My wife was recently commenting about her woes regarding laundry. She said it never seems to end. As soon as one load is washed, dried, folded, and put away another load is waiting to be done. It is a never ending process and I can understand the pressure of constantly having that required chore and never being able to get ahead of it. I compare her statements to the similar situation I have that the supply of patients seems to be endless regardless of the time spent every day. There is always more the next day. I suppose this is a good thing for me as my income depends on the constant flow of patients and my services are desired.
Patients and friends ask me what the effect of the new health care bill, Obamacare, will mean to my practice. Truthfully, I do not know except for the fact that initially as more people get insurance there will will be more patients seeking services. This may actually be a windfall for me and physicians as a group as the government taxes society and transfers the money to me to take care of the additional patients (via medicare, medicaid, subsidized private health plans). Yet ultimately I think it will be a negative. As costs to society rise over the next several years measures will have to be implemented to either ration care, cut payments to doctors or increase revenue to cover payments. There is no way around this, it is inevitable.
So where does that leave me? Like the analogy to laundry my service are a necessity to society. The skill set possessed by specialist physicians are difficult and expensive to obtain and restricted to a small group. These skills are sought out by patients and ultimately these doctors will be paid accordingly. In Obama care it will be the patient that takes the hit, either by rationing of care or by not being able to get a doctor to accept their insurance due to poor reimbursement. If the government rations care then people will have to pay out of pocket for services not covered. For instance, if the government decides they should not pay for me to remove wax out of patients ears then the patient will have to pay. The service is required.
If the government whittles down reimbursements to physicians to low levels then the doctors will not participate with the insurance plan and the patient again will have to pay out of pocket for the service. In either case it is society that will pay the price. This will happen as costs will rise and increasing revenue with a VAT is likely to be implemented.
I suppose another option is for the patient to just live with wax in his/her ears and not seek out a doctor to clear them. He/she would just live with a hearing loss. But this would be analogous in the case of laundry to spending ones life wearing dirty underwear every day. I am not sure which one is worse.
Sunday, April 4, 2010
Monday, March 29, 2010
Passover v.2010
As we head into the Passover season I thought I would borrow a theme from the seder to illustrate a point. During the recitation of the haggada we talk about four sons with different qualities and their approach to inquiry regarding the uniqueness of Passover night. Since the retelling of the Passover story is too long I will truncate my rendition to two sons regarding their relationship to their parents. The first son is obedient and the second is rebellious.
The obedient son is caring to his parents and has values very much in common with his parents. He appreciates the sacrifices his parents have endured for him and does not talk badly about his parents either directly to them or behind their back. The son realizes he is dependent on his parents and thus is grateful for what he receives and is very careful about avoiding anything that would upset his parents. When they do disagree the son usually bows to the pressure of his parents.
The rebellious son has no respect for his parents and regardless of what the parents have done or are willing to do for him, he is not willing to engage in a mutually respectful relationship. He has no respect for his parents beliefs and he feels that only his beliefs and practices are correct. His actions are deliberately provocative to his parents as if he is tempting his parents to retaliate. He persists on testing the limits of his parents patience.
What would one expect to be the approach of the parents to these diametrically opposed sons? Obviously, praise for the obedient son and condemnation for the rebellious son. The rebellious son deserves to be scolded and punished for his actions in the hope that he will change his ways. But with dysfunctional parents you might see a scenario where the parents take the obedient son for granted. They know he will always be respectful because that is his nature and temperament and thus treat him with contempt and with disregard. The parents understand that this relationship will always be maintained and can never be severed so they have no problem dictating to their obedient son how he should act even if it is not what the son desires or perhaps detrimental to him.
Regarding the rebellious son, the dysfunctional parents are so desperate to have a relationship with the him that they are scared to repudiate his beliefs and actions in the fear that this will push him further away. They walk on egg shells whenever they approach. They always have their hand out waiting for the son to see things their way and give up his destructive pattern of behavior. They offer him prizes if and when he will change. They fear to place any demands on him with the fear that it will exacerbate the tenuous relationship.
