Tuesday, June 30, 2009

Welcome to Cavalcade of Risk, Version 81 (CoR.81)

Welcome to the Disease Management Care Blog’s hosting of Version 81 of the Cavalcade of Risk (CoR.81). In its one and a half years of blogging, the DMCB has also enjoyed thinking about health insurance risk, risk transfer, risk management, markets, carve outs, reserves, premiums and managing surplus, so it’s a special treat to share the latest insights on these and other related topics from its sister blogs.

The only remaining issue for the DMCB was finding a suitable CoR.81 theme. It considered Michael Jackson’s untimely demise (his life was so awful, the DMCB couldn’t look away), Farrah Fawcett’s death (in days past, the DMCB didn’t want to look away), Mr. Sanford’s political suicide (the Governor should have looked away) and Bernie Madoff’s sentencing (investors shouldn’t have looked away). The risk dimensions of each are not inconsequential: there are the lingering travails of concert insurance, the health insurance coverage of treatments not approved by the FDA, the downside of hitching your political star to a flawed Governor, and $1 billion in investor insurance fallout.

In the end, the DMCB decided to not run with any of these themes: they are for media-besotted amateurs. Instead, the DCMB would like to dedicate CoR.81 to Peter Bernstein (January 22, 1919-June 5, 2009). He was a truly remarkable person: economist, investor, educator and consultant who not only advanced insights about markets but explained risk so us average guys could grasp many of the underlying concepts. The DMCB thinks his best work was Against the Gods, which described the creation of one of the arguably greatest intellectual achievements of mankind: the transformation of risk into a financial engine that makes modern society possible. You can read more about this intellectual giant here. His greatest legacy is that people should - and will -continue to look to his insights for decades to come.

So armed with that inspiration, on to this Cavalcade!

Healthcare and Related Risks

‘Health Risk Assessments’ (HRAs) are surveys used by insurers, employers and even towns to gauge the health of the population, determine which prevention initiatives have the best chance of success and provide a baseline for future comparative measurements. Henry Stern over at the InsureBlog points out that, despite HRAs’ merits, the Equal Employment Opportunity Commission is worried that HRAs may enable employers to unfairly discriminate against the disabled. Is this 1) unnecessary government meddling, 2) the protection of high risk persons from the overzealous health police and/or 3) another example of the government’s right hand not knowing what the left is doing? The DMCB can’t decide on the first two, but thinks no one should be surprised by the latter.

One purpose of HRAs is to identify persons who abuse tobacco. Maybe Fiat/Chrysler should look into that for its new senior management because David Williams of the Health Business Blog warns it’s not unusual for persons from Italy to smoke – including physicians. Despite l’angoscia (anguish) from witnessing so much morte (death), those docs would do well to pay attention to their 43% chance of prematurely sharing Jacko's fate.

The DMCB always enjoys how the CATO healthcare blog combines libertarianism and health insurance. You can sample CATO’s unending skepticism about everything government by checking out Jeffrey Miron’s post on how insurers should be free to assess risk and price it accordingly. He also points out excessive government subsidization will create moral hazards, fulfill a only a minority's view of what's fair, make the market less efficient, strip us of all our liberties and force us to have to wait in line to see a government salaried health worker.

And speaking of liberty, Wenchypoo’s Mental Wastebasket cannot believe how far the U.S. House of Representatives is willing to go to protect us against ourselves from the risk of climate change. California building codes preempting those in rural Pennsylvania? Yearly home audits by the climate change police? Wenchypoo's astonishment has a link to C-Span for you to see and hear for yourself.

Information Technology Risks:

If you think you are cool because you can talk confidently about cloud computing, you may want to pause and think about its risks. This post on the topic of controlling server clouds from the Burton Group Blogs is a good lesson on how service providers may have inadequate security assurances. Short question: can they be automatically trusted? Their short answer is a red-alert ‘no.’

OK, if you can’t feel confident about cloud computing, don't you want to buff your information tech mojo by being familiar with denial of service attacks, SQL injection, cross site scripting as well as network exploits and their overlap with traditional risk management? Keep this link from the Silver Tail Blog handy so you can steal the show at your next risk meeting with those arrogant IT and/or Finance Department weenies.

