COVID, Inflation and Value Investing

Millennial Investing

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By Vitaliy Katsenelson, CFA

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COVID, Inflation, and Value Investing: Millennial Investing
I was recently interviewed by Millennial Investors podcast. They sent me questions ahead of time that they wanted to ask me “on the air”. I found some of the questions very interesting and wanted to explore deeper. Thus, I ended up writing answers to them (I think through writing). You can listen to the podcast here

By the way, I often get asked how I find time to write. Do I even do investment research? Considering how much content I’ve been spewing out lately, I can understand these questions. In short – I write two hours a day, early in the morning (usually from 5–7am), every single day. I don’t have time-draining hobbies like golf. I rarely watch sports. I have a great team at IMA, and I delegate a lot. I spend the bulk of my day on research because I love doing it. 

This is not the first time I was asked these questions. If you’d like to adapt some of my daily hacks in your life, read this essay.

How has Covid-19 changed the game of value investing?

Value investing has not changed. Its fundamental principles, which I describe in “The Six Commandments of Value Investing,” (one-click sign up here to receive it in your inbox) have not changed one iota. The principles are alive and well. What has changed is the environment – the economy. 

I learned this from my father and Stoic philosophers: You want to break up complex problems into smaller parts and study each part individually. That way you can engage in more-nuanced thinking. 

Let’s start with what has not changed. Our desire for in-person human interaction has not changed. At the beginning of the pandemic, we (including yours truly) were concerned about that. We were questioning whether we were going to ever be able to shake hands and hug again. However, the pandemic has not changed millions of years of human evolution – we still crave human warmth and personal interaction. We need to keep this in mind as we think about the post-pandemic world. 

What we learned in 2021 is that coronavirus mutations make predicting the end of the pandemic an impossible exercise. From today’s perch it is safe to assume that Covid-19 will become endemic, and we’ll learn how to live with it. I am optimistic on science. 

Let’s take travel, for example. Our leisure travel is not going to change much – we are explorers at heart, and as we discovered during the pandemic, we crave a change in scenery. However, I can see business travel resetting to a lower base post-pandemic, as some business trips get resolved by simple Zoom calls. Business travel is about 12% of total airline tickets, but those revenues come with much higher profit margins for airlines. 

Work from home. I am still struggling with this one. The norms of the 20th-century workplace have been shaken up by the pandemic. Add the availability of new digital tools and I don’t need to be a Nostradamus to see that the office environment will be different. 

By how much? 

The work from home genie is out of the bottle. It will be difficult to squeeze it back in. My theory right now is that customer support, on-the-phone types of jobs may disproportionately get decentralized. The whole idea of a call center is idiotic – you push a lot of people into a large warehouse-like office space, where they sit six feet apart from each other and spend eight hours a day on the phone talking to customers without really interacting with each other. Current technology allows all this work to be done remotely.

On another hand, I can see that if you have a company where creative ideas are sparked by people bumping into each other in hallways, then work from home is less ideal. But again, I don’t think about it in binary terms, but more like it’s a spectrum. Even for my company. Before the pandemic, half of our folks worked outside of the IMA main office in Denver. Most of our future hires will be local, as I believe it is important for our culture. However, we provide a certain number of days a year of remote work as a benefit to our in-office employees. 

From an investment perspective, we are making nuanced bets on global travel normalizing. We don’t own airlines – never liked those businesses, never will. Most of their profitability comes from travel miles – they became mostly flying banks. 

Office buildings I also put into a too-difficult-to-call pile. There was already plenty overcapacity in office real estate before the pandemic, and office buildings were priced for perfection. The pandemic did not make them more valuable. Maybe some of that overcapacity will get resolved through conversion of office buildings into apartments. By the way, this is the beauty of having a portfolio of 20–30 stocks: I don’t need to own anything I am not absolutely head over heels in love with.

What is the importance of developing a process to challenge your own beliefs?

My favorite quote from Seneca is “Time discovers truth.” My goal is to discover the truth before time does. I try to divorce our stock ownership from our feelings. 

Let me give you this example. If you watch chess grandmasters study their past games, they look for mistakes they have made, moves they should have made, so in the future they won’t make the same mistake twice. I have also noticed they say “white” and “black,” not “I” and “the opponent.” This little trick removes them from the game so that they can look for the best move for each side. They say “This is the best move for white”; “This is the best move for black.”

You hear over and over again from people like Warren Buffett and other value investors that we should buy great companies at reasonable prices, and I’d like to dig deeper on that idea and its two key parts, great companies and reasonable prices. Could you tell us what it takes for a company to qualify as a “great” company?

This question touches on Buffett’s transformation away from Ben Graham’s “statistical” approach, i.e., buying crappy companies that look numerically cheap at a significant discount to their fair value, to buying companies that have a significant competitive advantage, a high return on capital, and a growth runway for their earnings. 

The first type of companies often will not be high-quality businesses and will most likely not be growing earnings much. Let’s say the company is earning $1. Its earnings power will not change much in the future – it is a $5 stock trading at 5 times earnings. If its fair value is $10, trading at 10 times earnings, And if this reversion to fair value happens in one year, you’ll make 100%. If it takes 5 years then your return will be 20% a year (I am ignoring compounding here). So time is not on your side. If it takes 10 years to close the fair value gap, your return halves. Therefore you need a bigger discount to compensate for that. Maybe, instead of buying that stock at a 50% discount, you need to buy a company that is not growing at a 70% discount, at $3 instead of $5. This was pre-Charlie Munger, “Ben Graham Buffett.” 

