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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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

RELATED: https://www.msn.com/en-us/news/world/what-is-swift-and-why-does-it-matter-in-the-russia-ukraine-war/ar-AAUlLDv?li=BBnb7Kz

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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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The Modern US Monetary System

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On Modern Monetary Realism

By Rick Kahler MS CFP® ChFC CCIM www.KahlerFinancial.com

In a previous ME-P column I explained why any currency-issuing country, like the US, will never default on its obligations or run out of money with which to purchase goods and services priced in its own currency. Sovereign nations that are currency issuers have no solvency constraints, unlike currency users such as individuals, corporations, and government entities that don’t issue currency.

Why the Government is Not-Like Medical Professionals

On Modern Monetary Realism

To follow up, let’s look at what has become known as Modern Monetary Realism (MMR).  Economist Cullen O. Roche describes it in a 2011 article on his Pragmatic Capitalism website titled “Understanding the Monetary System.”

This theory came into existence in 1971 when President Nixon eliminated the gold standard and allowed the government to print money at will. This was a paradigm shift in our monetary policy that’s gone largely unnoticed for decades by many educators, economists, and politicians.

Guiding MMR Principles

The principles of MMR are:

  • The Federal Reserve works in partnership with the US Treasury to issue currency. All other units of government, private entities, and individuals are users of the currency.
  • The government creates money by minting coins, printing cash, and issuing reserves. The private banking sector creates money by creating loans and bank deposits.
  • The Federal Government cannot “go broke.” It is inaccurate to compare it to households, companies, and local governments, which all are users of money and can go bankrupt.
  • The major constraint on currency issuers (sovereign governments like the US) is inflation. It behooves governments to manage the money supply prudently in order to avoid impoverishing their citizens through devaluing the currency.
  • Floating exchange rates between countries are a necessity to help maintain equilibrium and flexibility in the global economy. Nations that unduly inflate their currency suffer the consequences of devalued currency, shrinking purchasing power, and contracting lifestyles.
  • The debt of a sovereign currency issuer is default-free. The issuer can always meet debt obligations in the currency which it issues.

Cullen O. Roche Speaks

Roche suggests that a functional government supports the country’s financial system in four ways:

  1. The US government was created by the people, for the people. “It exists to further the prosperity of the private sector—not to benefit at its expense.” Roche argues that when government becomes corrupt by obtaining too much power or issuing too much currency that results in high inflation, it then becomes susceptible to a revolt and dissolution.
  2. Government’s role is to be actively involved in regulating and helping to build an infrastructure within which the private sector can generate economic growth. Roche views regulation as not only beneficial, but necessary to temper the inevitable irrationality that can disrupt markets. Still, he emphasizes that it is the private sector, not the public sector, which drives innovation, productivity, and economic growth.
  3. Money, while a creation of law, must be accepted by the private sector while prudently regulated by the federal government, keeping in mind that the purpose of the regulation is to maximize private sector prosperity.
  4. “Because the Federal government is not a business or a household it should not manage its balance sheet for its own benefit,” notes Roche, “but in a way that most benefits the private sector and encourages private sector prosperity, productivity, innovation and growth.”

Assessment

Like me, you may need to re-read this a couple of times to begin to grasp the concepts. Once you throw off the outdated pre-1971 model of the monetary system, understanding the basics of MMR isn’t difficult. Knowing the basics of how our monetary system works will help physicians, and all of us, frame the important issues in the turmoil unfolding in Europe and in our own upcoming elections. 

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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The SAFE-HAVEN Demand

By Staff Reporters

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Stocks are riskier than bonds. But the reward for investing in stocks over the long haul is greater. Still, bonds can outperform stocks over short periods. Safe Haven Demand shows the difference between Treasury bond and stock returns over the past 20 trading days.

Bonds do better when investors are scared. The Fear & Greed Index uses increasing safe haven demand as a signal for Fear.

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

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FIVE CONDITIONS: Total 50% of Healthcare Financial Costs

By Staff Reporters

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5 Conditions Total 50% of Healthcare Costs

 •  Cancer makes up nearly 15% of all healthcare spending with employers in the study paying $533 million for nearly 103,000 cancer claims.
 •  Musculoskeletal conditions (including joint wear, knee injuries, hip pain, etc.) makes up 13% of healthcare spending with employers spending $477 million for 317,000 musculoskeletal claims.
 •  Cardiovascular conditions (including heart rhythm issues, stroke, heart attack, and heart failure) makes up 9% of healthcare spending with employers paying $357 million towards 169,000 claims.
 •  Gastrointestinal conditions (including colitis, irritable bowel system, celiac disease, etc.) makes up 7% of healthcare spending with employers paying $284 million for 136,000 claims.
 •  Neurological conditions (including Parkinson’s disease, migraines, epilepsy, etc.) makes up 6% of total health care spending with employers paying $225 million for 240,000 claims.

Source: HAC and UHC via ACDIS, April 14, 2022

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

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GO FUND ME: Medical Campaigns Reveal a Big Problem with Health Care

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By Jules Lipoff, MD: Senior fellow at the Leonard Davis Institute of Health Economics and an assistant professor of clinical dermatology at Perelman School of Medicine, both of the University of Pennsylvania. Erica Mark, medical student at the University of Virginia, contributed to this article. The opinions expressed in this article do not necessarily represent those of the University of Pennsylvania Health System or the Perelman School of Medicine.

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If you follow the news or your social media feed, you know that crowdsourcing medical expenses is increasingly popular for financing health care costs. In fact, you might have contributed to one; 22 percent of American adults report donating to GoFundMe medical campaigns.

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

As of 2021, approximately $650 million, or about one-third of all funds raised by GoFundMe, went to medical campaigns. That staggering amount of money highlights how dysfunctional our health care system is, forcing people to resort to crowdsourcing to afford their medical care — but it’s not surprising. In the United States, 62 percent of bankruptcies are related to medical costs. This should be a wake-up call to address and reform the system further.

Related: https://medicalexecutivepost.com/2021/12/30/does-crowd-sourcing-democratize-the-health-care-insurance-system/

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ESSAY: https://www.msn.com/en-us/news/politics/gofundme-medical-campaigns-reveal-a-big-problem-with-health-care/ar-AAXabGB?li=BBnbfcL

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What Really is a STABLECOIN?

Types with Guide

By Staff Reporters

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According to Investopedia, a stablecoin is a class of cryptocurrencies that attempt to offer price stability and are backed by a reserve asset. Stablecoins have gained traction as they attempt to offer the best of both worlds—the instant processing and security or privacy of payments of cryptocurrencies, and the volatility-free stable valuations of fiat currencies.

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Stablecoins are cryptocurrencies where the price is designed to be pegged to a cryptocurrency, fiat money, or to exchange-traded commodities (such as precious metals or industrial metals).

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

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Key Points

  • Stablecoins are cryptocurrencies that attempt to peg their market value to some external reference.
  • Stablecoins may be pegged to a currency like the U.S. dollar or to a commodity’s price such as gold.
  • Stablecoins achieve their price stability via collateralization (backing) or through algorithmic mechanisms of buying and selling the reference asset or its derivatives.

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Lifelong Learning for Entrepreneurs: 5 Books For Business Success — Jolly Innopreneur

The great vizier of Persia, Abdul Qassim Ismail (who lived in the 10th century), never parted with his library. If he went anywhere, the library “followed” him. The library was made up of 117,000 volumes of books and was transported by 400 camels. And the books (together with the camels) were arranged in alphabetical order. […]

Lifelong Learning for Entrepreneurs: 5 Books For Business Success — Jolly Innopreneur

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CRAFTING A BUSINESS PLAN AND STARTING A MEDICAL PRACTICE

[Understanding Business Models, the Entrepreneurial Spirit and Obtaining Capital]

Dr. DEM

By Dr. David Edward Marcinko MBA CMP™

Medical Office Business Plan

We have been involved in the highly competitive private, and/or “for-profit”, education sector for two decades. Yet, are also familiar with the larger public university and sustainable ecosystem.

Solo Medical Practice NOT Dead!

For example, we’ve participated in start-up business competitions, and refereed PhD / MBA Capstone presentations at Georgia State University, Emory University and the Georgia Institute of Technology; including at Triangle Technology Park, NC; and the Whitman School of Business in Syracuse, NY.

Funding was achieved for emerging initiatives deemed most efficient and profitable; like solo and small group medical practices and clinics.

Executive Service Line [ESL] education

Also known as Executive Service Line [ESL] education, this business model refers to academic programs for business leaders and adults that are generally non-credit and non-degree-granting, but may lead to professional certifications.

