How Much Money Would You Need At 65 If Medicare Did Not Exist?

Posted on 05/30/2012 by

Blue Box Special #11

Folks at work were wondering about this as a bunch of us are in the mid 50s, that age where you have ten years to work unless they put you out to pasture sooner, and finding similar high-wage work is just about nil. Retirement health care is an important consideration obviously. Some one asked: What if Medicare did not exist, how much would good health care cost out of pocket for insurance? Great question. PiLogic Street is up to the task.

In order to answer that question requires just a bit of simplified stats, this blog’s specialty, hence the blue box graphics you see around here now and then. If you are a man around 55, Social Security is planning you will make it to around 78; that would be 13 years of needed health insurance if Medicare did not exist when you turn 65. So what would it personally cost?

The University of Wisconsin\State of Wisconsin publicly publishes the cost it and its employees pay for health insurance for a full-time worker. A single person HMO plan with a 10% coinsurance rate and maximum payable deductible of $1,000 costs $8,280 per year to the state’s taxpayers and employees. Presently, the interest rate on ten-year US Treasury bonds is around 2%, rounded up. So, 13 years of this available HMO insurance has a net present value, or required investment value at 65 of $100,240, as the following graphic shows. This type of calculation is standard finance and economics.

So, if Medicare did not exist, one would have to fork out about $8,280 for a single HMO plan in an inflation free world, or have retirement savings equal to nearly $100,000. That is a whole lot of money. Medicare is a very valuable item for retirees when looked at it this way. Not too many people who are retired will have that cash flow or liquid retirement savings. That means in the coming election cycle, we all need to pay careful attention to what the two big political parties have up their sleeves on this subject, because the baby boomers are a retir’n.

In a later post, the question “Is Medicare an Entitlement, Insurance, Subsidy, or Welfare?” will be explored.  That one will be fun and enlightening.

Posted in BLUE Box, Economics, Retirement, United States | Tagged , , | 12 Comments

Have A Safe Memorial Day Weekend!

Posted on 05/25/2012 by

Those of us alive today owe a debt of gratitude to the armed services folks who have left us a country in peace, with freedom, and on top of the world as the remaining super power.

So, as you go about this weekend doing whatever, have fun, drive safe, play safe, and keep in the back of the mind the sacrifices of the few and the proud.  That is why that stop light sign is in this picture!

Have a great Memorial Day Weekend, the start to summer in a way.

More posts coming next week.  Randel.

Posted in 2012, United States | Tagged , | 2 Comments

Meet Mitt Romney’s Economists, The Same Ones George W Bush Had

Posted on 05/23/2012 by

This recycling of economists is really getting old. It happens under the Democrats and the Republicans. It is unbelievable that the same washed up talent gets reappointed.

First, there is Democrat President Bill Clinton who had Harvard’s Larry Summers, who together failed the nation with their push to fully deregulate the big banks in 1998-2000.  Then in 2009, there is a replay. This time Democrat President Obama appoints Larry Summers to be his economic advisor, and this time we again get failed bank re-regulation and a laggard economy.

The recycling on the Democrat side is appalling, but now it is happening on the Republican side.

Mitt Romney, pictured above, his party’s presumptive nominee, has his own team of academic economic advisers. Harvard economist Greg Mankiw and Columbia Business School’s Glenn Hubbard. Guess what? This pair advised George W Bush, and we know how that eight years turned out with the big economic collapse of 2007-2009.

Why do the two parties turn to the same people?  Cannot they find someone other than these pathetic advisors?  America is doomed if our Presidents turn to the same tried and failed policies of the past and these economists who advised the Presidents.

Summers, Mankiw, Hubbard, and there are other recyleds too, need to pack up and go.  Their time is past. Bring in some new blood, as this country needs some new thinking to turn matters around.

