Investing Curiouscatblog

Tag: quote

  • Statistics on Entrepreneurship

    Some statistics from the Kauffman Foundation

    • From 1980–2005, firms less than five years old accounted for all net job growth in the United States.
    • More than half of the companies on the 2009 Fortune 500 list were launched during a recession or bear market, along with nearly half of the firms on the 2008 Inc. list of America’s fastest-growing companies.
    • Contrary to popularly held assumptions, the highest rate of entrepreneurial activity belongs to the 55–64 age group over the past decade. The 20–34 age bracket has the lowest.
    • Only 16 percent of the fastest-growing and most successful companies in the United States had venture investors.
    • More than a quarter of technology and engineering companies started in the United States from 1995 to 2005 had at least one key founder who was foreign-born.
    • Foreign nationals residing in the United States were named as inventors or co-inventors in 25.6 percent of international patent applications filed in the U.S. in 2006.

    Related: Y-Combinator’s Fresh Approach to Entrepreneurship – Entrepreneur Results – Kiva Fellows Blog: Nepalese Entrepreneur Success

  • USA Spends Record $2.3 trillion ($7,681 Per Person) on Health Care in 2008

    Nominal health spending in the United States grew 4.4% in 2008, to $2.3 trillion or $7,681 per person. This was the slowest rate of growth since the Centers for Medicare & Medicaid Services started officially tracking expenditures in 1960, yet once again outpaced nominal GDP growth (2.6% in 2008). This brings health care spending to 16.2% of GDP. In 2003 the total health care spending was 15.3% of GDP.

    The huge amount being spent continues to grow to an even larger percentage of GDP every year. The damage to the economy of the dysfunctional health care system in the USA is huge. For comparison the total GDP per person in China is $5,970 (the closest total country per capita GDP, to the health care spending per capita in the USA, is Thailand at $7,703 – World Bank data). The average spending by OECD countries (Europe/USA/Japan…) was $2,966 per person in 2007 (the USA was at $7,290). In 2007 Canada spent $3,895; France $3,601; UK $2,992; Japan $2,581.

    • Hospital spending in 2008 grew 4.5% to $718 billion, compared to 5.9% in 2007, the slowest rate of increase since 1998.
    • Physician and clinical services’ spending increased 5.0% in 2008 to $496 billion, a deceleration from 5.8% in 2007.
    • Retail prescription drug spending growth also decelerated to 3.2% in 2008 as per capita use of prescription medications declined slightly, mainly due to impacts of the recession, a low number of new product introductions, and safety and efficacy concerns. Drug prices increased 2.5% in 2008.
    • Spending growth for both nursing home and home health services decelerated in 2008. For nursing homes, spending grew 4.6% in 2008 compared to 5.8% in 2007.
    • Total health care spending by public programs, such as Medicare and Medicaid, grew 6.5% in 2008, the same rate as in 2007.
    • Health care spending by private sources of funds grew only 2.6% in 2008 compared to 5.6 percent in 2007.
    • Private health insurance premiums grew 3.1% in 2008, a deceleration from 4.4% in 2007. Remember many people lost their jobs and did without insurance. Doing so results in reduced spending on health insurance but is far from a good sign.
    • Home health care spending growth decelerated from 11.8% in 2007 to 9.0% in 2008. Expenditures reached $64.7 billion in 2008. You can understand why investors (and companies) are looking to invest in home health care.

    At the aggregate level, the shares of financing for health services and supplies by businesses (23%), households (31%), other private sponsors (3%), and governments (42%) have remained relatively steady over time. Between 2007 and 2008; however, the federal government share increased significantly (from 23 to 25%), while the state and local government share declined (from 18 to 17%).

    Decades ago Dr. Deming included excessive health care costs as one of the seven deadly diseases of western management. We have only seen the problem get worse. Finally it seems that a significant number of people are in agreement that the system is broken.
    (more…)

  • Dollar Decline Due to Government Debt or Total Debt?