Brand Risk

Like many bloggers, the DMCB imagines its posts makes the giants of the healthcare be afraid - very afraid. After all, it is a blog and everyone knows that in our interconnected world, blogs are only ignored at great peril. Not so fast says the Digital Marketing Blog, which draws lessons from one blogger’s impotent track record to point out that, under the right circumstances and armed with measures of internet traffic, companies can safely ignore them. The DMCB is so angry about this that it is threatening to post A LOT of bad things about the Digital Marketing Blog.

The Risk of Ignoring Adam Smith

Didn’t The Wealth of Nations point out the irony that water, which was so critical for sustaining life, was cheap while inert practically useless stones called diamonds can command a steep price? While the answer may have to do with marginal utility, The Healthcare Economist Blog’s Jason Shafrin is showing us how the city of San Diego would rather regulate water use than harness the invisible hand of markets. They do so at their peril, but this is California. Go figure.

Personal Risk

What’s any posting on risk without some common sense advice from the Manilla Folder on three ways to reduce your risk of identity theft? There’s even a handy link there that will take you to a web site where you can enter all your personal information so you can better protect all your personal information.

Market & Business Risks:

It’s ironic that the certainty of Death and Taxes is the risk-oriented namesake of this posting on an important dimension of the classic moral hazard involved in the Great Bailout. Not only does the unprecedented foray of the U.S. taxpayer into banking mean risk-taking behavior will become more likely, but the signals used by investors to price various financial instruments will be dampened by indifference.

Fancy yourself a savvy armchair investor? The DMCB doesn’t either, but if it did, it would appreciate this reminder from Monevator that intentional market timing is a mirage. A better approach to managing equities is to ‘drip feed’ your money in, even if things are unendingly bearish. It’s not a ‘piffling’ matter.

And speaking of protecting capital, what about the merits of buying gold? Common wisdom says this commodity is a wise hedge against the inflation that is sure to follow the expanding money supply. Maybe, maybe not says Goldbug who speculates over a number of scenarios that include the word ‘doom.’ The message here is that the complicated state of the current markets is truly unprecedented. If you think it's predictable, think again. If the folks from Treasury and the Federal Reserve tell you they have things in hand, think again and again.

So, without much hope of getting a decent return with even precious metals, maybe your money should be tasked to more being more socially minded through the use of microloans. So says the Nobel Prize Committee, but now you don’t have to send your cash overseas to poverty-ridden Africa or Asia anymore. Read about Kiva microloans in none other than San Francisco at the MortgageLoanPlaceBlog. The DMCB never heard of Kiva either but it suspects it’s legit because it was mentioned here by Associated Press. A new risk market if interest income can be garnered? Maybe.

As further testimony to how far we've come, Julie Ferguson of Workers Comp Insider takes a look back at how we've evolved by posting these vintage WWII video clips about teaching workplace safety to women. Hint: The DMCB suspects Brad's troubles are multiple.

But in the end, we can always count on the sometimes cool and often loopy Presidential candidate Ron Paul to occasionally pull at our ‘now wait a minute, he may be right….’ heartstrings. More power to the very institution that presided over the current disaster? Is putting a check on the Fed’s power that outlandish? The darkly suspicious TheTruth blog has this post on how Mr. Paul wants to audit those miscreants. Before you shake your head at silly lingering extremism over the defense of liberty, check out this related editorial on the topic.


Wenchypoo said...

So who linked my article? I certainly didn't submit it! It wasn't risk-worthy, I felt.

Jaan Sidorov said...

Hi Wenchypoo:

The DMCB took editorial license and accepts full responsibility. The issue of the possibility of overestimation of the risk climate change and the response of the US HOR is a risk-worthy topic, the DMCB likes the style of your blog and thought the CoR.81 would be enriched by adding it.

Let me know if you want me to edit it out.


Henry Stern, LUTCF, CBC said...

Super job, Jaan!

Thanks so much for hosting this week!