Taking Note

Dream On

Though most of us are all sobered up, there remains in the minds of many investors the whispered questions: “Is it time to get back in?” “Will I miss the big move that gets me back to even?”

We’re often still susceptible to the siren call of the markets, despite the costly lesson of believing in the “The wisdom of crowds,”  “Dow 36000,” or the so-called “the risk-free premium.” We want these things to be true. Who wouldn’t want to live in a time of endless prosperity – in a world where all problems vanish as the magic of the market provides the plenty from which flows more jobs and goods? This yearning – this uncritical belief system – underpinned the conviction that the magic of markets could lead to wealth for all (see privatized Social Security), and the less regulation the better (see your daily newspaper, if you still have one).

In this sense, the Madoff melt down was a metaphor for the larger fallacy that we can all consistently beat the market (as in Lake Wobegon where the children are all “above average.”).  A large number of cheerleaders for this notion (George Bush, Henry Paulson, Martin Feldstein, etc.) tried very hard to convince the nation that prosperity in the future was dependent on shifting more risk to wage earners.

Baghdad Endgame and Afghan Ambiguity

Out of one war, working our way out of the other, was President Obama's message Tuesday night in announcing the withdrawal of the last U.S. combat forces in Iraq.

The president claimed credit, legitimately, for having stuck to his campaign promise and timetable to end the American war in Iraq--an unprovoked war that shredded the credibility of American global leadership.  His Republican adversaries were reduced to complaining that Obama had opposed his predecessor's gamble on a big troop increase, or "surge," in the war's fifth year  -- though they modestly decline to claim due credit for having started the war in the first place.

Obama was, however, notably more ambiguous about his determination to achieve his complementary campaign pledge to succeed in Afghanistan. 

Afghanistan: As Tough as Reporting Gets

The war in Afghanistan, already the longest conflict in American history, may also be the most difficult major military operation reporters have had to cover in the modern age of journalism and communications. By contrast, the Iraq invasion was a classic undertaking on a grand scale. At the time the Iraq assault started in 2003, every major news organization—newspapers, magazines, networks, wire services—were represented with hundreds of correspondents embedded in military units or operating as independents. Coverage was pervasive and the advances in digital equipment made it possible for instant relay of events for print, the Web (in a relatively early stage), and broadcast.

            Afghanistan represents a vastly different set of logistical and substantive issues, even though allied troop strength at 130,000 is nearly what it was at the height of the Iraq campaign. There are many factors in this extraordinary change of circumstances, some of which I’ll try to explain below. But the key question that emerges is whether the difficulties of coverage in Afghanistan (and its inevitable overlap with the political and military situation in Pakistan) limit what readers and viewers can learn to make meaningful judgments about what is happening on the ground.

            The evidence from most surveys is that Americans are devoting much less attention to Afghanistan than they did in the initial phases of the Iraq war, and of those who do have an opinion, the majority believes that the war is not going well. There is no scenario put forward by the Obama administration, or anyone else for that matter, that predicts “victory” in the traditional sense. The best that can be forecast is a withdrawal of foreign forces at a time when Afghanistan can hold its own against the most brutal elements of Taliban control; resist al Qaeda, should it reassert its influence; and devise a modus vivendi with Pakistan, which has played so duplicitous a role in the conflict as an ally of American interests and a significant obstacle through its covert backing of extremists inside Afghanistan and in the tribal areas along the border.

When I was your age...

“I became an adult at 22: Why can't you?” Nelle Engoron’s piece in Salon.com asked.

The column, an excerpt from her blog, comes on the heels of the New York Times’ piece on twentysomethings a few days ago.  Hers is not the only response to the piece, but she got at something different than most responses.  Engoron asserts that twentysomethings today are actively choosing not to become adults, and instead rely on Mom and Dad for our “personal computers, cellphones, DVRs, [and] Frappuccinos.”

A pretty unpleasant picture of a bunch of whiners, no?

First, I am a twentysomething looking at moving in with her parents.  Does it bruise my ego a bit?  Sure. Does it make financial sense, at this point, to do so?  Absolutely.  Living with my parents for a short time gives me the ability to seek out a gratifying job that will be able to pay for food and shelter.

Unintended Consequences of Medicare Drug Benefit

In 2006, when the government began offering prescription drug coverage for seniors through Medicare Part D, the goal was to increase utilization of prescription drugs by the elderly who may not have been able to afford them before, and also to lower the average price of these drugs. The idea was that insurers—representing all the new Medicare Part-D recipients—would be able to use the clout of having this huge market to negotiate price discounts with pharmaceutical companies.

Studies since then—like this one from The Annals of Internal Medicine—have found that Medicare Part D “appears to have led to modest savings and modest increases in drug use by older people.”  With a new provision coming from the Affordable Care Act that aims to help “fill the donut hole” that seniors experience in coverage, these effects should be heightened.

But two new studies have revealed some unintended consequences of Medicare Part D. According to an AARP Rx Price Watch report released today, the retail prices for some of the most popular brand-name drugs sold to seniors increased 41.5% over the last five years, while the consumer price index rose only 13.3%. For example, the drug Flomax (which began facing generic competition this year and is usually prescribed for incontinence due to prostate problems), had the biggest price jump, climbing 24.8% in 2009. Over the past five years, Flomax increased in price by an alarming 92%. Other popular name brand drugs that experienced sharp price increases over that time span include the respiratory drug Advair (40%), the Alzheimer’s drug Aricept (40%), Nexium (28%) and Lipitor (24%)

EMR Technology Experiences Growing Pains

Last week I had my first visit with my new primary care doctor. I picked him based on recommendations (plus he’s one of the few that accepts my insurance), and also because he seemed to be an eager adopter of electronic medical records (EMR). On his website, there was a portal for making appointments on-line, asking questions of the doctor and staff by e-mail and once a registered patient, I could also use a secure system to access my medical records. With EMRs being portrayed as key drivers of quality and savings in health reform, I felt encouraged by my new doctor’s embrace of the technology.