    With the dollar declining sharply, many are focused on the issue now. And the most common culprit for blame seems to be the federal debt. While I agree the dollar is likely to fall, the deficit doesn’t seem like the main reason, to me. The federal debt is large and growing quickly, which is a problem. But still the USA federal debt to GDP is lower than the OECD average. Even with a few more years of crazy federal debt growth the USA will still be below that average.

    Japan has by far the highest level of government debt in the OECD. The Yen is not collapsing. The debt is a factor but the lack of saving (USA consuming more than it produces) seems the biggest problem to me. China not only does not have large government debt it has large amounts of personal savings. People have been living far within their means in Japan and China (only by government intervention, due to desires to not have the currency appreciate has that appreciation been slowed).

    Thankfully we have been increasing savings a bit recently but it is a drop in the bucket so far (Consumer Debt Down Over $100 Billion So Far in 2009). It will have to increase in size and continue for years to begin to address the problems in a significant way.

    Related: The USA Economy Needs to Reduce Personal and Government Debt (March 2009) – The Truth Behind China’s Currency Peg – Who Will Buy All the USA’s Debt?

  • Using Outcome Measures for Prison Management

    What is the aim of prison? To keep criminals locked up so they can’t commit crimes in society is another. Punishment, in order to deter people from committing crime is one reason they exist. And you would hope to mold prisoners so they do not commit crimes when they are freed. But the payment for services does not factor in the results of releasing productive members of society. It seems like doing so could result in improvements.

    Better Jails by Andrew Leigh, economics professor, Australian National University

    Prisons do reduce crime, but mainly because of what criminologists call ‘the incapacitation effect’ (when you’re doing time in Long Bay, it’s harder to hotwire a car). There may also be some deterrence effect, but this is small by comparison. And there is little evidence of a rehabilitation effect.
    …
    To encourage innovation, we should start publicly reporting the outcomes that matter most. Rather than merely telling the public how many people are held in each jail, governments should publish prison-level data on recidivism rates and employment rates.
    …
    As well as focusing on the important outcomes, Australian states should rethink the contracts they write with private providers. At present, about 16% of inmates are held in a private jail. Unfortunately, the contracts for private jails bear a remarkable similarity to sheep agistment contracts.

    Providers are penalised if inmates harm themselves or others, and rewarded if they do the paperwork correctly. Yet the contracts say nothing about life after release. A private prison operator receives the same remuneration regardless of whether released inmates lead healthy and productive lives, or become serial killers.

    A smarter way to run private jails would be to contract for the outcomes that matter most. For example, why not pay bonus payments for every prisoner who holds down a job after release, and does not reoffend? Given the right incentives, private prisons might be able to actually teach the public sector a few lessons on how to run a great rehabilitation program.

    The idea of paying for outcomes is great. It makes sense for some pay to be based on keeping prisoners housed during their terms. But providing incentives for achievement in returning productive people back to free society is something we should try.

    Related: Lean Management in Policing – Urban Planning – Rich Americans Sue to Keep Evidence of Their Tax Evasion From the Justice Department – Randomization in Sports – LA Jail Saves Time Processing Crime – Measuring and Managing Performance in Organizations
    Quality Improvement and Government: Ten Hard Lessons From the Madison Experience by David C. Couper, Chief of Police, City of Madison, Wisconsin
    (more…)

  • Mortgage Delinquencies Continue to Climb

    The delinquency rate for mortgage loans rose to 9.94% of all loans outstanding at the end of the third quarter, up 108 basis points from the second quarter of 2009, and up 265 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The delinquency rate breaks the record set last quarter (since 1972).

    The delinquency rate includes loans that are at least one payment past due but does not include loans somewhere in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the third quarter was 4.47%, an increase of 17 basis points from the second quarter of 2009 and 150 basis points from one year ago. The combined percentage of loans in foreclosure or at least one payment past due was 14.4% on a non-seasonally adjusted basis, the highest ever recorded in the MBA delinquency survey.