Estimates by Business Week magazine suggest that executive education in the United States is a $900 million annual business with approximately 80 percent provided by university schools. Beside the educational benefits, monetary dividends are reaped as open enrollment eases matriculation access. Similar programs at the Wharton School, Darden, Harvard and the Goizueta Business School at Emory University charge premium rates for the implied institutional moniker.

Assessment

And, an imperative is that electronic technology be used to expand the universe of targeted adult-learners. This is for aspiring professionals and executives, or those already in the workforce. The tuition gathering universe is thus expanded beyond the School. We have developed and launched several such successful programs that were merged or sold to private investors, colleges and hedge funds

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Physician Medical Risk Management and Insurance Planning Practices of Leading CERTIFIED MEDICAL PLANNERS®

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“BY DOCTORS – FOR DOCTORS – PEER REVIEWED – FIDUCIARY FOCUSED”

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SAMPLE: 21. Practice Risks

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Common Entrepreneurial Mistakes

BY JONATHAN MASE R.N.

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Being an entrepreneur is not necessarily easy, and many people that try to become entrepreneurs wind up failing. It’s important to recognize the risk of failure before you decide to walk down this path. Being an entrepreneur is very rewarding, and you can find success if you can do things right.

Keep reading to learn about common entrepreneurial mistakes that you can avoid to give yourself a better chance of realizing your entrepreneurial goals. 

READ: https://jonathanmase.wordpress.com/2021/08/06/common-entrepreneurial-mistakes/

Your comments are appreciated.

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MD Entrepreneurs: https://medicalexecutivepost.com/2021/07/29/minnovation-for-physician-entrepreneurs/

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BUSINESS PLAN CONSTRUCTION: For Health Industry Modernity

FOR MEDICAL AND HEALTHCARE ENTREPRENEURS AND INNOVATORS

By Dr. David Edward Marcinko MBA MEd CMP®

I was asked by business schools and medical colleagues – and their bankers, CPAs and advisors – to speak about this topic several times last year before the pandemic.

Now, with the specter of M-4-A etc; it certainly is a vital concern to all young entrepreneurs, doctors & medical professionals whether live, audio recorded or in podcast form. And so, here is a written transcript of a recent presentation for your review.

Now, with the specter of tele-health, tele-medicine, M-4-A etc; it certainly is a vital concern to all young doctors & medical professionals whether live, audio recorded or in podcast form. And so, here is a written transcript of a recent presentation for your review.

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New Product Business Plan Sample [2021 Updated] | OGScapital

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READ: https://healthcarefinancials.files.wordpress.com/2017/08/mba-business-plan-capstone-outline.pdf

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HOME VALUES: Appraised vs. Assessed vs. Fair Market Value

KNOW THE THE DIFFERENCE

By Staff Reporters

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As doctors, nurses and medical professionals try to get an idea of what their home is worth, please go into the process with the knowledge that the concept of “value” can carry a different definition depending on who’s assigning it.

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Home Value Estimator | What Is Your House Worth?

For example:

  • Appraised value – The appraised value of your home is the number assigned to it by a professional appraiser. This value is especially important when a home buyer is getting a mortgage. The lender will typically require a professional appraisal to verify that the borrower hasn’t agreed to an unrealistic valuation.
  • Assessed value – The assessed value of your home is the figure assigned to it by the county where it’s located for property tax purposes. While an appraisal involves someone inspecting the interior and exterior of your home, assessments are often conducted in a mass approach by using pricing trends.
  • Fair market value – The fair market value of your home doesn’t involve a professional. Instead, it involves other people just like you who might be willing to pay more because they love a home or a certain neighborhood. So, for example, an appraised value might be $300,000, but a recent surge in buying activity and limited supply might motivate a buyer to go above that price. On the flip side, keep in mind that those buyers might be willing to pay less than what you believe it’s worth, too.
  • CITE: https://www.r2library.com/Resource/Title/082610254

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MORTGAGES: https://medicalexecutivepost.com/2022/01/23/manual-mortgage-underwriting-what-is-it-really/

RENT v. BUY: https://medicalexecutivepost.com/2017/03/14/the-apartment-rent-vs-home-buy-decision/

MORTGAGE CALCULATOR: https://www.msn.com/en-us/money/personalfinance/use-this-calculator-to-find-out-how-much-house-you-really-can-afford/ar-AATkoSK?li=BBnb7Kz

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PODCAST: Medicare Re-Admission Penalty Explained

As part of the Affordable Care Act of 2010

CMS changed its hospital readmission penalty methodology

BY ERIC BRICKER MD

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Health Consumption Expenditures Per Capita

By Staff Reporters

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KFF: Health Consumption Expenditures Per Capita

 •  United States: $11,946
 •  Switzerland: $7,138
 •  Germany: $6,731
 •  Netherlands: $6,299
 •  Austria: $5,899
 •  Sweden: $5,754
 •  France: $5,564
 •  Belgium: $5,458
 •  Canada: $5,370
 •  United Kingdom: $5,268
 •  Australia: $4,919
 •  Japan: $4,691

Notes: U.S. value obtained from National Health Expenditure data. Data from Australia, Belgium, Canada, Japan and Switzerland are from 2019. Data for Australia, France, and Japan are estimated. Data for Austria, Canada, Germany, Netherlands, and Sweden are provisional. Health consumption does not include investments in structures, equipment, or research. Data for 2020 except as noted.
Source: KFF analysis of National Health Expenditure (NHE) and OECD data, January 21, 2022

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

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ALPHABET GOOGLE: Stock Splitting!

By Staff Reporters

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DEFINITION: A stock split or stock divide increases the number of shares in a company. For example, after a 2-for-1 split, each investor will own double the number of shares, and each share will be worth half as much. A stock split causes a decrease of market price of individual shares, but does not change the total market capitalization of the company: stock dilution does not occur.

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

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EXAMPLE:

Google parent company Alphabet said it would split its stock 20–1. That means in July 2022, Alphabet shareholders will receive 19 more shares for every one that they own. It doesn’t mean they’ll be 20x richer—the price of the stock they hold will drop a proportional amount. If the stock split were to happen now, Alphabet’s share price would fall from $2,865 to $143.

Image result for stock split

Why does it matter?

In many ways, it doesn’t. A stock split does not change the value of the company. It’s simply a way to increase the number of shares outstanding.

Think of it like slicing a pizza. At a share price of almost $3,000, Alphabet’s slices were a wide a monstrosity. With the stock split, it’s cutting company ownership into smaller portions. But, in the end, the pizza isn’t growing—there are just more slices to be shared.

So why do it? By making the slices of its company smaller, it hopes that more people will look at them and say, “Well I guess one couldn’t hurt.” Alphabet said the goal of the stock split is to attract more small-time investors who might have been intimidated by buying in at such a steep share price.

  • Only 27 other stocks in the S&P 500 have share prices above $500 besides Alphabet.

And, there’s evidence this bit of corporate inception can be effective. To see why, let’s look at what happened when two other tech giants, Tesla and Apple, split their stock recently.

  • When Apple split its stock 4–1 in July 2020, retail investors upped their purchases from $150 million per week to nearly $1 billion, according to Vanda Research.
  • When Tesla split its stock 5–1 in August 2020, retail investing jumped from $30–$40 million/week to $700 million.

There may be another play for Alphabet here—and that is to pad its resume for inclusion in the iconic Dow Jones Industrial Average. Because the Dow is weighted by share price (an antiquated system, to be sure), Alphabet at its current price would overwhelm all of the companies. It would become the Alphabet Industrial Average. At $247, it becomes a much more attractive candidate for the Dow.

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PODCAST: The FOUR PERCENT Spending Rule with Challenge?

Still Valid or Not?

PLUS the “RULES of 72, 78 and 115″ Explained”

By Staff Reporters

SPONSOR: http://www.CertifiedMedicalPlanner.org

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What Is The 4% Rule? How Much Money Do I Need To Retire? - YouTube

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The 4% Rule is a practical rule of thumb that may be used by retirees to decide how much they should withdraw from their retirement funds each year; according to Investopedia.

READ: https://www.investopedia.com/terms/f/four-percent-rule.asp#:~:text=The%20Four%20Percent%20Rule%20is%20a%20rule%20of,account%20balance%20that%20keeps%20income%20flowing%20through%20retirement.

The purpose of adopting the rule is to keep a steady income stream while maintaining an adequate overall account balance for future years. The withdrawals will consist primarily of interest and dividends on savings.