Then Charlie showed him there was value in growth. If you find a company that has a moat around its business, has a high return on capital, and can grow earnings for a long time, its statistical value may not stare you in the face. But time is on your side, and there is a lot of value in this growth. If a company earns $1 today and you are highly confident it will earn $2 in five years, then over five years, if it trades at 10 times earnings, a no-growth company may be a superior investment if the valuation gap closes in less than 5 years, while one with growing earnings is a superior investment past year 5. 

Both stocks fall into the value investing framework of buying businesses at a discount to their fair value, looking for a margin of safety. With the second one, though, you have to look into the future and discount it back. With the first one, because the lack of growth in the future is not much different from the present, you don’t have to look far.

There is a place for both types of stocks in the portfolio – there are quality companies that can still grow and there are companies whose growth days are behind them. In our process we equalize them by always looking four to five years out. 

What qualifies as a “reasonable price”? 

We are looking for a discount to fair value where fair value always lies four to five years out. In our discounted cash flow models, we look a decade out. Our required rate of return and discount to fair value will vary by a company’s quality. There are more things that can go wrong with lower-quality companies than with the better ones. High-quality companies are more future-proof and thus require lower discount rates. We are incredibly process-driven. We have a matrix by which we rate all companies on their quality and guestimate their fair value five years out, and this is how we arrive at the price we want to pay today. 

Why do you believe that buying great companies sometimes isn’t a great investing strategy?

Because that is first-level thinking, which only looks at what stares you in the face – things that are obvious even to untrained eyes and thus to everyone. First-level thinking ignores second-order effects. If everyone knows a company is great, then its stock price gets bid up and the great company stops being a great investment. With second-level thinking you need to ask an additional question, which in this case is, what is the expected return? Being a great company is not enough; it has to be undervalued to be a good stock. 

We are looking for great companies that are temporarily (key word) misunderstood and thus the market has fallen out of love with them. Over the last decade, when interest rates only declined, first-level thinking was rewarded. It almost did not matter how much you paid for a stock. If it was a great company, its valuations got more and more inflated. 

You’re a big advocate of having a balanced investment approach that is able to weather all storms. What investments have you found that you expect will be able to hold their buying power if inflation persists through 2022 and 2023?


There are many different ways to answer this question. In fact, every time I give an answer to this question I arrive at a new answer. You want to own companies that have fixed costs. You want assets that have a very long life. I am thinking about pipeline companies, for instance. They require little upkeep expense, and their contracts allow for CPI increases (no decreases); thus higher inflation will add to their revenue while their costs will mostly remain the same. 

We own tobacco companies, too. I lived in Russia in the early ’90s when inflation was raging. I smoked. I was young and had little money. I remember one day I discovered that cigarette prices had doubled. I had sticker shock for about a day. I gave up going to movies but somehow scraped up the money for cigarettes. 

Whatever answer I give you here will be incomplete. It’s a complex problem, and so each stock requires individual analysis. In all honesty, you have to approach it on a case-by-case basis. 

With higher inflation, you’d expect bond yields to rise, since bond investors will demand a higher return to keep pace with inflation. However, CPI inflation is currently over 6%, and the 10-year Treasury is sitting at 1.5%. Why haven’t we seen Treasury yields rise more, and what does it mean for investors if a spread this wide persists?

I am guessing here. My best guess is that so far investors have bought into the Fed’s rhetoric that inflation is transitory due to the economy’s rough reopening and supply chain problems. I wrote a long article on this topic. To sum up, part of the inflation is transitory but not all of it. 

I am somewhat puzzled by the labor market today. I’ve read a few dozen very logical explanations for the labor shortage, from early retirement of baby boomers to the pandemic triggering a search for the meaning of life and thus people quitting dead jobs and all becoming Uber drivers or starting their own businesses. Labor is the largest expense on the corporate income statement, and if it continues to be scarce then inflation will persist. 

I read that employees are now demanding to work from home because they don’t want to commute. The labor shortages are shifting the balance of power to employees for the first time in decades. This will backfire in the long run, as employers will be looking at how to replace employees with capital, in other words, with automation. If you run a fast-food restaurant and your labor costs are up 20–30% or you simply cannot hire anyone, you’ll be looking for a burger flipping machine. 

If we continue to run enormous fiscal deficits, then the US dollar will crack. The pandemic has accelerated a lot of trends that were in place. We were on our way to losing our reserve currency status. Let me clarify: That is going to be a very slow, very incremental process. It will be slow because currency pricing is not an absolute but a relative endeavor, and the alternatives out there are not great. But two decades ago the US dollar was a no-brainer decision and today it is not. So we’ll see countries slowly diversifying away from it. A weaker US dollar means higher, non transitory inflation. 

You wrote The Little Book of Sideways Markets, in which you point out that history shows that a sideways market typically occurs after a secular bull market. With the role that the Federal Reserve plays in the financial markets, do you still anticipate that valuations will normalize in the coming years?

I say yes, in part because declining interest rates have pushed all assets into stratospheric valuations. Rising bond yields and valuations pushed heavenward are incompatible. Yes, I expect valuations to do what they’ve done every time in history: to mean revert. In big part this will depend on interest rates, but if rates stay low because the economy stutters, then valuations will decline – this is what happened in Japan following their early-1990s bubble. Interest rates went to zero or negative, but valuations declined. 

The stock market today is very much driven by the Federal Reserve’s monetary policy. Is there a point at which they are able to take the gas off the pedal and allow markets to normalize?

I am really puzzled by this. We simply cannot afford higher interest rates. Going into the pandemic our debt-to-GDP was increasing steadily despite the growing economy. In fact, you could argue that most of our growth has come from the accumulation of debt (the wonders of being the world’s reserve currency). Our debt has roughly equaled our GDP, and all of our economic growth in some years equaled the growth in government debt.

