There are more good news articles, commentaries, and analyst reports on the Web every week than anyone could read in a month. Here are eight fascinating ones I read this week.
Kaiser Health News interviews Medicare's outgoing chief actuary, Richard Foster, who talks about the slowing growth of drug costs:
Q: The cost of the Medicare prescription drug benefit has been lower than what your office or the CBO estimated. Why?
A: There are several reasons, but here's the biggest one by far: Drug costs were growing 12, 14, 15 percent per year. We assumed the growth rates would start to come down. And they did come down. But they came down far faster than we ever would have guessed.
What happened is that all the insurance companies -- in an effort to drive utilization to generic drugs -- were creating these tiered benefit formulas and formularies. If you used a generic equivalent, you'd have a very modest co-payment. If you used a brand name, you'd have a much higher co-payment. And if you used a brand name that wasn't on the formulary, it would be even higher yet. That effort was enormously successful in changing the rate of use of generic drugs. So at the time, the generic proportion of all prescriptions was in the neighborhood of 40 percent. Today, it's over 75 percent.
Lost amid the mewling and mindless pandemonium was any sense of perspective. In the first quarter of Apple's fiscal year -- the crucial period from October to December in which the year's highest-earning holidays fall - the group's revenues for the first time topped $50bn, and it earned more than any other business. Sales were $8.2bn higher than in the same quarter of the preceding year
This jump in quarterly sales -- just the gain -- is more than one-and-a-half times the revenue Facebook is expected to record for all of last year. Were Apple a nation, its gross domestic product would rank about 45th in the world -- well ahead of Pakistan and New Zealand. It is almost enough to make you think Apple should have a seat in the UN.
Moving in the right direction
Sarah Kliff in the Washington Post notes that health care cost growth is coming in below projections. That's great news if it sticks, because health care accounts for essentially all of the long-term budget deficit:
Here for the long haul
James Surowiecki in The New Yorker defends the long-run sustainability of Social Security:
Half of all Americans aged between eighteen and twenty-nine don't think that Social Security will exist when they retire. That's a bizarre thing to believe about an important government program. No one ever says, "I don't think the U.S. Army will be there when I get old" or talks about the Defense Department "going broke." We assume that there will always be a need for the military, and that we'll end up paying the taxes that are necessary to fund it. But, because Social Security and Medicare have always been self-supporting, it's easy to believe that they'll just vanish if the trust funds dry up. This isn't the case. Relatively minor tweaks to Social Security will allow it to keep paying full benefits for many decades. And, if we wanted, we could supplement funding for both programs with general government revenue.
George Soros sticks it to his own industry:
George Soros, the billionaire philanthropist and former hedge-fund manager, said institutions that invest in the industry should expect poor performance, in part because managers charge high fees.
"Since hedge funds are now a dominant force in the market, they can't, as a group, outperform the market," Soros said today in a Bloomberg Television interview with Erik Schatzker from the World Economic Forum in Davos, Switzerland. The funds' fees, typically 2 percent of assets and 20 percent of returns, eat into profits, Soros said.
Buyers of fixed-income products must be told that "just because it is a bond doesn't mean that it trades at par," Cohn said yesterday.
"At some point, interest rates will go higher again, and all of the money that has piled into fixed income over the past three years, some of it will come out," Cohn said. "We will clearly be there to facilitate, we will clearly be there to provide balance sheet and liquidity to our clients, but ultimately, we can't be the buyer of last resort."
Two year ago, California was drowning in record deficits with no end in sight. Now, writes The Wall Street Journal:
California is predicting a surplus for its next fiscal year, in a turnaround from the steep deficits of recent times, as cost cuts, tax increases and an improving economy have started to put the state on firmer financial footing.
"Right now, for the next four years, we're talking about a balanced budget, we're talking about living within our means," said Gov. Jerry Brown, a Democrat, as he unveiled his budget proposal for the coming fiscal year, which begins on July 1. "This is new."
Enjoy your weekend.
Morgan Housel has no position in any stocks mentioned. The Motley Fool recommends Apple and Goldman Sachs. The Motley Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.