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Are Younger Employees Really an Asset to Health Plans?

We’ve been bombarded by news lately, proclaiming that The Affordable Health Care Act can only be successful if vast numbers of young adults join the plans.And news that many, if not most, young adults have little or no interest in participating has also made headlines. Further, there are reports that a substantial numbers of young adults don’t even know about it. But, who has evaluated the underlying claim cost data?How does one know it is correct? I, for one, have very serious doubts that young adults are significantly cheaper to insure.

Here’s why. 1.As a CFO, I’ve been involved in purchasing employee health plans, and negotiating the terms and features of those plans.I frequently asked to see the data supporting the assertion that health costs were concentrated in the older age cohort but never did.Insurance companies and third-party administrators acted like there was rock-solid support for the claim that younger people have lower medical costs, but never produced supporting data.
2.T…

President Obama's TVA Proposal

Fortune Magazine recently ran an article on the TVA (“Uncle Sam’s River”, Oct, 28th.) As a native Tennessean, I read the article with great interest.In the President’s most recent budget proposal, TVA apparently was put on the disposition block. Probably the vast majority of Americans have no idea that they own a utility company, or that it borrows with government-backed debt.The Tennessee Valley Authority is a vestige of the Roosevelt administration’s efforts to end the Great Depression.It brought electricity to great swaths of the rural South.

I propose that we Americanize TVA: 1.Convert TVA to a “C Corporation” with approximately 350 million shares;

2.Give each holder of a Social Security number one share; and
3.Seek a listing on an exchange. The American taxpayer has bought and paid for TVA and should own it directly.And this would provide numerous benefits: Americans would feel a little richer, TVA would no longer be a credit drag on the full faith and credit of the U.S., and TVA would…

Sue Grafton and the Alphabet Series

I occasionally write book reviews, which I post here, or on Amazon, or on another of my websites. This really isn't a book review, but more of a commentary on Sue Grafton and her "alphabet series".

First, I wish Sue Grafton a very long, healthy, vigorous life.According to Wikipedia, Ms. Grafton is 73.While I do with her well, this, of course, is solely selfish.I want to read her Kinsey Millhone “Alphabet” series for a long time.I’m sure that I’m not the only fan who hopes she doesn’t retire after “Z”. (She is through the letter W currently). In the protagonist Millhone, Grafton has created a self-reliant, disciplined, organized terrier of a private detective.She lives a very modest lifestyle, is fiercely independent and very self-aware.By-the-way, the series is set about twenty-five years ago, and has maintained that relationship to the current period.Kinsey is generally a good, quick judge of character, is smart but not dazzlingly so, and solves each case as a result of t…

Government Shutdown, EPA

NBC has been shadowing a couple of EPA workers who were laid-off during the government shutdown to discover the impact it is having on their household budgets and spending plans.
I wish NBC would spend some time in coal country to see what affect the EPA's open war on the coal industry has had on those working families.  As long as the EPA operates unconstrained, those jobs are never coming back.

Government Spending and Pop Culture

Last night I watched back-to-back episodes of "Castle", the popular crime series.
It was a two-parter, with a plot revolving around a series of events that, if touched-off, would result in the economic collapse of the U.S.
It turned out that the triggering event was a death of Chinese child who was the daughter of an influential Chinese businessman, and the death would be tied to the CIA.  That, in turn, would lead to the Chinese ceasing to buy U.S. government debt, leading to austerity measures, leading to tax riots, etc. etc. and eventual collapse of America.
It is interesting that Hollywood scriptwriters can foresee this, but our rulers apparently can't.

High-level Financial Comparison of Wal-Mart ( WMT ) and Amazon (AMZN )

Let’s begin with full disclosure: I own $WMT.I don’t own $AMZN.I shop both regularly, particularly the Sam’s Club division of $WMT for numerous products, and principally books and music from $AMZN.I’m a loyal customer of each. As an investor however, the Amazon valuation continues to baffle me.

I’ve compiled some numbers and ratios from each company for the trailing twelve months as of July 31, 2013 for $WMT and June 30th for $AMZN. To make my job easier, I’m listing Wal-Mart first each time in the following comparisons.

