The International Federation of Health Plans has published the 2015 Comparative Price Report, Variation in Medical and Hospital Prices by Country. Once again this illustrates the excessive cost of health care in the USA. See related posts for some of our previous posts on this topic.
The damage to the USA economy due to inflated health care costs is huge. A significant portion of the excessive costs are due to policies the government enacts (which only make sense if you believe the cash given to politicians by those seeking to retain the excessive costs structure in the USA the last few decades buy the votes of the political parties and the individual politicians).
In 2015, Humira (a drug from Abbvie to treat rheumatoid arthritis that is either the highest grossing drug in the world, or close to it) costs $2,669 on average in the USA; $822 in Switzerland; $1,362 in the United Kingdom. This is the cost of a 28 day supply.
All the prices shown here are for the prices reported are the average allowed costs, which include both member cost sharing and health plan payment. So it only includes costs for those covered by health plans (it doesn’t include even much larger price tags given those without insurance in the USA).
Harvoni (a drug from Gilead to treat hepatitis C is also near the top of drugs with the largest revenue worldwide). This is also a drug that has been used as a lightning rod for the whole area of overpriced drugs. One interesting thing is this is actually one that is not nearly as inflated in the USA over other countries nearly as much as most are. Again, for a 28 day supply the costs are $16,861 in Switzerland; $22,554 in the United Kingdom and $32,114 in the USA. Obviously quite a lot but “only” double the cost in the USA instead of over triple for Humira (from Switzerland to the USA).
Tecfidera is prescribed to treat relapsing multiple sclerosis. The cost for a 30 day supply vary from $663 in the United Kingdom to $5,089 in the USA ($1,855 Switzerland).
There are actually some drugs that are more expensive outside the USA (though it is rare). OxyContin is prescribed to treat severe ongoing pain and is also abused a great deal. The prices vary from $95 in Switzerland to $590 in the United Kingdom ($265 in United States).
The report also includes the cost of medical procedures. For both the drugs and the procedures they include not only average but measures to show how variable the pricing is. As you would expect (if you pay attention to the massive pricing variation in the USA system) the variation in the cost of medical procedures is wide. For an appendectomy in the USA the 25th percentile of cost was $9,322 and for the 95th was $33,250; the average USA cost was $15,930. The average cost in Switzerland was $6,040 and in the United Kingdom was $8,009.
As has been obvious for decades the USA needs to stop allowing those benefiting from the massively large excessive health care costs in the USA from buying the Democrats and Republicans support to keep prices so high. But there has been very little good movement on this front in decades.
Related: USA Heath Care System Needs Reform – USA Health Care Spending 2013: $2.9 trillion $9,255 per person and 17.4% of GDP – Decades Later The USA Health Care System is Still a Deadly Disease for Our Economy – USA Spends $7,960 per person Compared to Around $3,800 for Other Rich Countries on Health Care with No Better Health Results (2009) – Drug Prices in the USA (2005)
After a slowing of additional capacity added in 2013, both 2014 and 2015 saw a bit of a rebound in additions to global wind energy capacity. In 2013 capacity increased only 13% while in both 2014 and 2015 it increased 17%. Still 17% is less than any year in the last 10, except 2013.
At the end of 2013 China had 29% of global capacity (after being responsible for adding 62% of all the capacity added in 2013). In 2005 China had 2% of global wind energy capacity.
At the end of 2015 China accounted for 34% of global capacity, the only country in the top 8 increasing their share of global capacity. The USA now has 17% of capacity. Germany has 10%.
Europe moved first in adding large scale wind energy capacity but has added capacity very slowly in the last 5 years. Germany had 31% of global capacity in 2005. Spain had 17% in 2005 and now has just 5% (during that time Spain has more than doubled their wind energy capacity).
The 6 countries shown on the chart account for 76% of total wind energy capacity globally. From 2005 to 2015 those 8 countries have accounted for between 74 and 77% of total capacity – which is amazingly consistent.
Wind power now accounts for approximately 4 to 5% of total electricity used.
