The Case Against Indexing (I Don't Buy It) March 17, 2009March 13, 2017 SMALL BUSINESS BOOST The way to help small businesses is NOT to give them tax cuts – what good’s a tax cut when you’re making no profit to be taxed ON? I refer you back to my five questions on tax cuts. But yesterday the Obama Administration did three things concrete things that WILL help small business: It waived the fees small businesses have to pay to take out SBA loans. It raised the Federal guarantee on such loans from 75% and 85% to 90%, which will encourage more lending (yet still leave the lender on the hook for significant scratch). It set aside $15 billion of TARP money to buy securitized SBA loans, until private investors regain their appetite, so that the banks can sell them and, with the proceeds, make new small business loans. That money will be ready to start buying 7A loan securitizations by the end of this month – any minute now – and 504 loan securitizations by mid-May. To take just one concrete example of how constructive this is: I have an investment in a private company that has <>profitable orders it can’t fill. It lacks the working capital to pay suppliers, shippers, and so on. It may have to close and lay everyone off. But with an SBA loan, it would be able to keep people employed filling the orders, remain in business, and continue to grow. Now, because of the Administration’s swift action, it has a better chance of getting an SBA loan. Compare that with telling the owners of this company that they will get a tax break on their nonexistent profits. I think the Obama approach makes more sense. THE CASE AGAINST INDEXING Basically, I don’t buy it. But here it is, from my pal Chris Brown. As you know, most responsible financial advisors suggest that for that portion of your money you want in the stock market, low-expense “index” mutual funds are the best way to go. They’re like horses with 20-pound jockeys (fees, typically, of 20 hundredths of one percent) running against actively managed mutual funds with 200-pound jockeys (fees, transactional costs that weigh down fund performance, and tax inefficiency). Chris says the paradox is that, with so much money now being indexed, stock prices have become less efficient . . . not enough active investors bidding up or down the price of the truly desirable or undesirable companies . . . with the result that there’s more room for the savvy stock picker who does his homework to make outsized gains. I doubt that’s true – or that it’s true by enough to give most people, or even most professional mutual fund managers, an edge. (And year after year, the subpar performance of professional mutual fund managers proves me right.) Then again, I do believe there will always be special opportunities, and exceptionally bright, hard-working, psychologically-well-wired investors – like Chris – who will be favored to outpace the crowd. But remember: they are few in number (not everyone can be way above average); and when you and I try our hands at this game, we are competing with them. Footnotes: Chris cites the example of the Harvard endowment. But Harvard recently lost perhaps 30% of its endowment, maybe more. So the performance numbers he points to may have changed. And he cites the example of a very smart (I hope) Class A/Class B arbitrage he put on; which I do think is an example of the way really smart, diligent folks can find opportunities in the market . . . . . . which is why I put a little of my own money with Chris . . . and why I sometimes pass on what I think are smart ideas (generally from people smarter than me) . . . some of which turn out well (Nitromed puts made us five or ten times our money, as did Aldabra warrants) and some of which turn out to be unmitigated disasters (FMD leaps painfully to mind). And speaking of how miserably sorry I am for money you lost in FMD or WM or TXCO or anything else . . . DAN Dan: “You sure have a lot to say. Stocks you now fancy, the budget, politics and an ever expanding list you know equally nothing about. While you offer new companies for your readers to invest in you rarely speak about your many bad choices. Is FMD a buy at .78? What about all those dolts who follow your glib none-sense blindly? Don’t you owe them some honestly. You never print negative responses to your poorly informed blather. You should probably stick with comments on the gay world or politics. On second thought, forget politics you really don’t know much about that subject either.” ☞ The subject heading for Dan’s email was “coward.” I wrote back to say I was sorry about the money I assumed he’d lost on FMD, and could he provide his last name for posting with his comment. He then wrote back to say he had not lost money in FMD – that he actually read this page for its coverage of some stock (BOREF? GLDD?) he does own (coverage he called “even-handed”) – and declined to reveal his last name.
