being created, so that the capital stock depreciates without replacement. This makes a steady state unsustainable except at zero output, which again implies a consumption level of zero.

Somewhere in between is the “Golden Rule” level of savings, where the savings propensity is such that per-capita consumption is at its maximum possible constant value.

Assessment

Put another way, the golden-rule capital stock relates to the highest level of permanent consumption which can be sustained.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements.

Book Marcinko: https://medicalexecutivepost.com/dr-david-marcinkos-bookings/

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DOCTORS:

“Insurance & Risk Management Strategies for Doctors” https://tinyurl.com/ydx9kd93

“Fiduciary Financial Planning for Physicians” https://tinyurl.com/y7f5pnox

“Business of Medical Practice 2.0” https://tinyurl.com/yb3x6wr8

Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

HOSPITALS:

“Financial Management Strategies for Hospitals” https://tinyurl.com/yagu567d

“Operational Strategies for Clinics and Hospitals” https://tinyurl.com/y9avbrq5

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What is the 70-20-10 Leadership Model?

Developing Leadership Ability

[By Dr. David Edward Marcinko MBA]

We have written about leadership and management before on this ME-P. It is an important and very popular topic; not only in healthcare but in most all industries today.

According to the Center for Creative Leadership there is a model for learning and development that blends experience, relationships and training.

It is referred to as the 70-20-10 model, where approximately:

  • 70% of learning is provided through the use of challenging assignments and on-the-job experiences.
  • 20% of learning is developed through relationships, networks, and feedback.
  • 10% of the learning is delivered via formal training processes.

So, does your medical office, clinic, hospital or healthcare organization put most of its leadership development resources into training?

Is this akin to the medical teaching adage: “See one – Do one – Teach One“?

Assessment

Sometimes it’s easier to purchase external vendor training rather than develop the internal infrastructure to support business succession planning with stretch and / or rotational assignments, coaching, mentoring, and action learning.  The weaker this internal support infrastructure, the more important the formal training will be, but it can’t be a close substitute for the lessons learned on the job and through feedback from peers, bosses and mentors.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements.

Book Marcinko: https://medicalexecutivepost.com/dr-david-marcinkos-bookings/

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Medical School Ethics VERSUS Business School Ethics

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Is Business Finally Embracing Medical Values?

[By Render S. Davis MHA CHE]

[By David Edward Marcinko MBA]

dr-david-marcinko

In the evolutionary shifts in models for medical care, physicians have been asked to embrace business values of efficiency and cost effectiveness, sometimes at the expense of their professional judgment and personal values.

While some of these changes have been inevitable as our society sought to rein in out-of-control costs, it is not unreasonable for physicians to call on payers, regulators and other business parties to the health care delivery system to raise their ethical bar.

Tit-for-Tat

Harvard University physician-ethicist Linda Emmanuel noted that “health professionals are now accountable to business values (such as efficiency and cost effectiveness), so business persons should be accountable to professional values including kindness and compassion.”

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face-off

[Medicine versus Business]

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Assessment

Within the framework of ethical principles, John La Puma, M.D., wrote in Managed Care Ethics, that “business’s ethical obligations are integrity and honesty.

Medicine’s are those plus altruism, beneficence, non-maleficence, respect, and fairness.”

About the Author

Render Davis was a Certified Healthcare Executive, now retired from Crawford Long Hospital at Emory University, in Atlanta, GA He served as Assistant Administrator for General Services, Policy Development, and Regulatory Affairs from 1977-95.  He is a founding board member of the Health Care Ethics Consortium of Georgia and served on the consortium’s Executive Committee, Advisory Board, Futility Task Force, Strategic Planning Committee, and chaired the Annual Conference Planning Committee, for many years.

More:

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

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What is [Health] Economic Satisficing?

A decision-making strategy 

[By staff reporters]

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What is satisficing? Definition and meaning - Market Business News

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Satisficing is a business decision-making strategy or cognitive heuristic that entails searching through the available alternatives until an acceptability threshold is met.

The term economic satisficing, a portmanteau of satisfy and suffice, was introduced by Herbert A. Simon in 1956, although the concept was first posited in his 1947 book Administrative Behavior. Simon used satisficing to explain the behavior of decision makers under circumstances in which an optimal solution cannot be determined. He maintained that many natural problems are characterized by computational intractability or a lack of information, both of which preclude the use of mathematical optimization procedures.

CITE: https://www.r2library.com/Resource/Title/082610254

He observed in his Nobel Prize in Economics speech that “decision makers can satisfice either by finding optimum solutions for a simplified world, or by finding satisfactory solutions for a more realistic world. Neither approach, in general, dominates the other, and both have continued to co-exist in the world of management science”.

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Assessment

“Satisficing” – a made-up word created by combining satisfactory and sufficient – indicates something good, but not great. Like the Canadian single-payer health system, like Medicare-for-All.

KEN ARROW PhD: https://medicalexecutivepost.com/2010/08/17/on-professor-kenneth-arrow-phd/

MORE: https://www.acsh.org/news/2018/09/18/canadas-single-payer-health-system-satisfices-13272

Conclusion: Your thoughts are appreciated.

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Put and Call OPTIONS RATIO?

By Staff Reporters

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Options are contracts that give investors the right to buy or sell stocks, indexes or other financial securities at an agreed upon price and date. Puts are the option to sell while calls are the option to buy.