These two sons represent Israel and Iran with the United States as the parents. Instead of support for Israel, the administration is quick to criticize any actions that may be seen as questionable and will not see things from the point of view of the Israelis, a strong and dependable ally. Iran is treated with kid gloves as it proceeds with its march to nuclear capabilities. This is truly upside down and reflects the dysfunctional nature of this administration's policies.
Ultimately, what do the two sons do if this dysfunctional relationship continues? The obedient son finally says I've had it, enough with these parents who do not appreciate me. This son ultimately moves away from his dysfunctional parents as they are not dependable to be there for him and he takes matters into his own hands. On the other hand, the rebellious son continues to become more radical as there is no consequence to his actions.
This administration has turned US middle east policy into one of appeasement towards Iran and criticism towards Israel. This is dysfunctional policy and will ultimately lead to an outcome exactly the reverse of what is in the best interest of this country and the world.
The Passover story is not just a historical remembrance. In it we describe how in every generation forces stand up against us to destroy us but at the end we are saved. It is clear in our own generation who the actors are. Hopefully, in our generation's battle, a similar outcome results in our redemption and the rebels in the bottom sea.
The obedient son is caring to his parents and has values very much in common with his parents. He appreciates the sacrifices his parents have endured for him and does not talk badly about his parents either directly to them or behind their back. The son realizes he is dependent on his parents and thus is grateful for what he receives and is very careful about avoiding anything that would upset his parents. When they do disagree the son usually bows to the pressure of his parents.
The rebellious son has no respect for his parents and regardless of what the parents have done or are willing to do for him, he is not willing to engage in a mutually respectful relationship. He has no respect for his parents beliefs and he feels that only his beliefs and practices are correct. His actions are deliberately provocative to his parents as if he is tempting his parents to retaliate. He persists on testing the limits of his parents patience.
What would one expect to be the approach of the parents to these diametrically opposed sons? Obviously, praise for the obedient son and condemnation for the rebellious son. The rebellious son deserves to be scolded and punished for his actions in the hope that he will change his ways. But with dysfunctional parents you might see a scenario where the parents take the obedient son for granted. They know he will always be respectful because that is his nature and temperament and thus treat him with contempt and with disregard. The parents understand that this relationship will always be maintained and can never be severed so they have no problem dictating to their obedient son how he should act even if it is not what the son desires or perhaps detrimental to him.
Regarding the rebellious son, the dysfunctional parents are so desperate to have a relationship with the him that they are scared to repudiate his beliefs and actions in the fear that this will push him further away. They walk on egg shells whenever they approach. They always have their hand out waiting for the son to see things their way and give up his destructive pattern of behavior. They offer him prizes if and when he will change. They fear to place any demands on him with the fear that it will exacerbate the tenuous relationship.
These two sons represent Israel and Iran with the United States as the parents. Instead of support for Israel, the administration is quick to criticize any actions that may be seen as questionable and will not see things from the point of view of the Israelis, a strong and dependable ally. Iran is treated with kid gloves as it proceeds with its march to nuclear capabilities. This is truly upside down and reflects the dysfunctional nature of this administration's policies.
Ultimately, what do the two sons do if this dysfunctional relationship continues? The obedient son finally says I've had it, enough with these parents who do not appreciate me. This son ultimately moves away from his dysfunctional parents as they are not dependable to be there for him and he takes matters into his own hands. On the other hand, the rebellious son continues to become more radical as there is no consequence to his actions.
This administration has turned US middle east policy into one of appeasement towards Iran and criticism towards Israel. This is dysfunctional policy and will ultimately lead to an outcome exactly the reverse of what is in the best interest of this country and the world.
The Passover story is not just a historical remembrance. In it we describe how in every generation forces stand up against us to destroy us but at the end we are saved. It is clear in our own generation who the actors are. Hopefully, in our generation's battle, a similar outcome results in our redemption and the rebels in the bottom sea.