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

READ: https://www.financial-planning.com/news/kitces-smart-fix-for-the-4-rule#:~:text=The%20purpose%20of%20the%204%25%20rule%20is%20to,when%20it%20provides%20superior%20outcomes%20in%20all%20situations.

CHALLENGE: But, experts like Mike Kitces are divided on whether the 4% withdrawal rate is the best option. Many, including the creator of the rule, say that 5% is a better rule for all but the worst-case scenario.

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RULES of 72, 78 and 115: https://medicalexecutivepost.com/2020/11/22/the-rules-of-72-78-and-115/

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PODCAST: https://www.bing.com/videos/search?q=4+percent+rule&&view=detail&mid=5B0C2D1CABA12C7CF6075B0C2D1CABA12C7CF607&&FORM=VRDGAR&ru=%2Fvideos%2Fsearch%3Fq%3D4%2Bpercent%2Brule%26FORM%3DHDRSC3

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SPIKE: Hospitals Suing Patients for Unpaid Medical Bills

By Staff Reporters

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Spike in Hospitals Suing Patients for Unpaid Medical Bills

 •  Lawsuits over unpaid bills for hospitals rose by 37% in Wisconsin from 2001 to 18.
 •  Wage garnishments from the lawsuits rose 27% in that time period.
 •  5% of hospitals account for 25% of lawsuits. Nonprofit hospitals and critical access hospitals are more likely to sue patients, according to the study.
 •  There were 1.86 lawsuits per 1,000 Black residents in 2018, compared to 1.32 per 1,000 white residents.

Source: YaleNews, December 6, 2021

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

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PODCAST: Ray Dalio on How the Healthcare Economy Works

Economy Works’ Applied to Healthcare … Credit Cycles and Healthcare Policy

By Eric Bricker MD

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

RICARDIAN DEMAND HEALTH ECONOMICS: https://medicalexecutivepost.com/2021/12/14/ricardian-derived-demand-economics-in-medicine/

RISING HEALTH CARE COSTS: https://medicalexecutivepost.com/2018/03/11/medical-treatment-costs-becoming-expensive-25-factors/

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INFLATION Is Here – UPDATE?

But for How Long?

See the source image

Vitaliy N. Katsenelson, CFA

[CEO & Chief Investment Officer]

READERS

DEFINITION: In economics, inflation (or less frequently, price inflation) is a general rise in the price level of an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy. The opposite of inflation is deflation, a sustained decrease in the general price level of goods and services. The common measure of inflation is the inflation rate, the annualized percentage change in a general price index, usually the consumer price index, over time.

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

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See the source image

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DEAR READERS

This essay is going to be long.
I blame inflation, be it transitory or not, for inflating its length. 

The number one question I am asked by clients, friends, readers, and random strangers is, are we going to have inflation? 

I think about inflation on three timelines: short, medium, and long-term

The pandemic disrupted a well-tuned but perhaps overly optimized global economy and time-shifted the production and consumption of various goods. For instance, in the early days of the pandemic automakers cut their orders for semiconductors. As orders for new cars have come rolling back, it is taking time for semiconductor manufacturers, who, like the rest of the economy, run with little slack and inventory, to produce enough chips to keep up with demand. A $20 device the size of a quarter that goes into a $40,000 car may have caused a significant decline in the production of cars and thus higher prices for new and used cars. (Or, as I explained to my mother-in-law, all the microchips that used to go into cars went into a new COVID vaccine, so now Bill Gates can track our whereabouts.)

Here is another example. The increase in new home construction and spike in remodeling drove demand for lumber while social distancing at sawmills reduced lumber production – lumber prices spiked 300%. Costlier lumber added $36,000 to the construction cost of a house, and the median price of a new house in the US is now about $350,000.

The semiconductor shortage will get resolved by 2022, car production will come back to normal, and supply and demand in the car market will return to the pre-pandemic equilibrium. High prices in commodities are cured by high prices. High lumber prices will incentivize lumber mills to run triple shifts. Increased supply will meet demand, and lumber prices will settle at the pre-pandemic level in a relatively short period of time. That is the beauty of capitalism! 

Most high prices caused by the time-shift in demand and supply fall into the short-term basket, but not all. It takes a considerable amount of time to increase production of industrial commodities that are deep in the ground – oil, for instance. Low oil prices preceding the pandemic were already coiling the spring under oil prices, and COVID coiled it further. It will take a few years and increased production for high oil prices to cure high oil prices. Oil prices may also stay high because of the weaker dollar, but we’ll come back to that.

Federal Reserve officials have told us repeatedly they are not worried about inflation; they believe it is transitory, for the reasons I described above. We are a bit less dismissive of inflation, and the two factors that worry us the most in the longer term are labor costs and interest rates. 

Let’s start with labor costs 

During a garden-variety recession, companies discover that their productive capacity exceeds demand. To reduce current and future output they lay off workers and cut capital spending on equipment and inventory. The social safety net (unemployment benefits) kicks in, but not enough to fully offset the loss of consumer income; thus demand for goods is further reduced, worsening the economic slowdown. Through millions of selfish transactions (microeconomics), the supply of goods and services readjusts to a new (lower) demand level. At some point this readjustment goes too far, demand outstrips supply, and the economy starts growing again.

This pandemic was not a garden-variety recession 

The government manually turned the switch of the economy to the “off” position. Economic output collapsed. The government sent checks to anyone with a checking account, even to those who still had jobs, putting trillions of dollars into consumer pockets. Though output of the economy was reduced, demand was not. It mostly shifted between different sectors within the economy (home improvement was substituted for travel spending). Unlike in a garden-variety recession, despite the decline in economic activity (we produced fewer widgets), our consumption has remained virtually unchanged. Today we have too much money chasing too few goods– that is what inflation is. This will get resolved, too, as our economic activity comes back to normal.

But …

Today, though the CDC says it is safe to be inside or outside without masks, the government is still paying people not to work. Companies have plenty of jobs open, but they cannot fill them. Many people have to make a tough choice between watching TV while receiving a paycheck from big-hearted Uncle Sam and working. Zero judgement here on my part – if I was not in love with what I do and had to choose between stacking boxes in Amazon’s warehouse or watching Amazon Prime while collecting a paycheck from a kind uncle, I’d be watching Sopranos for the third time. 

To entice people to put down the TV remote and get off the couch, employers are raising wages. For instance, Amazon has already increased minimum pay from $15 to $17 per hour. Bank of America announced that they’ll be raising the minimum wage in their branches from $20 to $25 over the next few years. The Biden administration may not need to waste political capital passing a Federal minimum wage increase; the distorted labor market did it for them. 

These higher wages don’t just impact new employees, they help existing employees get a pay boost, too. Labor is by far the biggest expense item in the economy. This expense matters exponentially more from the perspective of the total economy than lumber prices do. We are going to start seeing higher labor costs gradually make their way into higher prices for the goods and services around us, from the cost of tomatoes in the grocery store to the cost of haircuts.

Only investors and economists look at higher wages as a bad thing. These increases will boost the (nominal) earnings of workers; however, higher prices of everything around us will negate (at least) some of the purchasing power. 

Wages, unlike timber prices, rarely decline. It is hard to tell someone “I now value you less.” Employers usually just tell you they need less of your valuable time (they cut your hours) or they don’t need you at all (they lay you off and replace you with a machine or cheap overseas labor). It seems that we are likely going to see a one-time reset to higher wages across lower-paying jobs. However, once the government stops paying people not to work, the labor market should normalize; and inflation caused by labor disbalance should come back to normal, though increased higher wages will stick around.

There is another trend that may prove to be inflationary in the long-term: de-globalization.  Even before the pandemic the US set plans to bring manufacturing of semiconductors, an industry deemed strategic to its national interests, to its shores. Taiwan Semiconductor and Samsung are going to be spending tens of billions of dollars on factories in Arizona.  

The pandemic exposed the weaknesses inherent in just-in-time manufacturing but also in over reliance on the kindness of other countries to manufacture basic necessities such as masks or chemicals that are used to make pharmaceuticals.  Companies will likely carry more inventory going forward, at least for a while.  But more importantly more manufacturing will likely come back to the US. This will bring jobs and a lot of automation, but also higher wages and thus higher costs.  

If globalization was deflationary, de-globalization is inflationary  

We are not drawing straight-line conclusions, just yet. A lot of manufacturing may just move away from China to other low-cost countries that we consider friendlier to the US; India and Mexico come to mind.  

