Adam Jewell – Search & Affiliate Marketing

A couple hours ago, Barrack Obama gave a national address on health care. It’s obvious something needs to be done. The US spends a fortune on it (1/6 of GDP or so), people go bankrupt when they get sick, we’ve got around 30 million people without health insurance and many more under-insured. Obama presented some good ideas and so did the republican response given by Charles Boustany.

After hearing both of them, here’s my suggestion – JewellCare

First lets make some assumptions:

People want “choice” and we need to setup a system that gives them “choice”, even if it means choosing to gamble and not pay into an insurance pool in their younger years when they are healthy and feel invincible.

We need competition among insurance companies and government regulations needs to encourage that competition, not prevent it. Regulation also needs to preserve competition. A complete “free market in health insurance won’t work.

We need to get rid of the pre-existing condition clause that enables insurance companies to deny or discontinue coverage but insurance companies need premiums to pay for pre-existing conditions.

Malpractice lawsuits need to be reigned in to prevent unnecessary testing procedures and ridiculous judgments.

Individuals and small businesses need to be able to buy insurance at group rates.

Consumers need to have a stake in their health care and their insurance coverage. The govt can offer assistance but can’t offer endless handouts.

Consumers need incentives to lead healthy lifestyles to exercise and not smoke at minimum.

People need to be able to keep their existing insurance if they are happy with it.

So what are some elements of the solution?

Encouraging Competition to Bring Down Insurance Premiums

Regulations that currently prevent insurance companies from competing and entering new markets need to be repealed to encourage competition.

Mergers and acquisitions between insurance companies need to be limited in markets with limited competition (how many is the minimum needed to ensure competition – 5? 10?)

A public option or a pool for individuals and small businesses to buy insurance at group rates.

Insuring Unhealthy People and Those with Pre-existing Conditions That Require On-going Expensive Treatment

We need to realize that insurance companies decline insurance and refuse treatments because it makes financial sense to do so for the insurance company because treatment is expensive and can cost far more than the premiums received.

We can “require” that consumers buy health insurance.

We can assume that some people will not follow a law that requires them to buy insurance.

Enforcing and chasing down people who do not buy insurance will add expense to the system.

We don’t want the government to add and another tax that will add bureaucracy and inefficiency.

If someone chooses to “break the law” and not purchase insurance and needs treatment they cannot pay for out of pocket, they will need to pay all the average premium they chose not to pay or 5% of their income for every month they chose not to pay times 2.5.

They will receive initial treatment for an emergency or trauma bust must start paying premiums as well as back premiums and penalties for future treatments or will be treated after everyone who has paid their premiums over the years.

These back premiums cannot be discharged through bankruptcy.

Doctors Need to Focus on Treatment and Not Preventing Lawsuits

Ambulance chasers and personal injury attorneys need to pay all legal costs if the lose a case.

There need to be caps on malpractice settlements such that any settlements are “reasonable”.

Consumers Need Incentives to Live a Healthy Lifestyle

People tend to do things when they have a financial incentive and incentives for healthy lifestyles need to be just that – incentives that reduce premiums for healthy lifestyles, not penalties for unhealthy lifestyles.

Regular exercise has a host of health benefits and should be encouraged. Financial incentives should be provided for regular exercise in the form of reimbursement for actually using gym memberships or other activities that can be easily tracked and verified.

Everyone knows the dangers of smoking. If ya don’t smoke you get a discount equal to the projected % less it will cost to treat your health conditions while you are insured.

There are a host of other things that need to be addressed in the US healthcare system that require education, people taking personal responsibility for their own health, as well as the incentives provided to health care professionals and the communication between doctors and patients.

People need to stop eating junk and healthy food needs to be more readily available.

Patients need to be able to communicate with doctors for more than a 15 minute office visit during which is may very difficult for a patient to express what they are feeling and difficult for the doctor to understand what the issue may be to diagnose or refer to an appropriate specialist.

Medical professionals need to be compensated not by the number of procedures they give or authorize but by the quality of treatment they provide (if that is measurable) or on a straight salary.

Lifestyle changes need to take priority over prescriptions for every single ailment.

Obviously health care reform is a huge issue with many considerations. Even if the government does some through with reforms, your best bet is to take control of your diet, your habits (eating, smoking, drinking, drugs), reduce your stress level, and get out and move your body.

If you’re reading this, what do you think, how can we solve this problem in a way that will provide better care, contain costs, put aside our beliefs of how things should work and instead strucuture them to synch up with human nature and the way they will work when any new plan is offered to real people.

The tragic and shocking death of Michael Jackson on June 25, 2009 set off a flurry of activity on the Internet as it came so suddenly and seemed so unbelievable. Michael was best known for his Thriller album, his white sparkly glove and unbelievable dance steps and talent. This Halloween will provide all of his fans with the opportunity to dress up like the “King of Pop” and pay tribute to their beloved pop icon with a Michael Jackson costume. Surprisingly, the number of different Michael Jackson costumes and accessories does not match up with all of his different looks, however there are some great costumes available including the Michael Jackson Bad Costume, Thriller and Billie Jean. Some online costume shop appear to have already sold out and inventory could be in short supply espcecially in light of the expected tremendous demand for anything to do with Michael Jackson. Halloween is a multi billion dollar industry and it will be interesting to see what share of that market Michael Jackson costumes acount for this year.