During the pandemic we added 40% to our debt in less than two years. We have higher debt-to-GDP than we had during WWII. After the war we reduced our debt. Also, we were a different economy then – we were rebuilding both the US and Europe. As a society we had a high tolerance for pain. 

Just like debt increases stimulate growth, deleveraging reduces growth. Also, I don’t think politicians or the public care about high debt levels. So far debt has only brought prosperity. However, higher interest rates would blow a huge hole in government budgets. If the 10-year Treasury rises a few percentage points, interest rates will increase by the amount we spend on national defense. One thing I am certain about is that our defense spending will not decline, so higher interest rates will lead to money printing and thus inflation. 

I am also puzzled by the impact of higher interest rates on the housing market. Housing will simply become unaffordable if interest rates go up a few percentage points. Loan-to-income requirements will price a huge number of people out of the market, and housing prices will have to decline. This Higher rates will also reduce the number of transactions in the real estate market, because people will be locked into their 2.5% mortgages, and if they sell they’d have to get 4-5-6% mortgages. There are a lot of second-order effects that we are not seeing today that will be obvious in hindsight. Housing prices drive demand in adjacent sectors such as home improvement. And think of the impact of higher rates on any large purchase, for example a car. 

We’re seeing the continuing rise of China has a big player in the global economy, and I know you like to invest internationally. As a value investor, how do you think about China’s rise as a global powerhouse and how it might affect the financial markets?

During the Cold War there were two gravitational centers, and as a country you had to choose one – you were either with the Soviets or with the West. Something similar will likely transpire here, too. I have to be careful using the Cold War analogy, because the Cold War was driven by ideology – it was communism vs. capitalism. Now the tension is driven by economic competition and our unwillingness to pass the mantle of global leader to another country. 

We are drawing red lines in technology. Data is becoming the new oil. China is using data to control people, and we want to make sure they don’t have control over our data. Therefore, the West wants to make sure that our technology is China-free. The US, Europe, and India will likely be pursuing a path where Chinese technology and Chinese intellectual property are largely disallowed. We have already seen this happening with Huawei being banned from the US and Western Europe. Other countries, including Russia, will have to make a choice. Russia will go with China.

Also, we are concerned that most chip production is centered in Taiwan, which at some point may be grabbed by China. The technological ecosystem would then have to undergo a significant transformation. This has already started to happen as we begin to bring chip production back to the US and Europe. 

The pandemic made us realize that globalization had made us reliant on the kindness of strangers, and we found we could not even get facemasks or ventilators. 

Globalization was deflationary; deglobalization will be inflationary.

This increased tension between countries has led to your investing in the defense industry. Could you tell us how you think about this industry? 

Despite the rise of international tensions, the global defense industry has been one of sectors that still had reasonable (sometimes unreasonably good) valuations. We have invested in half a dozen US and European defense companies. The US defense budget is unlikely to decline in the near future. There is a common misperception that Republicans love defense and Democrats hate it. Those may be party taglines, but history shows that defense spending has been driven by macro factors – it did not matter who was the occupant of the White House. 

There are a lot of things to like about defense businesses. They are an extension of the US or European governments. Most of them are friendly monopolies or duopolies. They have strong balance sheets, good returns on capital, and predictable and growing (maybe even accelerating) demand. They are noncyclical. They have inflation escalators built into their contracts. I don’t have to worry about technological disruptions. They are also a good macro hedge.

We added to our European defense stocks recently for several reasons. Europe has underinvested in defense, relying on the US Yet we have shown time and again that we may not be as dependable as we once were. 

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SURVEY on COVID-19’s Impact On Physician Practices and Employment

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By Staff Reporters

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• 108,700 additional physicians became employees of hospitals or other corporate entities – 83,000 of that shift occurred after the onset of COVID-19.
• Hospital and other corporate entities acquired 36,200 additional physician practices over the three-year period, resulting in a 38% increase in the percentage of corporate owned practices.
• 58,200 additional physicians become hospital employees – 51,000 of that shift occurred after the onset of COVID-19.
• 50,500 additional physicians became employees of corporate entities – 32,000 of that shift occurred after the onset of COVID-19.

Source: Physicians Advocacy Institute, April 2022

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Great Resignation: https://medicalexecutivepost.com/2022/03/08/healthcare-industry-hit-with-the-great-resignation-retirement/

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Can Doctors Afford to Retire Early – TODAY?

By Staff Reporters

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You’ve got a sense of your ideal retirement age. And you’ve probably made certain plans based on that timeline. But what if you’re forced to retire sooner than you expect? Aging baby-boomers, corporate medicine, the medical practice great resignation and/or the pandemic, etc?

RESIGNATION: https://medicalexecutivepost.com/2021/12/12/healthcare-industry-hit-with-the-great-resignation-retirement/

Early retirement is nothing new, but it’s clear how much the COVID-19 pandemic has affected an aging workforce. Whether due to downsizing, objections to vaccine mandates, concerns about exposure risks, other health issues, or the desire for more leisure time, the retired general population grew by 3.5 million over the past two years—compared to an annual average of 1 million between 2008 and 2019—according to the Pew Research Center.1 At the same time, a survey conducted by the National Institute on Retirement Security revealed that more than half of Americans are concerned that the COVID-19 pandemic has impacted their ability to achieve a secure retirement.2

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There’s no need to panic, but those numbers make one thing clear, says Rob Williams, managing director of financial planning, retirement income, and wealth management for the Schwab Center for Financial Research. Flexible and personalized financial planning that addresses how you’d cope if you had to retire early can help you make the best use of all your resources. 