Related: Chart of Global Wind Energy Capacity by Country 2005 to 2013 – Solar Energy Capacity by Country (2005 to 2013) – Nuclear Power Generation by Country from 1985-2010 – Chart of Largest Petroleum Consuming Countries from 1980 to 2010
The report, The Dwindling Taxable Share Of U.S. Corporate Stock, from the Brookings Institution Tax Policy Center includes some amazing data.
In 1965 foreign ownership of USA stocks totaled about 2%, in 1990 it had risen to 10% and by 2015 to 26%. That the foreign ownership is so high surprised me. Holdings in retirement accounts (defined benefit accounts, IRAs etc.) was under 10% in 1965, rose to over 30% in 1990 and to about 40% in 2015. The holdings in retirement accounts doesn’t really surprise me.
The combination of these factors (and a few others) has decreased the holding of USA stocks that are taxable in the USA from 84% in 1965 to 24% in 2015. From the report
As with much economic data it isn’t an easy matter to determine what values to use in order to get figures such as “foreign ownership.” Still this is very interesting data, and as the report suggests further research in this area would be useful.
Related: There is No Such Thing as “True Unemployment Rate” – The 20 Most Valuable Companies in the World – February 2016 (top 10 all based in the USA) – Why China’s Economic Data is Questionable – Data provides an imperfect proxy for reality (we often forget the proxy nature of data)
We have tax plans from the major USA Presidential candidates. I don’t like any of them, though I actually like Ted Cruz’s plan more than the others, but it has a huge problem. His plan doesn’t fund the government he wants, not even just as poorly as we have been doing. He would increase the debt substantially.
My plan would have 3 parts. I like a flat tax, I doubt it will ever happen, but if we could get one I would be happy. Cruz proposes that (at 10%). I am fine with his proposal to eliminate all deductions but mortgage interest and charity. I would definitely tweak that some – no more than $50,000 in mortgage interest deduction a year and the same for charity. Basically subsidizing it a bit for the non-rich is fine. Subsidizing these for the rich seems silly so I would cap the deductions in some way. I also wouldn’t mind an almost flat tax, say 12% up to $200,000 and 15% after that (or some such rates).
Cruz’s rate is far too low given the government he wants. The government budget is largely: Social Security, Medicare and Military. Then you also have debt payment which have to be paid. Those 4 things are over 80% of the spending. All the other things are just in the last 20%, you can cut some of that but realistically you can’t cut much (in percentage terms – you can cut hundreds of billions theoretically but it is unlikely and even if you did it isn’t a huge change).
We are piling on more debt than we should. Therefore we should increase revenue, not reduce it. But if we can’t increase it (for political reasons) we definitely should not reduce it until we have shown that we have cut spending below revenue for 2 full years. After that, great, then decrease rates.
The VAT tax on businesses replacing the corporate tax system is in Cruz’s plan and this is the best option for corporate taxes in my opinion. Another decent option is just to pass through all the earnings to the owners (I first heard this proposal from my Economics professor in College) and tax them on the earnings.
Increasing the giveaways to trust-fund baby as Cruz and Trump propose is the single worst tax policy change that can be made. I have explained previously how bad an idea this is: The estate tax is the most capitalist tax that exists. The trust-fund-baby favors should be reduced not increased. I would roll back to the Reagan Administration policy on estate tax rates.
Alphabet (Google) writes how they purchased 3.2 million shares this quarter in their earnings release:
In Q1 2016, we repurchased 3.2 million shares of Alphabet Class C capital stock for an aggregate amount of $2.3 billion, of which $2.1 billion was paid during the quarter. The total remaining authorization for future repurchases is approximately $1.4 billion. The authorization has no expiration date.
And they tout non-GAAP earnings, while of course reporting the GAAP earnings as required. One of the things executives like about non-GAAP earnings is they pretend the stock they give away to themselves doesn’t have a cost to shareholders. When you call attention to spending over $2 billion in the quarter to buy back 3.2 million shares it seems silly to then claim that the stock you gave away shouldn’t be considered as an expense.
How can you pay over $2 billion just to get back the stock you gave away and also pretend that money is not really a cost? And on top of that you promote the buyback as evidence that the stock is really worth more than you paid (after all why would you pay more than it is worth). But when you give the stock away to yourself that shouldn’t be seen as a cost? It is amazing they can do this and think they are not doing anything wrong.