    The percentages of loans 90 days or more past due, loans in foreclosure, and foreclosures started all set new record highs. The percentage of loans 30 days past due is still below the record set in the second quarter of 1985.

    “Despite the recession ending in mid-summer, the decline in mortgage performance continues. Job losses continue to increase and drive up delinquencies… Over the last year, we have seen the ranks of the unemployed increase by about 5.5 million people, increasing the number of seriously delinquent loans by almost 2 million loans,” said Jay Brinkmann, MBA’s Chief Economist.

    “The performance of prime adjustable rate loans, which include pay-option ARMs in the MBA survey, continue to deteriorate with the foreclosure rate on those loans for the first time exceeding the rate for subprime fixed-rate loans. In contrast, both subprime fixed-rate and subprime adjustable rate loans saw decreases in foreclosures.”

    This continues the bad news on housing. Though home sales have been picking up, the underlying strength of the housing market remains questionable. Without jobs increasing it is very difficult for the real estate market to recover.

    Related: Nearly 10% of Mortgages Delinquent or in Foreclosure (Dec 2008) – Loan Default Rates Increased Dramatically in the 2nd Quarter – Another Wave of Foreclosures Loom (July 2009) – Homes Entering Foreclosure at Record (Sep 2007)
    (more…)

  • The Truth Behind China’s Currency Peg

    Peter Schiff does a good job of explaining The Truth Behind China’s Currency Peg

    The peg, they argue, offers China a competitive advantage by making its products cheaper in U.S. markets, thus allowing Chinese firms to gobble up market share and steal jobs from U.S. manufacturers. The thought is that were China to allow its currency to rise, American manufactures would regain their lost edge, and both manufacturing firms and the jobs formerly associated with them would return.
    …
    In fact, for the U.S., de-pegging would cause the economic equivalent of cardiac arrest. Our economy is currently on life support provided by an endless flow of debt financing from China. These purchases are the means by which China maintains the relative value of its currency against the dollar. As the dollar comes under even more downward pressure, China’s purchases must increase to keep the renminbi from rising. By maintaining the peg, China enables our politicians and citizens to continue spending more than they have and avoiding the hard choices necessary to restore our long-term economic health.
    …
    As demand falls for both dollars and Treasuries, prices and interest rates in the United States will rise. Rising rates will restrict the flow of credit that is currently financing government and consumer spending. This change will finally force a long overdue decline in borrowing.
    …
    De-pegging will force the hand of U.S. politicians toward pursuing realistic policies. The Chinese will come to their senses eventually because it is in their interest to do so. Meanwhile, the longer the peg is maintained, the more indebted we become, the more out of balance our economy grows, and the more our industrial base shrivels. In short, the longer they wait, the steeper our fall.

    I agree the largest impact of the currency peg on the USA is supporting our economy in the short run. If we didn’t go into huge debt it would actually be good for the USA for the long run too. Essentially China subsidies our purchases and borrowing. The problem is that we have taken a good thing too far and become used to living beyond our means. That is not sustainable – even with a subsidy from China.

    I disagree that the USA manufacturing base is hollowed out. It is strong in comparison to the rest of the world, except China. China’s manufacturing growth has been phenomenal, compared to that everyone looks weak. Manufacturing jobs are disappearing everywhere, not just in the USA.

    Related: Top 10 Manufacturing Countries in 2008 – China and the Sugar Industry Tax Consumers – Why the Dollar is Falling – Who Will Buy All the USA’s Debt? – Peter Schiff Answers Redditers Questions

  • If you Can’t Explain it, You Can’t Sell It

    Over the last few years Elizabeth Warren has become one of my favorite leaders. She is a leader in economic thought, ethical society and the law (she is a law professor at Harvard Law School). Far too many on Wall Street, Washington and in C-suites are leading us down a very bad path. She is a voice we need to heed.