And then we have the elephant in the economy – interest rates, the price of money. It’s the most important variable in determining asset prices in the short term and especially in the long term. The government intervention in the economy came at a significant cost, which we have not felt yet: a much bigger government debt pile. This pile will be there long after we have forgotten how to spell social distancing
 
The US government’s debt increased by $5 trillion to $28 trillion in 2020 – more than a 20% increase in one year! At the same time the laws of economics went into hibernation: The more we borrow the less we pay for our debt, because ultra-low interest rates dropped our interest payments from $570 billion in 2019 to $520 billion in 2020. 

That is what we’ve learned over the last decade and especially in 2020: The more we borrow the lower interest we pay. I should ask for my money back for all the economics classes I took in undergraduate and graduate school.

This broken link between higher borrowing and near-zero interest rates is very dangerous. It tells our government that how much you borrow doesn’t matter; you can spend (after you borrow) as much as your Republican or Democratic heart desires. 

However, by looking superficially at the numbers I cited above we may learn the wrong lesson. If we dig a bit deeper, we learn a very different lesson: Foreigners don’t want our (not so) fine debt. It seems that foreign investors have wised up: They were not the incremental buyer of our new debt – most of the debt the US issued in 2020 was bought by Uncle Fed. Try explaining to your kids that our government issued debt and then bought it itself. Good luck.

Let me make this point clear: Neither the Federal Reserve, nor I, nor a well-spoken guest on your business TV knows where interest rates are going to be (the total global bond market is bigger even than the mighty Fed, and it may not be able to control over interest rates in the long run). But the impact of what higher interest rates will do the economy increases with every trillion we borrow. There is no end in sight for this borrowing and spending spree (by the time you read this, the administration will have announced another trillion in spending). 

Let me provide you some context about our financial situation 


The US gross domestic product (GDP) – the revenue of the economy – is about $22 trillion, and in 2019 our tax receipts were about $3.5 trillion. Historically, the-10 year Treasury has yielded about 2% more than inflation. Consumer prices (inflation) went up 4.2% in April. Today the 10-year Treasury pays 1.6%; thus the World Reserve Currency debt has a negative 2.6% real interest rate (1.6% – 4.2%). 

These negative real (after inflation) interest rates are unlikely to persist while we are issuing trillions of dollars of debt. But let’s assume that half of the increase is temporary and that 2% inflation is here to stay. Let’s imagine the unimaginable. Our interest rate goes up to the historical norm to cover the loss of purchasing power caused by inflation. Thus it goes to 4% (2 percentage points above 2% “normal” inflation). In this scenario our federal interest payments will be over $1.2 trillion (I am using vaguely right math here). A third of our tax revenue will have to go to pay for interest expense. Something has to give. It is not going to be education or defense, which are about $230 billion and $730 billion, respectively. You don’t want to be known as a politician who cut education; this doesn’t play well in the opponent’s TV ads. The world is less safe today than at any time since the end of the Cold War, so our defense spending is not going down (this is why we own a lot of defense stocks). 

The government that borrows in its own currency and owns a printing press will not default on its debt, at least not in the traditional sense. It defaults a little bit every year through inflation by printing more and more money. Unfortunately, the average maturity of our debt is about five years, so it would not take long for higher interest expense to show up in budget deficits. 

Money printing will bring higher inflation and thus even higher interest rates

If things were not confusing enough, higher interest rates are also deflationary 

We’ve observed significant inflation in asset prices over the last decade; however, until this pandemic we had seen nothing yet. Median home prices are up 17% in one year. The wild, speculative animal spirits reached a new high during the pandemic. Flush with cash (thanks to kind Uncle Sam), bored due to social distancing, and borrowing on the margin (margin debt is hitting a 20-year high), consumers rushed into the stock market, turning this respectable institution (okay, wishful thinking on my part) into a giant casino. 

It is becoming more difficult to find undervalued assets. I am a value investor, and believe me, I’ve looked (we are finding some, but the pickings are spare). The stock market is very expensive. Its expensiveness is setting 100-year records. Except, bonds are even more expensive than stocks – they have negative real (after inflation) yields.

But stocks, bonds, and homes were not enough – too slow, too little octane for restless investors and speculators. Enter cryptocurrencies (note: plural). Cryptocurrencies make Pets.com of the 1999 era look like a conservative investment (at least it had a cute sock commercial). There are hundreds if not thousands of crypto “currencies,” with dozens created every week. (I use the word currency loosely here. Just because someone gives bits and bytes a name, and you can buy these bits and bytes, doesn’t automatically make what you’re buying a currency.)

“The definition of a bubble is when people are making money all out of proportion to their intelligence or work ethic.”

By Mike Burry MD
[The Big Short]

I keep reading articles about millennials borrowing money from their relatives and pouring their life savings into cryptocurrencies with weird names, and then suddenly turning into millionaires after a celebrity CEO tweets about the thing he bought. Much ink is spilled to celebrate these gamblers, praising them for their ingenious insight, thus creating ever more FOMO (fear of missing out) and spreading the bad behavior.

Unfortunately, at some point they will be writing about destitute millennials who lost all of their and their friends’ life savings, but this is down the road. Part of me wants to call this a crypto craziness a bubble, but then I think, Why that’s disrespectful to the word bubble, because something has to be worth something to be overpriced. At least tulips were worth something and had a social utility. (I’ll come back to this topic later in the letter).

But ….

When interest rates are zero or negative, stocks of sci-fi-novel companies that are going to colonize and build five-star hotels on Mars are priced as if El Al (the Israeli airline) has regular flights to the Red Planet every day of the week except on Friday (it doesn’t fly on Shabbos). Rising interest rates are good defusers of mass delusions and rich imaginations. 

In the real economy, higher interest rates will reduce the affordability of financed assets. They will increase the cost of capital for businesses, which will be making fewer capital investments. No more 2% car loans or 3% business loans. Most importantly, higher rates will impact the housing market. 

Up to this point, declining interest rates increased the affordability of housing, though in a perverse way: The same house with white picket fences (and a dog) is selling for 17% more in 2021 than a year before, but due to lower interest rates the mortgage payments have remained the same. Consumers are paying more for the same asset, but interest rates have made it affordable.

At higher interest rates housing prices will not be making new highs but revisiting past lows. Declining housing prices reduce consumers’ willingness to improve their depreciating dwellings (fewer trips to Home Depot). Many homeowners will be upside down in their homes, mortgage defaults will go up… well, we’ve seen this movie before in the not-so-distant past. Higher interest rates will expose a lot of weaknesses that have been built up in the economy. We’ll be finding fault lines in unexpected places – low interest has covered up a lot of financial sins.

And then there is the US dollar, the world’s reserve currency. Power corrupts, but the unchallenged and unconstrained the power of being the world’s reserve currency corrupts absolutely. It seems that our multitrillion-dollar budget deficits will not suddenly stop in 2021. With every trillion dollars we borrow, we chip away at our reserve currency status (I’ve written about this topic in great detail, and things have only gotten worse since). And as I mentioned above, we’ve already seen signs that foreigners are not willing to support our debt addiction. 

A question comes to mind.
Am I yelling fire where there is not even any smoke? 

Higher interest rates is anything but a consensus view today. Anyone who called for higher rates during the last 20 years is either in hiding or has lost his voice, or both. However, before you dismiss the possibility of higher rates as an unlikely plot for a sci-fi novel, think about this. 

In the fifty years preceding 2008, housing prices never declined nationwide. This became an unquestioned assumption by the Federal Reserve and all financial players. Trillions of dollars of mortgage securities were priced as if “Housing shall never decline nationwide” was the Eleventh Commandment, delivered at Temple Sinai to Goldman Sachs. Or, if you were not a religious type, it was a mathematical axiom or an immutable law of physics. The Great Financial Crisis showed us that confusing the lack of recent observations of a phenomenon for an axiom may have grave consequences. 

Today everyone (consumers, corporations, and especially governments) behaves as if interest rates can only decline, but what if… I know it’s unimaginable, but what if ballooning government debt leads to higher interest rates? And higher interest rates lead to even more runaway money printing and inflation? 

This will bring a weaker dollar 

A weaker US dollar will only increase inflation, as import prices for goods will go up in dollar terms. This will create an additional tailwind for commodity prices. 

If your head isn’t spinning from reading this, I promise mine is from having written it. 

To sum up: A lot of the inflation caused by supply chain disruption that we see today is temporary. But some of it, particularly in industrial commodities, will linger longer, for at least a few years. Wages will be inflationary in the short-term and will reset prices higher, but once the government stops paying people not to work, wage growth should slow down. Finally, in the long term a true inflationary risk comes from growing government borrowing and budget deficits, which will bring higher interest rates and a weaker dollar with them, which will only make inflation worse and will also deflate away a lot of assets.