So – Here are six steps to follow. We’ll use as an example a person who’s seeing if they could retire five years early, but the steps remain the same regardless of your individual time frame.

Step 1: Think strategically about pension and Social Security benefits

For most retirees, Social Security and (to a lesser degree) pensions are the two primary sources of regular income in retirement. You usually can collect these payments early—at age 62 for Social Security and sometimes as early as age 55 with a pension. However, taking benefits early will mean that you get smaller monthly benefits for the rest of your life. That can matter to your bottom line, even if you expect Social Security to be merely the icing on your retirement cake.

On the Social Security website, you can find a projection of what your benefits would be if you were pushed to claim them several years early. But if you’re part of a two-income couple, you may want to make an appointment at a Social Security office or with a financial professional to weigh the potential options.

For example, when you die, your spouse is eligible to receive your monthly benefit if it’s higher than his or her own. But if you claim your benefits early, thus receiving a reduced amount, you’re likewise limiting your spouse’s potential survivor benefit.

If you have a pension, your employer’s pension administrator can help estimate your monthly pension payments at various ages. Once you have these estimates, you’ll have a good idea of how much monthly income you can count on at any given point in time.

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Step 2: Pressure-test your 401(k)

In addition to weighing different strategies to maximize your Social Security and/or pension, evaluate how much income you could potentially derive from your personal retirement savings—and there’s a silver lining here if you’re forced to retire early. 

Rule of 55

Let’s say you leave your job at any time during or after the calendar year you turn 55 (or age 50 if you’re a public safety employee with a government defined-benefit plan). Under a little-known separation-of-service provision, often referred to as the “rule of 55,” you may be able take distributions (though some plans may allow only one lump-sum withdrawal) from your 401(k), 403(b), or other qualified retirement plan free of the usual 10% early-withdrawal penalties. However, be aware that you’ll still owe ordinary income taxes on the amount distributed. 

This exception applies only to the plan (including any consolidated accounts) that you were contributing to when you separated from service. It does not extend to IRAs. 

4% rule

There’s also a simple rule of thumb suggesting that if you spend 4% or less of your savings in your first year of retirement and then adjust for inflation each year following, your savings are likely to last for at least 30 years—given that you make no other changes to your withdrawals, such as a lump sum withdrawal for a one-time expense or a slight reduction in withdrawals during a down market. 

To see how much monthly income you could count on if you retired as expected in five years, multiply your current savings by 4% and divide by 12. For example, $1 million x .04 = $40,000. Divide that by 12 to get $3,333 per month in year one of retirement. (Again, you could increase that amount with inflation each year thereafter.) Then do the same calculation based on your current savings to see how much you’d have to live on if you retired today. Keep in mind that your money will have to last five years longer in this instance.

Knowing the monthly amount your current savings can generate will give you a clearer sense of whether you’ll have a shortfall—and how large or small it might be. Use our retirement savings calculator to test different saving amounts and time frames.

Step 3: Don’t forget about health insurance, doctor!

Nobody wants to spend down a big chunk of their retirement savings on unanticipated healthcare costs in the years between early retirement and Medicare eligibility at age 65. If you lose your employer-sponsored health insurance, you’ll want to find some coverage until you can apply for Medicare. 

Your options may include continuing employer-sponsored coverage through COBRA, insurance enrollment through the Health Insurance Marketplace at HealthCare.gov, or joining your spouse’s health insurance plan. You may also find discounted coverage through organizations you belong to—for example, the AARP. 

Step 4: Create a post-retirement budget

To make sure your retirement savings will cover your expenses, add up the monthly income you could get from pensions, Social Security, and your savings. Then, compare the total to your anticipated monthly expenses (including income taxes) if you were to retire five years early and are eligible, and choose to file, for Social Security and pension benefits earlier. 

Take into account various life events and expenditures you may encounter. You may not pay off your mortgage by the date you’d planned. Your spouse might still be working (which can add income but also prolong certain expenses). Or your children might not be out of college yet. 

You’re probably fine if you anticipate that your monthly expenses will be lower than your income. But if you think your expenses would be higher than your early-retirement income, some suggest that you take one or more of these measures:

  • Retire later; practice longer.
  • Save more now to fill some of the potential gap.
  • Trim your budget so there’s less of a gap down the road.
  • Consider options for medical consulting or part-time work—and begin to explore some of those opportunities now.

To the last point, finding a physician job later in life can be challenging, but certain employment agencies specialize in this area. If you can find work you like that covers a portion of your expenses, you’ll have the option of delaying Social Security and your company pension to get higher payments later—and you can avoid dipping into your retirement savings prematurely. 

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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™

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

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Step 5: Protect your portfolio

When you retire early, you have to walk a fine line with your portfolio’s asset allocation—investing aggressively enough that your money has the potential to grow over a long retirement, but also conservatively enough to minimize the chance of big losses, particularly at the outset.

“Risk management is especially important during the first few years of retirement or if you retire early,” Rob notes, because it can be difficult to bounce back from a loss when you’re drawing down income from your portfolio and reducing the overall number of shares you own.  

To strike a balance between growth and security, start by making sure you have enough money stashed in relatively liquid, relatively stable investments—such as money market accounts, CDs, or high-quality short-term bonds—to cover at least a year or two of living expenses. Divide the rest of your portfolio among stocks, bonds, and other fixed-income investments. And don’t hesitate to seek professional help to arrive at the right mix. 

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SPONSOR: http://www.CertifiedMedicalPlanner.org

Many people are unaccustomed to thinking about their expenses because they simply spend what they make when working, Rob says. But one of the most valuable decisions you can make about your life in retirement is to reevaluate where your money is going now.