    If you can’t explain it, you can’t sell it

    “We need a new model: If you can’t explain it, you can’t sell it,”
    …
    The 1966 high school debate champion of Oklahoma may get what she wants. The House of Representatives will vote in December on her idea. She suggested a Financial Product Safety Commission in a 2007 article in the magazine Democracy [Unsafe at Any Rate]. President Barack Obama proposed it to Congress in June as the Consumer Financial Protection Agency.

    Warren won’t discuss whether she may be a candidate to lead the authority, which would have the power to regulate $13.7 trillion of debt products. A Warren nomination would tell banks that Obama is determined to force reduced checking-account fees and limit lender claims in mortgage advertising, among other measures the industry opposes, said Thomas Cooley, dean of New York University’s Stern School of Business.
    …
    In her role overseeing the TARP, Warren has been critical of the administration, accusing the Treasury Department of undervaluing the stock warrants that were supposed to compensate taxpayers when banks repay their bailouts. A lack of transparency about how TARP functions “erodes the very confidence” it was to restore, her committee said in a report.

    I hope she can take her attempts to reduce political favors being granted huge financial institutions and those institution be forced to follow sensible rules to protect individuals and our economy. With a few more people like there we will have a much better chance of a positive economic future.

    Related: Bogle on the Retirement Crisis – Bankruptcies Among Seniors Soaring – Don’t Let the Credit Card Companies Play You for a Fool – http://investing.curiouscatblog.net/2009/04/08/the-best-way-to-rob-a-bank-is-as-an-executive-at-one/

  • Actually Free Credit Report

    Viewing your credit report is an important step to financial security. You should review your credit reports annually (at least) to correct and any errors. Also doing so can be a tool to help you spot identity theft.

    The real free credit report site, annualcreditreport.com, is provided by government regulation (so those that don’t believe in regulation would rather use one of the sites advertising “free” credit reports). But I suggest using the government provided reports and I would suggest spreading the requests out during the year (you get 3 a year, 1 from each of the nationwide consumer credit reporting companies).

    The site also has a large frequently asked question section including:

    How do I request a “fraud alert” be placed on my file?
    You have the right to ask that nationwide consumer credit reporting companies place “fraud alerts” in your file to let potential creditors and others know that you may be a victim of identity theft. A fraud alert can make it more difficult for someone to get credit in your name because it tells creditors to follow certain procedures to protect you. It also may delay your ability to obtain credit. You may place a fraud alert in your file by calling just one of the three nationwide consumer credit reporting companies. As soon as that agency processes your fraud alert, it will notify the other two, which then also must place fraud alerts in your file.

    Where can I find out more about credit reports, my rights as a consumer, the Fair Credit Reporting Act and the FACT Act?
    Please visit www.ftc.gov/credit

    Related: Credit Card Tips – Personal Finance Basics: Long-term Care Insurance – Financial Planning Made Easy

  • It is Never to Late to Invest

    I like to buy stocks cheap and then hold them as they rise in price. This is not a unique desire, I know. One thing this lead me to do was find a stock I liked but hold off buying it until I could buy it for less. When that works it is great. However, one thing that happened several times is that I found stocks I really liked and they just went up and went up more and kept going up. And I never owned them.

    I learned, after awhile, that is was ok to buy a stock at a higher price once I realized I made a mistake. Instead of just missing out because I made a mistake and didn’t buy it at a lower price than I needed to pay today (which made it feel really lame to buy it now at a higher price) I learned to accept that buying at the higher price available today was the best option.

    I have seen two types of situations where this takes place: one I realize I was just way off, it was a great deal at the price I could have bought at – I just made a mistake. And if it was still a good buy, I should buy it. Another is that the stock price goes up but new news more than makes up for the increased stock price (the news makes the value of stock increase more than the price has increased).