THE END
UPDATE: https://www.msn.com/en-us/news/us/how-us-inflation-rate-is-impacting-americans-wallets-before-the-holiday-season/vi-AAROG5J

CURRENT: https://www.msn.com/en-us/money/markets/us-treasury-yields-tick-lower-on-fears-omicron-will-dent-recovery/ar-AARYSKy?li=BBnbfcL

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PODCASTS: How Prescription [Rx] Coverage Works

Formulary Tiers, PBM, Rebates, Spread-Pricing Explained

By Dr. Eric Bricker MD

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What is QUANTITATIVE EASING?

Q.E.

By Dr. David E. Marcinko MBA CMP®

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QE (Quantitative Easing = compound noun)

Although standard definitions will tell you that it is a ‘monetary policy’ used by central banks to stimulate the national economy, in reality it is more as follows:

– A cleverly disguised word that simply means ‘money printing’.

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Central banks use QE as a disguise for increasing the money supply, as to monetize its increasing debt.

For a more technical analysis of the actual mechanics of QE, I invite you to read the article entitled QE for Dummies.

Examples:

1. The Central Bank embarked on another round of QE in hopes that it can kick-start the economy.

2. Ben Bernanke is set to begin the Fed’s taper of QE as soon as next month.

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PODCAST: Amazon Pharmacy VS. GoodRx Drug Prices

A HEAD-2-HEAD COMPARISON

By Eric Bricker MD

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STOCK ORDERS: Positions Doctors Should Know

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ACADEMIC C.V. | DAVID EDWARD MARCINKO

BY DR. DAVID E. MARCINKO MBA CMP®

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Miscellaneous STOCK Orders and MARKET Positions

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Beside market, limit and stop orders, there are some other miscellaneous orders for the physician or guided investor, to know:

A stop limit order is a stop order that, once triggered or activated, becomes a limit order. Realize that it is possible for a stop limit to be triggered and not executed, as the limit price specified by the doctor may not be available.

In addition, there are all or none and fill or kill orders, and even though both require the entire order to be filled, there are distinct differences. An all or none (AON) is an order in which the broker is directed to fill the entire order or none of it.

A fill or kill (FOK) is an order either to buy or to sell a security in which the broker is directed to attempt to fill the entire’ amount of the order immediately and in full, or that it be canceled.

The difference between an all or none and a fill or kill order is that with an all or none order, immediate execution is not required, while immediate execution is a critical component of the fill or kill. Because of the immediacy requirement,

FOK orders are never found on the specialist’s book. Another difference is that AON orders are only permitted for bonds, not stocks, while FOK orders may be used for either.

Also, there exists an immediate or cancel order (IOC), which is an order to buy or sell a security in which the broker is directed to attempt to fill immediately as much of the order as possible and cancel any part remaining. This type of order differs from a fill-or-kill order which requires the entire order to be filled. An IOC order will permit a partial fill. Because of the immediacy requirement, IOC and FOK orders are never found on the specialist’s book.

 Long and Short Positions

A long buy position means that shares are for sale from a market makers inventory or owned by the medical investor outright. Market makers take long positions when customers and other firms wish to sell, and they take short positions when customers and other firms want to buy in quantities larger than the market maker’s inventory. By always being ready, willing, and able to handle orders in this way, market makers assure the investing public of a ready market in the securities in which they are interested. When a security can be bought and sold at firm prices very quickly and easily the security is said to have a high degree of liquidity, also known as marketability. 

A short position investor seeks to make a profit by participating in the decline in the market price of a security.

Now; let’s see how these terms, long and short, apply to transactions by medical investors [rather than market makers] in the securities markets.

When a doctor buys any security – he is said to be taking a long position in that security. This means the investor is an owner of the security. Why does a doctor take a long position in a security? Well, receiving dividend income to make a profit from an increase in the market price is one reason. Once the security has risen sufficiently in price to satisfy the investor’s profit needs, the investor will liquidate his long position, or sell his stock. This would officially be known as a long sale of stock, though few people in the securities business use the label “long sale”. This is the manner in which the above investor had made a profit is the traditional method used; buy low, sell high.

Let’s look at an actual investment in General Motors to investigate this principle further. A medical investor has taken a long position in 100 shares of General Motors stock at a price of $70 per share. This means that the manner in which he can do that is by placing a market order which will be executed at the best “available market price at the time, or by the placing of a buy limit order with a limit price of $70 per share. The investor firmly believes, on the basis of reports that he has read about the automobile industry and General Motors specifically, that at $70 a share, General Motors is a real bargain. He believes that based on its current level of performance, it should be selling for a price of between $80 and $85 per share. But, the doctor investor has a dilemma. He feels certain that the price is going to rise but he cannot watch his computer, or call his broker, every hour of every day. The reason he can’t watch is because patients have to be seen in the office. The only people who watch a computer screen all day are those in the offices of brokerage firms (stock broker registered representatives), and doctor day traders, among others. 

In the above example, with a sell limit order, if the doctor investor was willing to settle for a profit of $12 per share, what order would he place at this time? If you said, “sell at $82 good ’til canceled”, you are correct. Why GTC rather than a day order? Because our doctor investor knows that General Motors is probably not going to rise from $70 to $82 in one day. If he had placed an order to sell at $82 without the GTC qualification, his order would have been canceled at the end of this trading day. He would have had to re-enter the order each morning until he got an execution at 82. Marking the order GTC (or open) relieves him of any need to replace the order every morning. Several weeks later, when General Motors has reached $82 per share in the market, his order to sell at 82 is executed. The medical investor has bought at 70 and sold at 82 and realized a $12 per share profit for his efforts.

Let’s suppose that the medical investor, who has just established a $12 per share profit, has evaluated the performance of General Motors common stock by looking at the market performance over a period of many years. Let’s further assume that the investor has found by evaluating the market price statistics of General Motors that the pattern of movement of General Motors is cyclical. By cyclical, we mean that it moves up and down according to a regular pattern of behavior.

Let’s say the investor has observed that in the past, General Motors had repeated a pattern of moving from prices in the $60 per share range as a low, to a high of approximately $90 per share. Further, our investor has observed that this pattern of performance takes approximately 10 to l2 months to do a full cycle; that is, it moves from about 60 to about 90 and back to about 60 within a period of roughly l2 months. If this pattern repeats itself continually, the investor would be well advised to buy the stock at prices in the low to mid 60’s hold onto it until it moves well into the 80’s, and then sell his long position at a profit. However, what this means is that our investor is going to be invested in General Motors only 6 months of each year. That is, he will invest when the price is low and, usually within half a year, it will reach its high before turning around and going back to its low again. How can the doctor-investor make a profit not only on the rise in price of General Motors in the first 6 months of the cycle, but on the fall in price of General Motors in the second half of the cycle? One technique that is available is the use of the short sale.

The Short Sale

If a doctor investor feels that GM is at its peak of $ 90 per share, he may borrow 100 shares from his brokerage firm and sell the 100 shares of borrowed GM at $ 90. This is selling stock that is not owned and is known as a short sale. The transaction ends when the doctor returns the borrowed securities at a lower price and pockets the difference as a profit. In this case, the doctor investor has sold high, and bought low. 

Odd Lots

Most of the thousands of buy and sell orders executed on a typical day on the NYSE are in 100 share or multi-100 share lots. These are called round lots. Some of the inactive stocks traded at post 30, the non-horseshoe shaped post in the northwest corner of the exchange, are traded in 70 share round lots due to their inactivity. So, while a round lot is normally 700 shares, there are cases where it could be 10 shares. Any trade for less than a round lot is known as an odd lot. The execution of odd lot orders is somewhat different than round lots and needs explanation.

When a stock broker receives an odd lot order from one of his doctor customers, the order is processed in the same manner as any other order. However, when it gets to the floor, the commission broker knows that this is an order that will not be part of the regular auction market. He takes the order to the specialist in that stock and leaves the order with the specialist. One of the clerks assisting the specialist records the order and waits for the next auction to occur in that particular stock. As soon as a round lot trade occurs in that particular stock as a result of an auction at the post, which may occur seconds later, minutes later, or maybe not until the next day, the clerk makes a record of the trade price.