What Does Less Antman Have to Say NOW? March 16, 2009March 13, 2017 THE MARKET John Hussman, who manages more than $3 billion, saw the handwriting on the wall years ago. There’s something in his latest newsletter for the bulls (he thinks stocks are undervalued and that the S&P average could return over 10% annually over the next decade) . . . and something in it for the bears (because stocks are only slightly undervalued, the bottom could be significantly lower, and the necessary bank restructurings are being needlessly delayed). But as his funds’ performance indicates, seeing the mess we were in five years earlier than most people may have made him insightful, but did not make him rich: over those five years his annualized return has been 1.33%. Better than a loss, to be sure; but this is a tough game to win. WHAT DOES LESS ANTMAN SAY NOW? Jack Kouloheris: “Would be interesting to hear Less Antman’s viewpoint, as he was ‘All equities All the time’ and insisted that the greatest risk to ones wealth was inflation. That may yet be true…however a 100% equity portfolio is hurting quite a bit now. He told us that even 20% non-equities was making him uncomfortable!” HERE’S WHAT Never underestimate my friend Less. We don’t march in complete lockstep (e.g., we agree you should “never try to time the market,” but he takes “never” to mean “never,” where I take it to mean, “well, only cautiously and with very good reason”); but I never fail to be impressed with what he says or how he says it (and by that, I mean never). To wit, his March Newsletter: LOOKING FOR A SAFE HAVEN? The year 2008 may have been the worst calendar year in the entire history of the US stock market. An investment in the S&P 500 lost 37% last year on a total return basis. Although 1931 looks worse on paper (a drop of 43%), that was also a year in which the consumer price level declined significantly, and since we have to buy goods and services at the prices being charged, calculations of return should be adjusted for inflation (or deflation, when it occurs). By that measure, both 1931 and 2008 resulted in 37% losses in wealth, and whether one or the other was slightly worse is debatable, since calculations of inflation are neither precise nor the same for each person (since we all buy different things with our money). Let’s just say it’s a tie. Unfortunately, there is no virtual tie if we want to measure returns over a 10-year period: the 10 years ended 2008 look like they were clearly the worst. On paper, the loss was 14%, and inflation raised the Consumer Price Index by 32% over that time. As a result, the real (inflation-adjusted) loss over that decade was 35%. This is worse than my calculation for any other 10 consecutive calendar years since the New York Stock Exchange opened in 1792: far worse than any 10 years that included the Great Crash (which were actually flat or slightly positive after considering the deflation in consumer prices), and only approached by the dreadful 30% real declines for the decades ended 1920 and 1842, which most of my readers are probably too young to remember. Do you want to know HOW horrible that 35% loss was for the decade ended 2008? I’ll tell you: IT WAS ALMOST AS BAD AS THE LOSS YOU WOULD HAVE SUFFERED IN US TREASURY BILLS IN THE DECADE ENDED 1950. That’s right: the investment everyone is currently racing to buy, even though it is yielding next to nothing: that absolutely safe and secure obligation of the US Treasury, repaid in full every 30 days, would have lost 41% of an individual investor’s real wealth over the 10 years ended December 31, 1950. While T-bills were averaging a return of 0.5% per year, inflation was averaging 5.9%. In 1946 alone, prices rose 18%, and a T-bill holder lost 15% of purchasing power as a result. In one year. Cash is not safe. No investment is safe in all environments. And right now, I would suggest you consider the words of billionaire investor Warren Buffett, often called the most successful investor of all time, from the annual report of Berkshire Hathaway released in late February, 2009: “When the financial history of this decade is written, it will surely speak of the Internet bubble of the late 1990s and the housing bubble of the early 2000s. But the U.S. Treasury bubble of late 2008 may be regarded as almost equally extraordinary.” Treasury bills, and what most people think of as equivalent FDIC-insured bank deposits (backed by the full faith and credit of the US government), are not builders of wealth. At best, they might preserve it. But in times of great panic (which certainly describes now), people often end up accepting a significant annual loss based on the dubious assumption that the US government can never default because it owns the monetary printing press. And it IS dubious. International investors are now willingly giving up 1% of the annual return on 5-year Treasury notes to buy insurance against a default by the Treasury. A year ago, they only had to pay 0.05%. This means that the risk of default on these securities has multiplied 20 times. In fact, the cost of insurance against a default on Treasuries is now more than that for the average AAA or AA security! The rating agencies wouldn’t dare say so, but the insurers who have to put their money where their mouth is think US Treasuries are in the single-A category. At this rate, in another year they’ll be junk bonds, especially if they keep promising to protect everyone in America from everything. Hopefully, they’ll get exhausted, or a sleeping sickness will hit Washington, DC. Or the public will stop trusting politicians and realize that “WE HAVE TO DO SOMETHING!” means WE, those who work, and invest, and create. Not those who rule. If not Treasuries, then what? Many investors searching for a safe haven are actually fleeing from dollars and buying gold. Is that the answer? Well, gold finally set a new high in 2008, surpassing a peak reached in 1980, but only in dollars. Adjusted for inflation, they are still down around 50% since then. I know, I know. U.S. stocks stink, International stocks stink, Real estate stinks, and the investment Less Antman told you generally goes up whenever stocks are going down, commodity futures, also stinks. When people asked me whether there was any environment in which all 4 categories of equity wealth dropped in the same year, I would tell them I couldn’t find any such year since 1931. Well, I just found another, and I feel your pain. But when I looked at those other two horrible decades, ending in 1842 and 1920, I also noticed something else. The horrible 10 years ended 1842 were immediately followed by 10 CONSECUTIVE YEARS OF POSITIVE RETURNS, and the horrible 10 years ended 1920 were followed by 8 CONSECUTIVE YEARS OF POSITIVE RETURNS. Also, while an investor in US stocks might have lost 35% in purchasing power over the 10 years ended 2008, someone who was invested globally did not. A 100% equity investor who split their money equally between US stocks, International stocks, REITs, and Commodity futures at the beginning of 1999 and then didn’t touch it for 10 years would have actually gained 8% above inflation. Admittedly, pretty pathetic, but at least it beat inflation over that time period. Oh, it also beat T-bills. Folks, it is time for a reality check. Nobody can tell you that an equity portfolio, even a globally diversified one, is safe. But the so-called safe havens aren’t safe, either, whether we are talking about the short-term or the long-term. If the businesses that provide the world’s goods and services do not continue to operate and earn reasonable returns over time, governments will not be able to raise any decent amount of revenue by taxation, and will either print increasingly worthless pieces of paper or default. Gold cannot buy non-existent products: it also depends on continued productivity in society. Production is the foundation of any livable future: there is no reward for successfully predicting the end of the world. You might as well expect the best: optimism is the only realism. Save, invest, diversify, wait. And find a hobby other than watching the news.
