Patting the wrists, rolling the eyes.

[Mmmm, Burger (C.J.)]

Originally posted by Sidd Finch
So is mine. Identify a private enterprise that operates with administrative costs as low as Social Security.

Identify a private enterprise given as much free reign over so much money as social security.

I'll bet that NASDAQ operates with lower admin costs.

Vanguard operates some funds with admin. costs approaching the levels that the federally run TSP does, which has a much larger base (most of the federal pension system).

[Tyrone Slothrop]

Originally posted by Mmmm, Burger (C.J.)
So, in designing health care, you have to identify a market failure that calls for a government-operated solution. The only market failure is not that, but a moral belief that everyone is entitled to "free" healthcare. That's fine, and worth voting on, but it doesn't mean that government needs to be involved in the solution any more than to move money from a rich pocket to apoor one.

Health care has lots of market failure going on. It's amazingly difficult to get the incentives aligned properly. RT can explain.

Which is not to say that there aren't other issues about the healthcare to which people are entitled.

[Mmmm, Burger (C.J.)]

Originally posted by Tyrone Slothrop
Health care has lots of market failure going on.

Sure, but one has to identify the precise market failure and how government can solve it before justifying a true gov't health care system (as opposed to single payor, subsidies, etc.)

BTW, clean out the salacious crap from you PM box so I can send you something substantive.

[Tyrone Slothrop]

Originally posted by Mmmm, Burger (C.J.)
Sure, but one has to identify the precise market failure and how government can solve it before justifying a true gov't health care system (as opposed to single payor, subsidies, etc.)

There are so many. Where to start? This is part of why I defer to RT. Plus, she's smarter and better informed than I am.

BTW, clean out the salacious crap from you PM box so I can send you something substantive.

I cleaned out the salacious crap, and now I'm down to three PMs, two-thirds of which were from Hank. Wow!

[Mmmm, Burger (C.J.)]

Originally posted by Tyrone Slothrop
There are so many. Where to start? This is part of why I defer to RT. Plus, she's smarter and better informed than I am.

Many smart people have debated these issues. Doesn't mean Canada and England have it right.

[Replaced_Texan]

Originally posted by Mmmm, Burger (C.J.)
Many smart people have debated these issues. Doesn't mean Canada and England have it right.

I don't think any one was saying that Canada and England is going to work here. I will specifically say that I am NOT ADVOCATING a Canada or UK model.

Things that I think are essential for all people:

• Primary care. Check ups. Annual ob-gyn trips for women. Screenings for blood and weight and cancers.
  
• Pediatric care. All vaccines, annual checkups, etc. Kids shouldn’t have to be burdened with bad health because of their parents.
  
• Catastrophic care. Richard Morrison was envisioning something like FEMA, so the regular insurance companies didn’t have to be burdened with the really expensive care that can wipe out a plan's reserves.
  
• Clinics scattered everywhere. Easily accessible, easy to access records. Places where you can go to get antibiotics for a UTI or an ear ache or flu shots. In some states, there are mini-clinics setting up in Target stores, and I think the more healthcare facilities for the small stuff, the less the system will be burdened.
  
• Outcomes research. We need to more efficiently deliver healthcare, and outcomes research can tell us what works well and what doesn't.

I think that every American should be covered by, at the least, one of those crappy college plans that give just basic coverage. More comprehensive coverage could be purchased in group plans or through buying cooperatives. Most Medicare beneficiaries purchase additional supplemental coverage, and I see no reason that the rest of us couldn’t operate under a similar, if not stripped down, system. Supplemental coverage would then address the "I don't want to lose anything" arguments. Those people are already paying for coverage in some manner. If some was subsidized by the basic and catastrophic coverage offered through a single payor, then either their salaries would increase or their premiums should go down.

If you know where else I post, you'll find an expanded version of the above.

[LessinSF]

Originally posted by Spanky
Are you against any government involvment at all in health care?