Every odd lot order that has been received since the last round lot trade, whether an order to buy or sell, is then executed at the just noted round lot price, the price at which the next round lot traded after receipt of the customer’s odd lot order, plus or minus the specialist’s “cut “.  Just like everything else he does, the specialist doesn’t work for nothing. Generally, he will add 1/8 of a point to the price per share of every odd lot buy order and reduce the proceeds of each odd lot sale order by 1/8 per share. This is the compensation he earns for the effort of breaking round lots into odd lots. Remember, odd lots are never auctioned but, there can be no odd lot trade unless a round lot trades after receipt of the odd lot order. 

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What is CHROMETOPHOBIA?

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A great question to ponder during National Financial Planning Month!

About the “FEAR OF MONEY”

By Charles Patrick Davis, MD, PhD

Fear of money: An abnormal and persistent fear of money. Sufferers experience undue anxiety even though they realize their fear is irrational. They worry that they might mismanage money or that money might live up to its reputation as “the root of all evil.” Perhaps they remember well the ill fortune that befell the mythical King Midas. His wish that everything he touched be turned to gold was fulfilled, and even his food was transformed into gold.

The fear of money is termed chrometophobia or chrematophobia, from the Greek “chrimata” (money) and “phobos” (fear). The “chrome” in “chrometophobia” may also be related to the Greek word “chroma” (color) because of the brilliant colors of ancient coins — for example, gold, silver, bronze and copper.

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

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

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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™ book cover

RISK MANAGEMENT: https://www.routledge.com/Risk-Management-Liability-Insurance-and-Asset-Protection-Strategies-for/Marcinko-Hetico/p/book/9781498725989

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PHYSICIAN FINANCIAL ADVISORS: https://medicalexecutivepost.com/2021/10/11/

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US DEBT BUSTERS: The 1 TRILLION DOLLAR Coin

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BY MORNING BREW

The Legend of the $1 Trillion Platinum Coin

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You may have heard that a deadline to suspend the debt ceiling is rapidly approaching, and if lawmakers don’t do anything it could lead to “economic catastrophe,” in the words of Treasury Secretary Janet Yellen.

But what if we told you there was a solution to the debt ceiling fiasco so crazy…it just might work?

The solution: Yellen could have the Treasury mint a $1 trillion platinum coin, deposit it at the Fed to “retire” loads of US federal debt, and then enable the government to carry on with business as usual without having to worry about defaulting on its existing debt.

But can the Treasury really do that? Yes. According to Section 31 US Code § 5112

  • “The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.”

The law is crystal clear, and has been deemed kosher by numerous academics. “The statute clearly does authorize the issuance of trillion-dollar coins,” Laurence Tribe, a Harvard Law professor, told Washington Monthly back in 2013.

In fact, nothing says we have to stop at $1 trillion. Yellen could go big with a $10 trillion coin, hypothetically. As Bloomberg’s Joe Weisenthal explains, none of this would lead to inflation because it’s merely an “accounting trick”—not an influx of money into the economy.

Have we tried this before? The $1 trillion platinum coin idea seems to pop up every time the US faces a debt ceiling crunch. It was first introduced by a Georgia lawyer in 2010 and gained traction during the debt-ceiling crisis of 2011.

Things really turned up in 2013, when the government was…you guessed it, facing another debt ceiling deadline. The hashtag #MintTheCoin became popular on Twitter, and economists like Paul Krugman advocated for unleashing the coin. “If we have a crisis over the debt ceiling, it will be only because the Treasury Department would rather see economic devastation than look silly for a couple of minutes,” he wrote.

But each time the $1 trillion coin is mentioned as a way of resolving debt ceiling problems, the people in charge dismiss it as a distraction from Congress doing its job. “Neither the Treasury nor the Federal Reserve believes that the law can or should be used to produce platinum coins for the purpose of avoiding an increase in the debt limit,” The Treasury wrote during…well, yes, another debt ceiling emergency in 2015.

As for our current predicament, the Biden administration rejected the minting of the $1 trillion coin yet again last week.

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Bottom line: Perhaps some enterprising future Treasury Secretary will manifest the platinum coin into existence, but for now it remains as mythical as Camelot.

MORE: https://medicalexecutivepost.com/2021/09/21/what-is-the-us-debt-ceiling/

COINS: https://www.msn.com/en-us/news/politics/2-democrats-say-they-want-to-mint-a-coin-to-solve-the-debt-ceiling-showdown-and-save-the-us-from-catastrophic-default/ar-AAOXLcU?li=BBnb7Kz

GOVERNMENT Rxn: https://www.msn.com/en-us/news/politics/heres-what-would-happen-if-washington-doesnt-prevent-a-government-shutdown/ar-AAODYi5?li=BBnb7Kz

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PODCAST: Medicare Part D [Rx Drugs]

LATE ENROLLMENT PENALTY CALCULATIONS

Medicare – CMS

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

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What is the US DEBT CEILING?

IN BRIEF

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By Dr. David E. Marcinko MBA CMP®

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What is the domestic national debt ceiling? 

A cap on how much the US government can borrow to finance its operations. 

  • It was introduced during World War I so that Congress wouldn’t have to approve every bond issuance by the Treasury Department as it had done previously—freeing up more time for name-calling. 
  • The debt ceiling has been suspended dozens of times over the years, including 3x during the Trump administration. 

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

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Debt Ceiling: Definition, Current Status

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Without suspending the debt ceiling, the US wouldn’t be able to borrow money to pay its bills—and things would get ugly if that happened. The federal government would have to slash spending for programs like Medicaid, local governments would find it harder to borrow, and financial markets could go haywire.

In short, a failure to act would “produce widespread economic catastrophe,” Treasury Secretary Janet Yellen wrote in the Wall Street Journal. 

Important note: The debt ceiling doesn’t account for new spending, like the $3.5 trillion proposal the Democrats have on the table. Instead, it’s about spending Congress has already authorized, such as paying out Social Security. Over the years, the debt ceiling has become a “political weapon,” according to the AP, as each party tries to blame the other for their spending habits and for heaping more debt on the US. 

IRS: https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/debt-limit

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

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PODCASTS: Surgery Safety Checklists

ATUL GAWANDE MD

Medical Culture

BY ERIC BRICKER MD

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Study Finds COVID-19 Accelerated Physician Practice Acquisitions

Study Finds COVID-19 Accelerated Physician Practice Acquisitions

By Health Capital Consultants, LLC


A recent study from Physicians Advocacy Institute (PAI), prepared by Avalere Health, associated the growing number of both physician practice acquisitions and employed physicians between 2019 and 2021 with the COVID-19 pandemic.

To study COVID-19’s impact on physician employment trends, the June 2021 study evaluated the IQVIA OneKey database that contains physician practice and health system ownership information.

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To assess these trends at a national and regional level, Avalere researchers studied the two-year period from January 1, 2019 to January 1, 2021. (Read more…)

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The BUSINESS of Medical Practice

BY DR. David Edward Marcinko MBA

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RELATED TEXTS: https://medicalexecutivepost.com/2021/04/29/why-are-certified-medical-planner-textbooks-so-darn-popular/

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HOSPITAL OPERATIONS: Organizations, Strategies, Techniques, Tools, Templates and Case Models

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Hospitals and Healthcare Organizations

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On Higher Prescription Drug Cost-Sharing and Mortality?

Raises Mortality among Medicare PART D Beneficiaries

QUERY: What are the health consequences when patients reduce their use of prescribed medications in response to higher out-of-pocket costs?

w28439.jpg

In The Health Costs of Cost-Sharing (NBER Working Paper 28439), researchers Amitabh Chandra, Evan Flack and Ziad Obermeyer use the distinctive out-of-pocket cost-sharing features of Medicare Part D to demonstrate that such reductions can increase mortality.

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CMS: Open Payment Data

OPEN PAYMENTS DATA SEARCH TOOL

By Dr. David Edward Marcinko MBA

The Open Payments Search Tool is used to search payments made by drug and medical device companies to physicians and teaching hospitals.

CMS releases star ratings; nearly 10% of hospitals earn ...

WEBSITE: https://openpaymentsdata.cms.gov/

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The Next-Generation of “Anti-Millionaire” Doctors

“$1 Million Mistake: Becoming a Doctor”

See the source image

BY DR. DAVID E. MARCINKO MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

CBS Moneywatch published an article entitled “$1 Million Mistake: Becoming a Doctor” Aside from the possibility that devoting one’s life to helping others might be considered a mistake, medical student Dan Coleman was struck by the “$1 million” figure.