This serves two aims. First, it’s a reality check on the spending plan you’ve envisioned for retirement, which may be idealized (e.g., “I’ll do all the home maintenance and repairs!”). Second, it enables you to adjust your spending habits ahead of schedule—whichever schedule you end up following. This gives you more control and potentially more income. 

Step 6: Reevaluate your current spending

For example, if you’re not averse to downsizing, moving to a less expensive home could reduce your monthly mortgage, property tax, and insurance payments while freeing up equity that could also be invested to provide additional monthly income.

“When you are saving for retirement, time is on your side”. You lose that advantage when you’re forced to retire early, but having a backup plan that anticipates the possibility of an early retirement can make the unknowns you face a lot less daunting.

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

References:

1Richard Fry, “Amid the Pandemic, A Rising Share Of Older U.S. Adults Are Now Retired”, Pew Research Center, 11/04/2021, https://www.pewresearch.org/fact-tank/2021/11/04/amid-the-pandemic-a-rising-share-of-older-u-s-adults-are-now-retired/.

2Tyler Bond, Don Doonan and Kelly Kenneally, “Retirement Insecurity 2021: Americans’ Views of Retirement”, Nirsonline.Org, 02/2021, https://www.nirsonline.org/wp-content/uploads/2021/02/FINAL-Retirement-Insecurity-2021-.pdf.

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UPDATE: The Markets, COVID and Home Prices

By Staff Reporters

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  • Markets: Yesterday was a tale of two markets. The Dow, which is home to blue-chip corporations like P&G, gained, while the NASDAQ, comprised of tech stocks, fell. Netflix is now the worst performing stock in the S&P this year.
  • Covid: The DOJ appealed a judge’s ruling that overturned a federal mask mandate for transportation. The move came at the suggestion of the CDC, which determined that people should still wear masks in indoor public transportation settings.
  • Homes: The median existing-home price in the US hit an all-time high of $375,300 in March, up 15% from the year before. With surging mortgage rates and higher home prices, the average borrower is paying ~38% more than they would have for the same home a year ago, according to Realtor.com.

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What is the plan for a future with COVID?

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Q: What is the plan for a future with COVID?
A:
A new 136-page report written by dozens of experts provides a comprehensive roadmap to the next normal both to address the pandemic and protect against future biosecurity threats. The group identified 12 key areas of focus, including long COVID, equity, and vaccines. The report also addressed concerns about how the end of the pandemic will disrupt the U.S. health care system when policies introduced during the public health emergency come to an end. 

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COVID, Inflation and Value Investing [Millennial Interview]

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By Vitaliy Katsenelson CFA

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COVID, Inflation, and Value Investing: Millennial Investing Interview
I was recently interviewed by Millennial Investors podcast. They sent me questions ahead of time that they wanted to ask me “on the air”. I found some of the questions very interesting and wanted to explore deeper. Thus, I ended up writing answers to them (I think through writing). You can listen to the podcast here

By the way, I often get asked how I find time to write. Do I even do investment research? Considering how much content I’ve been spewing out lately, I can understand these questions. In short – I write two hours a day, early in the morning (usually from 5–7am), every single day. I don’t have time-draining hobbies like golf. I rarely watch sports. I have a great team at IMA, and I delegate a lot. I spend the bulk of my day on research because I love doing it. 

This is not the first time I was asked these questions. If you’d like to adapt some of my daily hacks in your life, read this essay.

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

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Update on COVID-19 Booster Shots

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Update on COVID-19 booster shots
In case you missed it: If you or a loved one are 50 or older, or are moderately or severely immunocompromised, you can get an additional Pfizer or Moderna COVID-19 booster shot at no cost to you.

The CDC recommends an additional booster shot for certain individuals to increase protection from severe disease from COVID-19. People over the age of 50, or who are moderately or severely immunocompromised, can get an additional booster of Pfizer or Moderna 4 months after their last dose.

This is especially important for those 65 and older who are at higher risk from severe disease and most likely to benefit from getting an additional booster.

Learn More: Remember: Medicare covers the COVID-19 vaccine, including booster shots, at no cost to you. Find a COVID-19 vaccine location near you.

Sincerely
The Medicare Team

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MORE: https://www.medicare.gov/medicare-coronavirus?utm_campaign=20220406_cvd_prv_gal&utm_content=english&utm_medium=email&utm_source=govdelivery

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The Millennial Spend on COVID-19 Tests?

By Dr. David E. Marcinko MBA CMP®

SPONSOR: http://www.CertifiedMedicalPlanner.org

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Millennials Spent the most on COVID-19 tests ($142)

A recent ValuePenguin survey found out-of-pocket costs for COVID-19 tests on average varied by age groups as follows:

 •  Gen Zers (ages 18-25): $125
 •  Millennials (ages 26-41): $142
 •  Gen Xers (ages 42-56): $101
 •  Baby boomers (ages 57-76): $59

Source: ValuePenguin, “COVID-19 Testing Survey: Americans Talk Out-of-Pocket Charges, Bill Negotiations, Barriers,” February 14, 2022

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

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UPDATE: The Stock Markets and IRS Online Taxpayer ID

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By Staff Reporters

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MARKETS: The S&P 500 fell into a correction for the first time in two years, joining the NASDAQ Composite, as Russia sent troops into pro-Russian regions in Ukraine. The S&P 500 index ended down 1% at 4,304.76, below the correction level at 4,316.91, which would represent a 10% drop from its January 3rd record close. A correction is commonly defined by market technicians as a fall of at least 10% (but not greater than 20%) from a recent peak. The last time the S&P 500 entered a correction was February 27th 2020, when the market was being whipsawed by fears about the outbreak of the COVID pandemic.