And where does Google stand compared to last year for outstanding shares? 689,498,000 last year compared to 699,311,000 now. So nearly 10,000,000 more shares outstanding, even after they bought back 3.2 million this quarter. In the previous quarter there where 697,025,000 shares outstanding. All these figures are weighted-average diluted share balances for the entire quarter.
Google CEO, Sundar Pichai, got a $100 million stock award in 2015 (before being promoted to CEO). After the promotion he will be taking an additional “$209 million in stock granted every other year (he has to stay at Google for four years after each grant to cash them out).” He was granted $335 million in stock in 2014 and $78 million in 2013. You can see how quickly the executives paying themselves this well (this is 1 executive, a highly ranked one but still just 1) can dilute stockholders positions even with multi billion dollar buybacks in a quarter.
You don’t hear companies promoting how much dilution they are imposing on shareholders in order to provide windfalls for executives. I wonder why? No I don’t. I do wonder why reporters promote the buybacks and ignore the fact that the dilution is so extreme that it even overwhelms billions of dollars in buybacks.
Alphabet reported $6.02 a share in earnings and $7.50 a share in non-GAAP “earnings” for the latest quarter.
As I have said before I believe Google’s ability to extract enormous profit from their search dominance (as well as YouTube and adwords) makes it a very compelling long term investment. It would be better if the executives were not allowed to take such huge slices from the cash flow Google generates. But it is able to sustain those raids on stockholder equity and still be a good investment and appears likely to be able to continue to do so. Though I think they would be better off reducing the amount executives take going forward.
This post continues our series on peer-to-peer lending (and LendingClub): Peer to Peer Portfolio Returns and The Decline in Returns as Loans Age, Investing in Peer to Peer Loans. LendingClub, and other peer-to-peer lenders let you use filters to find loans that meet your criteria. So if you chose to take more, or less, risk you can use filters to find loans fitting your preferences. Those filters can also be applied to automate your lending.
There are resources online to help you understand the past results of various investing strategies (returns based on various filters). Some filter are just a trade-off of risk for return. You can invest in grade A (a LendingClub defined category) loans that have the lowest risk, and the lowest interest rates and historical returns. Or you can increase your risk and get loans with higher interest rates and also higher historical returns (after factoring in defaults).
LendingClub lets you set filters to use to automatically invest in new loans as funds are available to invest (either you adding in new money or receiving payments on existing loans). This is a nice feature, there are items you can’t filter on however, such as job title. And also you can’t make trade-offs, say given x, y and z strong points and a nice interest rate in this loan I will accept a bit lower value on another factor.
So I find I have to be a bit less forgiving on the filter criteria and then manually make some judgements on other loans. For me I add a bit higher risk on my manual selections. I would imagine most people don’t bother with this, just using filters to do all the investing for them. And I think that is fine.
Practically what I do so that I can make some selections manually is to set the criteria to only be 98% invested. This will cause it to automatically invest any amount over 2% that is not invested. You can set this to whatever level you want and also is how you can make payments to yourself. I will say I think one of the lamest “features” of LendingClub is that is has no ability to send you regular monthly checks. So you have to manually deal with it.
It should be simple for them to let you set a value like send me $200 on the 15th of each month. And then it manages the re-investments knowing that and your outstanding loans. But they still don’t offer that feature.
As I said one of the factors in setting filters is managing risk v. reward but the other is really about weaknesses in the algorithm setting rates. You can just see it as risk-reward trade-off but I think it is more sensible to see 2 different things. The algorithm weaknesses are factors that will fluctuate over time as the algorithm and underwriting standards are improved. For example, loans in California had worse returns (according to every site I found accessing past results). There is no reason for this to be true. If a person with the exactly same profile is riskier in California that should be reflected in higher rates and thus bring the return into balance. My guess is this type of factor will be eliminated over time. But if not, or until it is, fixed filtering out loans to California makes sense.