Before medical school, he worked in the pharmaceutical industry and even turned down a hefty promotion to his education as soon as possible, rather than defer for a year or two. But, his financial calculations made it fairly obvious that, including benefits, bonuses, and potential promotions, his medical decision was not a $1 million mistake, but was more like a $1.3 million dollar disaster. Still; he opined:

Yet, even today, as we stare down the barrel of the Affordable Care Act, being a doctor is a very desirable job. We may not be famous, but we will be well-respected. We may not be rich, but we will certainly live comfortably. We may work a lot, but we will never be out of work. To future doctors, the young and impecunious, the anti-millionaires, tuition is a mere afterthought. All that matters is the MD.

Source: http://in-training.org/medical-students-the-anti-millionaires-4361

Millionaire Interview 81 - ESI Money

OVER HEARD IN THE MEDICAL STUDENT’S LOUNGE

“We are medical students.
We are young, proud, and righteous.
We have made the hard choice (medicine), but we have cleared the high hurdle (getting into school).


We know healthcare is a difficult, imperfect art, but we are devoted.
We arm ourselves with the weapons of knowledge and compassion, prepared to defend against the onslaught of trauma, disease, and time.
We are here to the bitter end, for our patients and ourselves.
And above all, we know the cost of our choice.

And if we’re lucky, it will stay under 6% interest through graduation”.

Daniel Coleman

[Georgetown University School of Medicine]

First-year Student

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

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MEDICARE: Safe Harbor Regulations

Medicare “Safe Harbor” Regulations

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The Medicare Safe Harbor rules were passed in an effort to identify areas of practice that would not lead to a conviction under the anti-fraud statute.  The Safe Harbor regulations provide for eleven areas where providers may practice without violating the anti-fraud statute. 

CITE: https://www.amazon.com/Dictionary-Health-Insurance-Managed-Care/dp/0826149944/ref=sr_1_4?ie=UTF8&s=books&qid=1275315485&sr=1-4

Areas of safe practice under these regulations are briefly highlighted below:

  • Large Entity Investments – Investment in entities with assets over $50 million. The entity must be registered and traded on national exchanges.
  • Small Entity Investments – Small entity investment entities must abide by the 40-40 rule.  No more than 40% of the investment interests may be held by investors in a position to make referrals. Additionally, no more than 40% of revenues can come through referrals by these investors.
  • Space and Equipment Rentals – Such lease agreements must be in writing and must be for at least a one year term. Furthermore, the terms must be at fair market value.
  • Personal Services and Management Contracts – These contracts are allowable as long as certain rules are followed. Like lease agreements, these personal service and management contracts must be in writing for at least a one-year term, and the services must be valued at fair market value.
  • Sale of a medical practice – There are restrictions if the selling practitioner is in a position to refer patients to the purchasing practitioner.
  • Referral services– Referral services (such as hospital referral services) are allowed. However, such referral services may not discriminate between practitioners who do or do not refer patients.
  • Warranties – There is certain requirements if any item of value is received under a warranty.
  • Discounts – Certain requirements must be met if a buyer receives a discount on the purchase of goods or services that are to be paid for by Medicare or Medicaid.
  • Payments to Bona Fide Employees – Payments made to bona fide employees do not constitute fraud under the Safe Harbor Regulations.
  • Group Purchasing Organizations – Organizations that purchase goods and services for a group of entities or individuals are allowed; provided certain requirements are met.
  • Waiver of Beneficiary Co-Insurance and Deductible – Routine waiver would not come under the safe harbor.

A physician’s actions that come under the Safe Harbor Regulations will not violate the Medicare Fraud and Abuse Statutes.  However, the provider must still abide by the Stark amendments and must also abide by applicable state law.

STARK UPDATE: https://medicalexecutivepost.com/2018/08/03/cms-to-review-stark-law-relevance-once-again/

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Financing LONG-TERM CARE Needs?

AGING AND RETIREMENT

Long-term care (LTC) may not be the first thing individuals or couples think about as they approach retirement, but the costs for those who needs it can disrupt and derail retirement security. A good plan for long-term care requires many decisions over an extended period of time, and well before retirement.

In this article, Milliman consultant Robert Eaton discusses the major considerations and options for financing LTC needs in retirement.

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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™

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Effect of Negative Credit Shocks on Hospital Quality

A STUDY OF the National Bureau of Economic Research

BY HEALTH CAPITAL CONSULTANTS, LLC


A recent study from the National Bureau of Economic Research (NBER) indicates that quality and patient outcomes suffer in hospitals that cannot maintain their relationships with banks and their lines of credit.

The NBER study measured quality and cost data in Medicare-certified hospitals from 2010 to 2016, during which banks were undergoing annual stress tests. Regulatory “stress tests” are annual assessments from the Federal Reserve, put in place after the Great Recession in 2008, to examine a bank’s ability to survive an impending economic crisis. (Read more…) 

ASSESSMENT: Your thoughts are appreciated.

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Tele-Medicine Valuation and Reimbursement

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By Health Capital Consultants, LLC
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The second installment in this five-part Health Capital Topics series on the valuation of telemedicine will focus on the reimbursement environment for telemedicine.
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Telemedicine is reimbursed based on the services provided through this medium and includes many restrictions on where, how, and by whom services can be conducted. The first installment in this series introduced telemedicine and its increasing importance to, and popularity among, providers and patients. It also discussed the current and future challenges related to telemedicine, many of which hinge upon reimbursement restrictions and regulations. (Read more…)
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Financial Stress in Times of Transition

Financial Stress Adaptation

By Rick Kahler CFP®

Stress is what happens when something you care about is at stake. This definition comes from Susan Bradley, CFP, author of Sudden Money and a specialist in the financial aspect of life transitions.

The stress around these transitions is a common reason that people seek out financial advice. We tend to be driven to consult advisors as a result of stressful changes in our lives, such as a divorce, a sudden money event like an inheritance or insurance settlement, an investment or job loss, retirement, or the death of a loved one.

While all these life events certainly have financial components, it’s almost always the emotional components of the change—how we respond to them—that are the cause of the stress.

Any change includes three stages: an ending, a period of passage while we relate and adapt to the change, and a new beginning. This period of transition can be fraught with emotion and behaviors that can trip us up in many ways, including financially.

Susan identifies nine such emotions and behaviors that she sees commonly in people in transition.

1. Lack of identity. If the transition results in the loss of a familiar role—spouse or employee, for example—you may struggle with “Who am I now? “There is often confusion and ambivalence about the future, and an inability to make decisions.

2. Confusion/Overwhelm/Fog. There is a sense of defeat by everything. You may physically slump, have a glazed-over look, and ask others to repeat a lot. It’s hard to understand, be present, respond, focus, or move forward.

3. Hopelessness. You may have a sense of having given up, not being in control of your fate, or being a victim. It may seem that there is nothing you can do to change yourself or the outcome. Financial decision-making is very difficult.

4. Invincibility. This can happen with a big positive change in your finances. You may think everything is going to turn out fine. You may feel euphoric, confident, and smarter than your advisors. You may spend more and take greater investment risks.

5. Mental and Physical Fatigue. Change can be exhausting, and the exhaustion can go undetected by others and even yourself. You may have difficulty following an agenda and tasks.

6. Numb/Withdrawn. You may feel ambivalent about and indifferent to exploring the changes in your life, what you want, and what the future may hold. You don’t give much feedback and are withdrawn and non-expressive. You may miss or not return phone calls or emails. The planning process often comes to a standstill.

7. Narrow or Fractured Focus. You may either be preoccupied with one area that excludes everything else or have an inability to focus on anything. In either case, focusing on what’s important becomes difficult or impossible.

8. Inconsistent Behavior. This is the inability to hold to one position. Instead, you may change your mind repeatedly or switch between opposite positions. You are uncertain and often embrace opposites in your wants and desires in the same breath. Making decisions become impossible.

9. Combative. You may hold on to feelings of anger, resentment, victimization, and rage regardless of the facts. You are outwardly emotionally expressive and challenging. You don’t respond well to logic and practicality. A combative person doesn’t have problems making decisions, but does have difficulty making good decisions that are in their best interests.

Assessment

Emotions and behaviors like these are generally temporary. Financial decisions made in the midst of transition-based stress, though, can have lasting negative consequences. The support of trustworthy advisors can be invaluable in navigating through both painful and joyful life changes.

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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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The Surprising Spending Patterns of High Earners

If you want to guess someone’s income level, look at what they buy

By Rick Kahler CFP®

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Obviously, the rich and the poor will spend their available funds on different things.  Just what those things are, however, is less obvious. To illustrate, here is a pop quiz: Since 1992, what two products most consistently indicated that those using them were in the top 25% of all income earners in the U. S.?