800-GOOG-411 March 13, 2009March 13, 2017 JIM CRAMER ON WHY IT PAYS TO MANIPULATE THE MARKET At press time, they’d not quite yet posted last night’s Daily Show, devoted entirely to Jon Stewart interviewing Jim Cramer. But click here to go to the site – it should certainly be up by the time you do. And click here, if you haven’t already seen it, for the remarkable December, 2006, Cramer interview Stewart kept showing clips from. It will be interesting to see how the S.E.C. reacts. GOOGLE 411 Craig D.: “Leave it to Google to come up with something like this! Here’s a number worth putting in your cell phone, or your home phone speed dial: 1-800-GOOG-411 (1-800-466-4411). This is an awesome service from Google, and it’s free – great when you are on the road. Don’t waste your money on information calls and don’t waste your time manually dialing the number. For example: I am driving along in my car and I need to call the golf course and I don’t know the number. I hit the speed dial. The voice at the other end says, ‘City and State.’ I say, ‘Garland, Texas.’ He says, ‘Business, Name or Type of Service.’ I say, Firewheel Golf Course.’ He says, ‘Connecting’ and Firewheel answers the phone. How great is that? This is nationwide and it is absolutely free! Here’s a quick and amusing demo.” UNWANTED SALES CALLS James Musters: “Do you get them on your ‘do not call’ phone line? Or junk faxes? Tired of telling them to take you off their list? Here is a link to a quick on-line FCC complaint form. I just used it and was surprised at how streamlined and simple they made it.” THE $2 TRILLION SOLUTION Jonathan Levy: “Realizing this was mostly a joke, it still hit me pretty quickly why this would not work. Most people with a spare $1 million probably can already spend about as much time as they wish in the U.S. and get on the citizenship path.” Thorsten Kril: “The $2 Trillion Solution is already in place! And has been for a long time. It’s called the EB-5 visa. Bring $1 million to invest in a new business and you get a green card. The $1 million does not go to the Federal government, but serves to create small businesses and jobs, which is better. So far it has not brought in $2 trillion, though.” ☞ Only about 1,000 EB-5 visas were issued in a recent year – it would take 2,000 years at that rate to bring in $2 trillion. So (and, yes, my tongue is partly in my cheek, because this whole notion of jumping to the head of the line if you’re rich sounds so un-American*) we need to make it easier. What if you don’t want to do all the paperwork, make all the promises, and then work like heck to start a business? What if you just want to buy a house and employ a cook and a gardener, patronize the local businesses, and pay taxes? Uncle Sam needs the money! *And yet, at the same time, hugely American, no?
