Blog Archives

Market Manipulation

Friday, September 25th, 2009

Last year, when oil prices went nuts, there were cries from everywhere that the government needed to step in and limit the manipulation of prices by speculators that was keeping prices artifically high, and we’re getting close to the point of seeing those new rules become law.

But the Federal Government has done the same thing since the 1930s, and the FDR programs have generally been considered a “good thing”, at least by FDR Democrats.   The Federal Government sets artificial price levels and limits the down side risk to farmers – that if the crops are plentiful and prices would normally drop due to excess supply and low demand, the taxpayers jump in and buy up the excess crops and put them in government storage.   The social purpose is that by protecting farmers from losing money, we make sure there will always be a stable supply of food.

What’s the difference?  Why is it okay for government to manipulate prices?

Instinct vs Science

Wednesday, September 23rd, 2009

About two months ago, I wrote a little screed which got me quoted in a newspaper that “I’m fat, I know I’m fat, and I don’t care that you don’t like it”.  The point was that people in talk radio (and some politicians) are feeding the notion that fat people are what are causing health care costs to go up.  The most blatant example of this was Michael Savage advocating that “fat people” be denied  health care insurance by government edict (Mr Conservative?).

This attitude also is widely held in the medical community despite the fact that the science and data says otherwise.  Having just been hospitalized for fainting and immediately being put on high blood pressure medication and cholesterol lowering medications while I was literally strapped in a bed and unable to have a rational discussion, I feel ever more strongly now about this subject.

The “gold standard” for estimating risk of heart disease and stroke is the Framingham Risk Score.   I’m 53, not diabetic, have never smoked, not African American, no family history of premature death due to heart attacks,  my total cholesterol is under 200, my systolic blood pressure is below 140 without taking any medications.   My 10 year risk of having a heart attack is about 5% (that’s 1/2 of 1% per year – most of which is probably when I’m 60+).  That makes my risk of having a stroke or a heart attack significantly less than the average person my age – but people see a 300 pound man and their instinct says “high heart attack risk” when in fact that’s not based in fact.  Add to this that I was on a heart monitor for 4 days and didn’t have so much as a flutter and the sonogram showed my heart being normal in the way it  beats and its size (no early signs of congestive heart failure) and no heart murmer or other indication of heart disease or valve damage.

So now I’m still on a blood pressure medication to lower my systolic pressure from the 140 range to the 120 range, despite the fact that if you look at the Framingham scale that 145 untreated and 120 treated have identical risk profiles for heart attack and stroke.  So maybe you’re thinking, well it can’t hurt anything to take it….   One of the side effects of lisinipril/hctx is that it can cause symptoms of low blood pressure – fainting and dizziness – which is the reason I wound up in the hospital in the first place – in addition to causing weight GAIN.

You’ll notice that weight and BMI (body mass index) are not factors  – there is a reason for that – BMI is not an indicator of heart attack/stroke risk – in fact the highest risk is in the people who have very low BMIs.  To have a low BMI, you have to have very little muscle tissue which means you are highly inactive and a good chance you’re a smoker.  People who are moderately obese have a lower risk than those of normal weight.    The real measurement of risk is comparing the size of your waist to the size of your hips, which nobody has measured yet.

So looking to the future when the Health Care Czar is empowered to make rules based on politics, not science – if I make the above case to my doctor and he insists that I continue to take this medication despite all of the scientific data that says he’s wrong and I become “non compliant” with my doctor’s “orders”, what will the government do next?

Moral Hazard

Tuesday, September 22nd, 2009

Back during the crisis last year, when Rick Santelli – the floor trader in Chicago – first proposed the idea of a second tea party (did you forget that Howard Kurtz?), his helper jumped in saying “Moral Hazard! “.

Video

I don’t think most of the people watching, including the reporters who cover Wall Street got the significance of that shout out – because it is a term of art in the Insurance business, not on Wall Street.

A fundamental principle of underwriting insurance is making sure that you don’t create a “moral hazard” – a reason for the owner or beneficiary of the policy to behave recklessly because they know they have insurance.   In the extreme, they may deliberately cause a loss to enrich themselves. 

