Archive for March 16th, 2009

Pity the baby boomers …

March 16, 2009

Excerpted from cnbc.com, “Market Meltdown Amplifies Baby Boomer Worries”, 03 Mar 2009

If losing one’s job weren’t enough to worry about in this recession, for many Americans there’s the added angst of being able to afford one’s retirement.

And that may help explain why the seemingly relentless declines in home and stock prices have ravaged consumer confidence.

The depth of that damage … household wealth in the fourth quarter, … was some 12 percent below what it was during its peak in the third quarter of 2007.  The decline in wealth is the greatest on record.

Thus far, the median price of a home is down more than 20 percent from $219,000 at the market peak in 2007 to $170,000 in January.

Stock prices, however, have fallen twice as much, some 50 percent, from their October 2007 peak.

And while a greater percentage of Americans are homeowners than investors and thus the average household’s wealth is more defined by real estate than investments, the investment outlook is still a major force.

In 2008, 47 percent of all households, or some 54.5 million, participated in the market through equity or bond ownership .., 65 million.people participate in defined contribution (DC) retirement savings plans, such as 401(k)s.

The value of those holdings has shrunk considerable. Americans held $15.9 trillion in retirement assets at the end of the third quarter of 2008, accounting for 35 percent of all household financial assets.

At the end of the second quarter of 2007, right before the credit crunch first bit, the value of those holdings was $17.4 trillion.

In the current environment, the huge losses in the stock market may actually have a larger psychological effect than those of the housing market because of the more frequent reminders; the declines are measured daily and weekly, not just monthly, like housing.

While major stock market indices are at 12-year lows; existing single family home prices are a mere six-year low.

“Economic advisors are worried about the stock market because it is part of the puzzle, and it’s almost as if the politicians don’t care what the stock market is doing,”

Some say the President’s stated desire to raise the tax on dividends and capital gains from 15 to 20 percent … sent a negative message to Wall Street, even if it was consistent with his campaign comments.

What’s more, a higher capital gains rate may not pay off if investors continue to lose money because stock prices head ever lower.

Economists don’t expect the President to identify with investors the way he does with homeowners …

Full article:
http://www.cnbc.com/id/29471950

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Electronic medical records: huge savings, huge benefits … well, not so fast.

March 16, 2009

Ken’s Take:

The evidence is equivocal, but on balance, I’m a fan of electronic med records.  As a patient, I get frustrated when I have to repeatedly document my medical history — sometimes to multiple people on the same doctor’s visit. But, I think Team Obama severely underestimates the time, effort and resources that will be required to upgrade and integrate the multitude of competing  legacy computer systems in place in hospitals, labs, and doctors’ offices.  It’ll make landing a man on the moon look like a walk in the park.

Also — while I have zero concerns re: the FBI or any other government agencies tapping my phone or rifling through my bank accounts — I do do have concerns about the lack of privacy re: medical records. 

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Excerpted from WSJ, “Obama’s $80 Billion Exaggeration”, March 11, 2009

The flagship of Pres. Obama’s healthcare proposal is the national adoption of electronic medical records — a computer-based system that would contain every patient’s clinical history, laboratory results, and treatments.

This, he said, would save some $80 billion a year, safeguard against medical errors, reduce malpractice lawsuits, and greatly facilitate both preventive care and ongoing therapy of the chronically ill.

Physicians at the Harvard teaching hospitals, where electronic medical records have been in use for years, are dumbfounded, wondering how such dramatic claims of cost-saving and quality improvement could be true. The real-world use of electronic medical records is quite different from such an idealized vision.

To be sure, there are real benefits from electronic medical records. Physicians and nurses can readily access all the information on their patients from a single site. Particularly helpful are alerts in the system that warn of potential dangers in the prescribing of a certain drug for a patient on other therapies that could result in toxicity. But do these benefits translate into $80 billion annually in cost-savings? The cost-savings from avoiding medication errors are relatively small, amounting at most to a few billion dollars yearly..

Other potential cost-savings are far from certain. The impact of medication errors on malpractice costs is likely to be minimal, since the vast majority of lawsuits arise not from technical mistakes like incorrect prescriptions but from diagnostic errors, where the physician makes a misdiagnosis and the correct therapy is delayed or never delivered. There is no evidence that electronic medical records lower the chances of diagnostic error.