The World May Not End March 12, 2009March 13, 2017 DAZZLED Will Alford: “I too am absolutely dazzled each time I fly. Every time I see a plane from the ground, or see the ground from a plane, and every time I board a jet I say to myself, ‘What would Wilbur and Orville say if they could see this?!’” THE $2 TRILLION SOLUTION? Joel G.: “Why don’t we sell memberships in the United States of America (a member becomes a citizen after a short period), the cost is $1 million per approved person and we’ll take up to 2 million people (probably won’t even notice them). I think that’s $2 trillion (plus all the other wealth and productivity they bring with them).” ☞ We could sure use the money. THE WORLD MAY NOT END Writing in yesterday’s Financial Times, Jeremy Grantham, one of the very smartest guys around, presents a bluntly sober but not apocalyptic overview. Where not long ago we had $50 trillion of perceived wealth (stocks and real estate) in a country with $25 trillion in private debt, now that $50 trillion has shrunk to $30 trillion* – and creditors have grown very nervous about the $25 trillion they’ve loaned. He foresees a rather painful multi-year workout, a combination of some inflation (which erodes the real value of a debt), of some write-offs (which wipes it out entirely), some growth and multi-year paydown. “It will not be pleasant but not the end of the world. When it’s over all the same houses, office blocks, factories and educated workers that make up our real wealth will be waiting to be fully used again and we will be travelling lighter without so many illusions. We have not lost real wealth, only the illusion of wealth.” *He puts that $20 trillion loss in context this way: it’s about 150% of one year’s GDP. That compares with a loss in perceived value three times Japanese GDP a generation ago (a collapse the Japanese are still working through). But it also compares, he says, with a loss in perceived value of only 75% of a year’s GDP in the Great Depression. Certainly (my words now, not his), our true wealth remains more or less unchanged: our technology, our natural resources, our homes (even the ones currently unoccupied) and farms and tractors and tools and computers, our factories and skyscrapers and hospitals. The house next to mine rose 6-fold in “value” from 1998 to 2005, but was not even one square foot bigger or more useful. So has it really lost half its value at today’s asking price? Or is it still the same modest two bedroom, one bath house with a great big tree on a double lot? ☞ On the theory the world may not end, I bought back the American Express (AXP) I sold two years ago, five times higher; and a little Wells Fargo (WFC) trading for about a third what it was then. Both of these entail clear and obvious risk, so feel free to laugh at me if/when they go bad. OFA John M: “I contributed to the DNC in the run-up to the election and continue to receive appeals from the party now that it is over. But I ask myself, ‘If certain Democrats in Congress can’t be persuaded to support the President’s agenda, why should I give more money?’ Republican opposition I can understand, if despise. Democratic opposition, under these circumstances, is inexcusable.” ☞ The main focus of the DNC now is a project called Organizing For America – what will soon be a huge cadre of neighborhood advocates in all 50 states to help push the President’s agenda. I hear your frustration; but if we don’t help by funding this effort, WE will be the ones missing an opportunity to be team players. As to Dems who occasionally vote like Republicans, typically they are from “red states,” where, if they hadn’t won, their opponents would almost never have voted with us. So there is at least that silver lining. MITCH HEDBERG John Seiffer: “If you like Steven Wright, you’ll probably like Mitch Hedberg.” ☞ There’s only one Steven Wright, but I liked these three: One time, this guy handed me a picture of him, he said, “Here’s a picture of me when I was younger.” Every picture of you is when you were younger. “Here’s a picture of me when I’m older.” “You son-of-a-bitch! How’d you pull that off? Lemme see that camera!” The depressing thing about tennis is that no matter how good I get, I’ll never be as good as a wall. I saw this wino, he was eating grapes. I was like, “Dude, you have to wait.”
Four Minutes of Fun March 11, 2009March 13, 2017 FOUR MINUTES OF FUN Zac Bissonnette: “You will like this quite a bit.” ☞ I am totally with this guy (Louis CK). I am dazzled every time I fly. THE POWER OF A $1,000 COMPUTER IN 40 YEARS Click here for an estimate (it comes 50 seconds from the end of the video). I’m telling you, kids: we are going to have to be wise indeed not to spin out of control. STEVEN WRIGHT AGAIN “He who laughs last thinks slowest.”
Yesterday’s Big News March 10, 2009March 13, 2017 DOW 6,500 Joey: “The minute I read 3,500, I knew we’d reached the bottom (or at least close).” ☞ I had the same thought – and boy do I hope you’re right. We have a terrific Administration focused on putting Americans to work doing the work America needs done. That is the nub of it, and promises a stronger, more prosperous, energy-independent country a decade from now. Whatever happens in the market, if we’re smart about it, and work together, America’s best days do indeed lie ahead of us, as Warren Buffett notes time again. THE REAL IMPACT OF WHAT HAPPENED YESTERDAY Yesterday, Barack Obama reversed eight years of leaning against embryonic stem cell research. This is huge. I know you already know it, but it deserves mention anyway. There is no guarantee, but a reasonable likelihood, that embryonic stem cell research will lead to spectacular advances in medicine. If someone you love should ever need one of these advances, that need is likely to be desperate, and it will be a matter of more than theoretical importance whether it had been achieved in time. It could be the difference between life and death, paralysis and freedom, happiness and despair. If he or she should miss the cure by a year or two – as thousands, if not millions, will – the policy of the last eight will be to blame. If they should make it by a year or two, yesterday’s action may be the reason why. (It might also be noted, as we look for 21st Century industries in which America can generate profit and employment, that yesterday’s action unties a hand from behind our back.) WORKING TIRELESSLY, LIKE A LASER BEAM I have a modest proposal. Could we all just go back to working? And focusing? Or, when appropriate, working “hard” or “well” or “joyously” or “creatively”? Focusing “intently”? (Though isn’t that what focusing is?) Please, people. STEVEN WRIGHT (thanks Peter) “If any of you believe in telekinesis, raise my hand.” AOL USERS! Rex: “Go to aol.com, log in to your mail, click on ‘Settings’ at the top right, then on ‘Compose’ on the left. You will then see ‘Message Footer’ on the right and you can then turn off the stupid ads at the bottom of your e-mails.”
