HELPING PHYSICIANS ATTAIN FINANCIAL SECURITY
By Robert M. Doroghazi, M.D., F.A.C.C.
Subscriber Comments
Monday’s newsletter about the seductiveness of “flipping plastic” as compared to cash, internet usage and loss of privacy, the worsening financial crisis in Europe (and here?), and about gold hit home, eliciting more responses than any other newsletter.
“I have an anecdote about “plastic seduction”. Some years ago one of my med students about to start internship came in to talk about her personal finances. I asked if she had credit card debt. She owed $5K on her Master Card and paid the minimum every month. I explained she was just giving money to the credit card company via the double-digit interest rates. She then said she was thinking of buying a new car and putting the down payment on the same card!! I suggested she not buy a new card since she wouldn’t be driving much during her internship and that she pay off the $5K with the payment every month. A year later her credit card was paid off. I told her she had just saved herself hundreds of dollars of interest”
Joseph Alpert, MD
Editor, The American Journal of Medicine
RMD comment: Sometimes a little good advice can go a long way. Unfortunately, sometimes a little bad advice can go a long way too.
Credit cards are an essential in modern-day society. But even with tightened standards, I believe credit card companies are still to lax in their lending practices. They certainly make it easy to take on debt, but likewise, they don’t “force” people to do it. It’s like blaming McDonalds and KFC for the terrible obesity in our society.
“My kids laugh, or call me paranoid. We take our monthly budget in cash, and if possible, don’t use plastic for anything. But try buying an airline ticket with cash. The chance of an “interview” goes up exponentially.
I do not participate in any air miles programs offered by supermarkets, etc. They are deceitful and a costly way to gather customer’s buying habits. A study has shown similar items purchased at competing stores absent a loyalty program are less. Customers effectively pay in advance for their rewards and provide their buying preferences for free. I do like paying bills on-line though”.
MF, Calgary, Alberta
RMD comment: As I have mentioned many times, I hope you learn as much from me as I learn from you. Mike’s comments show why it is so important to think things through and draw you own conclusions.
“An anecdote about the European debt crisis: My barber of 21 years is an Italian-American from Sicily, who remains very connected with what is happening there. We recently discussed how the looming “economic crisis” could spread to Italy.
1) Greece and Italy are very different countries. Greece is poor—a difficult reality Greek citizens do not want to face.
2) Italy is not poor. They have the 3rd largest economy in the EU, and one of the highest per-capita incomes in Europe. The financial condition of the citizens is good, with one of the highest savings rates in the world.
3) The problem is that the government is rapidly running out of money after providing decades of social benefits, including universal health coverage.
4) Two years ago my friend was in Italy and collapsed with chest pain. He had a complete cardiac workup, including a cath. The physicians and nurses were excellent, competent, and caring. He never saw a bill, and as a businessman understands that resources don’t materialize out of thin air.
5) Health-care costs in Italy are further complicated by the graft and corruption that occurs in a government-run enterprise.
In my opinion, the likelihood the US will turn into Greece is low. On the other hand, the risk the US will follow the path of Italy to fiscal insolvency is significant”.
Rene Mora, MD, PhD
Chief Scientific Officer, Managing Director
Leerink Swan, LLC, Boston.
RMD comment: In the last newsletter, I noted one point made in The Price of Everything is that the most expensive things are sometimes those that are “free”. In the 1980s, I saw a bumper sticker: “If you think health care is expensive now, wait ‘til it’s free”. We are seeing that now.
Social Security/pensions are certainly a significant problem, but are fixable. Just change the retirement ago, contributions, benefits, etc. It is Medicare and Medicaid that are bankrupting us.
“I have written to you before about the disappearance of the business of medicine. A large group has a pending buyout offer of almost 7-figures per physician. For the older partners it’s not a thought. The younger ones feel they are giving up their independence. Two points they don’t consider. After the hospitals move in, the offer won’t be as good. Also, some have no conception of the time value of money. $1M of gold purchased now will be worth more than they earn in devalued dollars that the government will pay for Medicare and Medicaid in the future”
OO, TX
RMD comment:
1) The politics and finances of medicine are not my area of expertise, so I will not comment.
2) The older the physician, the more incentive to take the money. Consider this: you are 55 years old. Kids educated and self-supporting, home mortgage paid off, no other debts, and an investable net worth of $1.5M (a position of many physicians who were careful with their money). It would take another 10 years of work to generate $1M of investment capital, and here you have it up front. Take it.
3) OO is a long-time subscriber, who understands the advantages of gold.
RMD
Last week gold broke to a new high. Yesterday in the pre-market, it touched $1,610; then dropped quickly to $1,583, closing at $1,590.
RMD comment: Watch $1,563, the previous closing high. It is very common that after something breaks to a new high, it will then drop toward (but not touch) the previous high. In technical terms: the previous “resistance” level ($1,563) will now become the “support” level.
If gold falls below $1,563 (possible), this would be a “false” breakout, which is bearish. More frequently, such drops serve to “shake-out” the “weak hands” (the speculators), so the “strong hands” (the commercials), can cover their shorts and go long.
Consider this: A drop from 1610 to 1585 is about 1.7%. Don’t get shaken out of a position you like because of the variability in price that occurs with all assets.
My garden this year will be the best ever. I have zucchini, cucumbers, green beans, tomatoes, acorn squash, eggplant, cantaloupe, dill and basil. This is in addition to strawberries, asparagus, and more recently, blackberries. When you’ve had a home-grown tomato, it’s impossible to ever eat a “store-bought” tomato again (when is the last time you heard “store-bought?). Last weekend Diane helped me can green beans. Yesterday we did 3 quarts of pickled green tomatoes.
Gardening is relaxing and good exercise, especially hoeing and just all the bending over: To think that my father, uncles and grandfather dug their garden with a pitchfork. I admit I’m getting soft: 7 years ago I finally broke down and bought a tiller.
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