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The Kids Birthday Party Hustle
Issue #518A, April 18, 2018

A Pension Question: Part II of II
Issue #518, April 16, 2018

A Physician is an Executive
Issue #517A, April 11, 2018

A Pension Question: Part I of II
Issue #517, April 09, 2018

Is the Correction Over?
Issue #516A, April 05, 2018

Used Car Dealers, Student Loans, the Chinese, and Uncle George’s Rule
Issue #516, April 02, 2018

Starter Homes
Issue #515, March 26, 2018

Redecorating: Beware!
Issue #514, March 19, 2018

NASDAQ Closes at Record High
Issue #513, March 12, 2018

A 40% Chance
Issue #512, March 05, 2018

Several Things
Issue #511, February 27, 2018

Human Capital, Education and Wealth
Issue #510, February 19, 2018

Another Stock Market Update
Issue #509A, February 18, 2018

Some Thoughts on Savings
Issue #509, February 12, 2018

A Stock Market Upfate
Issue #508S, February 10, 2018

Who Can You Trust? Part II of II
Issue #508, February 05, 2018

The Christmas Decoration Pre-worn Jeans Hustle
Issue #Interim Bulletin #507A, February 03, 2018

2018 Outlook for Financial Markets
Issue #507, January 29, 2018

Who Can You Trust? Part I of II
Issue #506, January 22, 2018

Life Insurance Settlements
Issue #505, January 15, 2018

Commodities and Buying the Breakout
Issue #504, January 08, 2018

Buffett Wins His Bet
Issue #503A, January 04, 2018

Practice Real Estate and Free Agency
Issue #503, January 01, 2018

Outlook for 2018: Part III: Stocks and Bonds
Issue #502, December 25, 2017

My Outlook for 2018: Part Ii: Precious Metals
Issue #501A, December 21, 2017

Outlook for 2018: Hard Assets: Part I of III
Issue #501, December 18, 2017

More Thoughts on Bitcoin
Issue #500A, December 14, 2017

Fees and Good Relations with Bankers
Issue #500, December 11, 2017

Salvator Mundi
Issue #499A, December 07, 2017

Should You Rent or Own a Home?
Issue #499, December 04, 2017

A Gift Subscription
Issue #Interim Bulletin #498A, December 02, 2017

Stocks vs Real Estate: Asset Allocation: Part II of II
Issue #498, November 27, 2017

When Good Enough is Fine
Issue #497A, November 22, 2017

Stocks vs Real Estate: Asset Allocation. Part I of II
Issue #497, November 20, 2017

The Saudi Arrests and the Perils of Foreign Investing
Issue #496, November 13, 2017

Gambling and Las Vegas
Issue #495, November 06, 2017

Some Tips on Auto Insurance
Issue #494, October 31, 2017

Bitcoin and the Digital (Crypto) Currencies
Issue #493, October 23, 2017

The Coming Bear Market: Part II How to Prepare
Issue #492, October 16, 2017

Some Observations on Cemeteries
Issue #Interim Bulletin #491A, October 12, 2017

The Coming Bear Market: Part I: The Myth of Buy and Hold Forever
Issue #491, October 09, 2017

The Market makes New Highs
Issue #490, October 02, 2017

The Importance of a New High
Issue #489, September 25, 2017

A Little Insurance: Wealth, War and Wisdom
Issue #488, September 18, 2017

Some Observations
Issue #487, September 11, 2017

How to be Successful in Your Career
Issue #486A, September 07, 2017

How NOT to Buy a Home
Issue #486, September 04, 2017

This Week in the Market
Issue #485, August 28, 2017

Is the “Trump Bump” Running Out of Gas?
Issue #484, August 21, 2017

Gold is on the Move
Issue #483, August 14, 2017

The Importance of Estimation
Issue #482, August 07, 2017

Buying Art and Collecting: Part II of II
Issue #481, July 31, 2017

Buying Art and Collecting in General, Part I of II
Issue #480, July 24, 2017

Physicians need to be More Forceful: Follow-up
Issue #479, July 17, 2017

Physicians need to be More Forceful
Issue #478, July 10, 2017

Your First “Real” Investment
Issue #477, July 03, 2017

Leasing a Watch: Don’t
Issue #476, June 26, 2017

The Importance of Your Children having a Job
Issue #475, June 16, 2017

The Problem with Medical Student Debt is—the Med Schools
Issue #474, June 12, 2017