Monday, March 22, 2010
The Individual Mandate
Should each American be required to possess health insurance? Should the government impose an individual mandate and what measures should be use to enforce it? These are very critical questions which cut directly to the core of our society. As a proponent of limited government and personal liberty I naturally lean away from federal imposition into our personal lives. But I believe that mandatory health insurance for every individual should be the law.
People should not have the option of being without health insurance and then if they are in an accident or are the unfortunate victim of a serious disease show up at the emergency room looking for the rest of society to pay for their care. If they want to take the gamble with their own money, fine. But to take a gamble with the money of those who are cautious and do purchase health insurance is unfair and should not be tolerated. If someone decides not to purchase insurance and then gets sick he loses his gamble and either should have to pay for his care or if he cannot afford it not receive care. But since in this country refusing care based on money is not an option he receives care at the expense of everybody else.
Once the mandate is in place, the minimum health plan required should be one that protects society from having to provide for an individual’s unexpected or catastrophic condition. If a person doesn’t want to be covered for obesity treatment, in vitro fertilization, abortion, drug rehabilitation or other similar treatments then he should be able to find a bare bones catastrophic plan that excludes such coverage. Ultimately, he is required to hold insurance not for himself but to protect society from him becoming a burden in the case of illness. This is why mandatory insurance is acceptable. Not to force the individual to purchase something he may or may not want to protect himself but to protect everybody else from having the burden of taking care of that person in case of illness.
This insurance plan would probably be fairly inexpensive, especially for an otherwise healthy 20 year old. My worry is that BO will force people into specific types of plans. In fact, it will be the government that determines which plans are acceptable. This is where I return to my limited government position. The government should mandate that the minimal plan acceptable to be a catastrophic plan that protects society. Once that is covered then anything beyond that is a personal choice.
The personal mandate would not be in place to baby the individual on how government believes he should run their lives. But rather it is in place to protect society from the individual and to not allow the individual to gamble with public money.
It is a mandatory protection of society not an individual mandate to protect oneself.
People should not have the option of being without health insurance and then if they are in an accident or are the unfortunate victim of a serious disease show up at the emergency room looking for the rest of society to pay for their care. If they want to take the gamble with their own money, fine. But to take a gamble with the money of those who are cautious and do purchase health insurance is unfair and should not be tolerated. If someone decides not to purchase insurance and then gets sick he loses his gamble and either should have to pay for his care or if he cannot afford it not receive care. But since in this country refusing care based on money is not an option he receives care at the expense of everybody else.
Once the mandate is in place, the minimum health plan required should be one that protects society from having to provide for an individual’s unexpected or catastrophic condition. If a person doesn’t want to be covered for obesity treatment, in vitro fertilization, abortion, drug rehabilitation or other similar treatments then he should be able to find a bare bones catastrophic plan that excludes such coverage. Ultimately, he is required to hold insurance not for himself but to protect society from him becoming a burden in the case of illness. This is why mandatory insurance is acceptable. Not to force the individual to purchase something he may or may not want to protect himself but to protect everybody else from having the burden of taking care of that person in case of illness.
This insurance plan would probably be fairly inexpensive, especially for an otherwise healthy 20 year old. My worry is that BO will force people into specific types of plans. In fact, it will be the government that determines which plans are acceptable. This is where I return to my limited government position. The government should mandate that the minimal plan acceptable to be a catastrophic plan that protects society. Once that is covered then anything beyond that is a personal choice.
The personal mandate would not be in place to baby the individual on how government believes he should run their lives. But rather it is in place to protect society from the individual and to not allow the individual to gamble with public money.
It is a mandatory protection of society not an individual mandate to protect oneself.
Tuesday, March 16, 2010
Contact Your Congressman
Unfortunately, my house has lost power for the last 3 days and I have been unable to blog. I am writing in the doctors lounge at the hospital and want to copy a letter I just wrote to my congressman, Bill Pascrell. I urge everybody to write, call, email their representative and let them know what they think about this bill. It is our responsibility to let our representatives know how their constituents feel. Please take the time. It only takes a few minutes.