6,500 Amazing Grace March 9, 2009March 13, 2017 DOW 6,500 From time to time I’ve noted the irony that 6,500 on the Dow – the Great Giddiness a dozen years ago that prompted Alan Greenspan’s famous “irrational exuberance” comment – might wind up being our bottom. After a lot of growth and a little inflation, and an even Greater Giddiness that took the Dow up to 14,164, maybe we’ve grown into 6,500. I hope it’s the bottom, because I love irony – and because, more to the point, it’s here (the Dow dipped below 6,500 before rebounding a little Friday) and as a patriotic, shareholding American, I don’t want to see it fall any further. But markets are frequently irrational in both directions; and there’s nothing irrational (that I can see) about Dow components like Citigroup and GM selling for a buck or two. Sadly, their common shareholders are likely to get wiped out altogether. Likewise, I’m not sure the other 28 Dow stocks are irrationally low here either, given the current state of affairs, or that some of them may not have to go through some form of reorganization, too. (Not that I have the skills to know – but then again, neither does anyone else.*) So even if 6,500 were, ironically, fair value for the Dow here, there’s nothing to keep it from going to 3,500. Even at today’s prices, the stock market is no place for money you may actually need in the next five years.** It never is. *They’ll just be wrong for more sophisticated reasons. **If you’re anywhere near retirement, you wouldn’t want all your money in stocks even if you did have abundant resources for the next five years. BRIGHTER DAYS It never fails to surprise me: the days are getting longer. It’s thrilling! And if you can afford a broadband connection, there are endless free ways to amuse yourself, from web boggle and chess to hulu clips and movies, to long walks in the fresh air (this one requires no broadband connection), to roaming the ocean floor, to occasional moments worth pausing for . . . like this one: FOUR MINUTES OF GRACE Click here. NOT SOAKING THE RICH Amazingly, a lot of people are wailing that Obama is promoting class warfare or attempting to soak the rich – because he proposes not to interfere with the Bush-signed, Republican-Congress-enacted “sunset” provisions of their tax-breaks for the rich. Which means that someone making $15 million in 2011 would be taxes at a 39.6% marginal rate, up from 36% (but still have about $9 million left to pay the bills) . . . or, if her income had been from long-term capital gains, at 20% up from 15% (leaving $12 million). Nor is it only the rich who will be clipped. As this Slate piece details, the tax rate on the next $100,000 or so above the first $250,000 a family earns would go back up from the current 33% to 36%. But what can I say? Times are tough. This is not class warfare, and this is not socialism, or “confiscatory.” And this is no more likely to deter a bright young entrepreneur from starting the next Apple Computer than the then-prevailing 70% top tax bracket stopped Jobs and Wozniak from starting the first one. As Frank Rich noted yesterday: The simplest explanation for why America’s reality got so distorted is the economic imbalance that Barack Obama now wants to remedy with policies that his critics deride as “socialist” (“fascist” can’t be far behind): the obscene widening of income inequality between the very rich and everyone else since the 1970s. “There is something wrong when we allow the playing field to be tilted so far in the favor of so few,” the president said in his budget message. He was calling for fundamental fairness, not class warfare. America hasn’t seen such gaping inequality since the Gilded Age and 1920s boom that preceded the Great Depression.
The Loyal Opposition And Jon Stewart Eviscerating CNBC March 6, 2009March 13, 2017 But first . . . GREAT GRADUATION PRESENT It’s never too early to start saving up to buy your child or grandchild the only investment guide he or she will ever need – but that’s actually not what I have in mind. I have in mind a kid in high school – whether a fancy prep school or tough inner city school – who faces peer pressure to use drugs and alcohol. Not least because this summer their circle may have more trouble than usual finding gainful employment . . . and you know what they say about “idle hands.” This is a job that calls for VISION WARRIOR! Faster than a speeding bullet (or he was, when I first met him a dozen years ago; time takes its toll), more powerful than any other high school presenter your kid has ever seen (see below), able to leap onto the auditorium stage in a single bound (I’ve seen him do it). If you – perhaps in concert with fellow parents – can come up with his ridiculously modest $2,000 fee, I’ll pick up his airfare and together we can . . . ROCK YOUR KID’S WORLD Here is a letter Scot Robinson (aka Vision Warrior) got last month from the counselor at Washington’s Sidwell Friends school. Feb 20th 2009 Dear Scot, I cannot thank you enough for the profound impact you have had on the Upper School community at the Sidwell Friends School. You spoke here several months ago and I want you to know that the students still reference things you said and vividly remember your performance. Rarely do students come up to me after an assembly to thank me for a particular speaker but you are an exception. One after another, students flooded my office or approached me in the hall, thanking me for bringing you to Sidwell. I also had several faculty members approach me to tell me that never in the history of their ten, twenty or thirty year tenure at Sidwell had they seen such a compelling speaker. Both students and adults continued to talk about you for days afterwards. You were phenomenal! You spoke from the heart. By giving such an extraordinarily gripping and raw performance, you provided the students with a rare but poignant and personal glimpse into an insidious life of alcohol and drugs. Teenagers are especially perceptive and they were moved by how honest and vulnerable you were, struck by how much they could relate to your story and uplifted by your inspiring tale of recovery. And, in the midst of telling an incredibly moving and painful story, you brought humor to it in a way that was appropriate and grabbed the audience right