Revenue: (in billions)

Absolute: $470.0 vs. $66.8
Revenue Growth $: $12.4vs. $12.5
Revenue Growth %:2.7% vs. 23.1%
There is no question that the clear growth winner is Amazon – adding $100 mil more in revenue in the last twelve months despite Wal-Mart’s base size advantage.And the rate of growth is indeed impressive at almost 10X Wal-Mart’s.
Operating income: (in billions)
Absolute: $28.0 vs. $0.6
Operating income growth $: 0.6 vs. $0.0
Operating income growth %: 2.2% vs. 0.0%
Op…

Letter to Steve Ballmer

Mr. Ballmer:

As a long-time shareholder, I’ve sent a few letters to you in the past.I sent one just a few months ago, which was intercepted by your haughty IR department which penned a self-congratulatory response.This time I’ve chosen to post on Blogger (interesting that Microsoft doesn’t have anything like that, isn’t it?).
Last night I was reading Miguel Helft’s quite good article on YouTube in the August 12th issue of Fortune.As I read it, I couldn’t help but wonder what would have happened if Microsoft, instead of Google, had acquired YouTube.Sadly, my conclusion is that YouTube have faded away, after becoming another goodwill impairment charge for Microsoft and perhaps then limping along like Digg. Instead it’s becoming a juggernaut under Google’s ownership.
Why is it that other entities have found a way to grow and expand over the last decade, while Microsoft has settled for a GDP growth rate?Has Microsoft become sclerotic?Does it have warring fiefdoms like General Motors in 2005?…

Ripping Off Seniors

My ninety year old mother-in-law lives with us.She is generally in good health, and her memory and mind are good.However, the scam mails showing up in our mailbox are increasingly sophisticated, and she frequently falls for them. Almost every day we receive one or more letters –in impressively designed envelopes-touting the imminent reduction in Medicare benefits, or Social Security benefits, or both, and the necessity of sending a contribution to some appropriately named organization such as the Center for Saving Medicare.The letters are worded to convince the reader that Congress is on the verge of gutting (Medicare; Social Security; or some other program).And that the reader must send money immediately, immediately- or their benefits will be stripped.

The various subscription services have polished their direct mail messages to a fine gloss.She falls for these scams frequently.With the Baby Boom swing into older ages fully underway, I’m sure these organizations are only going to get …

Senator Pat Toomey on Syrian Involvement

Recently, I sent a letter to Senator Pat Toomey expressing my concerns about the U.S. becoming involved in Syria.  In essence, I stated that a) I don't believe the U.S. has much of a strategic interest there, and b) that we are broke and can not afford another adventure.  Here is his reply:

May 10, 2013

Dear Mr. Morphis, Thank you for contacting me about U.S. assistance to the opposition against the regime of Syrian President Bashar al-Assad. I appreciate hearing from you. With regard to foreign assistance, one of my concerns is the national security implications of our policies, as well as ensuring that such expenditures meet a rigorous test for fiscal responsibility. Especially during these challenging fiscal times, we should not be wasting taxpayer money and providing foreign assistance dollars to corrupt entities that abuse such aid. However, carefully focused funding supports the security interests of the United States. As you know, the Syrian government, led by Pre…

Gerry Birnbach Tribute

I recently attended the funeral for Gerald Birnbach. Up from humble beginnings as the son of a Boston funeral director, and suffering from a variety of serious childhood ailments, Gerry became the CEO of Rowe Furniture, and, as far as anyone could determine, was the longest-serving NYSE CEO.Employees at all levels called him “Mr. B.” and he treated them all with respect and a smile. Gerry was the consummate salesman.He had many standard lines and clever sayings that all his friends and acquaintances knew.One that I recall well, was “I know my customer”.And he did.He knew all about them, and how to help them and how to help make their businesses grow.

He was also a family man, leaving four children and a growing band of grandchildren behind.He hosted the entire bunch to Maryland University basketball games (in first row seats by the way).He loved his grandchildren and, as far as I can tell, they returned his love and then some. Gerry was my boss and a man far ahead of the times in his cho…

HBR Online Article

Senior marketing guru Kimberly Whitler asked me to co-write an article on how CFOs and CMOs can work together more effectively, based on our experience at in those positions at David's Bridal.  After many, many drafts, it is now published on the Harvard Business Review blog.  You can follow Kim on Twitter: @kimwhitler.
Please check it out and give us your thoughts.

