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Thoughts from the Frontline

The Healthcare Blues

February 27, 2013

It has been some time since we peeked into my worry closet. A few questions this weekend prompted me to think about things I am paying attention to but have not written about, and one thing that I am not worried about at all, despite the apparent media hysteria.

But first, a quick note. My tenth annual Strategic Investment Conference (May 1-3 in Carlsbad, California) seems to be filling up nicely. The speaker lineup is exceptional: Kyle Bass; Ian Bremmer; Mohamed El-Erian; Niall Ferguson and his wife, Ayaan Hirsi Ali; Lacy Hunt; Charles and Louis Gave; Jeff Gundlach; Anatole Kaletsky; David Rosenberg; Nouriel Roubini; and Gary Shilling.

Seriously, where else can you find a roster like that? And the attendee list has a who’s who” feel to it, as well. Those who come regularly know that the real value is in meeting the other attendees. David Rosenberg noted last year that this is the top investment conference he has ever addressed. The speakers all seem to bring their “A” game. The attendees agree, and this year we will have more interaction than ever.

The conference always sells out, and we offer an early-bird registration, which is about to run out. Because of security regulations, we do have to limit attendance to accredited investors and those in the securities/investment business. You can start the process by going to the Strategic Investment Conference page.

But before we go any further, did you know that you can now absorb Thoughts from the Frontline through your ears, if your eyes are otherwise occupied? That’s right – our new audio service delivers my weekly letter to your cellphone, iPod, MP3 player, or computer, whenever and wherever you choose. You can check it out right here.

And now, let’s peek into my worry closet.

On Being a Professional Worrier

I should note that I am a professional worrier. I get paid to think about what can affect our economy, finances, and investments. Over the years I have become quite good at it. But the sheer volume of things to worry about has grown so much that there is not enough time to worry about everything, so I have had to prioritize.

For instance, there was a…

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Tony M

Feb. 27, 2013, 7:59 a.m.


I disagree that we have the best healthcare system in the world. We have the best at treating the effects of self inflicted disease, but not the root cause. The root cause of the our modern medical problems is the Standard American Diet, one only has to walk through any public place and notice the obesity crisis and you can quickly tie this to the healthcare crisis.

Americans now eat over twice the sugar, meat, and dairy than they did in 1900, and heart disease was about the number 10 leading cause of death in that year according to the CDC. Now it is number one by a mile with cancer a steady number 2.

No one has the guts to take on the beef, dairy, and processed food industries. They make a nice co-conspirator with big pharma and the healthcare industry. The healthcare industry is really the “disease management” industry.

All of this is changeable, and could be reversed in a single generation. As Bill Maher has stated, the answer is spinach.

To learn more, watch

Tom Day

Feb. 27, 2013, 7:28 a.m.

You might have your staff look at AFLAC supplemental policies. AFLAC helps policy holders avoid financial disaster from higher deductibles and copays, that are just going to go higher each year. In a group plan, these policies are very affordable and the best part is, it doesn’t cost your firm anything! Check it out John, and let us all know what you think.
Sonoma, CA

Feb. 27, 2013, 7:09 a.m.

Good take on healthcare - but if you think that healthcare costs are excessive now, wait for the current demographic trends to kick in; and then add the weight- and NIDDM-related pathologies, which are basically accelerated ageing. Health expectancy is falling, and life expectancy at middle and old age is starting to fall back too, whatever the polyannas may tell you.

You have to look under the fringes of the current medical / pharmaceutical paradigm to see how things might be improved, and you have to look back. Did you know that life and health expectancy were better in the second half of the 19th century that they are today? And that was achieved without the ‘best medical care on the planet’ you cite in your piece - a system that focusses on post-hoc, crisis management.

Few medical and pharma personnel talk about this but if you filter out child mortality, the figures show that our great great grandparents lived slightly longer than we do today, and far more healthily. In this population heart disease, cancer and the other degenerative diseases occurred at levels around 10% of today’s.

If you’re interested, the whats and whys can be found in a series of papers published in the Journal of the Royal Society of Medicine:

All the best,

Kenneth Goldman

Feb. 27, 2013, 6:55 a.m.

I am sorry, John, but your “free-market sensibilities” are quite misplaced where our Healthcare Industrial Complex is concerned.  First, there is no transparent free market.  Medical bills couldn’t be more opaque, or more marked up.  Second, the oligopoly that is the Healthcare industry is extracting excess profits from employers, consumers, and other payers (taxpayers and otherwise) into the system.  It is almost tantamount to monopoly rent that economists and regulators warned that our country should outlaw or avoid.  Finally, Healthcare is one industry where profits may be immoral.  Why should Insurance Company XYZ, or HMO ABC, or even Doctor YME, be able to extract enormous revenues way in excess of costs and thus profit off of the injuries and illnesses of others, mostly the elderly, who are also under duress during such times of hardship?  To me, the Healthcare industry should be a not-for-profit industry, or at least have their revenues and profits highly regulated and limited.  Otherwise, you get Tylenol marked up 10-fold as you mentioned in your article.  This industry is almost 20% of our economy for a reason, John.