P.S. I am meeting Pete McCloskey at 5:00 at the Ferry Building (to discuss the demise of Tom Delay). You want to hit the town after my meeting? Maybe go to the Green Rock where Sharon Stone is the bartender?

I'm just talking pragmatically, given that extrication of government from health care is about as likely as Sharon Stone blowing me tonight. To paraphrase someone - "I am wary of those who hold strong opinions; I was a history professor first."

I'm having dinner with Mom at 6:15, but should be free around 8:00. (Y'all can resume not changing each others' minds now.)

[sgtclub]

From the Cato Institute: http://www.cato.org/pub_display.php?pub_id=3750

[Gattigap]

Originally posted by sgtclub
From the Cato Institute: http://www.cato.org/pub_display.php?pub_id=3750

[*sniff*]

Our young man has come so far.

[ltl/fb]

Originally posted by Mmmm, Burger (C.J.)
Vanguard operates some funds with admin. costs approaching the levels that the federally run TSP does, which has a much larger base (most of the federal pension system).

Managed funds, or indexed funds? Indexed funds, which is what Vanguard is famous for, are always insanely cheap to run.

I'm curious what Vanguard/Fidelity/whatever other large mutual fund industry's asset base is as compared to the TSP. TSP is no doubt the largest single retirement plan, but there are a whole lot aggregated w/Vanguard etc. Of course, I guess many of the very largest non-fed-gov't employers don't offer commercial mutual funds as the main investment options b/c the money is too big, so maybe Vanguard/Fidelity don't have as much even in the aggregate.

[Hank Chinaski]

Originally posted by ltl/fb
Managed funds, or indexed funds? Indexed funds, which is what Vanguard is famous for, are always insanely cheap to run.

I'm curious what Vanguard/Fidelity/whatever other large mutual fund industry's asset base is as compared to the TSP. TSP is no doubt the largest single retirement plan, but there are a whole lot aggregated w/Vanguard etc. Of course, I guess many of the very largest non-fed-gov't employers don't offer commercial mutual funds as the main investment options b/c the money is too big, so maybe Vanguard/Fidelity don't have as much even in the aggregate.

Burton Malkiel, author of A Random Walk Down Wall Street and Professsor at the University of Chicago, as well as many other pundits of managed funds have consistently studied and verified that the average MANAGED mutual fund does NOT outproduce the S&P 500 index. William Sharpe, who won a Nobel prize in economics for his studies on securities, noted that on a net of expense basis, in the aggregate, fund and institutional managers will tend to underperform the market by an amount equal to the fees that they charge for managing the portfolio, plus associated costs. Vanguard's Bogle's study of the Wilshire 5000 Index from 1971 to 1990 tended to show exactly that- professional managers underperformed the index by an average of 1.8% per year- approximately the cost of managing the fund; 1% for management fee, 0.5% in fund transaction costs and 0.3% due to cash positions required by investor inflows and outflows. Another study by Brinson, Hood and Beebower of the quarterly returns of 91 large pension funds between 1974 to 1983 compared the returns from the asset classes they were investing in. 93.6% of the return was explained by the movements in the underlying asset classes they were investing in. They also showed that active managers, in the aggregate, underperformed the benchmarks by 1.10% a year. In other words, the active selection of stock did little to nothing to the overall return- it was where the money was invested that made the difference. Money Magazine (August, 1995), though certainly not an education tool in itself, also had a lengthy commentary regarding how passive investments (index funds) should be considered because of the lack of management expertise in consistently beating or even meeting the S&P 500 Index annual returns. A study by Barksdale and Green of 144 institutional equity portfolios over the rolling 10 year periods between January 1, 1975 and December 31, 1989 showed that portfolios that finished the first five years in the top quintile were actually the least likely to finish in the top half over the next five years. The results were entirely random. That meant that what might have beaten the market for a certain period of time had little consistency in doing so in the near future. Robert Stalla, instructor for Chartered Financial Analysts, stated in his material that "a properly diversified portfolio should be utilized first in many portfolios unless there is a compelling reason to do otherwise". Most recently, Jack Beebe, Director of Research for the Federal Reserve Board of San Francisco and a former stock and bond analyst, stated that "I learned that you cannot easily beat the market" and uses mostly index funds in his portfolio. The point with this limited commentary is that 401(k) funds, since they are limited in number, should at least offer a S&P 500 index fund as well as an Intermediate Bond index fund since these could/should be the major platforms from which an investor then moves. That is not to say that an investor MUST use them, but that they are made available. Without adhering to basic investment teachings, XXXXX Training Corporation is probably at risk in the future if the funds actually selected underperform baseline indexes- particularly when high fees are also noted.