Honorable Representative Pascrell,
As a physician on the front lines,I would like to inform you that I agree the health care system is broken and is in need of significant changes. The changes proposed by the current senate bill will ultimately lead to much higher costs to the taxpayer and likely rationing of care. A yes vote by you will be seen as advocating for big government health care and you will be blamed for peoples future negative experience as they confront the new system as well as its cost. I urge you to consider these issues as you vote. Do you really think the government is the right body to make decisions about a persons health care issues. You know that ultimately government control is the desire of the far left currently in power. Does Pelosi really speak for you? If you fall in line behind her you will be seen as a far left puppet. Be strong and courageous. Do not fall in line behind the far left wing of the democratic party. Demonstrate that you can buck the enormous pressure being put on you to ram this thing through. You will be seen as a free thinker with strong convictions if you vote no for this bill. I strongly recommend you listen to the interview with Warren Buffet when he described the 2000 page bill as nonsense and the real issue is to LOWER COSTS. If that is done the issue of coverage will be easily fixed. Address the cost issue first then coverage not the reverse. This is where the American people are at. If you would care to communicate further regarding these issues please do not hesitate to contact me.
Respectfully, Dr. Mayersquared
Honorable Representative Pascrell,
As a physician on the front lines,I would like to inform you that I agree the health care system is broken and is in need of significant changes. The changes proposed by the current senate bill will ultimately lead to much higher costs to the taxpayer and likely rationing of care. A yes vote by you will be seen as advocating for big government health care and you will be blamed for peoples future negative experience as they confront the new system as well as its cost. I urge you to consider these issues as you vote. Do you really think the government is the right body to make decisions about a persons health care issues. You know that ultimately government control is the desire of the far left currently in power. Does Pelosi really speak for you? If you fall in line behind her you will be seen as a far left puppet. Be strong and courageous. Do not fall in line behind the far left wing of the democratic party. Demonstrate that you can buck the enormous pressure being put on you to ram this thing through. You will be seen as a free thinker with strong convictions if you vote no for this bill. I strongly recommend you listen to the interview with Warren Buffet when he described the 2000 page bill as nonsense and the real issue is to LOWER COSTS. If that is done the issue of coverage will be easily fixed. Address the cost issue first then coverage not the reverse. This is where the American people are at. If you would care to communicate further regarding these issues please do not hesitate to contact me.
Respectfully, Dr. Mayersquared
Monday, March 8, 2010
When Time Stands Still
It is Monday morning and I am drinking coffee and playing online poker instead of going to work, treating patients, and earning a living. I wish I could say I was on vacation lying on a beach somewhere but actually I am at the court house serving on jury duty. As much as I dislike getting the summons to serve and costs me due to lost wages I realize it is my civic responsibility and I do so begrudgingly (not that I have any choice). Anyway, it give me time to blog.
You know you really enjoy an activity when it seems that time goes by very quickly when you are engaged in such activity. Contrarily, some activities (like jury duty), it seems as though the clock is not moving or worse seems to be moving backwards. This clearly indicates how tedious and unenjoyable certain activities are. Other examples of such activities include sitting in a really boring lecture or sermon, engaging in certain exercise routines, or some employment situations where people are engaged in boring and tedious work.
There are two activities that come to mind when I feel that time just flies by. The first is casino gambling. I realize this is probably not so good but in truth I could sit at a blackjack table or a poker table for hours and it feels like I just sat down, especially if I am winning (a rare event). Of course the casinos promote this by not having any clocks visible or any windows so gamblers will lose their sense of time and continue to enrich the proprietors. I guess it is a good thing that the nearest casino is over two hours away and I refuse to take part in online gambling (only play money).
The second activity where I lose sense of time is in the operating room. I can tell you that there are instances during an operation when I ask the OR nurse for the time and hours have passed when it feels like twenty minutes. In the past I have been involved in surgeries that last for 12-18 hours. Although I no longer perform such operations, those hours were amongst the shortest of my life. I suspect for those who are not surgeons it is difficult to understand how a person can operate for many hours straight without a break or wake up in the middle of the night and operate with little or no sleep. I suppose when a surgeon's concentration is so intense and focused the feel for time is lost. It is this intensity along with the gratification experienced by being a surgeon that creates the phenomenon of timelessness.