In fact, once a misdiagnosis enters into the electronic record, it is rapidly and virally propagated. A study of orthopedic surgeons, comparing handheld PDA electronic records to paper records, showed an increase in wrong and redundant diagnoses using the computer — 48 compared to seven in the paper-based cohort.

But the propagation of mistakes is not restricted to misdiagnoses. Once data are keyed in, they are rarely rechecked with respect to accuracy. For example, entering a patient’s weight incorrectly will result in a drug dose that is too low or too high, and the computer has no way to respond to such human error.

What is clear is that electronic medical records facilitate documentation of services rendered by physicians and hospitals, which is used to justify billing. Doctors in particular are burdened with checking off scores of boxes on the computer screen to satisfy insurance requirements, so called “pay for performance.”

Some have speculated that the patient data collected in national electronic health records will be mined for research purposes to assess the cost effectiveness of different treatments. This analysis will then be used to dictate which drugs and devices doctors can provide to their patients in federally funded programs like Medicare. Americans should decide whether they want to participate in such a national experiment only after learning about the nature of the analysis of their records and who will apply the results to their health care.

All agree skyrocketing health-care costs are a dangerous weight on the economic welfare of the nation. Much of the growing expense is due to the proliferation of new technology and costly treatments. Significant monies are spent for administrative overhead related to insurance billing and payments. The burden of the uninsured who use emergency rooms as their primary care providers, and extensive utilization of intensive care units at the end of life, further escalate costs.

Full article:
http://online.wsj.com/article/SB123681586452302125.html

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Does $1.3 million per new job sound high to you? … Economists rip stimulus plan

March 16, 2009

Excerpted from WSJ, “Old Europe Is Right on Stimulus”, March 12, 2009

A recent study by a trans-Atlantic team of four economists subjected the Administration’s stimulus to the most recent Keynesian scholarship.

The White House estimates of 3.6 million new jobs is based on an “Old Keynesian” model on the impact of government spending, while the new models adjust for the rational behavioral response to the stimulus by businesses and consumers.

What the four economists found is that the Administration’s estimates for stimulus growth were six times as high as they could produce under a modern Keynesian simulation. By their estimates, the stimulus would produce, at most, 600,000 jobs and add perhaps 0.6% to GDP at its peak.

For those keeping score at home, that’s $1.3 million in spending per job … and pushes the US deficit over 60% of GDP

image

The Administration is already worried that its stimulus will come up short … and the outside intellectual godfathers of the Obama plan are denying paternity.

Full article:
http://online.wsj.com/article/SB123681403239101741.html

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Help Wanted: Apply US Treasury Dept … why Geithner can’t staff up

March 16, 2009

Noticed that Secretary Geithner hasn’t been able to fill many direct report slots in the Treasury Department.   Hmmm. Wonder why ?

There’s the obvious: some folks don’t want to sign up with a guy who got caught ducking  his income taxes, who has stumbled in his initial prime time showings, and who has, at best, a 50/50 shot of being at Team Obama’s Christmas party.

More subtle: A high ranking finance person from real world ops — say, Jamie Dimon from JP Morgan Chase — would bring with him a team of tested, trusted stars — a cadre of key people who already buy in to his philosophy and way of doing business.

Geithner doesn’t have that expedient luxury.  He can only bring some fellow geeks from the Fed, or start the drawn out process of recruitment, selection, indoctrination, etc.  Which gets back to the obvious point — who’d want the jobs ?

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Trading down … from Target to Walmart

March 16, 2009

Excerpted from WSJ, ” Wal-Mart’s Trickle-Down Economics”, March 5, 2009 

The economic crisis is compelling shoppers to dig ever deeper for bargains.

Wal-Mart Stores and Target both stand to benefit from trade-down purchases, but even price-matching can’t trump Wal-Mart’s reputation for value.

Target has been matching Wal-Mart’s prices on identical items in local markets for over 10 years. That’s 20,000 to 30,000 of the roughly 80,000 products in a store.

But Wal-Mart’s image as a bastion of value may be helping it steal traffic, causing customers to purchase items that they could otherwise buy at Target for the same cost.

Target also carries more expensive variations on items such as apparel that consumers are passing over. And more than half of Wal-Mart’s products are regular purchases such as food and personal-care products, while that is about a third of Target’s mix.

Full article:
http://online.wsj.com/article/SB123628850444943445.html

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Told you so … Charities revolt to O’s tax hikes

March 16, 2009

Ken’s Take: We were on this one early last week.  O’s strategy: nationalize funding of NFPs … let government, not individuals, decide which charities are worthy.