Admittedly, this review is not to suggest that managed funds cannot or do not provide returns exceeding the S&P 500 index. A study by Lipper found that, in the extreme, with the very good and the very bad funds, there does tend to be repetitive performance under similar conditions. Therefore, from the vast universe of funds, it is possible to use a fund(s) that can consistently outproduce the market- at least for some period of time. But another study reviewed the Forbes Honor Roll over periods of 1980- 1984 and 1986- 1990. Only once did those in the honor roll outperform, in the aggregate, the S&P 500 index- and that by a very slight margin in the first five year period. Further, the group never outperformed both the index and the average equity fund during any five year periods. So, since a 401(k) plan offers normally just a few funds from one fund family, the odds of one of those funds consistently outproducing an index, on a risk adjusted basis, is relatively remote. It again reinforces the necessity of the offering of some index funds.


The above is corroborated by the returns of the funds selected. The Basic Value (mostly growth but with some income) has generally underperformed the market. The Capital Growth (mostly growth but with convertible securities and cash) and the Global Allocation Fund (both US and Foreign securities) have both consistently underperformed the index for all periods. That does not mean that an investor may not wish to use them nor that they might outperform an index. But when employees have NO CHOICE but to pick a fund(s) that has consistently underperformed the market, I believe the company is at risk for future liability in not recognizing basic investment teachings and reflecting that in the offerings.


While the B category funds (all the above) are exempt from the back end loads under a retirement plan agreement with Merrill Lynch, they still are subject to a 1.00% 12b-1 fee for eight years on the Global Allocation, Basic Value and Capital Fund, a .75% 12b-1 fee for ten years on the High Income and Investment Grade portfolios and a .50% 12b-1 fee for ten years on the Intermediate Bond portfolio. Even though most of the 12b-1 fees are reduced to "just" .25% at those times, the cumulative 12b-1 fees are comparable to a 6.25% (6.75% at the discretion of Merrill Lynch) total load. Additionally, high 12b-1 fees on bond funds simply reduce return overall since appreciation is not a usual consideration for bond funds today.


All the funds must attempt to outperform an index just to account for these fees- and have essentially been unable to do so. As regards bond funds, it is generally held that bond investment and returns are effectively limited for all portfolios of similar ilk and that the only way one fund can outproduce another is to take more risk- either through lower rated bonds or by use of derivatives. The returns on the Intermediate and Corporate bond portfolio have clearly underperformed the indexes. The High Income portfolio, as compared to Vanguard's High Income portfolio, shows a lower return for almost all periods and with higher risk. While I am certainly not advocating Vanguard as your fund choice, it would be utilized as a gauge in almost all law suits regarding the suitability of fund selection.


In conjunction with the above, it is necessary to relate how the overall fees compare to industry standards. I have included several performance reports for Vanguard since they are the industry gauge for low costs. The difference in fees is most notable on bond funds. Merrill's High Income management fee is 1.29%- Vanguard is .35%. Merrill's Intermediate portfolio fee is 1.04% while Vanguard charges .18%. There are other issues that could substantiate the higher fees- service is one- but they still must be viewed in terms of performance.

I'm just sayin....

[Mmmm, Burger (C.J.)]

Originally posted by ltl/fb
Managed funds, or indexed funds? Indexed funds, which is what Vanguard is famous for, are always insanely cheap to run.

.

