Lunchtime Links 7-10

July 10, 2009

(Send links, pics, vids to optionarmageddon at gmail.com)

With sale of good assets, GM tries for fresh start (NYT)  GM made it through bankruptcy in 40 days.  Remember when everyone was saying that if GM filed for bankruptcy the world would end?  It didn’t.  Yeah they got lots of government help, but they were still able to divest billions of old liabilities.  So why don’t we remove the bailout facilities benefiting banks and busted homeowners and force them through the bankruptcy process?

AIG seeks clearance on bonuses (WSJ)  Are they kidding?  The fact that these guys still get a paycheck should be bonus enough.  If they want to leave, fine.  Let the company implode.  We need more creative destruction.

10 most broke states (ABC News)  This article notes that police overtime for the Michael Jackson memorial was estimated at $4 million.  That hits L.A.’s budget, not the state’s.  Still: Not helpful.

Whip Inflation Now (David Brooks)  “Health care inflation is not some optional side issue that can be left out of reform. It is the core problem that undermines the viability of the health care system, the federal budget and the economy as a whole. Maybe the administration will provide some last-minute solution in conference or somewhere else. But right now the prospects don’t look good.”

FDIC said to be unwilling to back CIT on risk (Bloomberg)  Kudos to Sheila Bair for saying no to someone (assuming she sticks to it).  If only other arms of the government would do this more often, we might actually clean up the financial mess rather than sweep it under the rug.

Lending industry attacks homeowner’s rights to legal help (PR Web)

Biff! Wham! Pow!  Times Sq. cops vs. superheroes (NY Post)  “Mommy, it’s Superman!”

If Swine Flu weren’t enough, now there’s Swine Ebola (Scientific American)  Actually, this isn’t a new virus.  Apparently pigs have always carried a strain of ebola that doesn’t infect humans.  Not yet anyway…

Of mice and monkeys: how to extend your life by a decade or two (Economist)

60 million stung by social networking ripoff (Independent)  I definitely got half a dozen e-mails from Tagged.  I don’t remember if I clicked on any.  Hope not.

Why didn’t I think of this?

split_ring_key

Comments

So Rolfe,

Let’s say it’s 1980. You’re out playing ball of some type with some friends and you tweak your knee. You go to the doctor and he tells you to take some aspirin and to rest it, then call him in a week if it’s still bothering you.

Now let’s say its 2009. You’re out playing and tweak your knee. You go to the doctor and he tells you that probably you’ll need to take some aspirin and rest but just in case we’re going to run you through the MRI. Or maybe you’re offered the option of having an MRI and you take it because it’ll be interesting, or a good story for your buddies about how bad you were hurt… because it might not cost you anything past your office visit copay.

Now how much of your increased bill is really inflation? How much is due to extra services? How much is due to extra services you didn’t need but the Dr is doing a little CYA re: lawsuits or you thought it might be cool/fun/are paranoid?

This is my problem with complaints about healthcare costs increasing. I haven’t seen anyone quantify the costs increases that are due to extra services v. a base year, and that portion of cost increase just isn’t inflation any more than the extra expense of buying Angus steak v. mystery meat ground burger.

Posted by Andrew | Report as abusive
 

A very good point Andrew. Remember the link I posted about the Texas town that has huge medical costs per capita compared to the town where the Mayo clinic is in MN? I think that’s the area we’re talking about here. Surely you’re right, some of the increased spending is due to improved technology. At the same time, the way the medical system is set up, doctors’ incentives aren’t very different from bankers’. They get paid a fee for services. The more deals bankers do, the more they get paid. The more services doctors render, the more they get paid.

There’s systemic risk inherent to both models. Doctors of course aren’t going to take us down all of a sudden the way Wall Street can. But they’ll bleed us to death over time if we don’t figure out a way to change the model.

Posted by Rolfe Winkler | Report as abusive
 

Here’s the link to that article….

http://www.newyorker.com/reporting/2009/ 06/01/090601fa_fact_gawande

Should have made the point more clearly above: Doctors get paid for services rendered, regardless of outcomes.