Finally, the most galling thing actually is that all of these Democrat and Republican economists still advocate a freely deregulated big banking sector, and are against reigning in Wall Street. We just saw JPMorganChase lay an egg with a speculating $2-$5 billion loss.  Both parties have been bought by Wall Street which keeps wanting the same old retreaded economists who favor Wall Street–and it does not matter if the Democrats or the Republicans control the White House. Wall Street and its fellows always win.

If Obama or Romney want to join the list of great Presidents listed at the bottom of this blog, they had better take on Wall Street. The former Presidents did so successfully, and now rank among our finest. Apparently, we live in a period of much weaker character or talent.

Here is a link from CNN confirming the picks.

http://economy.money.cnn.com/2012/04/18/romneys-economic-brain-trust/?iid=HP_LN

Posted in 2012, Banking, Economics, President, United States, Wall Street | Tagged , , , , , | 3 Comments

Two Months of Economic Progress As Health Clinic Expands

Posted on 05/19/2012 by

This was the view outside our windows back in March 2012. They were tearing down old wharehouses to make room for a health clinic and new urban style apartments and shops.

The last picture shows what has happened in just 60 days. It is amazing. The old is gone, the new is getting started, and the whole 20 acre parcel of land has been cleared.

The new building going up is an outgrowth of the University of Wisconsin hospital system.  They have filled up all their spots near campus and now are branching out to new areas on the west side of Madison.

The reason for this post is that in our current dismal economy, the one area that still seems to have growth is in health care, as the the baby boomers get old.

Will post more pictures in another 60 days.

Mid-March 2012

 

 

 

 

 

 

 

 

 

Mid-May 2012

Posted in 2012, Business, News, Photography | Tagged , , , , , | 8 Comments

Sears Is Trying to Make a Comeback, But This Experience is Sad.

Posted on 05/14/2012 by

Sears has been struggling to stay relevant in the retail world.  They have a big fight on their hands, but if two recent experiences are any indication, the company is in trouble.

Recently, while shopping for running shoes, a lady dressed up as a Sears salesperson came up with clipboard and brochures in hand asking if the household was up to any current remodelling.  Sears offered all kinds of things to update the home.  Stunned, the reply was no thank you politely, just looking for shoes.  This form of hawking smacked of the desperate selling practices at some State Fair vendor where you expect that kind of thing.

Then some more shopping and browsing in the guys area of hardware tools etc., and low and behold, the checkout counter looked like something from a convenience store, or at a gas station.  No kidding, the lower level of the counter was surrounded with candy and candy bars like this favorite:

 

 

The message was clear.  Sears needs fast cash, big or small, on items with big mark up.  The candy bar probably costs them 50 cents and they try and sell it like the convenience store at $1.50.  Next thing, soda pop coolers will be next to the counter.  And, who would expect walking into a department store to be hit up for some $10,000 re-roofing or windows remodeling when you are looking for $50 sneakers.

This combined to leave that will-probably-never-be-back feeling.

Posted in 2012, Business, Life | Tagged , , , | 3 Comments

Thinking, Fast and Slow

Posted on 05/11/2012 by

This week was a big learning week, covering the subjects of psychology and finance. Never knew this before, but there is System 1 thinking that is fast, and there  is System 2 thinking that is very deliberative and slow. Each has particular strengths; but if you use System 1 thinking to solve a System 2 problem, you will be making big mistakes for sure.

What is System 1 thinking? It is fast thinking, on the spot analysis. Examples include when asked what 2 plus 2 equals, you already know the answer. If a car jumps out from a red stop light, you know to hit the brakes. System 1 is very fast and often accurate, but not without its pitfalls.

System 2 thinking is involved thinking, that is slow and takes some time. It is the type of thinking you use to solve not immediately apparent solutions to important decisions or questions. An example of System 2 thinking is if asked the question: What is the answer to 24 times 43? You do not know on the spot; you need a calculator. Other System 2 questions are: should I really buy that car, or house, or invest in that company, or marry that special someone? These problems need System 2 slow thinking, to increased the probabily of getting it right.