Critters and Varmints in your Home and Yard
Issue #473A, June 07, 2017

Leveraged ETFs
Issue #472, May 29, 2017

Leasing a Vehicle: Don’t!
Issue #471, May 22, 2017

Escheat
Issue #470, May 15, 2017

More on Buying Jewelry
Issue #469, May 08, 2017

Buying Jewelry: Gold, Diamonds and Pearls
Issue #468, April 30, 2017

Thomas Sowell: Part III of III
Issue #467, April 24, 2017

Thomas Sowell: Pat II of III
Issue #466, April 17, 2017

Live Close to Where You Work
Issue #465, April 10, 2017

Medtronic in Hospital Management
Issue #Interim Bulletin #464A, April 07, 2017

Thomas Sowell: Part I of II
Issue #464, April 03, 2017

A Political Contribution a an Investment: Part II of II
Issue #463, March 27, 2017

A Political Contribution as an Investment: Part I of II
Issue #462, March 20, 2017

Buffett Selling Vacation Home
Issue #461, March 13, 2017

Advanced Placement (AP) ourses
Issue #460, March 06, 2017

The Importance of a Credit History
Issue #459A, March 02, 2017

A Credit Card Scam
Issue #459, February 27, 2017

The Electronic Health Reord
Issue #458, February 20, 2017

Contracts
Issue #457, February 13, 2017

Platinum and Palladium
Issue #456, February 06, 2017

Economic Outlook for 2017: Part II of II
Issue #455A, February 02, 2017

Economic Outlook for 2017: Part I of II
Issue #455, January 30, 2017

A Story From Vegas
Issue #454A, January 25, 2017

Land Donation Deals and the IRS
Issue #454, January 23, 2017

The Theory of Gambler’s Ruin
Issue #453, January 16, 2017

Student Loans: But Wait, There’s More!
Issue #452, January 13, 2017

A Second Home
Issue #Interim Bulletin #451A, January 04, 2017

The Consumer Confidence Index
Issue #451, January 02, 2017

Social Security
Issue #450, December 26, 2016

My Outlook for 2017: Part II of II
Issue #449, December 19, 2016

My Outlook for 2017: The Market
Issue #448, December 12, 2016

Medicine in 20 Years
Issue #447, December 05, 2016

Higher Interest Rates
Issue #446, November 28, 2016

Trump and the Markets: The Bad and Ugly
Issue #445A, November 23, 2016

Trump and the Markets: The Good
Issue #445, November 21, 2016

Negative Trends: The Suits aren’t Makin’ Steel
Issue #444, November 16, 2016

The New DOJ Fiduciary Rule
Issue #443, November 07, 2016

Barron’s Conference, Part IV of IV
Issue #442, October 31, 2016

Barron’s Conference, Part III of IV
Issue #Interim Bulletin #441A, October 26, 2016

Barron’s Conference, Part II of IV
Issue #441, October 24, 2016

Barron’s Conference, Part I of IV
Issue #440, October 20, 2016

THE PHYSICIAN INVESTOR NEWSLETTER

HELPING PHYSICIANS ATTAIN FINANCIAL SECURITY
By Robert M. Doroghazi, M.D., F.A.C.C.