Use common sense, John, not your GOP prism through which you see everything, economically-speaking.  Since the Healthcare Industrial Complex sucks up almost 20% of US GDP, well over what advanced countries have to spend for better outcomes for their nationalized systems, don’t you think some people and corporations (who aren’t people) are making out like bandits?  Some get awfully rich, richer than they deserve to be, due to the $2.8 trillion of money changing hands.  You like to focus on the government’s $0.8 trillion share of that pie as if it’s wrong, but actually government can negotiate far greater discounts for service than can the for-profit HMO’s and insurance companies.  Perhaps if Healthcare costs were taken out of the employers’ hands (with savings partially going toward higher employee wages as well as profits), and our government turned Medicare into “Medicare for All” whereby all those under 65 who wished could buy in early, the economies of scale could vastly reduce the profit margins of the industry, getting costs under control and HELPING reduce our deficits.  Just a thought.

Think outside the box, John.  You know there is a major problem with Healthcare costs, but your ideology toward free-market profits is blinding you to the ultimate solutions that are out there.  The multibillion dollar industry that is the Healthcare Industrial Complex lobbying effort probably prevents any progressive change in this arena anytime soon beyond Obamacare (which I agree doesn’t reign in costs well enough), but conventional thinkers with the power of the keyboard such as you, who don’t look outside the box, don’t help matters.  Please consider what I’ve written here, look into your soul to answer whether you really think the USA’s corporations and medical professionals are right and justified to enjoy huge and rising profits at the expense of the sick, the injured, the elderly, and all taxpayers.  YES, we have the best healthcare in the world, and Yes you would like it to be there to keep you healthy to 100 and beyond, but will it be there for 315 million other Americans?  I think not, at least not in an affordable and accessible way, unless we as a country start to “think different” about this industry, as Steve Jobs used to put it.  Thanks for reading.

Norman Leet

Feb. 27, 2013, 6:43 a.m.

A heartless economist might perk up and ask (in a strictly abstract sense, you understand) what investment opportunities in offshore health care present themselves as a country destroys its internal health care delivery system through unfunded mandates, subsidies, cost transfers, price controls/rationing and falling quality of service. A literature survey of the Canada and Britain experience could possibly be enlightening. 
Life was simpler when life was regarded as priceless, but cost was contained by the limited bag of tricks that you could throw at a malady.  Since the cost was constrained by the limited benefits available, you did not have to think about the cost/benefit trade.  Now we have to do the trade, and we do not like it, neither as a market based supply/demand balance (unequal, but high incentive for efficiency) nor as a bureaucratic determined (notionally equal, but incentive killing) allocation of resources.
In the long term, the market based solution will prevail because it realizes the most productive utilization of resources.  Psychologically, we will no doubt fight that destiny every step of the way, much to our <overall> detriment.
Ok, I will stop now.

Jim Coulson

Feb. 27, 2013, 6:17 a.m.


I wrote a War College Masters thesis on Chinese expansionism in the South China Sea back in 1997.  (I’m a retired Navy Captain). There is a significant economic and strategic element to the Senkaku island dispute.

First, every rock out in the South China Sea that China can bully its way into taking over (like Mischief reef off the Philippines) expands its rights to economic exclusion zones.  It hopes to take over vast undersea oil and gas fields, if they are indeed there as thought to be.

Second, taking this particular set of islands over gives them further strategic leverage over the first island chain, isolating Taiwan from help by allied forces in time of conflict, and bringing pressure on Japan’s southern flank.

Think about it:  Should China become successful in attaining control via bullying, inaction on the part of allies, or via other means, they will effectively control the Straits of Malacca, through which most of the Middle East oil travels.

This allows them a significant lever on Australia, the US, and all the ASEAN allies.

So, while it may seem that this is a feud over “national emotion and barren rocks,” it is really a very important issue and bears watching.

Also, the increasing beligerance of North Korea may in fact be part of a deceptive act to focus the major powers more towards them, and away from their only major ally, the Chinese.  Watch those interactions closely.

Finally, the economic warfare being waged by the Chinese in their cyberwar efforts cannot be discounted.  We have some effective leverage that we are missing…the Taiwan card.  We should privately tell the Chinese they have “X-days, weeks, months” to knock it off.  Otherwise, the Taiwanese get to purchase 2 squadrons of F-15K’s for every X-days it continues, a new destroyer for every x-months, etc.  Then, we do it.

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