Specifically – A Call Option gives the buyer the right, but not the obligation to buy the underlying security at the exercise price, at or within a specified time. A Put Option gives the buyer the right, but not the obligation to sell the underlying security at the exercise price, at or within a specified time.

Ratio – When the ratio of puts to calls is rising, it is usually a sign investors are growing more nervous. A ratio above 1 is considered bearish. The Fear & Greed Index uses a bearish options ratio as a signal for Fear.

CITE: https://www.r2library.com/Resource/Title/0826102549

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What is Stock Price STRENGTH

By Staff Reporters

A few big stocks can skew returns for the market. It’s important to also know how many stocks are doing well versus those that are struggling. This shows the number of stocks on the NYSE at 52-week highs compared to those at 52-week lows.

When there are many more highs than lows, that’s a bullish sign and signals Greed.

CITE: https://www.r2library.com/Resource/Title/0826102549

Now; Relative Price Strength (RPS) compares the price trend of a stock to the market.

An RPS > 1 indicates that the stock outperformed the market, an RPS < 1 indicates that the stock underperformed the market, and an RPS = 1 indicates that the stock performed on par with the market.

RPS can be misleading as it uses historical data and does not take into account risk.

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Mutual Fund Terms and Definitions for Physicians

A “Need-to-Know” Glossary for all Medical Professionals

http://www.HealthDictionarySeries.org

HDS

[ME-P Staff Writers] 

ADV: A two-part form filed by investment advisors who register with the Securities and Exchange Commission (SEC), as required under the Investment Advisers Act. ADV Part II information must be provided to potential investors and made available to current investors.

Alpha: A measure of the amount of a portfolio’s expected return that is not related to the portfolio’s sensitivity to market volatility. A benchmark that uses beta as a measure of risk, a benchmark and a risk free rate of return (usually T-bills) to compare actual performance with expected performance.

For example, a fund with a beta of .80 in a market that rises 10% is expected to rise 8%.

If the risk-free return is 3%, the alpha would be –.6%, calculated as follows: (Fund return – Risk-free return) – (Beta x Excess return) = Alpha   (8% – 3%) – [.8 × (10% – 3%)] = (–) .6%   

Note: A positive alpha indicates out-performance while a negative alpha means underperformance. 

Asset allocation: Strategic asset allocation refers to the long-term targets for allocation of a percentage of a portfolio among different asset classes. In contrast, tactical asset allocation refers to short-term targets.

Average maturity: The average weighted maturity of the bonds in a portfolio providing an indication of interest rate risk.

Benchmark: An index, managed portfolio, or fund used to compare performance characteristics with the targeted portfolio or fund.

Beta: A statistically computed measure of the portfolio’s relationship to changes in market value. If, compared to the S&P 500, a fund has a beta of .80; it is expected to underperform a rising market by 20% and outperform a falling market by 20%. 

Bond: Publicly traded debt instruments that are issued by governments and corporations. The issuer agrees to pay a fixed amount of interest over a specified time period and to repay the principal at maturity.

Closed-end mutual fund: An investment company that registers shares in accordance with SEC regulations and is traded in securities markets at prices determined by investments. 

Diversification: Buying a number of different investment vehicles to protect against default of a single vehicle, thereby reducing the risk of the portfolio.

Duration: A more technical calculation of interest rate risk exposure that uses the present value of expected cash flows to be returned to the bond holder over the term of the bond. 

Fundamental analysis: An analysis of a company’s stock that focuses on the economic environment, the industry the company is in, and the company’s financial situation and operating results.

Mutual fund: A regulated investment company that manages a portfolio of securities for its shareholders.

Net asset value (NAV): The value of fund assets fewer liabilities divided by outstanding shares. 

Open-end mutual fund: An investment company that invests money in accordance with specific objectives on behalf of investors. Fund assets expand or contract based on investment performance, new investments and redemptions.

Portfolio manager: The person(s) who is/are responsible for managing the portfolio in accordance with the objectives dictated by an investor or a fund’s prospectus.

Prospectus: A disclosure document filed with the SEC and made available to prospective and current investors. The prospectus covers sales charges, expenses, investment objectives and restrictions, management fees, financial highlights, and other information. 

R-squared (R2): Relationship of a fund or portfolio’s performance to a benchmark index.

For example, a fund R-squared of .5 means only 50% of its return is explained by the index. Other factors are responsible for the balance of performance. 

SEC yield: A standardized calculation of yield over a 30-day period, sometimes quoted as the “30-day yield.” It takes into account yield-to-maturity rather than current dividends. 

Standard deviation: A statistic that looks at a series of returns and expresses the average deviation from the mean return.

Statement of additional information: A disclosure document filed with the SEC that supplements the prospectus. It is made available to investors upon request. 

Technical analysis: An analysis that focuses on trends in financial markets generally.

For example, a technical analyst may view an entire industry’s group of stocks to be declining. Although the analyst may be correct about the group of stocks as a whole, there may be exceptions represented by specific, individual companies.

Total return: The combination of investment return from income, such as dividends and interest, and appreciation or depreciation in the value of the investment (Income returns plus capital return.) 

Turnover: Under SEC rules, a figure computed that indicates how often securities in the portfolio are bought and sold. For example, if turnover is 100% over a one-year period, the securities (on average) were replaced once. 

12b-1 fee: The maximum annual fee payable from fund assets for distribution and sales costs as allowed by the SEC. 

