Odds 'n Ends
AUGUST 20, 2010
Jeff Brown, MD
OK, I'll admit it. You've got me … I love this stuff -- especially as an occasional contrast to the longer, more cogent, on-point pieces. So, unless and until you, dear reader, object, I will periodically digress and recycle these factoids and crumbs for thought financial. It is with this plan in mind that I humbly submit today's offerings:
- With money comes complexity. Without money, things are much simpler, more direct and more difficult. "Rich or poor, it's nice to have money...."
- Tax deductions appear to be a form of tax cut, but are really directed tax expenditures.
- Economist Karl Marx had this trick of explaining everything with one single question: "Who benefits?"
- Everyone in their working life has about a 30-year investing period. But they are all asymmetric, contrary to conventional wisdom. To cope with that variance, remember that -- due to human nature -- we tend to focus on the wrong things, the things that we cannot control. Like timing and "tips," we get caught up in the worst practices of the financial industry. All of us would be better served by attending to the things that we can control in investing, like regular saving, diversification and tax-deferred compounding, and ignoring the rest.
- Buying equities, or acquiring stock ownership, is really just a claim on uncertain future earnings.
- We are normal smart some of the time and normal stupid at others. The trick is to learn how to fractionally increase our ratio of smart behavior to stupid. In money matters, where we have little training, it should be easier than in medical matters, where we presumably have a methodology drilled into us. This is a corollary of one of my favorite musings: "You are not your own fault." (Well, some of the time.)
- The average amount of money in a rollover individual retirement accounts at retirement for everyone, not just doctors, is $200,000. That's scary if you live north of the border and partially explains why so many retirees live south of the border.
- I've read that private employers are not required to be closed on holidays, nor are they required to provide premium pay to employees in non-exempt positions when employees work on holidays. The typical number of holidays provided to such employees is six to 10.
- One problem with health maintenance organizations is that it's all too easy to lose your professionalism. Physicians have the moral and legal obligation to do what is best for our patients, not the insurance company which dictates whether or not its contract will pay for a given service. It's the classic tail wagging the dog, folks.
- The Dow Jones Industrial Average rises, on average for any given month since 1900, 57 percent of the time. The only months below average are marginally February and May -- and September is way below average. What that actually portends is rather meaningless in the long run, just a factoid. (But watch out next month, just in case.)
- Seventy percent of people reaching age 65 will need long-term care at some point, and 20% will need it for five years or longer. About 1.7 million already live in some type of continuing-care community. To paraphrase "Dirty Harry": "Are you feeling lucky...?" Is it time to consider long-term care insurance?
- The U.S. has shifted from a manufacturing economy to a service economy. Some economists now say that we are in the middle of a shift to an "experience" economy, meaning, we don't go to a coffee shop for just coffee, but also to relate to the ambience, which might comfort us into spending more. So why not gussied-up doctors' offices, with free refreshments and Wi-Fi?
- The U.S. Department of Veterans Affairs turned to electronic records out of necessity. The agency takes care of almost 8 million people at 150 hospitals, 765 clinics and 230 veterans’ centers.
- Don't confuse your interest or your skill-set in earning a living with your interest and skill-set in investing. To be successful, each activity requires a huge separate commitment in time, effort and aptitude. Realizing that, and acting accordingly, may well be worth many hundreds of thousands of dollars over your lifetime, both in earning more and losing less in investing. There is nothing wrong with being a "know-nothing" investor as long as you realize it and turn to a reputable professional for advice. (This will help you find one with your best interest at heart.)
- Last year, for the first time, more physicians took salaried positions than started practices. This is a huge, under the radar, sea change, with far-reaching implications -- legal, moral, financial as well as practical. Many forces have led to this, for better or worse, but our lack of training in organizational and business concepts has not prepared us to competently assess or undertake either one. Historically, most of us just expensively and wastefully muddle through. Learning the hard(est) way.
- Every dollar spends the same. If you think your tax refund or lottery winnings are different than your paycheck, you have fallen into a trap that economists call "mental accounting." Don't kid yourself; it is not the House's money to spend recklessly.
- And finally: Research shows that people are less likely to understand material or find it interesting if they read it onscreen compared with reading it on paper.