In medical school the third year is designed to allow the student to rotate through the various specialties and allow them to experience each discipline. When I first went to the operating room during this year I knew immediately this was where I wanted to be. Even at that early stage I felt time was imperceptible and that was the indication that this is where I need to be. Although I was a student and just assisting the main surgeon I knew I eventually wanted to be the person holding the scalpel.
It is a truly a gift when ones work is so interesting that it seems as though time doesn't exist whereas sitting at a job every day and watching the clock stand still is akin to torture. I realize I whine a lot on this blog about the ills of the health care situation but as I sit here at jury duty (I swear that clock is not moving) I honestly feel fortunate for what I am doing every day at work. And if I have a bad day I can always come home and play online poker.
You know you really enjoy an activity when it seems that time goes by very quickly when you are engaged in such activity. Contrarily, some activities (like jury duty), it seems as though the clock is not moving or worse seems to be moving backwards. This clearly indicates how tedious and unenjoyable certain activities are. Other examples of such activities include sitting in a really boring lecture or sermon, engaging in certain exercise routines, or some employment situations where people are engaged in boring and tedious work.
There are two activities that come to mind when I feel that time just flies by. The first is casino gambling. I realize this is probably not so good but in truth I could sit at a blackjack table or a poker table for hours and it feels like I just sat down, especially if I am winning (a rare event). Of course the casinos promote this by not having any clocks visible or any windows so gamblers will lose their sense of time and continue to enrich the proprietors. I guess it is a good thing that the nearest casino is over two hours away and I refuse to take part in online gambling (only play money).
The second activity where I lose sense of time is in the operating room. I can tell you that there are instances during an operation when I ask the OR nurse for the time and hours have passed when it feels like twenty minutes. In the past I have been involved in surgeries that last for 12-18 hours. Although I no longer perform such operations, those hours were amongst the shortest of my life. I suspect for those who are not surgeons it is difficult to understand how a person can operate for many hours straight without a break or wake up in the middle of the night and operate with little or no sleep. I suppose when a surgeon's concentration is so intense and focused the feel for time is lost. It is this intensity along with the gratification experienced by being a surgeon that creates the phenomenon of timelessness.
In medical school the third year is designed to allow the student to rotate through the various specialties and allow them to experience each discipline. When I first went to the operating room during this year I knew immediately this was where I wanted to be. Even at that early stage I felt time was imperceptible and that was the indication that this is where I need to be. Although I was a student and just assisting the main surgeon I knew I eventually wanted to be the person holding the scalpel.
It is a truly a gift when ones work is so interesting that it seems as though time doesn't exist whereas sitting at a job every day and watching the clock stand still is akin to torture. I realize I whine a lot on this blog about the ills of the health care situation but as I sit here at jury duty (I swear that clock is not moving) I honestly feel fortunate for what I am doing every day at work. And if I have a bad day I can always come home and play online poker.
Monday, March 1, 2010
On Call Dilemma
Once again I had the pleasure of being on call this past weekend and I had an episode which demonstrates the effects of the legal profession on my everyday decisions. A man called me about his 91 year old mother suffering from an ear ache and asked me if I could prescribe medicine for her over the phone. He said it had just snowed heavily and was unable to get his 91 year old mother to the office. I had never seen him or his mother before in the office and was likely a patient of one of the doctors I was covering. Naturally, I felt for his dilemma and would have liked to help his mother but I told him that I could not prescribe any medicines over the phone without first examining her. His options were to go to the emergency room, an urgent center, or wait until the following day when the office would be open and she could be seen. He was not happy with that answer and asked me simply whatever causes ear aches just give her the medicine to treat her to whom I replied it is not that simple and the pain could be due to several causes which are treated differently.
