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May 29, 2008Healthcare Perspectives
I recently attended a small gathering of analysts for a presentation by McKesson's CFO, Jeff Campbell. A few key takeaways: 1) Healthcare is the slowest industry to adopt new technology. The company that can facilitate this rate of adoption will be the biggest winner. It is less about the technology itself and more about making the process easier to adopt. 2) Total healthcare spending in the US is currently 14% of GDP. That number is expected to reach +19% in 2013. WOW! 3) The golden egg is DATA, when, how and what we do with it will depend on HIPAA and our attitudes toward privacy. However, Google is encouraging users to manage and track all financial data on-line and eventually, someone will be the largest owner of third party data for personal medical records. 4) Auction rate securities - these are not a big issue for those companies that have volatile cash requirements and therefore did not invest in them, but the best course of action from a treasury management point of view, is to move them to long term and wait out the auction process. - I am not sure this will work for companies that have a significant amount of ARS on the balance sheet.
May 27, 2008FAS 157 Meets Auction Rate Securities
Auction rate securities ("ARS") are now entering the infamous collection of securities that no one had heard of until companies began incurring losses from writing them down. ARS are debt instruments with long-term maturities (student loans, municipal bonds, CDOs and preferred stock are typically the underlying securities), but with interest rates that are reset regularly (typically every 7, 28 or 35 days) based on a Dutch auction. With a ready market, the ARS were carried at par on company's balance sheets and were viewed as a safe way to achieve a higher return than short-term bonds. Unfortunately, beginning at the end of 2007, the auctions began failing. By February, 100% of the auctions were failing and the ARS essentially became illiquid. This is where FAS 157 enters the scene. Without a ready market to support valuation at par, companies are being required to determine fair value for the securities.
May 20, 2008Notes from the Omaha Oracle
A long time and trusted friend of Quist, Mike Sargent, attends the Berkshire Hathaway Annual Meeting each year with great anticipation. I have made the trip with Mike myself and his annual synopsis is always a refreshing break from the media version. Please take a moment to enjoy Mike's notes. Thanks Mike!