MORE: Glossary Terms Ap 3

Library

https://www.amazon.com/Comprehensive-Financial-Planning-Strategies-Advisors/dp/1482240289/ref=sr_1_1?ie=UTF8&qid=1418580820&sr=8-1&keywords=david+marcinko

MARK CUBAN’s: “Cost Plus Drugs”. com

By Staff Reporters

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Mark Cuban: The billionaire owner of the Dallas Mavericks just launched an online pharmacy for generic drugs that looks to cut out middlemen and combat pharmaceutical industry price gouging by offering steep discounts.

Set up as CostPlusDrugs.com with 100 generic drugs to treat conditions like diabetes and asthma. Cost Plus will not accept health insurance but claims its prices will still be lower than what people would typically pay at a pharmacy.

“All drugs are priced at cost plus 15%!” Cuban tweeted.

READ: https://medicalexecutivepost.com/2022/01/23/podcast-the-mark-cuban-cost-plus-drug-co-mccpdc/

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The Market Technicians

Technical Analysis – Defined

[By Julia O’Neal; MA, CPA with Staff writers]

Image result for technical analysis

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Technical market analysis focuses on the historical price and volume changes that occur as a stock trades, and it attempts to predict the stock’s future behavior based on prior patterns.

Technical analysis is not concerned with the financials of a company; it assumes that fundamental factors are already reflected in the market behavior of a stock and that the history of that behavior gives a strong clue to the future. The focus on price and volume in technical analysis could also be considered a study of supply and demand. 

Technical analysis applies technical market theories to stock market data on stock prices, indexes, and trading. Technicians identify market trends and try to predict future movements.  

Theoretically, technical and fundamental analysis exist in opposition to each other, but in reality, most fundamental analysts sneak a look at the charts from time to time and technical analysts pay attention to some fundamentals. 

Both schools of thought are based on the possibility of predicting the future using the past. Market psychology, which does not always follow rhyme or reason, can prove both types of analysis wrong.

Technical analysis involves discovering patterns that repeat themselves. Patterns can exist for an individual stock or for an index, and stocks can be compared to their respective indexes. 

Stocks (and indexes) are said to trade in a range. When prices go above this range, they often encounter selling pressure. This is called an area of resistance, and stocks are characterized as “overbought.” 

Conversely, a decline below a level of support will instigate buying, because the stock seems cheap or “oversold.” 

When a breakout occurs above a resistance level – or below a support level – technical analysts predict the stock will stay on the new course.  

Methods for taking advantage of anticipated upward trends include buying stop orders or call options at a level slightly above the resistance level.  To profit from downward trends, physician investors would enter a sell-stop order, sell short, or purchase put options at a price slightly below the support level.  

  • Accumulation areas occur when medical buyers are accumulating stock and the support level is moving up.  
  • Distribution areas occur when physician selling is occurring and the stock is considered weak.  
  • A sideways movement (the stock continues to be bought and sold at the same price for some time) is called an area of consolidation. 

Technical analysis

Other technical patterns:

A head and shoulders pattern may be either above (“head and shoulders top”) or below (“head and shoulders bottom”) a constant trend line. This theory assumes that after a top there will be a reverse; after a bottom, there will be a move back to a top.  

Rising bottoms and ascending tops/falling bottoms and descending tops.  A rising trend in the low prices of a security shows higher and higher support levels. Combined with ascending tops, this would be a bullish indicator. The reverse would be bearish. 

Double top and double bottom show resistance and support levels.  A double bottom shows the stock could break below support levels and reach new lows; a stock with a double top pattern might be expected to move on to a new high.

Assessment

What kind of physician investor are you; fundamental or technical?

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

Our Other Print Books and Related Information Sources:

Health Dictionary Series: http://www.springerpub.com/Search/marcinko

Practice Management: http://www.springerpub.com/product/9780826105752

Physician Financial Planning: http://www.jbpub.com/catalog/0763745790

Medical Risk Management: http://www.jbpub.com/catalog/9780763733421

Hospitals: http://www.crcpress.com/product/isbn/9781439879900

Physician Advisors: www.CertifiedMedicalPlanner.org

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What is “Sentimental” Stock Market Analysis?

What it is – How it works

[By Staff reporters]

There is no shortage of analysis for anyone interested in investing. A search for the term “stock market analysis” turned up 16 million hits on Google and well over 200,000 hits each on Bing, and Yahoo.

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A Sentiment Analysis Approach to Predicting Stock Returns | by Tom Yuz |  Medium

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The majority of stock market analysis can be lumped into three broad groups: fundamental, technical, and sentimental. Here’s a close look at SA.

Sentimental Analysis

Sentimental analysis attempts to measure the market in terms of the attitudes of investors. Sentimental analysis starts from the assumption that the majority of investors are wrong. In other words, that the stock market has the potential to disappoint when “masses of investors” believe prices are headed in a particular direction.

Sentiment analysts are often referred to as contrarians who look to invest against the majority view of the market.

For example, if the majority of professional market watchers expect a stock price to trend higher, sentiment analysts may look for prices to disappoint the majority and trend lower.

Which approach is best?

There is no clear answer to that question.

But it’s important to remember three things:

  • Past performance does not guarantee future results, actual results will vary, and the best approach may be to create a portfolio based on your time horizon, risk tolerance, and goals.
  • Keep in mind that the return and principal value of stock prices will fluctuate as market conditions change.
  • And shares, when sold, may be worth more or less than their original cost.

Conclusion

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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements.

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SURVEY: Primary Care Doctor Trust or NOT?