from the start. Apart from your story, though, your message to the students about having the courage to be who they are and about the importance of self-discipline, self-respect, and self-esteem as a means to fight negative choices and behaviors was especially effective. An upperclassman told me that a group of students had made the conscious decision to not drink before attending the next school dance as a result of your assembly. What an incredibly positive influence you have had. One of the most valuable gifts you also gave our students was the opportunity to speak with them by grade without adults present. Feedback from the students was overwhelmingly positive as they had a chance to process your powerful performance with the freedom to ask relevant questions. As I told you, the parent program you held in the evening was one of the best attended we’ve ever had. We have never been at standing-room-only capacity before. Apparently, students went home and told their parents that they HAD to attend. Parents shared experiences of their children talking non-stop all the way home from school about their day with you… a ride that is usually full of silence or music blasting from the headphones of their Ipods. They expressed sincere appreciation for the exceptional and inspiring experience you provided their children. On behalf of Sidwell Friends, I would like to express my sincere gratitude for the incredible impact you have had on our community. Many thanks… we look forward to bringing you back to the Sidwell community soon as I strongly believe that every student who passes through our Upper School should be given the opportunity to experience Vision Warrior. Gabriela Grebski US Counselor ASSUME THE BEST From John Podesta’s Center for American Progress last month. I offer it both because it is specifically interesting, but also as an example of how relentlessly the loyal opposition – who are on record hoping Obama’s policies fail (could you be any more loyal?) – distorts and misleads. Anyway, herewith the post: Misinformation On Health Information Technology Late last month, the House passed an economic recovery package containing $20 billion for health information technology, which would require the Department of Health and Human Services to develop standards by 2010 for a nationwide system to exchange health data electronically. The version of the recovery package passed by the Senate yesterday contains slightly less funding for health information technology (“health IT”). But as Congress moves to reconcile the two stimulus packages, conservatives have begun attacking the health IT provisions, falsely claiming that they would lead to the government “telling the doctors what they can and cannot treat, and on whom they can and cannot treat.” The conservative misinformation campaign began on Monday with a Bloomberg “commentary” by Hudson Institute fellow Betsy McCaughey, which claimed that the legislation will have the government “monitor treatments” in order to “‘guide’ your doctor’s decisions.” McCaughey’s imaginative misreading was quickly trumpeted by Rush Limbaugh and the Drudge Report, eventually ending up on Fox News, where McCaughey’s opinion column was described as “a report.” In one of the many Fox segments focused on the column, hosts Megyn Kelly and Bill Hemmer blindsided Sens. Arlen Specter (R-PA) and Jon Tester (D-MT) with McCaughey’s false interpretation, causing them to promise that they would “get this provision clarified.” On his radio show yesterday, Limbaugh credited himself for injecting the false story into the stimulus debate . . . McCAUGHEY GETS THE FACTS WRONG: In her commentary, McCaughey writes, “One new bureaucracy, the National Coordinator of Health Information Technology, will monitor treatments to make sure your doctor is doing what the federal government deems appropriate and cost effective.” But the fact is, this isn’t a new bureaucracy. The National Coordinator of Health Information Technology already exists. Established by President Bush in 2004, the office “provides counsel to the Secretary of HHS and Departmental leadership for the development and nationwide implementation” of “health information technology.” Far from empowering the Office to “monitor doctors” or requiring private physicians to abide by treatment protocols, the new language tasks the National Coordinator with “providing appropriate information” so that doctors can make better informed decisions. As Media Matters noted, the language in the House bill, on which McCaughey based her column, does not establish authority to “monitor treatments” or restrict what “your doctor is doing” with regard to patient care. Instead, it addresses establishing an electronic records system so that doctors can have complete, accurate information about their patients. The Wonk Room’s Igor Volsky pointed out that “this provision is intended to move the country towards adopting money-saving health technology (like electronic medical records), reduce costly duplicate services and medical errors, and create jobs.” HEALTH I.T. BELONGS IN RECOVERY PACKAGE: Projected to create over 200,000 jobs, the funding for health information technology in the recovery package is both an important stimulus and a down-payment on broader health care reform. Speaking in Ft. Myers, FL, yesterday, President Obama said that investment in health IT was “an example of using a crisis and converting it into an opportunity.” “We are going to computerize our health care system, institute health IT,” said Obama. “That creates jobs right now for people to convert from a paper system to a computer system, but it also pays a long-term dividend by making the health care system more efficient.” Currently, fewer than 25 percent of hospitals, and fewer than 20 percent of doctor’s offices, employ health information technology systems. Researchers have found that implementing health IT would result in a mean annual savings of $40 billion over a 15-year period by improving health outcomes through care management, increasing efficiency, and reducing medical errors. Investing in health would also help primary care physicians — who often bear the burnt of tech implementation without seeing immediate benefits — afford the infrastructure for expansion. The Congressional