I could have called in an antibiotic or ear drop for her which most likely would have helped but by doing that I have accepted the legal responsibility of treating her which then infers that I know what is wrong with her without ever seeing her. If she had a rarer and more serious cause for the ear pain that went undiagnosed or a delay in diagnosis and I have treated her I am going to get a call from the local lawyer’s office. After he sues me and I show up in court he cross examines me and says “Doctor, you prescribed ear drop A for this 91 year old lady. Can you explain to the jury the results of your physical examination”. Of course, I have no answer and look incompetent. They do not care that it had just snowed and he couldn’t get his elderly mother out, and that I felt badly for their plight. The lawyer continues “Doctor, do you know that because you prescribed ear drop A the patient did not go to the emergency room, the ear pain was actually due to a life threatening infection and she ended up dying after a protracted course of hospitalization and suffering. Obviously, I have no acceptable answer and lose a multi-million award.
Yes, 999 out of 1000 times this would not happen and by calling in the medicine I would have cured her and had a satisfied customer. But because of the one in a thousand where I could have a bad outcome I refuse to prescribe medicines over the phone. I refuse to accept the legal exposure this puts me in. The lawyers, by exploiting the one in a thousand for a jackpot award have made the 999 suffer or be inconvenienced and this is all too often the result of legal actions. One person makes out real big (and the lawyer) while the remaining population ends up suffering for it.
Unfortunately, I have to practice medicine with the fear of being second guessed and a lawsuit around the corner. I am always thinking of the legal repercussions of my actions and with every interaction with a patient my assumption is that their lawyer is in the room or on the phone with us. Not only does this add a tremendous amount of money and stress to the practice, it ultimately gets translated into more inconvenience and expense for the patient. It’s hard to have compassion for this suffering 91 year old lady when no one will show compassion to me for the decisions I make and the factors that led to them.
I could have called in an antibiotic or ear drop for her which most likely would have helped but by doing that I have accepted the legal responsibility of treating her which then infers that I know what is wrong with her without ever seeing her. If she had a rarer and more serious cause for the ear pain that went undiagnosed or a delay in diagnosis and I have treated her I am going to get a call from the local lawyer’s office. After he sues me and I show up in court he cross examines me and says “Doctor, you prescribed ear drop A for this 91 year old lady. Can you explain to the jury the results of your physical examination”. Of course, I have no answer and look incompetent. They do not care that it had just snowed and he couldn’t get his elderly mother out, and that I felt badly for their plight. The lawyer continues “Doctor, do you know that because you prescribed ear drop A the patient did not go to the emergency room, the ear pain was actually due to a life threatening infection and she ended up dying after a protracted course of hospitalization and suffering. Obviously, I have no acceptable answer and lose a multi-million award.
Yes, 999 out of 1000 times this would not happen and by calling in the medicine I would have cured her and had a satisfied customer. But because of the one in a thousand where I could have a bad outcome I refuse to prescribe medicines over the phone. I refuse to accept the legal exposure this puts me in. The lawyers, by exploiting the one in a thousand for a jackpot award have made the 999 suffer or be inconvenienced and this is all too often the result of legal actions. One person makes out real big (and the lawyer) while the remaining population ends up suffering for it.
Unfortunately, I have to practice medicine with the fear of being second guessed and a lawsuit around the corner. I am always thinking of the legal repercussions of my actions and with every interaction with a patient my assumption is that their lawyer is in the room or on the phone with us. Not only does this add a tremendous amount of money and stress to the practice, it ultimately gets translated into more inconvenience and expense for the patient. It’s hard to have compassion for this suffering 91 year old lady when no one will show compassion to me for the decisions I make and the factors that led to them.
Monday, February 22, 2010
Buy Low Sell High
Last week I discussed the age old doctrine of buy low and sell high in the realm of politics and I want to expand on that somewhat but in its natural realm of investing. I do not profess to be an expert in economics or investing but I guess I have an interest in the world of money and I do a lot of watching, reading and listening. It seems to me that the best strategy when it comes to investing is to find the class that is most out of favor and buy quality within that class and then wait. I know this sounds very simplistic but in practice is very difficult to implement.
The natural tendency of people is to invest in the class that is running up or that already had its run-up resulting in buying at or near the top or missing a significant segment of the run up. It is inherently difficult to invest in a class that nobody else wants and seems to be decreasing but that is exactly the time to buy it. It amazes me the degree to which herd psychology plays a tremendous force in the world of investing and that is why it is difficult as one has to go against the herd. This scenario plays out over and over again.