By Staff Reporters

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75% Trust Their Primary Care Physicians

 •  Primary care physicians: 75%
 •  Specialty care physicians: 66%
 •  Pharmacies: 59%
 •  Hospitals and clinics: 58%
 •  Health insurance company: 51%
 •  Government: 24%

Source: Health Sparq, “2022 Annual Consumer Sentiment Benchmark Report,” January 2022

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What is SWIFT Banking?

Belgium’s Society for Worldwide InterBank Financial Telecommunications

A TIMELY FINANCIAL TOPIC

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By Staff Reporters

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Belgium’s Society for Worldwide Interbank Financial Telecommunications (SWIFT) runs a messaging service that facilitates transactions across 11,000+ financial institutions globally. Think of it as the “Gmail of global banking.”

Entities in every country except North Korea use SWIFT to shuffle trillions of dollars’ worth of funds across borders. And Russia is a SWIFT power user—as a major supplier of energy and other goods, it ranks sixth globally for payment messages sent on SWIFT. So if Russia were cut off from SWIFT, “the nation would essentially be severed from much of the global financial system,” the NYT wrote.

CITE: https://www.r2library.com/Resource/Title/0826102549

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SWIFT: https://www.swift.com/

MORE: https://www.livemint.com/news/world/what-is-swift-why-this-banking-service-could-be-a-big-weapon-against-russia-11645760070928.html

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On “Triple” and “Quadruple” Witching Day?

By Staff Reporters

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The final hour of trading on a Friday when stock index futures, stock index options, and stock options all expire. This happens on the third Friday in March, June, September, and December. See Quadruple Witching Hour.

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According to TheStreet, Inc

Triple witching sounds like something from a horror movie, but it’s actually a financial term. Options and derivatives traders know this phenomenon well because it’s the day when three different types of contracts expire. It happens only once a quarter and can cause wild swings in volatility, as large institutional traders roll over futures contracts to free up cash. Doing so creates a ton of increased volume—sometimes 50% higher than average, especially in the last trading hour of the day—but individual investors needn’t feel spooked. In fact, some might even view this volatility as a profit-making opportunity.

Which 3 Types of Derivative Contracts Expire on Triple Witching Day?

  1. Stock Options: These are contracts taken out on the direction of a stock price at a future date. Unlike stocks, they’re not an investment in a company; rather, they’re the right to buy or sell shares of a company at a later time frame. Calls let you buy stock shares at a set price, known as the strike price, on or before the expiration date. Puts give you the right to sell shares.
  2. Index Options: These are futures contracts on a stock index, such as the S&P 500. These options are settled in cash.
  3. Index Futures: These are futures contracts on equity indexes. These contracts are also settled in cash.

A futures contract is also referred to as an “anticipated hedge” because it’s used to lock in prices on future buy or sell transactions. These hedges are a way to protect a portfolio from market setbacks without selling long-term holdings.

It’s worth noting that a few times a year, single stock futures also expire on witching day, adding a fourth asset to the trading cauldron, and that’s why some investors refer to this date as “quadruple witching,” although the terms are interchangeable.

When Is Triple Witching? Triple Witching Calendar 2022

In modern trading, triple witching happens on the third Friday of March, June, September, and December (the last month of each quarter).

Upcoming Triple Witching Dates

  • Friday, March 18, 2022
  • Friday, June 17, 2022
  • Friday, September 16, 2022
  • Friday, December 16, 2022

What Is the Witching Hour?

In the U.S. stock market, the last hour of the trading day, before the closing bell, sees the most trading activity, so the witching hour is from 3–4 pm EST. In folklore, the “witching hour” actually happens in the dead of night, from 3–4 am. It was known as a time when spirits reached the height of their powers. During the Middle Ages, the Catholic Church even banned people from venturing outside during this time, so as not to get caught in the chaos.

Today, such ideas aren’t taken any more seriously than mere superstition, but triple witching can cause chaos among investors, if they are not aware of what is happening.

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What Happens During Triple Witching?

As you might imagine, a lot of trading activity happens in the market when stock options, index options, and index futures contracts all expire. We’re talking a lot of money here: during Triple Witching in September 2021, for example, around $3.4 trillion of equity options expired.

So, what exactly is going on? Should they keep their hedges on? Should they speculate? Should they roll, or close out, their contracts, and if so, by how much? This is what generates the increased trading activity, and the large trades, especially from offsetting trades, can cause temporary price distortions. 

At the same instant that the derivatives contracts expire, the anticipatory hedges that traders have placed become unnecessary, and so traders also seek to close these hedges, and the offsetting trades result in increased volume. These large volume increases can in turn cause price swing (i.e., volatility) in the underlying assets. 

How Does Triple Witching Affect the Stock Market?

Triple witching itself doesn’t move the stock market; it just creates increased volume. In the same way, the expiration of the options and futures contracts don’t necessarily result in volatility—that’s caused by the actions that traders take based on the temporary price fluctuations of their underlying assets which can be moved due to the increased volume.

When this happens, arbitrageurs try to take advantage, often making trades that are completed in mere seconds. An arbitrageur is a trader who looks for price inefficiencies in a security and then seeks to make a profit by buying and selling it simultaneously. This practice involves much risk.

Is Triple Witching Bullish or Bearish?

Historically speaking, triple witching is not always an “up” day, and it’s not always a “down” day for the markets. It does not signify a trend. Typically, it neither moves the market significantly higher nor lower; it simply adds a temporary increase in volume and liquidity.

However, it’s important to note that market volumes also tend to be higher on index re-balancing day as well as during and after broader macroeconomic news events, and so, when taken in tandem with triple witching, these events can cause big moves in the market.