    I missed out on the Google IPO, even though I really wanted to buy. Then the price went way up and even though I had learned this (don’t avoid buying a stock today just because you made the mistake of not buying it at a lower price earlier) tip I wanted to buy it for less than the current price and so kept not buying it (emotion is a real factor in investing and that is another thing I have realized – you need to accept it and deal with it to be a good investor). Then Google announced spectacular earnings and it was finally enough to get me to buy the stock a few days later at $219 (which was well over twice the price 6 months earlier). But it was a great buy at $219 and losing that just because I should have bought it at $119 is not wise – but something I did many times in the past.

    In March of 2009 I bought some ATPG at $3.20. In August I bought more at $11. The news was bit better but really it was just a huge huge bargain at $3.20 and I should have bought a lot more. In the last 5 trading days ATPG was up $5.12 (16.78 – 11.66). A nice gain. Right now, it is up another 68 cents today at $17.43. Now this is a volatile stock and until I sell it may not turn out to be profitable investment, but the odds are good that it will.

    It is also hard to know when to sell – in fact for many selling at the wrong time (either selling too late – after it collapses [for good or sell it after a collapse only to see it recover], or too early missing out on huge gains) is the biggest problem they have in becoming a successful investor). One trait of many successful investors is holding the right investments for huge gains. A few stellar performances can lift the entire portfolio to long term investing success. And if you sell those stocks early you miss huge opportunities.

    Holding on for the huge gains is a mistake I do not want to make – and so when the opportunity is there for such gains I am willing to risk losing some gains for the potential of a much larger gain. Right now the balance is keeping me from selling any ATPG, though I am likely to sell some if it increases (while continuing to hold some of the position).

    Related: Great Google Earnings April 2007 – Nicolas Darvas (investor and speculator) – Not Every Day is Profitable – Does a Declining Stock Market Worry You? – 401(k)s are a Great Way to Save for Retirement – Beating the Market, Suckers Game? – Sleep Well Fund

  • Consumer Debt Declined a Record $21.5 Billion in July

    Last November USA consumer debt fell, by a then record of $8 billion. In July, 2009, consumer debt was reduced another $21 billion, which is a good sign.

    April of 2008 USA consumer debt stood at $2.54 trillion. Based on a population of 300 million people that would mean $8,467 for every person in just personal debt. Living beyond your means is not a good thing. After the July decrease of $21.55 billion, the total consumer debt stood at $2.47 trillion, a decline of $70 billion over the last 15 months.

    Decreasing this debt level was (and is) necessary. If that means we have some suffering today to pay for living beyond our means for years the ‘fix’ is not to continue to live beyond our means. The ‘fix’ is to accept the consequences of past behavior and build a more sustainable economy now for the future.

    Consumer credit down record amount in July

    This is the sixth straight monthly drop in consumer credit — the longest consecutive string of declines in credit since the second half of 1991.

    Consumers have retrenched since the financial crisis hit in full force last September. Credit has fallen in every month except January. In percentage terms, the drop in credit is the biggest since June 1975.

    And on a year-on-year basis, credit is down 4.3%, the biggest drop since June 1944. The retrenchment was much more than expected. Economists surveyed by MarketWatch expected consumer credit to decline by $4.3 billion. There were also sharp downward revisions to June data.

    Economists said shrinking credit might strangle the recovery. “There is no real way to put a positive spin on these data. Credit is still shrinking and that is going to have an impact on consumption,” wrote Charmaine Buskas, senior economics strategist at TD Securities, in a note to clients.
    …
    credit-card debt fell $6.11 billion, or 8.5%, in July to $905.58 billion. This is the record 11th straight monthly drop in credit card debt. Non-revolving credit, such as auto loans, personal loans and student loans fell a record $15.44 billion or 11.7% to $1.57 trillion.

    Here is a positive spin on it. We owe $21.5 billion less than we did last month. How lost are we that there is no positive way to spin owing less money than you used to owe?

    Related: Personal Saving and Personal Debt in the USA – Americans are Drowning in Debt