I think Brooks is right to focus on medical cost inflation as the fiscal elephant in the room. It’s the rising cost of care that causes the HUGE growth of unfunded liabilities for Medicare in the out years.

I wonder…what is the best way to get those costs under control? Can it be done without rationing medical care for everyone?

Posted by Rolfe Winkler | Report as abusive
 

Well it would be unfair to compare the fuzzy U3 number with the Great Depression. I much prefer U6 which stands at 16.5% and is tracking the Great Depression quite closely.

Also shadowstats has the real number at 20.6% while the Center for Labor Market Studies has it at 18.2%. So It’s pretty high, especially if you account for all the statistical fudging.

Posted by VK | Report as abusive
 

Even if the New GM works as a company it won’t work as an investment for the 300 Million US shareholders. Here is the scary math behind our little investment.

The government effectively will get 60% of General Motors in exchange for $50 Billion in aid.

This, using standard investor math, means that GM has an implied value of:

50 Billion/.60 = $83.3 Billion

Currently (just prior to bankruptcy) GM had 610 million shares outstanding.

That means that for the taxpayer to break-even GM shares (in the pre-bankruptcy world) would need to be worth $136.55 PER SHARE (83.3 Billion/610 Million)

The lifetime HIGH for GM is $93.62 back in April 2000 when the going was good. So good luck with that.

Oh and to complicate matters the government will see its holdings diluted if the bondholders take the extra 10% that they were promised as part of setting up the bankruptcy filing. If GM is doing well one would assume they would exercise these options and taxpayer shareholders would get diluted.

In that case the taxpayer stake goes to 54% which means an assumed market cap of $89.3 Billion or a per share price of $146.39

So even if GM were to return to its lifetime high of $93.62 the taxpayer would only get back $34 Billion 0r 68% of its investment if GM got as BIG as it ever was.

This of course is impossible based on the Government’s own admission that they are structuring GM to compete in an economy where car sales are 33% less than they are now.

Sure these numbers are approximations and some of the debt might be repaid like a normal loan (and I hope most of it is) but you can tell that there is no way that the taxpayers will see even HALF of their money returned even if all the right things happened (in a short-period of time as President Obama doesn’t want to hold on for long).

Well look on the bright side. We got rust-protection and under-coating free with the deal and we know how important those are.

 

Rolfe,

But you have to ask yourself who set this medical system up? The government did! Government created the environment of lawsuit trigger happy patients. The doctors have to pile on extra procedures just to make sure there won’t be a basis for them to be sued. Case in point 76% OF ALL Obstetricians have been sued! So are we to believe that our medical schools are rolling out incompetent idiots? Of course not. This is a fundamental problem of our court system first and formost. What needs to be done is popularize arbitration courts in medical disputes. Studies have shown time and time again that arbitration courts are better than government courts for settling disputes, especially ones that require a deep and intensive knowledge of the field. If you take a medical case up to a government court and start talking in medical speak, the judge/jury will have no clue what you are talking about. The lawyers know this, so what ends up happening is they appeal to the judge’s/jury’s emotions not logic and facts. Thats how lawyers routinely are able to get huge settlements on factually incorrect information. One example was when lawyers claimed silicon implants helped cause cancer. There has always been a universal consensus that implants don’t and have never caused cancer. The silicon cancer evidence was flimsy at best but that didn’t stop the lawyers. The lawyers were able to get away with it because judge’s/jury didn’t have backgrounds in medicine and weren’t able to fully asses the evidence in front of them. What the judge/jury did understand were the women’s emotional anguish. Who ends up paying for this flawed system? We do…each and everyone of us in the form of higher prices, unnecessary procedures, and stressed out doctors. If we had arbitration courts then the arbitrator would be an experience medical professional. This would cut down on lawsuits because the lawyers wouldn’t dare run their little game on someone who knows a thing or two.
John Stossel did a decent video on lawyers and medical expenses:

http://cdn.abcnews.com/stossel/free/GMAB _TRIAL_LAWYERS.wmv

Posted by Geoffrey | Report as abusive
 

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