But when he greeted me in the examining room, I was surprised to see the medical assistant hand my doctor a pad of paper with my height, weight and blood pressure written on it. As we talked and he examined me, he wrote notes down on the same pad—even though there was a computer in the room. When I asked how he felt about his EMR system, he said it was a great advance for his practice—but unfortunately it had crashed  that morning and the “tech guy” said it might take a while to get it back on track. “By next week or so we should have you in our system,” he sheepishly explained.

What Even Murdoch Can't Control

In War at The Wall Street Journal: Inside the Struggle to Control an American Business Empire, Sarah Ellison has written a vivid and, by consensus, definitive account of how Rupert Murdoch came to buy the Dow Jones Company, controlled for more than 100 years by the Bancroft family, for a price nearly double the prevailing market value of the enterprise at the time of his deal in 2007—which also happened to be the start of the worst period in the newspaper business, well, ever. Within a year, Murdoch wrote down the $5.6 billion purchase price by half, but nonetheless he and his intensely committed team re-made The Wall Street Journal into an aggressive, general interest daily and digital platform with a local section for New York and a quarterly magazine designed to feature expensive advertising but virtually no content. In the heavy downdraft of newspaper circulation, the Journal has held its own.

By now, the Murdoch acquisition model is clear to anyone who follows the media landscape. He is a force of extraordinary will. Among his successes through News Corporation are the Fox channels, 20th Century Fox (think “Avatar"), and HarperCollins, his book publishing company, which is doing as well as any in the industry 15 years after he tried to sell it and couldn’t. So what fascinated me about the Ellison book was less the predictable rhythms of the Murdoch takeover than the portrait of the Bancroft family, the sprawling group of cousins whose ownership of Dow Jones gave the “professionals” latitude to produce a great newspaper but an increasingly less formidable purveyor of business information compared to its competitors, Bloomberg and Thomson-Reuters. By the time Murdoch bought Dow Jones, it was clear that the Bancroft’s stalwart (but passive) support of their enterprise left the company vulnerable to exactly what Murdoch did—overpay the shareholders, especially the family, and hurl this old-fashioned value driven business into the maelstrom of today’s media mayhem.

Putting a Lid on Health Care Inflation Is Possible

Over the past ten years the amount that health care insurers pay out to hospitals, doctors and patients has spiraled, risng by 5% to 11% each year, from roughly $1.3 trillion in 2000 to $2.5 trillion in 2009..  Yet few patients would say that the care they receive today is twice as good as the medical attention they received in 2000.

Quite the opposite.  A Greek chorus of doctors, nurses, and hospital patients tell us that, despite pockets of excellence, the overall quality of U.S. healthcare has declined over the past decade. They are the eyewitnesses who know how chaotic our hospitals have become, and how little time doctors have to spend with patients. Both caregivers and patients are less and less satisfied with the process.  Yet health care bills continue to rise.  In 1990, we spent 12% of GDP on medical services and products.  Now we spend 17% --without comparable improvement in the health of the population.

That is why I was intrigued when Jeremy Engdahl-Johnson sent me a report from Milliman, the actuarial firm, titled “Imagining 16% to 12%.”  (Since then health care spending has jumped, so the title needs to be revised: “Imagining 17% to 12%.”)

This may well sound pie-in-the-sky-- and I’m not suggesting that we’ll do it. Still, if you believe the many observers who suggest that at least one-third of our health care dollars are squandered in ways that provide no benefit to patients, in theory, we should be able to slice spending by 25%.

Facing the Pakistan Flood

Great natural disasters are a defining moment for nations and their friends. They have vast humanitarian and often political consequences, nationally and internationally. The Pakistan flood is another of those sudden earthshaking disasters. The continuing flood, already almost a month old, would have overwhelmed Pakistan no matter whether its President was ineptly slow to fly home to lead the rescue. The world has to help, but the American response -- almost always the most important for poorer countries -- has been slow, still inadequate, but growing. Read more at Huffington Post.

What Is Happening At The Washington Post?

Every month, two checks from BNY Mellon Asset Servicing arrive at my home for a total of $477.52, which represents my pension from The Washington Post. Considering that I left the newspaper in 1984, after 18 years as a reporter and editor, this small but welcome contribution to my income means that I remain attached to the company in the most concrete of ways: money. In 1996, when I was founding PublicAffairs, I thought each book we published should carry a tribute to three people for whom I had worked. The first was I.F. Stone, the great radical independent journalist whose assistant I was in the mid 1960s. The second was Robert L. Bernstein, the CEO of Random House who hired me as an editor when I left the Post and was also the founding chairman of what has become Human Rights Watch.

My third revered boss was Benjamin C. Bradlee, who led The Washington Post in all the years I worked there. Approaching Ben to ask about the use of his name on a dedication page was a daunting prospect. For all Ben's great attributes as a leader, I never thought of him as a sentimentalist, especially considering that by now I had already been gone from his employ for more than a decade, pretty much a generation in the newspaper business. Ben looked at me quizzically when I made my pitch but agreed. All he asked was that I not embarrass him. I assured him that I would do my best.