Examples of Triple Witching Volatility in Light of News Events

On June 18, 2021, a record number—$818 billion—of stock options expired, which led to nearly $3 trillion in “open interest,” or open contracts. On this day, the Federal Reserve also announced that it might raise interest rates in 2023 due to inflationary pressures. These news events resulted in increased volatility, and the S&P 500 lost 1.3% while the Dow Jones Industrial Average dropped 1.6%.

On September 17th, 2021, one week ahead of the Federal Reserve’s meeting, market volatility was growing based on mounting concerns about the COVID-19 Delta variant impacting the economy as well as the Federal Reserve’s announcement that it would begin to unwind its monetary stimulus. These news events, taken along with the S&P 500’s quarterly index rebalancing, which also happened that day, caused the S&P 500 to lose 1%. 

Is There Such a Thing as “Quadruple” Witching?

Single Stock Futures are the fourth type of derivative contract which can expire on triple witching day. This can cause the phenomenon to be called “quadruple witching,” although one term can replace the other. Single stock futures are futures contracts placed on individual stocks, with one contract controlling 100 shares being typical. They are a hedging tool that was previously banned from trading in the United States. The Commodity Futures Modernization Act lifted the ban in 2000, and single stock futures were traded on the One Chicago Exchange from November, 2002 until September, 2020, although currently they are only available on overseas financial markets.

MORE: https://www.tradestation.com/insights/2022/02/03/quadruple-witching-dates-2022-trading/

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How Did Triple Witching Affect 1987’s “Black Monday?”

On October 19th, 1987, the Dow Jones Industrial Average lost 22.6% in a single trading session. The day became known as “Black Monday,” but triple witching events, which took place the Friday before, on October 16, 1987, had caused the selloff of options and futures contracts to rapidly accelerate, resulting in stocks tanking in pre-day trading. The massive sell orders were left unchecked by any kinds of systematic stop gaps, and so financial markets roiled globally throughout the day. This stock market crash was the greatest one-day decline to occur since the Great Depression in 1929.

Taking lessons from the event, regulators moved the options expiration from the morning to the afternoon and put “circuit breakers” into place that would let the exchanges temporarily halt trading in the event of another massive sell off.

How Can Investors Prepare for Triple Witching Days? 

The triple witching takeaway is that investors should be aware of what happens on these days and understand that there is a lot more volume in the markets. There could be some drastic price swings, but investors shouldn’t be carried away by any short-term emotions (which, really, is great advice any day in the markets).

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Behavioral Finance for Doctors?

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On the Psychology of Investing [Book Review]

By Peter Benedek, PhD CFA

Founder: www.RetirementAction.com

Some of the pioneers of behavioral finance are Drs. Kahneman, Twersky and Thaler. This short introduction to the subject is based on John Nofsinger’s little book entitled “Psychology of Investing” an excellent quick read for all medical professionals or anyone who is interested in learning more about behavioral finance.

Rational Decisions?

Much of modern finance is built on the assumption that investors “make rational decisions” and “are unbiased in their predictions about the future”, however this is not always the case.

Cognitive errors come from (1) prospect theory (people feel good/bad about gain/loss of $500, but not twice as good/bad about a gain/loss of $1,000; they feel worse about a $500 loss than feel good about a $500 gain); (2) mental accounting (meaning that people tend to create separate buckets which they examine individually), (3) Self-deception (e.g. overconfidence), (4) heuristic simplification (shortcuts) and (4) mood can affect ability to reach a logical conclusion.

John Nofsinger’s Book

The following are some of the major chapter headings in Nofsinger’s book, and represent some of the key behavioral finance concepts.

Overconfidence leads to: (1) excessive trading (which in turn results in lower returns due to costs incurred), (2) underestimation of risk (portfolios of decreasing risk were found for single men, married men, married women, and single women), (3) illusion of knowledge (you can get a lot more data nowadays on the internet) and (4) illusion of control (on-line trading).

Pride and Regret leads to: (1) disposition effect (not only selling winners and holding on to the losers, but selling winners too soon- confirming how smart I was, and losers to late- not admitting a bad call, even though selling losers increases one’s wealth due to the tax benefits), (2) reference points (the point from where one measures gains or losses is not necessarily the purchase price, but may perhaps be the most recent 52 week high and it is most likely changing continuously- clearly such a reference point will affect investor’s judgment by perhaps holding on to “loser” too long when in fact it was a winner.)

Considering the Past in decisions about the future, when future outcomes are independent of the past lead to a whole slew of more bad decisions, such as: (1) house money effect (willing to increase the level of risk taken after recent winnings- i.e. playing with house’s money), (2) risk aversion or snake-bite effect (becoming more risk averse after losing money), (3) trying to break-even (at times people will increase their willing to take higher risk to try to recover their losses- e.g. double or nothing), (4) endowment or status quo effect (often people are only prepared to sell something they own for more than they would be willing to buy it- i.e. for investments people tend to do nothing, just hold on to investments they already have) (5) memory and decision making ( decisions are affected by how long ago did the pain/pleasure occur or what was the sequence of pain and pleasure), (6) cognitive dissonance (people avoid important decisions or ignore negative information because of pain associated with circumstances).

Mental Accounting is the act of bucketizing investments and then reviewing the performance of the individual buckets separately (e.g. investing at low savings rate while paying high credit card interest rates).