It came as quite a shock to hear that Amazon.com bought Zappos.com (best known for shoes but now in a multitude of categories including apparel, electronics and outdoor gear). Amazon seems hell bent on eliminating the human touch and offering the lowest prices on everything while Zappos emphasizes the human touch, top notch customer service provided by real people and providing a great fun place to work at an ecom company. So what is going on here and what is the deal?

Let’s make some assumptions about Zappos financial performance.

In this Internet Retailer clip on Zappos, Zappos was expecting to generate 800 million in sales in 2007 and aiming for 1 billion in 2010. Midway through 2008, the economy started to crumble and it is likely that Zappos sales ae now somewhere between 800 million and 1 billion annually.

If I had to guess, I’d say Zappos reports sales as the total amount of merchandise ordered from the company before returns. Shoes have a notoriously high rate of returns especially when Zappos offers free shipping and free returns on all orders (not just shoes). For the sake or arguement, let’s say Zappos had 900 million in sales in 2008 and that this is the total amount of merchandise ordered by customers. If we assume a 35% return rate (It’s likely to be somewhere between 30% and 40%), then the amount of merchandise Zappos actually sold and shipped that it’s customers actually kept is likely to be around $585 million dollars. If these assumptions are roughly correct, then the price tag for Amazon is about a P/S (price to sales ratio) of 1.5. It’s anybodys guess what Zappos actual earnings are but I’d guess they are marginally profitable so the P/E for this valuation could be anywhere from zero (or negative) to maybe 21.5 if Zappos had a 7% net profit margin on the estimated $585 million in merchandise sales that were not returned.

While some people may exclaim that the P/S ratio on this deal is less than one, when returns are factored in it doesn’t look anywhere near that low. Zappos sales may very well be declining with the economy and they may be lowering prices as well to move more merchandise. Zappos is privately held so all we can do is speculate on the direction of sales revenue and profit at this point. Zappos did lay off about 8% of staff in December 2008 so we can assume the either anticipated growth slowed or maybe there was a decline in sales.

Zappos Culture and Amazon Culture A Clash?

Zappos has a very unique culture. It’s the human in a sea of automated systems and robots all squeezing every last bit of revenue out of consumers and pushing retail margins down to zero. Amazon seems to be one of those companies determined to put everyone else out of business by automating everything and pushing margins to next to nothing. So what do these two companies have in common? Where is the “synergy”?

As far as culture goes, maybe there isn’t any synergy. In his traditional style of rather open communications with employees and the general public, Tony Hsieh sent out a letter to employees and posted it on the CEO blog detailing the Zappos Amazon deal. It sounds like the two companies will remain pretty separate. Jeff Bezos, the head honcho at Amazon posted a video about the deal here:

So what kind of sense does this deal make?

The two companies will likely be better able to quickly ship merchandise when their warehouse space is combined.

Zappos will benefit from the Amazon technology infrastructure.

Maybe some of the Zappos.com culture will rub off on Amazon.

As an upscale retailer, Zappos.com may have been near break even or close to it as the economy tanks and open to this buyout to avoid having to seek out more investment in a tough economic environment.

Amazon takes a competitor off the table with this move and now has a “luxury” brand under its umbrella without having to build it’s own or cause confusion among its customer base in the marketplace.

Amazon is smart to keep the Zappos.com brand alive and if they can supply the technical infrastrucure and analytics to help streamline any weak points in Zappos, they can help Zappos make more money.

Amazon will also be well positioned with the Amazon discount site and the upscale Zappos brand when the economy returns to at least a moderate growth rate.

With the Zappos acquisition, Amazon also gets 6pm.com so now has three shoe sites (Endless.com developed to compete with Zappos) and of course Zapops.com and 6pm.com now.

Amazon probably found that it was tough to grow Endless.com to compete with Zappos.com and now they dont’ have to.

As the economic downturn continues don’t be surprised to see Amazon snap up more struggling retailers to build its portfolio of online brands across other top consumer retail markets.

The US is apparently going to have a deficit of over 1 TRILLION dollars this year. That is a deficit, not the debt which is much, much greater than the deficit for a single year. This will bring the national debt to something like 11.5 TRILLION dollars. Eleven and half TRILLION dollars is $11,500,000,000,000. The population of the US is about 303,824,640 (that’s about 304 MILLION people). If every person in the US had to chip in an equal amount of money today to pay off the US national debt tomorrow, that would be $37,850.78 for each and every person in the United States. You’ve got an extra $38,000 laying around right?

By any measure, that is a staggering amount of money and the amount is growing daily. At an annual interest rate of 5%, we are racking up $575,000,000,000 in interest alone. That is 575 BILLION dollars per year in interest. For each person in the US that is about $2,000 per year in interest we will eventually have to pay back.

