Here’s Some Good News…


Healthcare spending is expected to increase more slowly during 2016! It’s projected to grow by 6.5 percent this year, according to a report from PWC. That’s still a lot faster than inflation. The Economist projects overall consumer prices in the United States will increase by 1.2 percent this year.

The report suggested several factors are contributing to lower healthcare spending, including:

  • The Affordable Care Act’s Cadillac Tax. PWC reported the tax “…is motivating businesses to enact high cost-sharing. Their workers are already responding to the higher deductibles by scrutinizing what services are necessary and which are not…cost sharing can backfire if the employee foregoes preventative care and faces years of chronic illness.” Twenty-five percent of employers offer only high-deductible healthcare plans for employees.
  • Virtual healthcare. Telemedicine appears to be the next big thing in medicine. Doctors making house calls using real-time audio and video is the gold standard for service, according to the Modern Medicine Network. Remote patient monitoring, pre-recorded videos, and computer-assisted or message-based communications also are being offered.
  • New health advisors. A new variety of healthcare company is making information about facilities, providers, services, and pricing more accessible. In some cases, financial incentives encourage employees to seek treatment at a preferred facility.

These gains are more than offset by factors that are pushing healthcare spending higher, including:

  • High-cost specialty drugs. PWC reported specialty drugs are becoming a focus for the pharmaceutical industry. “With 700 specialty products currently in development, these investments will soon surpass traditional drug investments…According to a recent Express Scripts report, total national prescription spending increased 13.1 percent last year to about $980 per person.”
  • Cyber security investments. Healthcare organizations are spending heavily on cyber security to protect patients from data breaches. The cost of a breach is about $200 per patient record. The cost of security is about $8 per patient record.

It’s critical to factor healthcare spending into retirement plans. In 2015, the Employee Benefits Research Institute (EBRI) found a 65-year-old man needs $124,000 in savings and a 65-year-old woman needs $140,000 if each wants a 90 percent chance of having enough money saved to cover healthcare expenses in retirement. EBRI’s analysis did not include the savings needed to cover long-term care expenses.

Apple Is Said to Be Working on an iPhone Even It Can’t Hack

New York police officers stood guard during a demonstration outside the Apple store on Fifth Avenue on Tuesday.
Jewel Samad/Agence France-Presse/Getty Images

WASHINGTON — Apple engineers have already begun developing new security measures that would make it impossible for the government to break into a locked iPhone using methods similar to those now at the center of a court fight in California, according to people close to the company and security experts.

If Apple succeeds in upgrading its security — and experts say it almost surely will — the company would create a significant technical challenge for law enforcement agencies, even if the Obama administration wins its fight over access to data stored on an iPhone used by one of the killers in last year’s San Bernardino, Calif., rampage. The F.B.I. would then have to find another way to defeat Apple security, setting up a new cycle of court fights and, yet again, more technical fixes by Apple.

The only way out of this back-and-forth, experts say, is for Congress to get involved. Federal wiretapping laws require traditional phone carriers to make their data accessible to law enforcement agencies. But tech companies like Apple and Google are not covered, and they have strongly resisted legislation that would place similar requirements on them.

“We are in for an arms race unless and until Congress decides to clarify who has what obligations in situations like this,” said Benjamin Wittes, a senior fellow at the Brookings Institution.

Companies have always searched for software bugs and patched holes to keep their code secure from hackers. But since the revelations of government surveillance made by Edward J. Snowden, companies have been retooling their products to protect against government intrusion.

Apple built its recent operating systems to protect customer information. As its chief executive, Timothy D. Cook, wrote in a recent letter to customers, “We have even put that data out of our own reach, because we believe the contents of your iPhone are none of our business.”

But there is a catch. Each iPhone has a built-in troubleshooting system that lets the company update the system software without the need for a user to enter a password. Apple designed that feature to make it easier to repair malfunctioning phones.

James B. Comey Jr., director of the F.B.I., said the government is not seeking a skeleton key to iPhones.
Drew Angerer/The New York Times

In the San Bernardino case, the F.B.I. wants to exploit that troubleshooting system by forcing Apple to write and install new software that strips away several security features, making it much easier for the government to hack into the phone. The phone in that case is an old model, but experts andformer Apple employees say that a similar approach could also be used to alter software on newer phones. That is the vulnerability Apple is working to fix.

Apple officials alluded to this in a conference call last week when a journalist asked why the company would allow firmware — the software at the heart of the iPhone — to be modified without requiring a user password. One executive replied that it was safe to bet that security would continue to improve, and someone close to the company confirmed this week that Apple engineers had begun work on a solution even before the San Bernardino attack. A company spokeswoman declined to comment on what she called rumors and speculation.

Independent experts have offered possible solutions in both public forums and private, informal conversations with the company over the last few weeks. “There are probably 50 different ideas we have all sent to Apple,” said Jonathan Zdziarski, a security researcher.

Apple regularly publishes security updates and gives credit to researchers who hunt for bugs in the company’s software. “Usually, bug reports come in an email saying, ‘Dear Apple Security, we’ve discovered a flaw in your product,’ ” said Chris Soghoian, a technology analyst with the American Civil Liberties Union. “This bug report has come in the form of a court order.”