For instance, if you sold a disability policy that paid 125% of the normal salary, people would be motivated to injure themselves on purpose.   If you could take out a life insurance policy on another person with which you have no economic connection, you could be motivated to cause the death of that person.

AIG started writing policies (Credit Default Swaps – CDSs) that protected people from the possibility that Freddie Mac and Fannie Mae’s mortgage backed securities (CDOs) would lose value.  Folks started buying the CDSs like crazy because they believed AIG was way underpricing the risk they were taking, and AIG was feeding a moral hazard.   They were incentivizing the entities buying the securities to CAUSE the failure of Freddie Mac and Fannie Mae.   The bulk of the federal bailout funds went right through AIG to pay off the people who benefited from the moral hazard of encouraging the reckless mortgage lending practices.

The “Wedding Cake” is ready

Monday, September 21st, 2009

Now if the Wedding Cake is a reference to a nuclear device somewhere in New York City, do you really want the CIA to not torture these guys from Pakistan to find out where it is?  It isn’t quite so hypthetical any more, is it?

Then again, maybe it is just a wedding cake.

Natural Gas and cars

Sunday, September 20th, 2009

Bob Brinker has been on a rant for months now that the solution to all our imported oil problems is to convert to using natural gas for cars, since the U.S. is drowning in domestic natural gas supplies.   Let’s look at the numbers

The U.S. currently consumes about 20 million barrels day of oil, the largest portion of which is used in transportation – which includes airplanes, trucks, and trains.  In 2008, we used about 132 billion gallons of gasoline.

Gasoline contains about 125,000 BTUs per gallon. 
8 gallons of gasoline = 1000 cubic ft (mcf) of natural gas = 1M BTUs
1 mcf delivered to your residence costs about $13 at current rates (about $1.62/gallon if you assume the engines are equally efficient)

The total annual consumption of natural gas for all purposes is about 23 million million cubic feet, or the energy equivalent of 184 billion gallons of gasoline.

Known U.S. reserves of natural gas are around 800,000 billion cubic feet, or the energy equivalent of 5.6 trillion gallons of gasoline, which would last about 41 years if all  gasoline consumption was switched to natural gas (and no new gas was found).

Natural gas gives off CO2 – it does nothing about so-called global warming.

Let me know if I dropped some zeroes…. :)

Pelosi: Climate of Political Violence

Thursday, September 17th, 2009

The Speaker of the House Nancy Pelosi made a curious statement:

“I have concerns about some of the language that is being used because I saw … I saw this myself in the late ’70s in San Francisco,” Pelosi said, choking up and with tears forming in her eyes. “This kind of rhetoric is just, is really frightening and it created a climate in which we, violence took place and … I wish that we would all, again, curb our enthusiasm in some of the statements that are made.”

Overlooking for the moment how the world would perceive the leader of the legislative branch on the verge of tears, what exactly is she referring to – what happened in the late 1970s in San Francisco?

That was way after MLK Jr and the race riots, so that isn’t it…  The logical reference is to the murder of San Francisco mayor Masconi and gay supervisor Harvey Milk (Wikipedia article) in 1978.

Dan White – the man who killed the mayor and Milk – was a Democratic supervisor who resigned his position because of rampant corruption in city government, and financial problems due to not being able to keep his job as a fireman and sit on the Supervisor’s board. 

I don’t see any real connections between that incident and anything happening today.  Maybe Nancy is crying because she is worried about the death threats Glenn Beck is getting every day?

Seems unlikely.    There are lots of things she could do to restore civility to the Democratic process like actually meet with Republicans when legislation is being written, not trying to stifle dissent by making more rules of what House members can’t say on the floor, calling off the pit bulls at Huffington Post and maybe asking President Obama to release his long form birth certificate to get that issue behind us.