You’ve probably heard about all the bailouts given to the banks, the automakers and everyone else who was irresponsible and gambled like someone smashed out of their minds at the roulette wheel in Vegas. The banks are broke, the government is broke, some of the states, most notably California is broke and a big chunk of US citizens are broke. Many gambled and got caught up in the housing frenzy and frankly deserve to lose while many other who behaved responsibly have been snared by job loss, personal bankruptcy due to health care costs or other unfortunate situations in life.

The stock market peaked on Monday, October 1, 2007 at 14,087.55. By March 6th, 2009, the DOW bottomed at 6,443.27, a drop of about 54.3%. Since then it has bounced back to 8,816 on July 15, 2009 after a nice pop following record earnings anounce by Goldman Sachs (GS). Not long ago, Goldman was going hat in hand to the US government for a bailout to stave off financial collapse. It seems rather ironic that all of a sudden, Goldman was able to
turn a profit of 3.22 BILLION in the previous quarter. Where did that proft come from?

The markets didn’t really seem to care. “Good news” from Intel added a little fuel to the rally and the DOW ended up 257 points or 3.07%. While the markets are still way down from the October 1, 2007 highs, they are up significantly from the March 6th, 2009 lows.

There doesn’t seem to be any logic to the recent jump in stock prices. The US economy continues to fall apart and lose jobs at an alarming rate. The housing crisis is still not finished by a long shot as liar loans (Option ARMs) and pick your payment (Alt-A) loans continue to reset en masse through early 2012. We’ve go 2 more years of home mortgage resets to go. So we’ll have at least 3 more years of steady or increasing foreclosures. The commercial real estate market will be another troublesome area as well. Maybe sometime in 2013 or 2014 this mess will have worked its way through the economy.

While the media continues to put a positive spin on the economy and various government people claim all is good and the stimulus is starting to take hold, the bottom line is that this country, the financial institutions, the states and many of the peopel are simply broke. If anything was still made in this country, the stimulus package might have a positive effect. Unfortunately not much is made in this country and borring money at the federal level to give people to spend may delay housing losses and bankruptcies, it is only a temporary and (probably empty) fix. We’re simply getting money to spend on products that come from overseas.

So what is a person to do?

Stop wasting money. This could be on toys, clothes, eating out, cable television, iPhone cell plans and other luxuries.

Don’t put any money in the stock market you will need in the next 3-4 years. There is nothing supporting the stock market and the economy is going to get worse, possibly much. Now that the markets are off their lows, the temptation is to chase them up. Bad move! We’ll retest the 2007 lows at some point in the next couple years. If you have a 401K and you may have to draw on that if you lose your job, you may want to watch the markets. If we get back to a 10,000 DOW, you might want to move your 401K funds into a money market or very conservative bond fund to preserve capital in case you will need to make a withdrawl.

Cut your fixed expenses. Cars and houses/apartments are generally the two biggest expenses you have. Can you refinance them or sell them now if you need to before the value drops further?

Start shopping smart! Look for bargains online. Ditch the department stores and find discounters. Go to the warehouse shopping clubs to save money and stock up on necessities. Try grocery stores like ALDI.

Know what government benefits are available to you in different situations.

If you get laid off and have employer health insurance, apply for COBRA. You’ll get it for 65% off for up to 9 months and can maintain the same health insurance plan for 18 months.

If you decide to buy a house and you are a first time homebuyer, take advantage of the 2009 $8,000 homebuyer credit. You’ll need to make less than $75,000 (single) to qualify for it and may get a partial tax credit if you make more than that but it phases out rather quickly.

Keep a positive attitude but anticipate that the economy is going to get worse and develop a plan if you lose your job. Can you get your expenses down to the point where you could live on unemployment? It’s generally around $2,000 per month give or take a little bit. That’s not much to live on but if you cut back to basics and have low car and housing payments, it can be done especially if you are single.

If you think you might get laid off and you’ve been at the job for a while, you might want to stick it out till you do get laid off unless you get a really good offer from another company you think will offer stable long term employment. A severance package from an employer you’ve been at for a long time will be better than somewhere you only spend a few months.

If you are considering a new job, do the math on the real costs (or cost savings) of the new job. Will you have to move? Will your housing costs go up? Will you have to sell a house? Will your commuting costs and time go up or down? Will you have to pay more in local taxes?

Be content with the low rates of return on savings for now. If you want to take a little risk then consider municipal bond funds in with any taxable accounts. You may be able to pull in a 4% tax free yield. It’s not much but its better than most savings of money market accounts.

Stockpile some cash. Six months would be great, but anything you can save will help!

The economy is going to get worse (maybe much) before it gets better so get smart now and get prepared to make it through the current turbulent times. Don’t forget to go out and get some exercise too. It’s a great way to burn off stress and hopefully sleep better at night!

Why does it take John Stewart on The Daily Show to educate the public on the financial markets? Kudos to Jim Cramer for having the guts to come on The Daily Show and face the music. Stewart does a great job of demonstrating the flaws in the financial news. Cramer seems like he may have some ethics but is definitely more focused on drumming up ratings than educating anyone looking for financial education. Watch this clip, shut off CNBC, Cramer and the “Money Honeys” permanently. As John points out, remember that our wealth is work!