So when should one buy into a class that is out of favor as it is impossible to detect the ultimate bottom. Since it is not possible then one should buy the out of favor class with the knowledge that if that class continues to decline then the opportunity presents itself to buy even more at a greater sale price. Thus, one should only invest gradually into this class. If it starts to rise then one could start looking at other investment classes that me be newly out of favor to invest in. The advantage of the individual investor is that he does not have to show an above market return every quarter. He can continue to amass more out of favor investments and sit tight and wait. At some point all investment classes eventually rise. The question of when to sell is also difficult but should also be done gradually as it is not possible to detect the top.
A strategy that would implement these ideas is to have a portfolio with each class comprising a specific percentage. The portfolio is adjusted yearly or quarterly to maintain the pre-determined percentage. In this scenario classes of investments that have declined would be bought to bring them up to the correct level and vice-versa for appreciating classes. This removes the psychological aspects and forces one to buy losing classes and sell winners.
Looking at today’s market then, which assets should be bought and which should be sold. The market which seems to be most overbought and bubble-like is the US treasury market. The upside is highly limited and those that are using these instruments as a hiding place to protect their money are going to experience significant losses when the market turns and interest rates rise (resulting in a depreciation of their principal). Currently, stocks and commodities are somewhere in the middle, neither overbought nor oversold.
The market which seems to be most out of favor is the one related to housing. Which mechanism to use to purchase within this class is difficult to say. Maybe certain REITs, or housing stocks, or buying foreclosed properties. If I could get my hands on certain distressed debt such as collateralized mortgage obligations at significant discounts I think would be a terrific play. Anyway, just to reiterate my disclaimer that I am an armchair investor but if you look historically every class eventually has its day it just takes courage to go against the herd and be patient.
The natural tendency of people is to invest in the class that is running up or that already had its run-up resulting in buying at or near the top or missing a significant segment of the run up. It is inherently difficult to invest in a class that nobody else wants and seems to be decreasing but that is exactly the time to buy it. It amazes me the degree to which herd psychology plays a tremendous force in the world of investing and that is why it is difficult as one has to go against the herd. This scenario plays out over and over again.
So when should one buy into a class that is out of favor as it is impossible to detect the ultimate bottom. Since it is not possible then one should buy the out of favor class with the knowledge that if that class continues to decline then the opportunity presents itself to buy even more at a greater sale price. Thus, one should only invest gradually into this class. If it starts to rise then one could start looking at other investment classes that me be newly out of favor to invest in. The advantage of the individual investor is that he does not have to show an above market return every quarter. He can continue to amass more out of favor investments and sit tight and wait. At some point all investment classes eventually rise. The question of when to sell is also difficult but should also be done gradually as it is not possible to detect the top.
A strategy that would implement these ideas is to have a portfolio with each class comprising a specific percentage. The portfolio is adjusted yearly or quarterly to maintain the pre-determined percentage. In this scenario classes of investments that have declined would be bought to bring them up to the correct level and vice-versa for appreciating classes. This removes the psychological aspects and forces one to buy losing classes and sell winners.
Looking at today’s market then, which assets should be bought and which should be sold. The market which seems to be most overbought and bubble-like is the US treasury market. The upside is highly limited and those that are using these instruments as a hiding place to protect their money are going to experience significant losses when the market turns and interest rates rise (resulting in a depreciation of their principal). Currently, stocks and commodities are somewhere in the middle, neither overbought nor oversold.
The market which seems to be most out of favor is the one related to housing. Which mechanism to use to purchase within this class is difficult to say. Maybe certain REITs, or housing stocks, or buying foreclosed properties. If I could get my hands on certain distressed debt such as collateralized mortgage obligations at significant discounts I think would be a terrific play. Anyway, just to reiterate my disclaimer that I am an armchair investor but if you look historically every class eventually has its day it just takes courage to go against the herd and be patient.
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