These ideas are those of Professor Daniel Kahneman in his book on behavioral finance. His conclusion is that folks use System 1 thinking too much to solve System 2 problems, leading to financial problems. So, rather than impulsively buy that stock or car or whatever, give it some time. Wait a day or two. Run all the numbers. Analyze the Probabilities and Possibilities. In other words, slow down your thinking and problem solving on the bigger topics. You will do much better than using on the spot instant System 1 thinking.

This is a huge topic today, because it applies to investing. So much investing is done using System 1 impulsive thinking than a more deliberative approach using System 2. In fact, guys are more prone to System 1 thinking in System 2 finance situations according to the professor, shown below.

According to the professor, when it comes to stocks and bonds, you might as well turn off all the cable tv finance channels and all the web cast instant-oriented stock market analysis too. All it does is really confuse you. He says you should not even look at at stock prices but maybe once every three months. Not kidding.

The reason this is all known is that the folks at the CFA Institute kindly broadcast their plenary sessions for free to the public this week, using the internet. CFA Folks in the room paid $1000+ plus hotels to attend the professional conference, but us websters could watch the main courses for free compliments of the CFA. By far the best session is the one-hour presentation by Dr. Kahneman. It is highly recommended, and especially for those with a finance bent.

Here is the institute logo and a link to watch this amazingly modest man talk about how our brains think, and how we can get in trouble when investing unless we do System 2 thinking. Yes, in some ways all this is common sense, but this man has put it all together in his book as theory and practice. The science is so sound, he got a Nobel prize for it. Remember the video lasts an  hour.

ll

http://www.cfainstitute.org/learning/products/multimedia/Pages/66489.aspx

Posted in Finance, Psychology, Stocks and Bonds, Wisdom | Tagged , , , | 4 Comments

Sunday View–Life Is A Beach, Or Is It?

Posted on 05/06/2012 by

Back in the teen, twenty’s and thirties, that was the view around here:  Life is a beach. Drink, swim, drive sports cars, meet fun women and go travelling, oh how exciting–everything was a first too. Other than the tough work of college–Life is a Beach really fit. Heck you even had lots of free time.  Here is a People magazine picture of two Hollywood stars.

Then reality hit.  Parents passing. Step children growing up and needing help, and jobs not so plentiful or as well paying. Suddenly, life is a beach was no longer. Plus, the old desires, lost their desire, or would get you in big trouble. Swimming in the ocean only goes so far. Sports cars, once you have had a few, who cares. Dating, well it is actually hard work. Getting the sun tan, staying buff became boring, and hard to do on the buff front, even with a good diet. And drinking, now it took fewer and fewer before the headaches would hit, and worse, the depressing, colors-get-sad effect was being felt. So out the door with beer will get you girl friends or fun staff. Who needs the bleak feeling?

But, then something happened again.  Life is Back to the Beach, but in a different way.  Smiley faced personality-full grandchildren are around.  At work there is more freedom to say what you want to say being an elder. And, fortunately some savings have piled up along the way. In the fifties, suddenly everyone is more attractive in a different kind of way, and you do not need to go to the beach.  You hear of their stories, successes and failures, and you realize that wisdom is setting in, and with it is a more caregiving and respectful attitude towards others.  A new freedom has been found.  Now I would not trade the fifties for the twenties or the thirties. A satisfying marriage is even in hand; and with that you look at the beach differently.  Hence this calm-water couples picture:

So life is really the attitude you take towards it.  Yes, there are going to be huge bumps coming in the road. But it is with hope that the past 50 years or so have built in a tough 4 wheel drive suspension to take them on.  While no longer a sports car, a rugged pick up truck actually fits better. And if not, God is by the side, and very much appreciated after so many years taking pride in one’s accomplishments and leaving Him aside.

So, enjoy your Sunday where ever you are.  A day of rest and reflection to prepare you for taking on this week’s waves.