I have no idea whether hank answered your question. and i doubt you want to read to find out. I'm talking index funds. of course, that's what TSP is too--just indexed.

quick search: TSP 153B in assets.
Vanguard 500, 104B in assets. Of course, TSP is accross severalfunds.

[taxwonk]

Originally posted by LessinSF
If it is a strong argument for government intervention into the health care system at all, it is a strong argument for an approach such as Oregon's, not a national health care system. I don't have the statistics at my fingertips, but some extraordinarily large portion of our health care expenditures is spent on the last year of people's lives or futile efforts to keep them alive or extend their (often miserable) life my some incremental amount. What Oregon is at least trying to do is insert some cost-benefit analysis into health care decisions, i.e. don't spend $1,000,000 on a liver transplant for a 70-year old.

We are spending something like 20% of our GDP (or GNP, I don't know and it doesn't matter) on health care in some misguided belief that all efforts must be made at all times for all people. And some disproportionate amount of that is not spent on the stuff that most people want from health insurance, whether it is keeping the vegetative alive, using extraordinary attempts to save the old, infirm and feeble, or on all the machines in the ICU that go "beep."

Somehow the doctors, lawyers and religious right have created this systemic belief that no amount of resources should be spared to save one life on the margin. Oregon is at least looking at the marginal benefit for the expeniture of extraordinary costs. A national health care system would not. I don't know what exactly, but I have no doubt that it would instead create some other system with unintentional, yet existent, built-in incentives for inefficiency, graft, and incompetency. (See, e.g. the TSA).

I argued exactly the same thing a couple of months ago. It was not well-received. YMMV.

[ltl/fb]

Originally posted by Mmmm, Burger (C.J.)
I have no idea whether hank answered your question. and i doubt you want to read to find out. I'm talking index funds. of course, that's what TSP is too--just indexed.

quick search: TSP 153B in assets.
Vanguard 500, 104B in assets. Of course, TSP is accross severalfunds.

TSP is only one fund? Or fed employees have only indexed options?

Usually an indexed fund or two are available, but there are also other funds -- fixed income, some kind of cash equivalent, balanced, small cap, large cap, international . . .

ETA What Hank posted is too long. He needs to summarize. I kinda skimmed b/c I'm sick and I think I know all that stuff and posted my most relevant thought.

[ltl/fb]

Originally posted by Hank Chinaski
Burton Malkiel, author of A Random Walk Down Wall Street and Professsor at the University of Chicago, as well as many other pundits of managed funds have consistently studied and verified that the average MANAGED mutual fund does NOT outproduce the S&P 500 index. William Sharpe, who won a Nobel prize in economics for his studies on securities, noted that on a net of expense basis, in the aggregate, fund and institutional managers will tend to underperform the market by an amount equal to the fees that they charge for managing the portfolio, plus associated costs. Vanguard's Bogle's study of the Wilshire 5000 Index from 1971 to 1990 tended to show exactly that- professional managers underperformed the index by an average of 1.8% per year- approximately the cost of managing the fund; 1% for management fee, 0.5% in fund transaction costs and 0.3% due to cash positions required by investor inflows and outflows. Another study by Brinson, Hood and Beebower of the quarterly returns of 91 large pension funds between 1974 to 1983 compared the returns from the asset classes they were investing in. 93.6% of the return was explained by the movements in the underlying asset classes they were investing in. They also showed that active managers, in the aggregate, underperformed the benchmarks by 1.10% a year. In other words, the active selection of stock did little to nothing to the overall return- it was where the money was invested that made the difference. Money Magazine (August, 1995), though certainly not an education tool in itself, also had a lengthy commentary regarding how passive investments (index funds) should be considered because of the lack of management expertise in consistently beating or even meeting the S&P 500 Index annual returns. A study by Barksdale and Green of 144 institutional equity portfolios over the rolling 10 year periods between January 1, 1975 and December 31, 1989 showed that portfolios that finished the first five years in the top quintile were actually the least likely to finish in the top half over the next five years. The results were entirely random. That meant that what might have beaten the market for a certain period of time had little consistency in doing so in the near future. Robert Stalla, instructor for Chartered Financial Analysts, stated in his material that "a properly diversified portfolio should be utilized first in many portfolios unless there is a compelling reason to do otherwise". Most recently, Jack Beebe, Director of Research for the Federal Reserve Board of San Francisco and a former stock and bond analyst, stated that "I learned that you cannot easily beat the market" and uses mostly index funds in his portfolio. The point with this limited commentary is that 401(k) funds, since they are limited in number, should at least offer a S&P 500 index fund as well as an Intermediate Bond index fund since these could/should be the major platforms from which an investor then moves. That is not to say that an investor MUST use them, but that they are made available. Without adhering to basic investment teachings, XXXXX Training Corporation is probably at risk in the future if the funds actually selected underperform baseline indexes- particularly when high fees are also noted.