Negative Secular Trends: Part I of II

Issue #415, April 25, 2016

Student Debt and High CEO Salaries
    This and next week’s letter will be a summary of my Commentaries on “Negative Secular Trends in Medicine” in The American Journal of Medicine from January through May (see below).
    Almost 10 years ago, Wall Street legend Barton Biggs noted that when he started on Wall Street in the 60s, the best doctors, lawyers and investment bankers made about the same, because it required similar intellectual ability, hard work and integrity. He quickly noted that was no longer the case. My Commentaries explore the reasons why I believe Medicine is losing its competitiveness for the smartest kids in the class.
Student Debt
    Many of the points I make are based on the realities of economics. No one who uses money to keep score in life goes into Medicine. But money is important. It is not presumptuous to assume that a bright young person would not go to college for 4 years, medical school for 4 years, and train for another 3-7 years to earn a minimum wage.
    In 2014, the average allopathic medical school graduate had $175,348 of debt. 16% were debt free. If 2 heavily-indebted medical students marry, they could be saddled with $400K or more of student loans.
    Some studies suggest debt influences choice of specialty and whether one goes into private practice or Academia. Some say it makes no difference. Common sense suggests that no one can ignore hundreds of thousands of debt. The Federal Reserve notes that student debt influences major life decisions, such as buying a home and having children.
    There are many reasons for the seemingly inexorable increase in student debt.
    1) I believe the greatest driver is the government guarantee of student loans. Since the Higher Education Act of 1965, part of LBJ’s Great Society, college tuition has increased triple the rate of inflation. Industries capture a subsidy by raising prices, which students fund by borrowing more: a classical positive feedback loop.
    2) The process to obtain residencies is out of control, and can easily cost $10K or more, which by definition must be borrowed by a student already in debt.
    3) There are 2 ways to have more money: make more and/or spend less. Since the mid-60s, the number of students working during med school has decreased precipitously. As Dr. Joseph Alpert and I note in “Come Down from the Ivory Tower” (Barron’s, 9/22/14), many students now enter med school having never held a job in the real world.
    4) Two decades ago it was noted that medical students were willing to take on more debt rather than compromise their life style. That has not changed. Students must remember that they will be paying back every dollar spent—with interest—for the next 10-20 years. $2.74 a day, the price of a Starbuck’s coffee, is $1,000 per year. 
High CEO Salaries
    In 2011 or 2012, 30 executives at (ostensibly) non-profit health care organizations made more than $4M in one year, with a mean compensation of $6.5M. Two executives made more than $10M, and one made more than $20M. For perspective, the average executive on this list made more in 2 days than a housekeeper makes in a year, more in 3 days than an RN males in a year, and more in 2 weeks than a physician makes in a year.
    Is one health care executive making $6.5M in a year worth more to society than 100 RNs. NO!! I believe such rock star salaries have many negative effects on the practice of Medicine and the cost of health care in the US.
    In the past, hospital administrators had 3 constituencies of relatively equal importance. First was the owner, usually a religious organization, government entity, or academic institution. Turning a profit is always important, but this was in the context of demonstrable community benefit, not to maximize executive salaries.
    Patients were the second constituency. They are still important, but note that good marks on patient satisfaction surveys are more important to the CEO’s compensation than patient outcomes, such as mortality and readmission rates.
    Physicians are now the weakest constituency, with increasingly less influence into hospital operations. Physicians previously controlled patient flow, giving them considerable leverage. Now patient flow is determined by their insurance coverage. Many physicians are now hospital employees. In truth, hospital administrators view physicians merely as a cost center to be controlled to maximize profits, no different than a custodian, piece of capital machinery, or how much it costs to pave the parking lot.