Posted in Fun, God, Life, Wisdom | Tagged , , , | 2 Comments

Natural Gas Vehicles May Be Our Future, Not Hybrids or Electric

Posted on 05/01/2012 by

Here is the revolutionary 2013 Chevy Truck that could change business and workers lives.  It runs 12% cheaper per mile, but uses compressed natural gas, or CNG, instead of regular unleaded gasoline. It will be available this summer.  Dodge may be planning one as well.

The use of natural gas in vehicles is not new, but the recent discoveries of lots of shale natural gas in the USA, extracted by a controversial new technology called fracking, has driven the cost of natural gas so low in the market place, that it makes natural gas vehicles cheaper in the long run to operate than cars or trucks using regular gasoline, assuming natural gas stays at it low level.  Right now natural gas is the cheapest it has been since around 2000..

Here is the analysis of the cost of using one of these trucks in say a construction business.  At the moment the purchase price of the Chevy truck is about $11,000 more due to the CNG required technology.  But, at heat content equivalent prices, natural gas vehicles would cost about 50% per mile cheaper to operate.  It takes some time to recoup the extra up front vehicle purchase capital cost, but in the long run it will be cheaper.  Commercial fleets are likely to adopt these vehicles first, since payback periods are around 7-10 years.

If current gasoline prices stay in the $3.69 range, and natural gas stays at its current low price due to all the fracking; then CNG cars and trucks may be the wave of the future, replacing Hybrid cars and electric vehicles.  This is all brought to you by the new practice of getting natural gas out of the ground using fracking.

Right now the EPA and many states are looking into the practice because it is controversial because it can contaminate ground water, and there is evidence the practice can cause small earth quakes.  But innovation is clearly at work even in today’s sick economy.

Posted in 2012, BLUE Box, Business, Cars, Energy, Technology | Tagged , , | 8 Comments

Weekend Fun–The Bumper Stickers of Madison

Posted on 04/27/2012 by

This is a liberal, progressive community; just about every one knows that.  Madison is known as 80 square miles surrounded by reality. So, it is interesting to see the range of bumper stickers that run the gamut of ideas.

Here are bumper stickers and car emblems you see around here.  Some are very left, and some way to the right. The spectrum is covered.  The graphic artists have done a pretty good job.  To maintain privacy rather than show the cars and fuzzied license plates, just downloaded the sticker images from Google.

These are the clever ones seen around here.  The political ones are of a negative cast since they are more fun; the others just expressing a sentiment, including accomplishing 26.2 mile marathons.  Free speech is alive and well on the back of cars and SUVs.

And yes, in liberal Madison we have the war of the car emblems over Darwinism and Christianity too.  By the way, there are no bumper stickers on the lowly black Ford Focus doing the commuting around here.

Posted in 2012, Cars, Fun, Humor, Politics | Tagged , , , , | 9 Comments

Steel Multi-Ply Coins May Be in Our Future

Posted on 04/25/2012 by

It costs the US mint just about 5 cents to make a nickel. The post-1982 zinc copper-coated penny about 0.5 cents. [Pennies before 1982 are actually worth 2.4 cents melted down because they were all copper.] To make a dime or a quarter costs about 2 to 5 cents a piece. Changing the metal composition of coins to something cheaper could add up to billions of dollars in savings if the US Government began minting such coins. Using a metal like multi-ply steel, the cost would be somewhere around 1 or 2 cents to make each coin. There would be savings if every coin was changed to steel too.

In Congress earlier in April, two proposed laws were introduced HR 3693 and HR3694 that would allow the US mint to change the composition of metals used in our coins. President Obama’s 2013 budget also allows the US Treasury Secretary to determine the optimal metals to be used in our coins. The favorite may be a form of steel. The US Government last issued steel coins, pennies, back in 1943 during World War 2. You see that in the above image.

So stay tuned, in the coming years our coins might change their metal composition.

Here are some references:

http://www.coinflation.com/

http://news.coinupdate.com/legislation-seeks-steel-cents-and-nickels-1117/

 

Related articles
Posted in 2012, Coins, Money | Tagged , , , | 10 Comments