And, this bearish market isn’t sparing 2021 winners like Home Depot, which fell the most in nearly two years after supply-chain bottlenecks squeezed its margins. HD was the Dow’s biggest gainer last year.

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

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IRS: According to a news release issued by the IRS, taxpayers now have the option to verify their identities during live, virtual interviews with agents. The agency stresses that no bio-metric data will be required for those interviews.

However, taxpayers once again have the option to verify their identity using ID.me’s facial recognition services. Addressing privacy concerns, the IRS says new requirements are in place to ensure that images provided will be deleted upon verification. That would apply to any new IRS accounts created and those where selfies have already been collected.

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COVID INFECTIONS: The Un-Vaccinated

By Staff Reporters

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33.6% of COVID Infections Were in Unvaccinated Persons

According to a recent CDC study. Among 422,966 reported SARS-CoV-2 infections in LAC residents aged ≥18 years during November 7, 2021–January 8, 2022:

 •  33.6% were in unvaccinated persons
 •  13.3% were in fully vaccinated persons with a booster
 •  53.2% were in fully vaccinated persons without a booster
 •  Unvaccinated persons were most likely to be hospitalized, representing 2.8% of COVID infections
 •  Unvaccinated persons were most likely to be admitted to an ICU, or 0.5% of COVID infections
 •  Unvaccinated persons were most likely to be require intubation for mechanical ventilation, or 0.2% of COVID infections.

Source: CDC, Morbidity and Mortality Weekly Report, February 1, 2022

Lost Vaccine Card: https://portal.ct.gov/vaccine-portal/Vaccine-Knowledge-Base/Articles/Lost-Vaccine-Card?language=en_US

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

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ENDEMIC: Definitions for Related Terms

By Staff Reporters

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Endemic: A constant presence and/or usual prevalence of a disease or infection, such as the Corona virus, within a geographic area. (Hyperendemic is a situation in which there are persistent high levels of disease occurrence.)

MORE: https://www.health.com/condition/infectious-diseases/coronavirus/what-is-an-endemic-virus

As opposed to the terms epidemic, pandemic and sporadic.

RELATED: https://medicalexecutivepost.com/2022/01/13/pandemic-versus-epidemic/

Seasonal Flu: https://www.msn.com/en-us/money/smallbusiness/bill-gates-is-releasing-a-new-book-about-how-to-avoid-another-pandemic-heres-what-we-know/ar-AATFjcO?li=BBnbfcL

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How can the world adapt to Covid-19 in the long term? | News | Wellcome

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UPDATE: Stock Markets, the Economy and Pandemic

By Staff Reporters

CMP logo

SPONSOR: http://www.CertifiedMedicalPlanner.org

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  • Stock Markets: US stocks staged a big afternoon comeback for the second day in a row … but still not big enough to close in the green. American Express was the top performer in both the S&P and the Dow after the company reported its highest billings volume ever in Q4. And, enthusiasm over meme stocks more broadly appears to be dwindling along with cryptos. And, while NASDAQ took a hit, Microsoft reported quarterly sales of more than $50 billion for the first time ever.
  • Economy: The weight of the financial world is on Jerome Powell’s shoulders today. The Federal Reserve chair will provide an update on the central bank’s views on sky-high inflation and its plan for interest rate hikes this year (though none are expected until March).
  • Pandemic: Pfizer and BioNTech started clinical trials for an Omicron-specific vaccine yesterday. The results will help the pharma partners decide whether to replace their current jab formula with one that targets the most dominant Covid variant. The new vaccine is being tested both as a three-shot series for un-vaccinated participants and as a booster for the already vaccinated.
  • CITE: https://www.r2library.com/Resource/Title/082610254

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UPDATE: Markets and the Economy

By Staff Reporters

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TELE-MEDICINE Fraud, Abuse and New Barriers!

Telemedicine: Fraud and Abuse During the COVID Pandemic

By Susan Walberg

The COVID-19 pandemic has brought with it huge challenges for people all over the world; not only the obvious health-related concerns but also shutdowns, unemployment, financial difficulties, and a variety of lifestyle changes as a result.

When the COVID pandemic struck, CMS quickly recognized that access to care would be an issue, with healthcare resources strained and many providers or suppliers shutting down their offices or drastically limiting availability. Patients who needed routine care or follow-up visits were at risk for not receiving services during a time when healthcare providers were scrambling to enhance infection control measures and implement other new safety standards to protect patients and healthcare workers.

The Centers for Medicare and Medicaid Services (CMS) has responded by easing restrictions and regulatory burdens in order to allow patients to receive the healthcare services they need without undue access challenges. One key area that has changed is the restrictions related to telehealth services, which were previously only paid by Medicare under certain circumstances, such as patients living in remote areas.

Among the changes and waivers CMS has offered, telemedicine reimbursement is among the more significant. Telemedicine services, which includes office visits and ‘check ins’ are now allowed and reimbursed by Medicare. In addition to reimbursement changes, CMS has also relaxed the HIPAA privacy and information security enforcement standards, paving the way for providers to adopt a new model of providing services electronically.

TELE-HEALTH BARRIERS: https://www.statnews.com/2021/07/13/telehealth-provisions-emergency-patients/

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MORE:  https://medicalexecutivepost.com/2021/05/18/fraud-schemes-of-few-medical-providers/

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Will Mr. Market Eat Too Much Pi?

By Vitaliy Katsenelson CFA

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This Holiday, Will Mr. Market Eat Too Much Pi?
You can also listen to a professional narration of this article on iTunes, Google & online.