Bankruptcy Watch: Triple Crown Media

Monday, September 14th, 2009

http://www.forbes.com/feeds/afx/2009/09/14/afx6882390.html

Not much here – just one more newspaper owner filing chapter 11.  Their biggest newspaper is in Albany, NY

What Cost Cutting looks like

Friday, September 11th, 2009

Wal*mart apparently wants to lead the way in “fixing” health care by working smarter.  A year or two ago, they rolled out a plan to sell many common prescriptions for $10 for 90 days worth.

Personal anecdotes are not the basis on which to make policy,  but I have the feeling this is showing us the future.   Two weeks ago upon discharge from the hospital, I went to CVS with 5 prescriptions on a Sunday with my niece, while we were still making small talk, the clerk announces – you’re all set…   my insurance company is paid, I pay my copay and I’m out of there.

My new doctor seems to want to save me money, so last week (after throwing away 4 of the 5 meds), he encourages me to go to wal*mart where I can “save money” by using the $10 special for the 1 remaining med he wants me to take.   I get there around 4:15 (the place is closed from like 12:30-2pm for lunch)…  hand over my script and am told “I won’t be  able to fill this today” given the impression that they ran out and more will be in tomorrow.   When I  ask what time I should pick it up (after the delivery comes in), then the story changes to “Oh, I have it, but there is no way it will get filled today – can you just come back tomorrow?”

So today, my dentist wants me to take that exotic drug penicillin (I probably have an ear infection affecting my balance).  About 4pm, the dentist says they’ll call it into Wal*mart.   About an hour later, I go into Wal*mart and am greeted with “OMG, this prescription just arrived.  You’ll have to come back in a few hours…. so I go grocery shopping, eat dinner, play with the iPhone and it’s now 6:30ish…  sun will be setting soon and I don’t like driving after dark.   Get to counter, the woman in front of me is being told that her prescription is not ready and maybe she’ll be able to get it in 20 or 30 minutes…   so it’s my turn to say “Hi”, and I get the same story….  there is only one pharmacist and the clerk and they’re buried.   I agree to come back tomorrow to pick up my antibiotics, by which time I probably will no longer need them or I’ll have a bigger problem than I do today.

I have the feeling I’ve just seen the future if we get Obamacare.

My Health Care Insurance proposal

Friday, September 4th, 2009

Being deeply in the middle of this at the moment, and the choices of my future limited by health care coverage, here is my thought and at least one rational proposal.

– unless compelled to, irresponsible people will not voluntarily buy health insurance coverage  they probably won’t use

– people who haven’t paid for coverage when they were healthy will demand coverage when they become sick

– insurance doesn’t work if only the people who have claims are part of the insurance pool

– government involvement is the problem, not the solution.  Much of why insurance is in trouble is Medicare and Medicaid force health care providers to cost shift onto private pay and insurance carriers.  If you end private insurance and make a single payer, there will be nobody to shift the costs to

– connecting health coverage to employment and which state a person lives in has many negative economic consequences

Here is my compromise:

– allow people to participate in Medicare as an insurer, but only after they have accumulated “x” years of private coverage, either through employment or privately purchased insurance.   Facilitate availability of health insurance that is portable across state lines.

This way people (even young people) are motivated to keep coverage for health insurance, even if they don’ t see any immediate need for care.  Being in the insurance system probably also means they’ll see a doctor more often for primary care, and head off future health problems when they are inexpensive to fix.   This doesn’t compel people to do anything they don’t want to do, basically doesn’t undermine private insurance, and should achieve many of the goals that President Obama says he wants.

Off to see the doctor :)

BP has “giant find” in Gulf of Mexico

Wednesday, September 2nd, 2009

British Petroleum has another very significant oil find in the Gulf of Mexico, at a depth of 35,000 feet:

http://finance.yahoo.com/news/BP-announces-giant-oil-find-apf-2273328778.html?x=0&.v=1

All of these deep oil finds strongly suggest that oil is not based on decayed organic material at all, but a chemical process based on the heat and pressure of the molten core of the Earth creating new oil constantly – throwing the entire notion of “peak oil” and “the last barrel of oil” out the window for those who still have open minds about science.