Examples of mental accounting are: (1) matching costs to benefits (wanting to pay for vacation before taking it and getting paid for work after it was done, even though from perspective of time value of money the opposite should be preferred0, (2) aversion to debt (don’t like long-term debt for short-term benefit), (3) sunk-cost effect (illogically considering non-recoverable costs when making forward-going decisions). In investing, treating buckets separately and ignoring interaction (correlations) induces people not to sell losers (even though they get tax benefits), prevent them from investing in the stock market because it is too risky in isolation (however much less so when looked at as part of the complete portfolio including other asset classes and labor income and occupied real estate), thus they “do not maximize the return for a given level of risk taken).

In building portfolios, assets included should not be chosen on basis of risk and return only, but also correlation; even otherwise well educated individuals make the mistake of assuming that adding a risky asset to a portfolio will increase the overall risk, when in fact the opposite will occur depending on the correlation of the asset to be added with the portfolio (i.e. people misjudge or disregard interactions between buckets, which are key determinants of risk).

This can lead to: (1) building behavioral portfolios (i.e. safety, income, get rich, etc type sub-portfolios, resulting in goal diversification rather than asset diversification), (2) naïve diversification (when aiming for 50:50 stock:bond allocation implementing this as 50:50 in both tax-deferred (401(k)/RRSP) accounts and taxable accounts, rather than placing the bonds in the tax-deferred and stocks in taxable accounts respectively for tax advantages), (3) naïve diversification in retirement accounts (if five investment options are offered then investing 1/5th in each, thus getting an inappropriate level of diversification or no diversification depending on the available choices; or being too heavily invested in one’s employer’s stock).

Representativeness may lead investors to confusing a good company with a good investment (good company may already be overpriced in the market; extrapolating past returns or momentum investing), and familiarity to over-investment in one’s own employer (perhaps inappropriate as when stock tanks one’s job may also be at risk) or industry or country thus not having a properly diversified portfolio.

Emotions can affect investment decisions: mood/feelings/optimism will affect decision to buy or sell risky or conservative assets, even though the mood resulted from matters unrelated to investment. Social interactions such as friends/coworkers/clubs and the media (e.g. CNBC) can lead to herding effects like over (under) valuation.

Financial Strategies

Nofsinger finishes with a final chapter which includes strategies for:

(i) beating the biases: (1) Understand the biases, (2) define your investment objectives, (3) have quantitative investment criteria, i.e. understand why you are buying a specific investor (or even better invest in a passive fashion), (4) diversify among asset classes and within asset classes (and don’t over invest in your employer’s stock), and (5) control your investment environment (check on stock monthly, trade only monthly and review progress toward goals annually).

(ii) using biases for the good: (1) set new employee defaults for retirement plans to being enrolled, (2) get employees to commit some percent of future raises to automatically go toward retirement (save-more-tomorrow).

Assessment

Buy the book (you can get used copies at through Amazon for under $10). As indicated it is a quick read and occasionally you may even want to re-read it to insure you avoid the biases or use them for the good. Also, the book has long list of references for those inclined to delve into the subject more deeply.

You might even ask “How does all this Behavioral Finance coexist with Efficient Market theory?” and that’s a great question that I’ll leave for another time.

More: SSRN-id2596202

Conclusion

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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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Medical Endowment Fund Manager Selection

Are External Financial Consultants Necessary?

[By Dr. David E. Marcinko MBA CMP]

http://www.CertifiedMedicalPlanner.org

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John English, of the Ford Foundation, once observed that:

[T]he thing that is most interesting to me is that every one of the managers is able to give me a chart that shows me he was in the first quartile or the first decile. I have never had a prospective manager come in and say, ‘We’re in the fourth quartile or bottom decile’.

According to Wayne Firebaugh CPA, CFP® CMP™ most medical endowment funds today, even those with internal investment staff, rely heavily upon consultants and external managers.

In fact, the 2006 Commonfund Benchmarks Healthcare Study revealed that 85% of all surveyed institutions relied upon consultants with an even greater percentage of larger endowments relying upon consultants.  The common reasons given by endowments for such reliance are augmenting staff and oddly enough, cost containment.  In essence, the endowment staff’s job becomes one of managing the managers.

Manager Selection 

Even those endowments that use consultants to assist in selecting outside managers remain involved in the selection and monitoring process.  Interestingly, performance should generally not be the overriding criterion for selecting a manager.  Selecting a manager could be viewed as a two-step process in which the endowment first establishes its initial allocation and determines what classes will require an external manager.  The second part of the process is to select a manager that due diligence has indicated to have two primary characteristics: integrity and a repeatable and sustainable systematic process.  These characteristics are interrelated, as a manager who embodies integrity will also strive to follow the established investment selection process.

Of Medical-Managers

In medicine, obtaining the best care often means consulting a specialist.  As a manager of managers, the average endowment should seek specialist managers within a given asset class. Just as physicians and healthcare institutions gain additional insight and skill in their area of specialty, investment managers may be able to gain informational or system advantages within a given concentrated area of investments.

Assessment

Since most plan managers are seeking positive alpha by actively managing certain asset classes, many successful endowments will use a greater number of external managers in the concentrated segments than they will in the larger, more efficient markets.