Mr. Market was less than kind to our portfolio over the last few months, and especially the last few weeks. I cannot tell you how little it worries us what Mr. Market thinks about our stocks at any particular point in time. We love* our portfolio even if the Mr. Market doesn’t fancy it today.

Also, before we take Mr. Market seriously, let us tell you about the rationality of Mr. Market lately. The World Health Organization (WHO) names each variant of the Covid virus by going to the next letter of the Greek alphabet. After Delta, which is currently the most predominant variant of the virus ravaging the world, there must have been nine others that were not important enough because we never heard of them. Why nine? Because when the latest variant of concern was found in South Africa, it emerged that the letter Nu was supposed to be applied to it. But Nu sounds a lot like new. WHO didn’t want to confuse people, so it skipped to the next letter in the Greek Alphabet, which is Xi – oops, that’s the Chinese supreme dictator. So, for the sake of global political stability, that letter was skipped, too.
This brings us to Omicron, the name of the latest variant.

This is where this story gets a bit more interesting.

The one disruption that really puzzles me is the labor shortage. There are millions of jobs going unfilled today. I hear stories of Starbucks stores being closed due to a lack of workers. Every service that has a heavy labor component has gotten worse – be it restaurants, ride-sharing, or pharmacies. There happens to be a cryptocurrency, one of thousands, that is also named Omicron. I still cannot grasp the logic behind it, but that cryptocurrency was up 900% on the day the South African variant was christened. There must have been a trading algorithm or a lot of bored investors looking for the next gamble, to drive something seemingly worthless up 900%.

That is the drunken Mr. Market that is pricing our stocks today.

I am going to repeat what you will find me saying several times in the letter: We own businesses that are priced, not valued, by Mr. Market thousands of times a day. We have done a lot of work on each company in the portfolio, and through diligent research we have reached the conclusion that each is worth more than the price it is changing hands at today. Are we going to be right about each and every stock? Of course not. This is a numbers game. But we use a time-tested methodology centered on common sense and the cash flows these businesses generate. Also, this is not our first rodeo. We’ll go on making small tweaks, taking advantage of Mr. Market’s manic-depressive moods, at least when it comes to anything that generates cash flows.

Of course, we could change our investment process and load up on the cryptocurrency called Pi Coin, which happens to take its name from the letter in the Greek alphabet that follows Omicron. But I think we all agree we should stick to our knitting, buying high-quality businesses that are significantly undervalued. (Anyway we already loaded up on pie during Thanksgiving.)

Our advice – enjoy this holiday season. Spend time with your loved ones; don’t look at your portfolio. Let us worry about it – after all, we own the same stocks you do.

We wish you joyful and safe holidays.

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Healthcare NOT a Part of the US Inflation Surge!

WHO KNEW?

By Staff Reporters

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According to Wikipedia, in economics, inflation refers to a general progressive increase in prices of goods and services in an economy.[1] When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money.[2][3] 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 annualised percentage change in a general price index.[4]

READ MORE: https://en.wikipedia.org/wiki/Inflation

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

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Health Care Price Changes and Per Capita Growth in Medicare | Mercatus  Center

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Healthcare Not a Part of the US Inflation Surge: Who Knew?

However, according to Jeff Goldsmith, overall health spending has only risen by 4.4% since January of 2020, and the percentage of GDP devoted to health has fallen by more than half a percent, from 18.1% pre-pandemic to 17.5% in October.   This is despite four surges of COVID hospitalizations, overflowing ICUs and ERs, labor shortages, and other COVID-related stresses.  Health system staffing levels are still nearly a half-million lower than they were pre-pandemic.  Had the federal government not stepped in through the CARES Act, FEMA funding, and temporary suspensions of Medicare rate cuts, the nations’ hospitals would have been seriously damaged by COVID-related financial stresses, which are far from being over.  

ESSAY: https://thehealthcareblog.com/blog/2021/11/19/healthcare-not-a-part-of-the-us-inflation-surge-who-knew/

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Round-Up on MARKETS and MEDICINE: 2022

By Staff Reporters

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  • Stock Markets: The three major equity indexes begin 2022 near record highs after closing out their best 3-year performance since 1999. The top-performing S&P sectors: Energy, whose 48% annual gain was its best ever (thank you, soaring oil prices). Real estate was the second-best performing sector at 42%, while tech and financials both rose 33%. The biggest winner in the S&P was Devon Energy, which gained nearly 190%. Ford, Moderna, and nine others in the index more than doubled their stock price. Microsoft rose 51%, and Apple’s 34% gain has it sitting close to a $3 trillion market capitalization.
  • Covid Medicine: Omicron has caused a rapid explosion of Covid cases in the US—the 7-day rolling average of nearly 400,000 new cases on Saturday was more than double the number from one week before. With hospitalizations also ticking higher, officials are warning that health systems will be overloaded before the Omicron wave is expected to peak in mid-January. And, Dr. Anthony Fauci said yesterday that health officials are looking at adding a negative test requirement after five days of quarantine. Under existing guidance, you can emerge from isolation without showing a negative test.
  • CITE: https://www.r2library.com/Resource/Title/082610254

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PODCAST Year End 2021: Rich Helppie Interviews Dr. James R. Baker, Jr., M.D.

The Common Bridge

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Entering the Last Chapter of Covid, From Omicron and Beyond – With Dr. James R. Baker, Jr., M.D.
Richard Helppie welcomes back University of Michigan Professor Emeritus of Internal Medicine, and Virologist, Dr. James R. Baker, Jr., M.D., who brings words of both encouragement and warning as the world comes to what he feels is the beginning of the final throws of the Covid-19 pandemic. 