    I believe the high compensation packages of CEOs have a negative effect on health care. Rather than improve clinical services, raise employee salaries, or lower the cost of patient care, CEOs at non-profit health care organizations have seized the tax advantages to fund their over-sized salaries.
    It is my opinion that a conflict of interest arises by tying administrator’s salaries to hospital profits. One scenario: the traditional patient-to-nurse ratio on the night shift was 5 to 1. At 6 to 1, the nurses are frazzled, but being dedicated health care professionals, they get the job done. Leaving 6 RN positions unfilled saves the hospital $400K, a fraction of which the administrators receive as a bonus.
    In 2014, the average physician’s salary in the US was about $250K. In 2009, the average compensation for the CEO at a non-profit was 2 ½ times greater at $595,781. Moreover, from 2011 to 2012, CEO compensation skyrocketed a whopping 24.2%. Considering that the training period of CEOs is significantly shorter than a physician’s, the best and brightest, who can do what they want, will increasingly choose health care administration over the stethoscope.
    I note that only one of the articles with negative comments on CEO salaries is from the academic literature, all others are from the lay press. “To criticize the man that signs your paycheck in public and in print can have a direct effect on one’s career”.       
                                                                  RMD
    The more an article is viewed or downloaded the more influential it is considered. I hope you find these topics interesting and important enough to have the articles downloaded so you can read them. Your hospital or medical school librarian should be able to help. If this is not an option, feel free to contact Boone Hospital Center librarian Judy Feintuch at   .(JavaScript must be enabled to view this email address)  Judy has been extremely helpful on this project: I couldn’t have done the literature search without her.
    1) Doroghazi RM. Negative Secular Trends in Medicine: Student Debt. Amer J Med. 2016;129(1):8-10.  http://dx.doi.org/10.1016/j.amjmed.2015.07.014     
    2) Doroghazi RM. Negative Secular Trends in Medicine: High CEO Salaries. Amer J Med. 2016;129(2):e1-2.  http://dx.doi.org/10.1016/j.amjmed.2015.07.018 
    3) Doroghazi RM. Negative Secular Trends in Medicine: The ABIM Maintenance of Certification and Over-reaching Bureaucracy. Amer J Med. 2016;129(3):238-239.
http://dx.doi.org/10.1016/j.amjmed.2015.08.009 
    4) Doroghazi RM. Negative Secular Trends in Medicine: Prolonged Training Periods. Amer J Med. 2016;129(4):352-353.  http://dx.doi.org/10.1016/j.amjmed.2015.07.034
    5) I will have the exact reference for the Summary article when it’s available.
    The Big Money poll in this week’s Barron’s is one of the least bullish in the poll’s more than 20 year history. Two-thirds of the respondents say stocks could fall 10% or more during the next 12 months.
    RMD comment: Ouch! This bull market is more than 7 years old. Valuations are high. Lowry’s feels the bear market has started. You never go broke taking a profit.   
    I highly recommend The Confidence Game: Why We Fall for It…Every Time (Konnikova, Viking).
    RMD comment: You think you’re immune? Be truthful: Everyone has been manipulated or conned at least once. If you don’t think so, then 1) the con was so good you don’t even know you were taken, and 2) you’re next.
    This book is far better than Misbehaving, the topic of the last 2 newsletters. 

    I also recommend The Triumph of William McKinley: Why the Election of 1896 Still Matters (Rove, Simon & Schuster). The issues were the same as today. Wm. Jennings Bryan, the Democratic nominee, was a Socialist. He preached class warfare, wanted to redistribute wealth, and was “Free Silver”, with the express goal to inflate the currency to bail out debtors. McKinley thought capitalism and sound money (gold) were the best path to prosperity for everyone, especially the working man.
    RMD comment: You must read history. All the answers are there.
    Last week I met a Pole who was 5 when Hitler invaded his homeland from the west and Stalin invaded from the east. As an “Enemy of the People (his words)”, he and his family were shipped to Siberia. When Hitler invaded Russia in June, 1941, and he and Stalin were no longer buddies, this man and his family were now “Comrades” (again his words), and were shipped back to the Eastern Front to fight the Nazis.
    RMD comment: think about that when you’re having a bad hair day.
    Zika virus in the US.
    RMD comment: break out the DDT. We’re talking human lives. 
   

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