Budget Office has estimated that one-third of $2 trillion spent annually on health care in America may be unnecessary due to inefficiencies in the system such as excessive paperwork. Investments in infrastructure like health IT will help improve the quality of America’s health care. MCCAUGHEY’S POISONING HEALTH REFORM AGAIN: Responding to her Bloomberg commentary, the New Republic’s health care writer Jonathan Cohn noted that “Elizabeth McCaughey is up to her old tricks again.” “Not content to have poisoned one major health care debate, she seems determined to poison this one, too,” wrote Cohn. In 1994, McCaughey published a “viciously inaccurate” article on the Clinton health care plan in the New Republic, which is credited with having “completely distorted the debate on the biggest public policy issue of 1994.” McCaughey’s article claimed that there would be “no exit” from the Clinton plan, and individuals would be prevented from “going outside the system to buy basic health coverage” that they preferred. But, as the Atlantic’s James Fallows pointed out after the Clinton plan was defeated, McCaughey ignored “the first provision of the bill,” which clearly said: “Nothing in this Act shall be construed as prohibiting the following: (1) An individual from purchasing any health care services.” Just like in 1994, McCaughey’s latest Bloomberg commentary provides page numbers from the legislation to give her claims the aura of credibility. But just as in 1994, McCaughey’s assertions are not supported by the language of the bill she cites. ☞ My “take-away” is that when the Administration proposes something, we should start from the assumption that it is the work product of thoughtful, honest people trying very hard to do sensible things that will make for better times. I.e., who ya gonna believe: Rush Limbaugh, Tom Delay, Fox News, and Joe the Plumber – or Barack Obama? George Bush,* Dick Cheney,** and Sarah Palin*** – or Barack Obama? He’d be the first to say he’ll make mistakes. But I think we will all do better if we assume the best of his Administration and hope it succeeds. *“By far the vast majority of [my] tax cuts will go to people at the bottom of the economic ladder.” ** We face an imminent threat from Iraq. ***Obama “pals around with terrorists.” JON STEWART EVISCERATES CNBC Now this is fun. Have a great weekend.
Insufficient Funds March 5, 2009March 13, 2017 GE Joey: ‘If GE goes bankrupt, will it be the first AAA-rated company to go bankrupt while rated AAA?’ ☞ And when will the ratings agencies go bankrupt for their system-threatening dereliction? Not with GE, necessarily – but with all those mortgage-backed securities they rated investment grade? Did they ever check the quality of the mortgages backing them? RUSH Conservative David Frum sizes it up thus: On the one side, the president of the United States: soft-spoken and conciliatory, never angry, always invoking the recession and its victims. This president invokes the language of ‘responsibility,’ and in his own life seems to epitomize that ideal: He is physically honed and disciplined, his worst vice an occasional cigarette. He is at the same time an apparently devoted husband and father. Unsurprisingly, women voters trust and admire him. And for the leader of the Republicans? A man who is aggressive and bombastic, cutting and sarcastic, who dismisses the concerned citizens in network news focus groups as ‘losers.’ With his private plane and his cigars, his history of drug dependency and his personal bulk, not to mention his tangled marital history, Rush is a walking stereotype of self-indulgence – exactly the image that Barack Obama most wants to affix to our philosophy and our party. And we’re cooperating! Those images of crowds of CPACers cheering Rush’s every rancorous word – we’ll be seeing them rebroadcast for a long time. ☞ Not all Republicans, but quite a few – and certainly Rush Limbaugh’s millIons of proud ‘dittoheads’ – join him in hoping for the failure of President Obama’s initiatives. Our job is to treat them with civility but see to it they don’t prevent necessary, positive steps from being taken. Because remember: these are in effect the same people, 75 years later, who opposed creating FDIC insurance and the Tennessee Valley Authority and the Securities and Exchange Commission in 1933 . . . the Social Security System and unemployment insurance in 1935 . . . the minimum wage in 1938 . . . the Interstate Highway Act in 1956 . . . and all the rest. This country could have really amounted to something, they believe, if it not been for those terrible government initiatives. They are entitled to their views, especially when founded on fact, not misinformation.* But my money’s on Obama. * See tomorrow’s post. SUZE ORMAN II Following up on yesterday’s quick clip . . . according to a forthcoming Center for American Progress study, the average same-sex couple ‘will be denied over $8,000 a year in Social Security survivor benefits upon the death of the higher-earning spouse after retirement.’ ‘Most Republicans seem reluctant to support LGBT equality,’ reports the Center. ‘RNC Chairman Michael Steele for instance, who [has] promised that the party would ‘reach out to new communities,’ recently rejected the idea of civil unions. ‘No, no no [he responded]. What would we do that for? What are you, crazy?’‘ LEDs Gary Diehl: ‘I have to agree with Fred Davis. I have actually bought an LED based bulb that was suitable as a full on light bulb replacement. While I am still happy with it and it works for its intended purpose, LEDs are enormously expensive and not as efficient as most people think. LEDs tie with much cheaper CFLs as the fourth most efficient lighting available, lagging behind low pressure sodium, metal halides, and standard tube fluorescents. They are all better than common incandescents – which rank slightly above fire – but where LED bulbs really ‘shine’ is their (hopefully) really long life span. I own one because the location of one of my stairway light sockets is so difficult and dangerous to reach that I’m willing to pay a hefty premium to avoid changing it.’ LETTER TO THE BANK (thanks, Roger, who thanks Bob) Dear Sirs: One of my checks was returned marked ‘insufficient funds.” Does that refer to me or you? ☞ Have a great day.