Once you set your filter criteria then you select what balance you want between A, B, C, D, E and FG loans. I set mine to
I actually have a bit over 1% in FG (but I select those myself). In 2015 the makeup of the loans given by LendingClub was A 17%, B 26%, C 28%, D 15%, E 10%, F and G 4%.
Related: Where to Invest for Yield Today (2010) – Default Rates on Loans by Credit Score – Investing in Stocks That Have Raised Dividends Consistently – Investment Risk Matters Most as Part of a Portfolio, Rather than in Isolation
Sadly Lending Club uses fragile coding practices that result in sections of the site not working sometimes. Using existing filters often fails for me – the code just does nothing (it doesn’t even bother to provide feedback to the user on what it is failing to do). Using fragile coding practices sadly is common for web sites with large budgets. Instead of using reliable code they seems to get infatuated with cute design ideas and don’t bother much making the code reliable. You can code the cute design ideas reliably but often they obviously are not concerned with the robustness of the code.
|2||Alphabet (GOOGL)||USA||$496 billion|
|4||Exxon Mobil||USA||$341 billion|
|5||Berkshire Hathaway||USA||$329 billion|
|8||Johnson & Johnson||USA||$296 billion|
|10||Wells Fargo||USA||$245 billion|
Apple lost $131 billion in market cap since my October post. Alphabet (Google) lost just $1 billion in market cap, and for a short time moved past Apple into the top stop. Facebook achieved a rare increase during this period, gaining $16 billion and moving up 1 spot on the list. All the top 10 most valuable companies are based in the USA once again.
The next ten most valuable companies:
|13||China Mobile||China||$219 billion|
|15||JPMorgan Chase||USA||$214 billion|
|16||Procter & Gamble||USA||$211 billion|
|18||Industrial & Commercial Bank of China||China||$206 billion*|
|20||Petro China||China||$191 billion|
Market capitalization shown are of the close of business February 26th, as shown on Google Finance.
The 11th to 20th most valuable companies includes 4 USA companies, 3 Chinese companies and 3 Swiss companies. Toyota fell from 20th to 25th and was replaced in the top 20 by Verizon, which resulted in the USA gaining 1 company and costing Japan their only company in the top 20. Pfizer also dropped out and was replaced by Walmart.
The total value of the top 20 decreased by $189 billion since my October post: from $6.054 trillion to $5.865 trillion. Since my October 2014 post of the 20 most valuable companies in the world the total value of the top 20 companies has risen from $5.722 trillion to $5.865 trillion, an increase of $143 billion. The companies making up the top 20 has changed in each period.
A few other companies of interest (based on their market capitalization):
BenefitsCheckUp is a free service of the National Council on Aging. Many adults over 55 need help paying for prescription drugs, health care, utilities, and other basic needs. There are over 2,000 federal, state and private benefits programs available to help those living in the USA. But many people don’t know these programs exist or how they can apply.
BenefitsCheckUp asks a series of questions to help identify benefits that could save you money and cover the costs of everyday expenses in areas such as:
- Health care
- Employment Training
While the National Council on Aging is focused on benefits for older people the service actually finds many sources that are not dependent on age.
If you complete the overall questionnaire it is fairly long (about 30 questions) but still can be completed in 10 minutes. Also you can target your request (say to health care) and have a shorter questionnaire. They will provide links and contact information to various programs you may qualify for based on your answers.
Since April of 2005, the portfolio Marketocracy calculated annualized rate or return is 7.1% (the S&P 500 annualized return for the period is 6.9%). Marketocracy subtracts the equivalent of 2% of assets annually to simulate management fees – as though the portfolio were a mutual fund. Without that fee, the return beats the S&P 500 annual return by about 220 basis points annually (9.1% to 6.9%).
Since the last update, I have added Gilead to the portfolio. I also dropped PetroChina and Templeton Dragon fund (as I had mentioned I would do).