Dr. Baker has been a valued guest on the Common Bridge since the beginnings of the coronavirus over a year ago, and brings thoughtful, scientific, data-driven analysis to the most significant health issue of our lifetime.

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PODCAST: https://richardhelppie.com/james-baker/

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MERRY CHRISTMAS EVE 2021: Stock Markets and Medicine

BY STAFF REPORTERS

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UPDATE: Stock Markets and the Economy

By staff reporters

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UPDATE: Markets, Money and Covid

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  • Markets: Down big one day, up big the next—that’s the Omicron-era stock market for you. Stocks surged yesterday following a 3-day losing streak, with travel companies leading the way.
  • Covid: The FDA is set to authorize Covid pills from Pfizer and Merck this week, Bloomberg reports. These treatments, which are intended to be taken by vulnerable people shortly after they are infected, could significantly reduce the burden on strained hospitals. Experts say the pills are a pandemic medical milestone second only to vaccines.
  • CITE: https://www.r2library.com/Resource/Title/082610254

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UPDATE: Markets and Medicine

By Staff Reporters

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The Federal Reserve announced that it will stop buying bonds about three months earlier than initially planned. The Fed now plans to trim its monthly Treasury and mortgage-backed security purchases by $30 billion a month starting next month. The new pace is expected to put an end to bond buying by March.

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

The Fed also announced that it would leave interest rates unchanged at near-zero percent. The announcement paves the way for three interest rate hikes by the end of 2022, which could weigh on tech and growth stocks.

UPDATE: https://www.msn.com/en-us/money/news/tech-takes-a-beating-as-central-banks-pull-back/vi-AARTp0n

  • Markets: Stocks reversed their post-Federal Reserve announcement rally with a stinker of a day—especially tech stocks. Semiconductor companies like AMD and Nvidia got particularly thwacked.
  • Covid: The CDC recommended adults use Moderna’s and Pfizer’s Covid vaccines over J&J’s due to the risk of developing rare but serious blood clots.

MORE: https://www.msn.com/en-us/money/markets/stocks-fall-as-investors-digest-feds-latest-move/vi-AARTm2C

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Economic Market Update

By Staff Reporters

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TRIFECTA Update: Markets, Covid and Congress

TOPICS PREVIOUSLY MENTIONED ON THE ME-P

By Staff Reporters

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  • Markets: Omicron who? Fed tapering what? Stocks continued to roar back from their post-Thanksgiving hangover, with tech shares leading the way. The NASDAQ had its best day since March.
  • Covid: Pfizer’s Covid-19 vaccine is less effective, but still provides some protection, against the Omicron variant, an early study from South Africa showed.
  • US Government: Congress had a busy evening. Lawmakers reached a deal to raise the country’s debt ceiling, and the House passed a $768 billion defense policy bill that increases pay for service members.
  • Citation: https://www.r2library.com/Resource/Title/0826102549

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Recent Weekend Stock Market Volatility

By Staff Reporters

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WHAT A WEEK!

  • Markets: Stocks ended a topsy-turvy week with another stinker yesterday, dragged netherward (big word alert) by the tech sector. Meta shares nearly entered a bear market, falling almost 20% from a closing record in September. Still, the S&P was down less than 1% for the week.
  • CITE: https://www.r2library.com/Resource/Title/0826102549
  • Covid: The first bits of solid Omicron data are starting to trickle out. One study from South Africa showed that the new variant may cause a higher rate of reinfection in people who already got Covid. Critical information on the effectiveness of current vaccines against Omicron could come in a few days, a WHO scientist said.

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The Bear MARKETS and Cyber ECONOMY

By Staff Reporters

  • Markets: Stocks dropped sharply in the post-Thanksgiving trading session on Friday due to concerns over the new Covid variant, Omicron. The Dow fell 2.5% for its worst day of the year, and the S&P also tumbled 2.3%. Oil prices and travel stocks also got rocked given fresh worries over travel demand, while “stay-at-home” names like Peloton and Zoom got a boost.
See the source image
  • Economy: It’s still way too early to know the impact of Omicron on economic growth. As we laid out last week, the Fed is under pressure to accelerate the winding down of its stimulus measures in order to battle inflation, but the new variant could change the calculus. Investors dialed back their expectations of a sooner-than-expected rate increase on Friday.

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Tele-Health Financial Expansion

BY HEALTH CAPITAL CONSULTANTS, LLC

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Additional $20 Million Directed to Rural Telehealth Expansion

It has been well documented that the COVID-19 pandemic resulted in unprecedented increases in telemedicine utilization across the U.S. However, rural providers and patients, as evidenced by their lower rates of telemedicine usage during this time, have not been able to take advantage of the opportunities provided by telemedicine to the same extent as urban providers.

On August 18, 2021, the Health Resources and Services Administration (HRSA) of the Department of Health and Human Services (HHS) announced the latest attempt to ameliorate this issue – the distribution of nearly $20 million to 36 recipients for the purpose of strengthening telehealth services in rural and underserved communities and expanding innovation and quality. (Read more…)

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

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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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Cumulative Covid-19 Vaccination Doses Administered to-Date!

2021 Vaccine Equity

January 16, 2021

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How Did We Screw Up the Pandemic So Badly?

By Bertalan Mesk MD PhD

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https://www.linkedin.com/pulse/how-did-we-screw-pandemic-up-so-bad-bertalan-mesk%C3%B3-md-phd/?trk=eml-email_series_follow_newsletter_01-hero-257-title_link&midToken=AQGGg4QStFgVOA&fromEmail=fromEmail&ut=0zs6pcrWG-_9o1

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