Conclusion

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HEDGE FUNDS: History in Brief

ABOUT | DAVID EDWARD MARCINKO

BY DR. DAVID E. MARCINKO MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

The investment profession has come a long way since the door-to-door stock salesmen of the 1920s sold a willing public on worthless stock certificates. The stock market crash of 1929 and ensuing Great Depression of the 1930s forever changed the way investment operations are run. A bewildering array of laws and regulations sprung up, all geared to protecting the individual investor from fraud. These laws also set out specific guidelines on what types of investment can be marketed to the general public – and allowed for the creation of a set of investment products specifically not marketed to the general public. These early-mid 20th century lawmakers specifically exempted from the definition of “general public,” for all practical purposes, those investors that meet certain minimum net worth guidelines.

The lawmakers decided that wealth brings the sophistication required to evaluate, either independently or together with wise counsel, investment options that fall outside the mainstream. Not surprisingly, an investment industry catering to such wealthy individuals, such as doctors and healthcare professionals, and qualifying institutions has sprung up.

EARLY DAYS

The original hedge fund was an investment partnership started by A.W. Jones in 1949. A financial writer prior to starting his investment management career, Mr. Jones is widely credited as being the prototypical hedge fund manager. His style of investment in fact gave the hedge fund its name – although Mr. Jones himself called his fund a “hedged fund.” Mr. Jones attempted to “hedge,” or protect, his investment partnership against market swings by selling short overvalued securities while at the same time buying undervalued securities. Leverage was an integral part of the strategy. Other managers followed in Mr. Jones’ footsteps, and the hedge fund industry was born.

In those early days, the hedge fund industry was defined by the types of investment operations undertaken – selling short securities, making liberal use of leverage, engaging in arbitrage and otherwise attempting to limit one’s exposure to market swings. Today, the hedge fund industry is defined more by the structure of the investment fund and the type of manager compensation employed.

The changing definition is largely a sign of the times. In 1949, the United States was in a unique state. With the memory of Great Depression still massively influencing common wisdom on stocks, the post-war euphoria sparked an interest in the securities markets not seen in several decades. Perhaps it is not so surprising that at such a time a particularly reflective financial writer such as A.W. Jones would start an investment operation featuring most prominently the protection against market swings rather than participation in them. 

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Apart from a few significant hiccups – 1972-73, 1987 and 2006-07 being most prominent – the U.S. stock markets have been on quite a roll for quite a long time now. So today, hedge funds come in all flavors – many not hedged at all. Instead, the concept of a private investment fund structured as a partnership, with performance incentive compensation for the manager, has come to dominate the mindscape when hedge funds are discussed. Hence, we now have a term in “hedge fund” that is not always accurate in its description of the underlying activity. In fact, several recent events have contributed to an even more distorted general understanding of hedge funds.

During 1998, the high profile Long Term Capital Management crisis and the spectacular currency losses experienced by the George Soros organization both contributed to a drastic reversal of fortune in the court of public opinion for hedge funds. Most hedge fund managers, who spend much of their time attempting to limit risk in one way or another, were appalled at the manner with which the press used the highest profile cases to vilify the industry as dangerous risk-takers. At one point during late 1998, hedge funds were even blamed in the lay press for the currency collapses of several developing nations; whether this was even possible got short thrift in the press.

Needless to say, more than a few managers have decided they did not much appreciate being painted with the same “hedge fund” brush. Alternative investment fund, private investment fund, and several other terms have been promoted but inadequately adopted. As the memory of 1998 and 2007 fades, “hedge fund” may once again become a term embraced by all private investment managers.

Photo by Alexander Mils on Pexels.com

ASSESSMENT: Physicians, and all investors, should be aware, however, that several different terms defining the same basic structure might be used. Investors should therefore become familiar with the structure of such funds, independent of the label. The Securities Exchange Commission calls such funds “privately offered investment companies” and the Internal Revenue Service calls them “securities partnerships.”

Your thoughts are appreciated.

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What if the Bear Market is OVER?

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By Michael A. Gayed, CFA

Portfolio Manager of the ATAC Rotation Funds

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Bob Farrell is a legendary Wall Street trader and market analyst. He’s perhaps best-known for his “10 rules” of investing that he developed based on his 50-year career in the industry. One of the more popular rules says that “when all the experts and forecasts agree, something else is going to happen.”Right now, almost everyone is expecting a recession driven by high inflation, rising interest rates and geopolitical risks. The S&P 500 is still more than 10% off of its highs, while the NASDAQ 100 is down by more than 20%. Many feel as if more downside is ahead, but what if they’re wrong? What if the bottom is already in? What if the worst is over?

My take? I have no idea. I believe there’s still a bigger and more traditional classic “risk-off” period coming where stocks decline and Treasuries rally in price (which is what historically happens during periods of heightened equity volatility), but the path to get there is what drives investor sentiment. And like everyone else in this business, I can’t tell the future. All I can do is identify conditions in a rules-based fashion that favor an outcome.The important thing to remember here is that the market isn’t the economy. The financial markets are often leading indicators of where investors feel things are going. The actual data is only showing how conditions are or were.

Take the 2020 COVID recession, for example. Once the government announced its multi-trillion dollar stimulus program, stock prices shot higher even though the worst of the economic pain had yet to be experienced.Today, some of the data isn’t even indicating imminent danger.
High yield spreads tend to blow out ahead of a recession. They’re currently not at the levels reached during 2016, 2018 or 2020. Investors often view the 10-year/2-year Treasury yield spread as the “recession indicator”. This number did briefly turn negative earlier this year, but has remained in positive territory ever since. While both of these numbers have teased the idea of higher risk conditions ahead, neither has done so in convincing fashion yet.Also consider that the markets tend to be very sensitive to what the Fed does. If the central bank ever decides that recession risk is too high and it hits the pause button on the rate hiking cycle, it could be off to the races again for equity prices. Risk asset prices have the ability to react favorably to looser monetary conditions. Any pivot in that direction could give a big boost to investor sentiment.