The current stocks, in order of return:
|Stock||Current Return||% of sleep well portfolio now||% of the portfolio if I were buying today|
|Amazon – AMZN||736%||12%||9%|
|Google – GOOG||400%*||21%||15%|
|Danaher – DHR||129%||8%||8%|
|Apple – AAPL||85%||17%||17%|
|Toyota – TM||50%||8%||10%|
|Intel – INTC||46%||7%||8%|
|Pfizer – PFE||21%||6%||6%|
|Cisco – CSCO||14%||3%||3%|
|Abbvie – ABBV||1%||6%||8%|
|Gilead – GILD||-6%||6%||8%|
The current marketocracy results can be seen on the Sleep Well marketocracy portfolio page.
I make some adjustments to the stock holdings over time (selling of buying a bit of the stocks depending on large price movements – this rebalances and also lets me sell a bit if I think things are getting highly priced. So I have sold some Amazon and Google as they have increased greatly (and I have added to ABBV and GILD at nice prices). These purchases and sales are fairly small (resulting in an annual turnover rate under 2%).
I would consider selling Cicso. I also would like to find a good natural resource stock or two if I can find good stocks. I do feel the portfolio is too concentrated in technology and medical stocks so I am would choose a stock with a different focus if it were close to as good as an alternative focused on technology or health care, but I will also buy great companies at good prices even if that results in a less diverse portfolio.
I don’t try and sell significant portions of the portfolio and have a large cash balance to time the market. I will, however, sell some of the individual positions if I think the price is very high (or to rebalance the portfolio a bit).
The market has gone down a fair amount recently and may go down more. It may be in that downdraft I will find a nice candidate to add at an attractive price.
If you wonder why the Apple return isn’t higher, I debated adding it at the outset but decided against it. So I only started adding Apple in 2010 and added to that position over the next several years.
* Marketocracy seems to have messed up the returns for Google (probably due to the split); this is sad as their purpose for me is to calculate returns, but my guess is between 350-450%
When I lived in Malaysia I learned that the residential electricity rates were very low for the low levels of use and climbed fairly rapidly as you used a lot of electricity (say running your air conditioner a lot). I think this is a very good idea (especially for the not yet rich countries). In rich countries even most of the “poor” have high use of electricity and it isn’t a huge economic hardship to pay the costs.
Effectively the rich end up subsidizing the low rates for the poor, which is a very sensible setup it seems to me. The market functions fairly well even though it is distorted a bit to let the poor (or anyone that uses very little electricity) to pay low rates.
In a country like Malaysia as people become rich they may well decide to use a great deal of electricity for air conditioning (it is in the tropics). But their ancestors didn’t have that luxury and having that be costly seems sensible to me. Allowing the poor to have access to cheap electricity is a very good thing with many positive externalities. And subsidizing the rate seems to be a good idea to me.
Often you get bad distortions in how markets work when you try to use things like subsidies (this post is expanded from a comment I made on Reddit discussing massive bad investments created by free electricity from the power company to city governments – including free electricity to their profit making enterprises, such as ice rinks in Puerto Rico).
With the model of low residential rates for low usage you encourage people to use less electricity but you allow everyone to have access at a low cost (which is important in poor or medium income countries). And as people use more they have to pay higher rates (per kwh) and those rates allow the power company to make a profit and fund expansion. Often in developing countries the power company will be semi-private so the government is involved in providing capital and sharing in profits (as well as stockholders).
The USA mainly uses central air conditioning everywhere. In Malaysia, and most of the world actually, normally they just have AC units in some of the rooms. In poor houses they may well have none. In middle class houses they may have a one or a couple rooms with AC units.
Even in luxury condos (and houses) they will have some rooms without AC at all. I never saw a condo or house with AC for the kitchen or bathrooms. The design was definitely setup to use AC in fairly minimal ways. The hallways, stairways etc. for the “interior” of the high rise condos were also not air conditioned (they were open to the outside to get good air flow). Of course as more people become rich there is more and more use of AC.
Related: Traveling for Health Care – Expectations – Looking at the Malaysian Economy (2013) – Pursuing a Growing Economy While Avoiding the Pitfalls That Befall to Many Middle Income Countries – Singapore and Iskandar Malaysia – Looking at GDP Growth Per Capita for Selected Countries from 1970 to 2010 – Malaysian Economy Continues to Expand, Budget Deficits Remain High (2012) – Iskandar Malaysia Housing Real Estate Investment Considerations (2011)