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Excerpted from WSJ, ” The Charity Revolt Liberals oppose a tax hike on rich donors”, March 10, 2009 
  
Among those shocked by President Obama’s 2010 budget, the most surprising are the true-blue liberals who run most of America’s nonprofits, universities and charities. How dare he limit tax deductions for charitable giving!

They’re afraid they’ll get fewer donations, but they should be more concerned that Mr. Obama’s policies will shove them aside in favor of the New Charity State.

His budget proposes to raise the top personal income tax rate to 39.6% in 2011 from 35%, and the 33% rate to 36% while reducing the tax benefit from itemized deductions for the top two brackets to 28% from 35% and 33%, respectively. The White House estimates the deduction reduction will yield $318 billion in revenue over 10 years.

Some worry that the tax change “could be a disincentive to some donors.”

In 2006, Americans gave $186.6 billion to charity, more than 40% from those in the highest tax bracket.

A back of the envelope calculation by the Tax Policy Center, a left-of-center think tank, estimates the Obama plan will reduce annual giving by 2%, or some $9 billion.

Americans of all income levels have long given generously, notably in the 1980s as income tax rates fell and the economy boomed. Over the last five decades, American giving overall has hardly deviated from 2% of personal income

The White House may have underestimated the power of the liberal nonprofit lobby. The charity deduction cut is the only one of the President’s many tax increases that Democrats on Capitol Hill have publicly criticized. Politics hath no fury like a rich liberal scorned.

Full editorial:
http://online.wsj.com/article/SB123664427493678121.html

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Soften your hard edges … with an empathic logo

March 16, 2009

Excerpted from Brandweek, “Grim Times Prompt More Upbeat Logos” By Todd Wasserman, Feb 21, 2009

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As the economy gets uglier, logos are getting prettier. The stolid, angular look of visual trademarks like IBM’s and Bank of America are being supplanted by ones that sport softer, more approachable fonts; multiple colors and natural, child-like symbols.

The latest example of the trend is Kraft. While the food giant’s previous visual treatment was a red, white and blue hexagon, the new one, which the company introduced with great fanfare last week, is in lower-case and sports yellow, green, purple, blue and orange as well …

Designers have a name for the trend: The Google Effect. Many say that Google’s multicolor design and the company’s willingness to tweak its logo for holidays and such have been widely influential.

Ruth Kedar, the woman who designed Google’s logo, agrees … While acknowledging that Google wasn’t the first to tweak its logo … she said the notion was still an anathema to most companies until recently. “The idea that you could modify a brand and play with it was kind of a radical change in branding, going way out of the corporate ID manual” …

Indeed, the Google Effect in this case may have a triple meaning—Google’s introduction of an era of more transparent corporate images and the advancement of the Internet as a medium to showcase logos are also influences. Years ago, logos were designed to be seen on buildings and trucks, but now the primary forum is the Internet where “color restrictions aren’t as much of an issue” …

In regard to transparency, Mike Mitchell, a Kraft rep, said that the company’s new logo is a manifestation of a bottom-up change at the company. The visual treatment, he said, is designed to convey Kraft’s new mantra: “Make today delicious.” It symbolically represents various Kraft products. The triangle shape “is invocative of pizza,” he said.

Most consumers won’t catch those references but instead will walk away with a more positive feeling about the company, said Mitchell.

Cal McAllister, co-founder of Wexly School for Girls, a design firm … said the new logos are a reflection of a desire to at least appear more approachable and transparent. “Everyone is working off the same brief,” he said. “They say, ‘Give me something natural, like a sun or a flower,’ or ‘Make it soft and make it seem friendly …”

Since such sentiment is based on consumer research, McAllister speculated that the gloomy times may be prompting consumers to gravitate to such imagery.

“Because we’re in a tough time and people are getting laid off, I think there’s a subconscious desire to take you back to when you weren’t worried about things like that, which is why we’re seeing these almost hand-drawn logos … And when you see a logo that’s boxy and the edges are hard and sharp, and the company just laid off 10,000 people, you get mad at them. But if it’s a watercolory rounded logo, you feel kind of sorry for them” …

Edit by SAC

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Full Article:
http://www.brandweek.com/bw/content_display/news-and-features/direct/e3i6c21c5456af55219d01b2ee3650498cf

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