High-level Comparison of Amazon vs. Wal-Mart

This is a high-level and admittedly simplistic comparison of 2012 financial performance of $AMZN versus $WMT.Full disclosure: I own $WMT and have for a long time.I don’t own $AMZN. The numbers are from each company’s earnings release (linked below).All ratios are calculated from GAAP amounts.

Sales: WMT $469.2 bil; +5.0%; an increase of $22.2 bil; AMZN $61.1 bil; +27.1%; an increase of $13.0 bil.EBIT and EBIT margin: WMT $27.8 bil; 5.92%; AMZN $0.7 bil; 1.1%. Net income: WMT $17.0 bil +11.1%; AMZN $(0.39) bil. Negative -NM;ROE: WMT 21.6%; AMZN (0.5)%. (ROE was calculated using two-point average equity: beginning and end of year.) EPS and growth: WMT $5.02 +11.1%; AMZN $(0.09) Negative - NM.

PE using trailing EPS and Feb. 23 closing prices: WMT 14.0; AMZN NA. Market cap to Sales: WMT .50X, AMZN 1.97X. I’m a regular shopper of both firms, frequenting Sam’s Club and Wal-Mart, and ordering regularly from Amazon.I love Amazon’s smooth and helpful website.And I’m increasingly unhappy with the le…

Review: Enchantment by Guy Kawasaki

Entrepreneur and venture capitalist Guy Kawasaki has become a prolific author.I’ve reviewed some of his previous books including The Art of the Start and Reality Check.A common theme of those books, continued and further developed in Enchantment, The Art of Changing Hearts, Minds and Actions, is action-oriented ideas for both startups and existing businesses. The core concept of this book is that in our hyper-competitive world, one must go far beyond meeting a customer’s basic requirements, particularly if one is attempting to convert a prospect to your offering from a competitor.One must enchant those customers to get a trial.One of the techniques Mr. Kawasaki uses with great effectiveness is liberal use of real-world examples.Almost all of the detailed concepts for winning customers (and obtaining real commitment from employees, and for making one’s boss a fan, e.g. enchanting your employees and your boss) come with a story taken from an existing business that has done exactly that.

A…

Book Review- The Power of Habit

As researchers and scientists learn more about the functioning of our brains, an increasing number of articles and publications are developed to help us understand how are brain works, and particularly how to be aware of the shortcuts the brain tends to take that aren’t always appropriate and how certain brain functions happen incredibly quickly without conscious thought.I’m going to recap some of those to set up Charles Duhigg’s The Power of Habit.

The autonomous brain functions were explored brilliantly by Daniel Goleman in Emotional Intelligence.As an example, if we accidentally touch something hot, we’ll jerk our hand back almost instantly, as the super-fast reptilian brain reacts.James Surowiecki, in The Wisdom of Crowds, explored subconscious biases, and logic shortcuts that we frequently take, that lead to poor choices and bad decisions – but how, in many circumstances, groups and markets are more likely to make the correct choice, or come up with closer estimates. Thinking Fast …

EBAY's Store of the Future

English: A photograph of eBay's Whitman Campus (corporate headquarters), taken from Greylands Dr. on Memorial Day 2009. For more photos of eBay and Google, visit http://www.foothillwebdesign.com (Photo credit: Wikipedia) I had the opportunity to tour EBAY's store of the future  courtesy of my friend Veronica Katz.  (OK, I don't know that they call it that, but that's what it is anyway).  It has a variety of sample formats, from a toy store to a food truck, and demonstrate how integrated messaging, customer access via mobile devices, real-time inventory measures can improve retail productivity.

While I have some reservations about how some of this works under the restrictions imposed by the Payment Card Industry (PCI) standards for isolating credit card info, they assured me that they understand that complexity and it is comprehended in their systems.

It is very impressive and very cool technology.  I would think that retailers would be quite interested - and perhaps a …