Wednesday, December 16, 2009

Christopher H. Browne, Value Investor, Dies

Christopher H. Browne, former managing director of the mutual fund company Tweedy Browne and legendary value investor, died Sunday from a heart attack, the company announced on its Web site. He was 62.

Mr. Browne stepped down in July from his duties as director, after two years of health complications, to become a senior adviser to the firm.

Mr. Browne graduated from the University of Pennsylvania in 1969 and joined Tweedy Browne, where his father also worked. He became partner in 1974, and would spend his forty-year career at the firm, which in the 1960s helped Warren Buffett take control of a New England textile company known as Berkshire Hathaway.

With a large stake in Hollinger International, he would lead a shareholder campaign against Conrad Black’s executive perks that ultimately landed Mr. Black in prison for fraud.

Mr. Browne was widely known for his twice yearly newsletter, and the author of The Little Book of Value Investing in 2006.

Thursday, December 10, 2009

Listen! Listen! Dr. Atul Gawande Speaks on Healthcare Reform!

Key messages:

  1. Between 1999 and 2009, the average annual premium for employer-sponsored family insurance coverage rose from $5,800 to $13,400, and the average cost per Medicare beneficiary went from $5,500 to $11,900.
  2. In 1900, more than forty per cent of a family’s income went to paying for food.
  3. The government never took over agriculture, but the government didn’t leave it alone, either. It shaped a feedback loop of experiment and learning and encouragement for farmers across the country. The results were beyond what anyone could have imagined. Productivity went way up, outpacing that of other Western countries. Prices fell by half.
  4. By 1930, food absorbed just twenty-four per cent of family spending and twenty per cent of the workforce.
  5. Today, food accounts for just eight per cent of household income and two per cent of the labor force.
  6. Our fee-for-service system, doling out separate payments for everything and everyone involved in a patient’s care, has all the wrong incentives: it rewards doing more over doing right, it increases paperwork and the duplication of efforts, and it discourages clinicians from working together for the best possible results. Knowledge diffuses too slowly. Our information systems are primitive. The malpractice system is wasteful and counterproductive.
  7. Among the most important, and least noticed, provisions in the reform legislation is one in the House bill to expand our ability to collect national health statistics. The poverty of our health-care information is an embarrassment.
  8. At the end of each month, we have county-by-county data on unemployment, and we have prompt and detailed data on the price of goods and commodities; we can use these indicators to guide our economic policies.
  9. But try to look up information on your community’s medical costs and utilization—or simply try to find out how many people died from heart attacks or pneumonia or surgical complications—and you will discover that the most recent data are at least three years old, if they exist at all, and aren’t broken down to a county level that communities can learn from.
  10. It’s like driving a car with a speedometer that tells you only how fast all cars were driving, on average, three years ago.
  11. We have better information about crops and cows than we do about patients.
  12. If health-care reform is to succeed, the final legislation must do something about this.

I have the highest respect for Dr. Atul Gawande.

Hope the government read what he just has written.



Cost is the spectre haunting health reform. For many decades, the great flaw in the American health-care system was its unconscionable gaps in coverage. Those gaps have widened to become graves—resulting in an estimated forty-five thousand premature deaths each year—and have forced more than a million people into bankruptcy. The emerging health-reform package has a master plan for this problem. By establishing insurance exchanges, mandates, and tax credits, it would guarantee that at least ninety-four per cent of Americans had decent medical coverage. This is historic, and it is necessary. But the legislation has no master plan for dealing with the problem of soaring medical costs. And this is a source of deep unease.

Health-care costs are strangling our country. Medical care now absorbs eighteen per cent of every dollar we earn. Between 1999 and 2009, the average annual premium for employer-sponsored family insurance coverage rose from $5,800 to $13,400, and the average cost per Medicare beneficiary went from $5,500 to $11,900. The costs of our dysfunctional health-care system have already helped sink our auto industry, are draining state and federal coffers, and could ultimately imperil our ability to sustain universal coverage.

What have we gained by paying more than twice as much for medical care as we did a decade ago? The health-care sector certainly employs more people and more machines than it did. But there have been no great strides in service. In Western Europe, most primary-care practices now use electronic health records and offer after-hours care; in the United States, most don’t. Improvement in demonstrated medical outcomes has been modest in most fields. The reason the system is a money drain is not that it’s so successful but that it’s fragmented, disorganized, and inconsistent; it’s neglectful of low-profit services like mental-health care, geriatrics, and primary care, and almost giddy in its overuse of high-cost technologies such as radiology imaging, brand-name drugs, and many elective procedures.

At the current rate of increase, the cost of family insurance will reach twenty-seven thousand dollars or more in a decade, taking more than a fifth of every dollar that people earn. Businesses will see their health-coverage expenses rise from ten per cent of total labor costs to seventeen per cent. Health-care spending will essentially devour all our future wage increases and economic growth. State budget costs for health care will more than double, and Medicare will run out of money in just eight years. The cost problem, people have come to realize, threatens not just our prosperity but our solvency.

So what does the reform package do about it? Turn to page 621 of the Senate version, the section entitled “Transforming the Health Care Delivery System,” and start reading. Does the bill end medicine’s destructive piecemeal payment system? Does it replace paying for quantity with paying for quality? Does it institute nationwide structural changes that curb costs and raise quality? It does not. Instead, what it offers is . . . pilot programs.