If the bear market is over, the ATAC Rotation Fund (ATACX), the ATAC U.S. Rotation ETF (RORO) and the ATAC Credit Rotation ETF (JOJO) could be primed to benefit.We believe all three funds use proven market signals to determine whether they should be positioned either offensively or defensively. Since investors often flock to safety in times of market volatility, the three funds use Treasuries as the “risk-off” or defensive asset class. Admittedly, Treasuries haven’t acted as they historically do relative to equities when in high volatility states. But that doesn’t mean things won’t revert back to historical behavior in the small sample of the here and now.When the signals suggest that conditions are more favorable, the funds can go “risk-on”.

In the case of RORO and ATACX, that could include some combination of large-cap stocks, small-caps and emerging markets. JOJO remains in the fixed income markets and targets junk bonds in this scenario.RORO and ATACX also use leverage, which offers higher return potential. Why? Because leveraging equities when risk-on helps to, over time, counter the impact of being in Treasuries when stocks continue to move higher and with hindsight, risk-off positioning there wasn’t warranted.

Of course this is a double-edged sword, since in a year like this year, the leveraged risk-on position in stocks earlier in the year led to a sizeable decline for both ATACX and RORO. However, over multiple roll of the die, it is that leverage which gives investors the opportunity to capture above average returns in more traditional markets when combined with occasional risk-off periods where Treasuries perform well.High volatility markets don’t need to be feared.

We believe strategies that add and remove market risk based on what the market is telling us give investors the opportunity to earn superior risk-adjusted returns while lowering downside risk. If the markets are ready to begin the next leg higher, the ATAC funds stand ready to benefit while (hopefully) Treasuries get back to doing what they normally would in true risk-off periods .

At some point.

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Money Management and Portfolio Performance

Money Management and Portfolio Performance

By Jeffrey S. Coons; PhD, CFA

By Christopher J. Cummings; CFA, CFP™

Evaluating portfolio performance is a vital and often contentious topic in monitoring progress towards a physician’s investment goals.   

Introduction 

A typical portfolio’s objective may be to preserve the purchasing power of its assets by achieving returns above inflation – or to have total returns adequate to satisfy an annual spending need without eroding original capital, etc.  Whatever the absolute goal for the doctor; performance numbers need to be evaluated based on an understanding of the market environment over the period being measured.

One way to put a portfolio’s a time-weighted return in the context of the overall market environment is to compare the performance to relevant alternative investment vehicles.   This can be done through comparisons to either market indices, which are board baskets of investable securities, or peer groups, which are collections of returns from managers or funds investing in a similar universe of securities with similar objectives as the portfolio.

By evaluating the performance of alternatives that were available over the period, the physician investor and/or his/her advisor are able to gain insight to the general investment environment over the time period.

The Indices 

Market indices are frequently used to gain perspective on the market environment and to evaluate how well the portfolio performed relative to that environment. 

Market indices are typically segmented into different asset classes.

Common stock market indices include the following:

· Dow Jones Industrial Average – a price-weighted index of 30 large U.S. corporations.

· Standard & Poor’s (S&P) 500 Index – a capitalization-weighted index of 500 large U.S. corporations.

· Value Line Index – an equally-weighted index of 1700 large U.S. corporations.

· Russell 2000 – a capitalization-weighted index of smaller capitalization U.S. companies.

· Wilshire 5000 – a cap weighted index of the 5000 largest U.S. corporations.

· Morgan Stanley Europe Australia, Far East (EAFE) Index – a capitalization-weighted index of the stocks traded in developed economies. 

Common bond market indices include the following:

· Lehman Brothers Government Credit Index – an index of investment grade domestic bonds excluding mortgages.

· Lehman Brothers Aggregate Index – the LBGCI plus investment grade mortgages.

· Solomon Brothers Bond Index – similar in construction to the LBAI.

· Merrill Lynch High Yield Index – an index of below investment grade bonds.

· JP Morgan Global Government Bond – an index of domestic and foreign government-issued fixed income securities.

Assessment

The selection of an appropriate market index depends on the goals of the portfolio and the universe of securities from which the portfolio was selected. 

Just as a portfolio with a short-time horizon and a primary goal of capital preservation should not be expected to perform in line with the S&P 500, a portfolio with a long-term horizon and a primary goal of capital growth should not be evaluated versus Treasury Bills.

Conclusion 

While the Dow Jones Industrial Average and S&P 500 are often quoted in the newspapers, there are clearly broader market indices available to describe the overall performance of the U.S. stock market.

Likewise, indices like the S&P 500 and Wilshire 5000 are capitalization-weighted, so their returns are generally dominated by the largest 50 of their 500 – 5000 stocks.

Fortunately, capitalization-bias does not typically affect long-term performance comparisons, but there may be periods of time in which large cap stocks out-or under-perform mid-to-small cap stocks, thus creating a bias when cap-weighted indices are used versus what is usually non-cap weighted strategies of managers or mutual funds.

Finally, the fixed income indices tend to have a bias towards intermediate-term securities versus longer-term bonds.  Therefore, a physician investor with a long-term time horizon, and therefore potentially a higher allocation to long bonds, should keep this bias in mind when evaluating performance.

How do you evaluate your portfolio?

Do you evaluate it on a risk-adjusted basis?

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