Getting Fit And the Suze Orman Clip March 4, 2009March 13, 2017 A BULL Not everyone is despairing. Remember that the massive stimuli you’ve been reading about are only in the early stages of phasing in. Maybe they’ll have an effect? From Hook Analytics current weekly compendium (an under-the-radar independent macro-economic research product for institutional clients): “Based on the history of large money supply increases, we estimate that the Fed’s forecast of second-half 2009 recovery is more likely than continued recession into 2010; that the next few years will probably have sub-normal growth, low inflation, and low interest rates. We think the circumstances more resemble 1933 than 1931; 1982 more than 1980. That is, we think we are mostly through a recession and market crash and that the next large move will be 40-60% higher stock prices.” I would hardly bet the farm on this scenario – and actually, neither would John Hook. But he sees central bankers flooding the world with money and credit – which, he says, is not what Hoover did in 1931 – so, from a monetary perspective, that could make this 1933. From a fiscal perspective, meanwhile, picture a bus that was going pretty fast in one direction . . . overshoots the turn-off . . . slams on the brakes and backs up (what we seem to be doing now) . . . . and then starts off in a better direction, gradually gaining speed. It’s a more dramatic and disruptive maneuver than a traditional recession. A lot of passengers get thrown from their seats when the brakes slam on. In a traditional “business cycle” recession, inventories grow swollen, causing a dip in orders and prices and profits and employment – until, a year or so later, the excess capacity had been worked off and demand once again set factories to humming, and rehiring. This is different. This is transformational. We’re going on a major diet and economic fitness program that will be painful at first but leave us healthier going forward. (Some of it, let’s hope, will be a literal diet: the obesity epidemic, especially childhood obesity, is real and ominous.) SUZE ORMAN I’m a few days late posting this quick clip, but it does make you wonder: what is it about us personal finance writers? VEGETABLES Alan Waldock: “I’m sure you know (by now, at any rate) that the Thatcher ‘anecdote’ relayed by Peggy Noonan is in fact a joke from a satirical TV puppet show.” LEDs and CFLs — Hmmmm Reader George Mokray passed yesterday’s item on to his friend Fred Davis, who’s been in the business of energy efficiency and lighting for decades. He writes that the page I linked to is, like most in this field, “at best misleading.” First off, “it compares a spot/reflector LED ‘bulb’ to a CFL spiral. You would not want to use those two products for the same use. Also, lumens (light output) is not mentioned for either” – yet it is lumens that allow a fair comparison. “And, unfortunately,” he says, “ratings for LED bulbs are highly suspect anyway. The only responsible program for testing LEDs is the Caliper program by the Department of Energy. It has found, over seven rounds in three years (as recently as January 2009) that stated specifications (such as lumens or watts) for LEDs are almost never accurate.” As for the long life of LEDs – well, yes, he says, perhaps. But we actually haven’t had enough experience with “high wattage” LEDs to make very good projections. And energy savings? “NOT a responsible statement, because it makes no reference to light output. By definition, a one watt anything consumes less energy than a two watt anything. A comparison would be apples-to-apples if it were for two products which both met the same lighting needs, or, more specifically, if they produced similar lumens (and the same CRI, color temperature, photometrics, etc.). Generally, CFLs are much much much brighter than LEDs. And, if you were to aggregate LEDs for an apples-to-apples comparison, CFLs are almost always more efficient (lumens per watt). In situations where you really want very low output, then, LEDs might be advantageous.” I was even wrong about LEDs throwing off less heat, he says. “Heat generation will be less only if wattage is less.” The one place he gave me a passing grade was on my question: (Does anyone know how much energy and environmental destruction goes into making an expensive LED bulb versus a CFL?) “Decent question: I haven’t yet seen the thorough analysis, but certainly there are issues, lead, cadmium, etc., long shipping, etc.”