Admittedly, this review is not to suggest that managed funds cannot or do not provide returns exceeding the S&P 500 index. A study by Lipper found that, in the extreme, with the very good and the very bad funds, there does tend to be repetitive performance under similar conditions. Therefore, from the vast universe of funds, it is possible to use a fund(s) that can consistently outproduce the market- at least for some period of time. But another study reviewed the Forbes Honor Roll over periods of 1980- 1984 and 1986- 1990. Only once did those in the honor roll outperform, in the aggregate, the S&P 500 index- and that by a very slight margin in the first five year period. Further, the group never outperformed both the index and the average equity fund during any five year periods. So, since a 401(k) plan offers normally just a few funds from one fund family, the odds of one of those funds consistently outproducing an index, on a risk adjusted basis, is relatively remote. It again reinforces the necessity of the offering of some index funds.


The above is corroborated by the returns of the funds selected. The Basic Value (mostly growth but with some income) has generally underperformed the market. The Capital Growth (mostly growth but with convertible securities and cash) and the Global Allocation Fund (both US and Foreign securities) have both consistently underperformed the index for all periods. That does not mean that an investor may not wish to use them nor that they might outperform an index. But when employees have NO CHOICE but to pick a fund(s) that has consistently underperformed the market, I believe the company is at risk for future liability in not recognizing basic investment teachings and reflecting that in the offerings.


While the B category funds (all the above) are exempt from the back end loads under a retirement plan agreement with Merrill Lynch, they still are subject to a 1.00% 12b-1 fee for eight years on the Global Allocation, Basic Value and Capital Fund, a .75% 12b-1 fee for ten years on the High Income and Investment Grade portfolios and a .50% 12b-1 fee for ten years on the Intermediate Bond portfolio. Even though most of the 12b-1 fees are reduced to "just" .25% at those times, the cumulative 12b-1 fees are comparable to a 6.25% (6.75% at the discretion of Merrill Lynch) total load. Additionally, high 12b-1 fees on bond funds simply reduce return overall since appreciation is not a usual consideration for bond funds today.


All the funds must attempt to outperform an index just to account for these fees- and have essentially been unable to do so. As regards bond funds, it is generally held that bond investment and returns are effectively limited for all portfolios of similar ilk and that the only way one fund can outproduce another is to take more risk- either through lower rated bonds or by use of derivatives. The returns on the Intermediate and Corporate bond portfolio have clearly underperformed the indexes. The High Income portfolio, as compared to Vanguard's High Income portfolio, shows a lower return for almost all periods and with higher risk. While I am certainly not advocating Vanguard as your fund choice, it would be utilized as a gauge in almost all law suits regarding the suitability of fund selection.


In conjunction with the above, it is necessary to relate how the overall fees compare to industry standards. I have included several performance reports for Vanguard since they are the industry gauge for low costs. The difference in fees is most notable on bond funds. Merrill's High Income management fee is 1.29%- Vanguard is .35%. Merrill's Intermediate portfolio fee is 1.04% while Vanguard charges .18%. There are other issues that could substantiate the higher fees- service is one- but they still must be viewed in terms of performance.

I'm just sayin....

If you don't have anything managed, you can't have an index, though.