Political will – Healthcare

I came across the following Chart in the January 2010 edition of National Geographic showing US healthcare spending per capita relative to other countries – it also shows the implications for life expectancy. While the daily US news flow continues  to highlight the political difficulties in achieving healthcare spending reform, the attached chart is a reminder of why it is required.

I have been impressed with the frankness and perspective of US Budget Office Director Peter Orszag on these issues but ultimately it is about political will from elected representatives.

USD / Debt / Gate Keepers

Moody’s Investors Services came out yesterday saying the US and UK have moved substantially closer to losing their AAA credit ratings. The announcement was the primary focus of the business news services to kick off the new week. Looking at the currencies moves overnight the markets seemed to have just yawned.

The historic trading relationships amongst the basket of currencies based on the perception of defensiveness and risk appetite appears to have been largely maintained over the past eighteen months. We think is an interesting dynamic given both the level of debt funded government support that has been injected into the developed world and also given how central the focus of sovereign risk has become amongst the investment community.

We take an active interest in currencies and sovereign risk, we have tried to take a fundamental approach to this research function. The questions we are focused on are how much debt do they have, what is their ability to service this debt, how has their debt position moved over time and what are the demographics issues that are likely to impact their position moving forward. Surprisingly the information is readily available, it is easy to track down and generally there is a tremendous amount of history and granularity to it. The difficult part though is converting this effort into profitable investments. There are numerous examples over the past eighteen months similar to last night when we have thought this is some sort of confirmation, but the markets have begged to differ.

The work we have done in this regard will come through the fund in two ways:

• From time to time we will look to buy currency options with the objective of profiting from the historic trading relationships breaking down due to a fundamental deterioration in the sovereign risk position of a country. We regard this as a capital preservation strategy within the fund. 
• We are trying to buy businesses that have a desirable offering regardless of the medium of exchange. Effectively, if the franchise is strong enough we suspect this is the best longer term protection we can get.

Bloomberg Article – Moody’s Says …

Leveraging Tech: 3

I had a look through Costco in Melbourne last week. This is the first Costco in Australia so I thought it would be interesting to gauge the offering versus the local retailers. I am reasonably familiar with Costco from time I have spent in America. The local format seemed to mirror this offering; busy, super – sized trolleys, single entry, show your membership on the way in, familiar shiny cement floors and stacked warehouse shelving presenting a breadth of goods from flat screen televisions, to Sherrin footballs, frozen chicken breasts and laundry detergent. Once the trolley is stuffed full, pay for it and line up at the single exit to reconcile the purchases with the receipt and then out.  

What really did catch my attention and got me thinking more broadly was the stacked aisle of Diet Coke. Ive taken a photo of the 30 packs, I took a photo of the same thing at the Costco in Westminster Colorado over Christmas. I’ve mulled this over for a few days, but Im struggling to reconcile what causes this price differential for the same common product. Maybe it can be partly explained by recent exchange rate moves or differing tax structures, but regardless I got sticker shock comparing the two. It drew me back to this sense that there are a number of industries locally that seem to earn excess returns; it is my bias that moving forward these margins will only head in one direction.  

Diet Coke Westminster, Colorado

Diet Coke Melbourne

Short Term Bias: 2

Good article in the Atlantic – frames my sense of where we are. (May take 15 minutes or so to read)

How a New Jobless Era Will Transform America

Short term bias

Has the seemingly cooler weather this summer in some States contributed to climate change being seen as a less important issue? Headlines of lower temperates and higher rainfall / flooding have replaced those of bushfires and sustained exteme temperatures. Seemingly, more emphasis is being placed on more recent observations. Perhaps similar can be said for investing – is undue emphasis placed on recent observations at the expense of medium to longer term trends?

Leveraging Tech: 2

Travelling to Melbourne today and haven’t bought my lap top. I had a lingering apprehension I wouldn’t have time to get onto a desktop in the airline lounge, they would be too busy. I ve scrambled around the lounge for a few minutes, their location was only given away by a printer peaking above the partitioning. I was surprised by how few computers appear to be here, (my recollection was of rows and rows of them), i was even more surprised to see them empty. For the last half an hour ive been happily accessing files, emails and news services, and finished the task off with this entry. My ease of access and availability of a desk top points towards how deeply mobile connections have penetrated our every day life and are are changing how we stay in touch.