Guessing a new car or a house would be logical, but wrong. The top two products indicative of being in that top one-fourth were dishwashers and dishwashing detergent. According to a fascinating study done by Marianne Bertrand and Emir Kamencia, “Coming Apart? Cultural Distances in the United States Over Time,” published in June 2018, if you use either there is about a 70% chance you are in the highest-earning 25%.

The study’s broader focus was on cultural differences, but what I couldn’t stop reading was the economic information. The products indicating affluence were nowhere near what I would have guessed.

Let’s start with 1992. The top product purchased by the rich was a dishwasher. If you owned one, there was a 70.4% chance you were in the top quartile of income earners. If you used dishwasher detergent, the chances were 70.2% you earned a high income. If you took a vacation where you traveled away from home, the chances were 67.0% you were high income. The top brands purchased by the affluent/rich were Grey Poupon Dijon mustard (62.2%), Kodak film (61.6%), and Thomas English muffins (61.5%). The top TV shows watched were Autoworks 200 (57.3%), Bush Clash (57.1%), and Tour du Pont (56.7%). Sorry, but I’ve never heard of any of these shows.

Moving on to 2004, the preferences of high income earners shifted slightly. The top product purchased by the affluent was a new vehicle (73.6%), followed by dishwashing detergent (71.6%), and owning a dishwasher (70.8%). A vacation was in fourth place with 70.5%. The top brands indicating affluence were Land O’ Lakes butter (59.2%), Kikkoman soy sauce (58.7%), and people who did not use a BIC lighter (58.7%). The top TV shows were the Super Bowl (58.5%), NFL Monday Night Football (56.1%), and NFL Regular Season Football (55.9%).

Jaguar Touring sedan XJ-V8-LWB

What about today? In 2016—the last year of data studied—the top product was a vacation (70.9%), owning a passport (70.3%), and having a Bluetooth in your vehicle (70.2%). Eight of the top 10 items related to travel or technology. The other two? Numbers five and six were owning a dishwasher and using dishwasher detergent. The top brand indicative of a high income was far and away Apple, with an iPhone first (69.1%) and an iPad second (66.9%). Across all years in their data, no individual brand was as predictive of being high-income than these two products. Other brands high on the list were Verizon Wireless (61.0%), an Android phone (59.5%), and Kikkoman soy sauce. Top TV shows were the Super Bowl (57.1%), Love It Or List It (55.9%), and Property Brothers (55.7%).

Keep in mind that the study showed seven out of 10 people who own iPhones, travel on vacation, or use dishwashers are in the top 25% of income earners. Not all people who do these things are affluent. Still, the odds that they are high earners are far better than the odds of winning any game of chance in Deadwood.

Assessment

So next time you want to size up the chances of someone being high income, ask them where they went on vacation this year and whether they took vacation photos with an iPhone or iPad. Or just ask how often they run their dishwasher.

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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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™

Poverty in the USA

Fewer people in the US are living in poverty

By Rick Kahler CFP®

According to the October 2017 annual report of the Hamilton Project of the Brookings Institute, the number of Americans living in poverty declined by 13%, or 6 million people, in the two years from 2014 to 2016. That’s encouraging news.

Not so encouraging is that 40.6 million people still live under the government poverty level. This is about one out of every eight Americans. The department of Health and Human Services sets the poverty rate at $32,580 or less for a family of six and $16,020 or less for two people.

Who are those officially classified as poor?

According to IPUMS, an organization associated with the University of Minnesota which integrates worldwide census data, 33% are children under age 18 and 11% are seniors over age 65. So 56% of those living in poverty are of working age, ages 18-65.

Of those who are working age, 21% are disabled, 15% are caregivers, 13% are students, and 10% are early retirees or unclassified, which leaves 41% available to work full time. This is 24% of all people who are in poverty, or about 9.8 million people.

Of that 9.8 million, 65% work part time, 25% work full time, and 10% don’t work. This means just under one million of the 40.6 million people in poverty are actually able to work but unemployed.

Something I found interesting was that of the 65% who work part time, two-thirds (4.3 million) choose to do so and only one-third (2.1 million) would like to work full time. If we add the one million who are unemployed and the 2.1 million part time workers who want full time employment, we have 3.1 million people in poverty who would like to work full time, but can’t find work. This is just 7.4% of all people considered to be below the poverty level.

That leads me to wonder what might change if the 4.3 million choosing to work part time actually worked full time. Might a significant portion of them pull themselves and their families out of poverty? Is it possible that many of these people choose to live in poverty? Or might some of them choose to work part time because earning more would be countered by factors like higher child care costs or losses in government benefits? While I don’t have any statistics on this, I have a hunch it is both.

Keven Winder, a life coach who blogs at thriveinexile.com, has a post from June 2017 titled “The Poverty of the Poor.” He says, “The cause of poverty is not solely education, politics, or the need for jobs. It’s not mental illness, addiction, housing, or food programs,” which he contends are by-products of poverty. “Poverty is deeper. Poverty is disengagement from that which powers us.”

It seems to me that Winder is using “disengagement” to mean what might be described as emotional poverty. The type of emotional disengagement that helps keep people in poverty may be no different from that of a person who earns a comfortable income but chooses not to save for retirement. Or someone who loses a job but has too much false pride to take a lesser one even temporarily.

We know the cure for financial behaviors based in emotional disengagement is not more information. Those choosing to work part time and live in poverty don’t need budget figures on how earning more would increase their standard of living. The behavior goes much deeper and is emotionally entrenched.

Assessment

Certainly, financial therapy might make a difference. Unfortunately, it’s still unavailable for too many of those who need it the most.

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.

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About USAFACTS.com

About the Website: USAFACTS.com

By Staff Reporters

Principles

USAFacts is a new data-driven portrait of the American population, our government’s finances, and government’s impact on society. They are a non-partisan, not-for-profit civic initiative and have no political agenda or commercial motive. They provide this information as a free public service and are committed to maintaining and expanding it in the future.

USA FACTS rely exclusively on publicly available government data sources. They don’t make judgments or prescribe specific policies. Whether government money is spent wisely or not, whether our quality of life is improving or getting worse – that’s for you to decide. They hope to spur serious, reasoned, and informed debate on the purpose and functions of government. Such debate is vital to our democracy. They hope that USAFacts will make a modest contribution toward building consensus and finding solutions.

More

There’s more to USAFacts than their website. They also offer an annual report, a summary report, and a “10-K” modeled on the document public companies submit annually to the SEC for transparency and accountability to their investors.

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Innspiration

USAFacts was inspired by a conversation Steve Ballmer [former CEO Microsoft Corporation] had with his wife, Connie. She wanted him to get more involved in philanthropic work. He thought it made sense to first find out what government does with the money it raises.

Assessment

Where does the money come from and where is it spent? Whom does it serve? And most importantly, what are the outcomes?

Visit: http://www.USAFACTS.com

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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CEO Compensation is Down

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NO, IT’S UP – YOU BETTER JUDGE FOR YOURSELF        

ArtBy Arthur Chalekian GEPC

[Financial Consultant]

The New York Times reported the 200 most-highly-paid CEOs in the United States collectively experienced a pay cut last year!

CEOs’ average compensation – all CEOs compensation added together and then divided by 200 – fell by 15 percent from 2014 to 2015.

Of course, you know what they say about lies and statistics

Equilar, the company responsible for the study, reported CEO pay grew modestly in 2015. They looked at median CEO pay – the number in the middle. It was $16.6 million for fiscal 2015. That’s up 5 percent from the previous year.

No matter how you interpret the results, not one CEO earned more than $100 million. CEOs in the technology industry had the highest median pay while those in basic materials (which includes oil and gas companies) had the lowest, according to Equilar.

Many people have argued company performance should inform CEO pay, but there wasn’t much evidence this was the case. Although there may have been a basis for CEO pay changes, there was no clear correlation to shareholder returns or company revenues.

For instance:

  • A 702 percent increase in pay was awarded when total shareholder return was down 5 percent, and company revenues were down 1 percent.
  • A 286 percent increase in pay was awarded when total shareholder return was up 16 percent, and company revenues were up 9 percent.
  • A 48 percent reduction in pay occurred when total shareholder return was up 25 percent, and company revenues were up 4 percent.

Assessment

The portion of 2015 corporate budgets allotted to pay hikes for employees increased by 2.8 percent, on average, according to Mercer. The report said, “… the highest-performing employees received average base pay increases of 4.8 percent in 2015 compared to 2.7 percent for average performers and 0.2 percent for the lowest performers …”

Conclusion

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