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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

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

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

This Newsletter
Issue #439A, October 12, 2016

Memoirs of US Grant: Vol II
Issue #439, October 10, 2016

More Points on Collecting, Investing and the Economy
Issue #Interim Bulletin #438A, October 05, 2016

Personal Memoirs of US Grant
Issue #438, October 03, 2016

Ideas for a High School Part-Time Job
Issue #Interim Bulletin #437A, September 29, 2016

Collecting, Investing, and the Economy
Issue #437, September 26, 2016

Free College
Issue #436A, September 22, 2016

A Military Commitment to Pay for Med School
Issue #436, September 19, 2016

When a CD isn’t a CD
Issue #435, September 12, 2016

I Made a Mistake
Issue #Interim Bulletin #434A, September 07, 2016

What is Your Spare Time Worth?
Issue #434, September 05, 2016

Credit Cards and Bonus/Loyalty Points
Issue #433, August 29, 2016

The Write-off of Student Loans
Issue #Interim Bulletin #432A, August 25, 2016

412 Retirement Plans
Issue #432, August 22, 2016

Join the Club
Issue #Interim Bulletin #431A, August 18, 2016

The Case for Precious Metals and Hard Assets
Issue #431, August 15, 2016

When the US went off the Silver Standard
Issue #430, August 08, 2016

Why NOT to Open a Restaurant
Issue #429, August 01, 2016

Some Tips on Life Insurance
Issue #428, July 25, 2016

More Observations on Negative Interest Rates
Issue #427, July 18, 2016

Issue #426, July 11, 2016

Is a PhD Worth It? Part II of II
Issue #425, July 04, 2016

Is a PhD Worth It? Part I of II
Issue #424, June 27, 2016

Avoid Part-time real Estate Agents
Issue #423, June 20, 2016

Issue #422, June 13, 2016

The Problem with Auction Reserves
Issue #421, June 06, 2016

Make Full Use of Your Capital Investments
Issue #420, May 30, 2016

The Fed’s Announcement
Issue #419, May 23, 2016

Quit While You’re Ahead: A True Story
Issue #418, May 16, 2016

The Precious Metals
Issue #417, May 09, 2016

Negative Secular Trends: Part Ii of II
Issue #416, May 02, 2016

Negative Secular Trends: Part I of II
Issue #415, April 25, 2016

Not Winning is not the same as not Losing
Issue #414, April 19, 2016

Behavioral Economics: Part II: Weaknesses
Issue #413, April 11, 2016

Behavioral Economics: Part I: Valid Points
Issue #412, April 04, 2016

The Most Important Books I’ve Read
Issue #411, March 28, 2016

Secret to Success: Take Risks and do Things Differently
Issue #410, March 21, 2016

The Over-Priced Food Presentation Hustle
Issue #409, March 14, 2016


By Robert M. Doroghazi, M.D., F.A.C.C.

The 80-20 Rule of Thumb Pareto Principle

Issue #404, February 08, 2016

    Vilfredo Pareto was a late-19th century Italian economist. He first noted that 80% of the peas in his garden came from just 20% of the pods. He later did a study of real estate in Italy, and observed that 80% of the real estate was owned by 20% of the people. Joseph Juran suggested the principle and named it after Pareto.
    Mathematically, the 80-20 “rule of thumb” is roughly followed by a power law distribution for a particular set of parameters, and many natural parameters have been shown empirically to exhibit such a distribution.
    Consider the distribution of the world’s GDP in 1988
    Richest 20%        82.7% of income
    Second 20%        11.75%
    Third 20%            2.3%
    Fourth 20%          1.85%
    Last 20%            1.40%
    The 80-20 rule if often cited in business. 80% of business comes from 20% of customers (RMD comment: for physicians, 80% of your referrals come from 20% of the doctors). 80% of complaints come from 20% of customers (For physicians: 80% of complaints seem to come from 1% of patients). The Pareto principle has applications in the computer software industry and load testing: 80% of the load comes during 20% of the time (RMD: think of the middle of the summer and air conditioners). In occupational health and safety, 80% of the injuries come from 20% of the hazard.
    Several further comments. The numbers don’t need to be exactly 80-20. 75-20 or 80-10 could fit. Likewise, it could just be a chance observation: it must follow that only 20% of the resources are required to solve 80% of the cases.
    What I found interesting, but not surprising, is that some of the self-help, power-within-you type hypsters have seized upon this concept to sell their books. You can be the greatest salesman in the world by focusing on 20% of the customers. To take this to an illogical conclusion: a business could drop 80% of the products it carries and wait on only 20% of the customers that come in the door.
    The 80-20 “rule of thumb” appears to be a natural distribution of cause and effect. Understanding the wonders of how our world operates is often no more than pattern recognition. Ex: Fibonacci (see Issue #209, 5/14/12) noted that many natural phenomenon, such as the branching of trees and the spiral of shells, can be explained by the sequence of adding the two previous numbers to obtain the next number. 0-1-1-2-3-5-8-13-21-34-55-89-144-233-377-610-1087-1697, etc. 

    I have emphasized for several years that currencies are running the markets. On Wednesday, it became apparent that the Fed will not raise interest rates as much as had been expected (if at all). The dollar had its worst day in 5 years.
    Gold had recently been moving up, and with it clear that the dollar will not soon be breaking to new highs, the precious metals exploded upwards. GDX, an ETF of the largest miners, was up more than 18% in just 3 days on huge volume.
    RMD comment: is this the end of the bear market in gold? I can’t say. Gold will probably pause to consolidate the gains, but further upward action is necessary. Gold must break and stay above $1,250.

    We are still very early in this stock bear market: there are many months of losses to come. Consider any bounce a “bear trap”. Don’t get drawn in. Preserve your wealth. Please be careful. Also note that the leaders in the next bull market were rarely the leaders in the previous bull market. Ex: Remember Sun Microsystems?
    Until recently, Exxon Mobil (XOM) was the most valuable company in the US by market capitalization. Apple (AAPL) surpassed XOM a couple of years ago, and at least for a moment last week, so did Google (GOOGL) and Facebook (FB).
    RMD comment: There are, of course, many things that contribute, such as they are not unionized and are still run by the geniuses that started them (Jobs died only a few years ago). But I believe the most important reason is that they are not regulated by the government: they show the greatness of American entrepreneurialism.
    Google took considerable heat when they purchased YouTube, but it has turned into a money machine. More and more holders of copyrighted material (studios, TV networks, etc.) have realized they can make a lot of money by putting things on YouTube and sharing the ad revenues. I rarely watch TV at night: rather, I look at Captain Midnight or Space Patrol or Cheyenne or the Life of Riley or the World Series of Poker on YouTube.
    I watched “Special Report”, a spectacular (and, God-forbid, prescient) 1983 made-for-TV movie about terrorists and a nuclear bomb in Charleston harbor. I strongly recommend you watch this because it is the dream of radical Islam to nuke us (or Israel). 
    It’s been a very long time since I’ve seen an adult with cyanotic congenital heart disease. At a casino (of all places) in St. Louis, I saw a 35-40 year old man with Down’s syndrome walking behind his (of course) quite elderly parents. He clearly had central cyanosis. I didn’t get to see if his fingers were clubbed.
    RMD comment: Almost 50% of patients with Downs have a cardiac anomaly. Endocardial cushion defects (Ostium Primum Atrial Septal Defect) are most common. To be cyanotic requires a reversal of the shunt from left to right to right to left = Eisenmenger’s physiology.

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