This has provided a soft target for critics. “Two thousand seventy-four pages and trillions of dollars later,” Mitch McConnell, the Senate Minority Leader, said recently, “this bill doesn’t even meet the basic goal that the American people had in mind and what they thought this debate was all about: to lower costs.” According to the Congressional Budget Office, the bill makes no significant long-term cost reductions. Even Democrats have become nervous. For many, the hope of reform was to re-form the health-care system. If nothing is done, the United States is on track to spend an unimaginable ten trillion dollars more on health care in the next decade than it currently spends, hobbling government, growth, and employment. Where we crave sweeping transformation, however, all the current bill offers is those pilot programs, a battery of small-scale experiments. The strategy seems hopelessly inadequate to solve a problem of this magnitude. And yet—here’s the interesting thing—history suggests otherwise.

Monday, December 07, 2009

Obesity Boom! Evolution of Obesity

Key messages:

1. The average American adult is now 23 pounds overweight.

2. Obese Americans—those who have a body mass index of 30 or greater, a number calculated from an individual’s weight in relation to height—spend about 40 percent more on health care annually (nearly $1,500 per person) than people of normal weight.

3. The prevalence of obesity among Americans has more than doubled in the past 30 years; one in three adults is now deemed obese.

4. Twenty years ago, a typical bagel was three inches in diameter and had 140 calories; today’s bagel is six inches wide and contains 350 calories.

5. Lack of sleep also may contribute to weight gain. In 1960, most adults in the United States reported that they slept eight or more hours each day. Recent surveys show that adults sleep less than seven hours on average, and nearly one in three reports habitually sleeping less than six hours. Laboratory studies show that sleep loss increases appetite, particularly for high-carbohydrate foods. It also raises levels of ghrelin, a hunger-stimulating hormone, and lowers levels of leptin, a hormone thought to help suppress hunger and regulate reproduction and development.

BTW, if you are interested in calculating your body mass index, the formula is BMI = Weight (kg)/height2 (m2). Ideal BMI is 20-25.


The average American adult is now 23 pounds overweight. That’s according to Thomas Frieden, director of the Centers for Disease Control and Prevention, who spoke in July at a CDC conference on obesity in Washington, D.C. Obese Americans—those who have a body mass index of 30 or greater, a number calculated from an individual’s weight in relation to height—spend about 40 percent more on health care annually (nearly $1,500 per person) than people of normal weight. Obesity increases the risk of developing heart disease and stroke, type II diabetes, certain cancers, and other diseases.

The prevalence of obesity among Americans has more than doubled in the past 30 years; one in three adults is now deemed obese. The problem is not peculiar to the United States: Human beings as a species are the fattest they have ever been, Michael L. Power and Jay Schulkin report in The Evolution of Obesity. While obesity may lead to pathology, and even be viewed as pathology, its biological underpinnings likely helped enable human evolution, say Power, a nutrition and metabolism researcher at the Smithsonian National Zoological Park, and Schulkin, a behavioral neuroscientist with the American College of Obstetricians and Gynecologists. To thrive in a world where food often was scarce and hard to acquire, the earliest humans stored fat on their bodies. Since they rarely had enough to eat, they probably stayed lean.

“We evolved on the savannas of Africa; we now live in Candyland,” the authors declare. We eat out more than our parents did. We supersize: Twenty years ago, a typical bagel was three inches in diameter and had 140 calories; today’s bagel is six inches wide and contains 350 calories. We eat highly processed foods: The added sugars and fats they contain may activate reward circuits in the brain, stimulating further eating. These foods are often cheaper than healthful alternatives, such as fresh fruits and vegetables. The result is one of the great ironies of our time: Obesity often coexists with poverty and malnutrition.

Most jobs now involve little physical labor. Exercise has become a leisure-time pursuit that often requires special clothing and equipment, health club fees, and child-care arrangements. Our built environment also discourages physical activity, with transportation routes favoring cars over bicyclists or pedestrians. At the typical two-story shopping mall, it is a lot easier to find escalators than stairs.

Full Article

Friday, December 04, 2009

3 folds Increase in 3 years: What Comes Next

Prem Watsa is one of the few investors in the world who saw last year's meltdown coming and placed his investment bets accordingly. Consequently, he made billions for the shareholders of Fairfax Financial Holdings Ltd. In 2006, Fairfax's shareholders' equity was US$2-billion and by 2009 it was US$6.5-billion. He sat down for an interview recently with the Financial Post's editor-at-large Diane Francis to discuss ways in which the world can "reset risk management" in order to avert future catastrophes.


Q Are we at the bottom?

A It is difficult to say but the economy is still in a great deal of trouble. Do you think anybody is going to speculate in houses for the foreseeable future? People may do something else irrational, but not houses; a housing bubble is no longer in the cards. This goes to your point about international regulation: You don't have to worry about new rules and regulations, the free market is sorting itself out.

Q What role did monetary policy, easy credit, play in all of this?

A The Greenspan policy was part of the problem. If Paul Volcker had been chairman of the U.S. Federal Reserve would this have happened? Not likely. He would have put interest rates up in 1996 when Greenspan warned about "irrational exuberance" and the tech bubble. Mr. Volcker would have let Long Term Capital Management go bust, raised interest rates and we never would have been in this current situation.

The financial collapse happened because we had 20 years of boom time, and bubbles, without any significant recession.

Q What stock market rules contributed to the meltdown?

A Eliminating the uptick rule [can only short on upticks in stock prices] was a mistake and so is short selling without borrowing the stock first. The ban on shorting financial institutions is lifted again and the SEC is debating whether to bring back the uptick rule again. What we need more of is transparency in all markets, including with respect to shorting and derivatives.

Full Article