The court order to which Mr. Soghoian referred was issued last week by a federal judge magistrate, and tells Apple to write and install the code sought by the F.B.I. Apple has promised to challenge that order. Its lawyers have until Friday to file its opposition in court.

In many ways, Apple’s response continues a trend that has persisted in Silicon Valley since Mr. Snowden’s revelations. Yahoo, for instance, left its email service unencrypted for years. After Mr. Snowden revealed how the National Security Agency exploited the company, the company quickly announced plans to encrypt email. Google similarly moved to fix a vulnerability that the government was using to hack into company data centers.

Apple’s showdown with the Justice Department is different in one important way. Now that the government has tried to force Apple to hack its own code, security officials say, the company must view itself as the vulnerability. That means engineers will have to design a lock they absolutely cannot break.

“This is the first time that Apple has been included in their own threat model,” Mr. Zdziarski said. “I don’t think Apple ever considered becoming a compelled arm of the government.”

The F.B.I. director, James B. Comey Jr., signaled this week that he expected Apple to change its security, saying that the phone-cracking tool the government sought in the San Bernardino case was “increasingly obsolete.” He said that supported the government’s argument that it was not seeking a skeleton key to hack all iPhones.

Apple, though, says the case could set a precedent for forcing company engineers to write code to help the government break any iPhone. “The U.S. government has asked us for something we simply do not have, and something we consider too dangerous to create,” Mr. Cook said in his letter.

The heated back-and-forth between the government and technology companies is, at least in part, a function of the Obama administration’s strategy. The White House has said it will not ask Congress to pass a law requiring tech companies to give the F.B.I. a way to access customer data. That has left the Justice Department to fight for access one phone at a time, in court cases that often go unnoticed.

While it is generally accepted that Silicon Valley’s tech giants can outgun the government in a technical fight, the companies do face one important limitation. Security features often come at the expense of making products slower or clunkier.

Apple’s brand is built around creating products that are sleek and intuitive. A security solution that defeats the F.B.I. is unworkable if it frustrates consumers. One of the impediments to encrypting all the data in Apple’s iCloud servers, for instance, has been finding a way to ensure that customers can easily access and recover photos and other information stored there.

“Telling a member of the public that they’re going to lose all the family photos they’ve ever taken because they forgot their password is a really tough sell,” Mr. Soghoian said. “A company wants to sell products to the public.”

Written by Matt Apuzzo and Katie Benner of The New York Times

(Source: MSN)


How a 29-Year-Old Grew a $1 Billion Tech Fund in 7 Months

© Courtesy of ISE
© Courtesy of ISE

Carpe diem! And in some cases carpe ETF may be a wise mantra. That is part of the story behind one rising star in the increasingly popular tech-fund universe.

The startup company behind an outfit named PureFunds is currently a one-man operation, but that hasn’t stopped the exchange-traded PureFunds ISE Cyber Security ETF from racking up $1.04 billion in investor money after launching a mere seven months ago.

Personal and corporate data is under siege, as evidenced by a fusillade of recent, high-profile data breaches. Those include a huge hack attack on Sony Pictures and a separate data breach that affected four million government employees. Even the Houston Astros baseball team has allegedly been among recent hacking victims.

The PureFunds ETF, which holds publicly traded companies selling security software and hardware, has benefited from all the hacking.

And the guy running the show? A 29-year-old wunderkind, who has shaken off early stumbles to success:

“Now, looking back, it seems obvious,” PureFunds CEO Andrew Chanin told MarketWatch, in an interview. “Smaller shops were maybe considering [focusing on cybersecurity], but a lot of times the bigger guys are looking for those much broader types of industries.”

Indeed, Chanin’s trajectory may offer a case study in trial and error. Before the success of the cybersecurity fund, his earlier ETF products didn’t fare nearly as well.

How the cybersecurity ETF was created

Chanin said he co-founded PureFunds after industry colleagues said: “Why do you keep giving us ETF ideas? You should try launching them on your own.” Those comments came as he worked at the Kellogg Group, an ETF specialist, right after graduating from Tulane University.

But the PureFunds’ first ETFs struggled. The PureFunds ISE Diamond/Gemstone ETF and PureFund ISE Mining Service ETF both closed down in early 2014. The PureFunds ISE Junior Silver ETF , which launched in 2012, is still up and running, but it has a comparatively meager $5 million in assets.

Chanin said the International Securities Exchange suggested launching a cybersecurity ETF after the two companies developed a good relationship while putting out PureFunds’ prior ETFs. ISE developed the index that the cybersecurity ETF tracks, but as an index provider and exchange, it wasn’t looking to run an actual fund.

Chanin said he was able to make PureFunds profitable in large part thanks to support from ISE, other business partners and industry colleagues, as well as from his parents, girlfriend and other family and friends. “Their support is absolutely what kept me—and my dreams of turning PureFunds into a profitable company—alive,” he said.

“It’s extremely unique that you see those narrow funds get that kind of traction,” said David Nadig, director of ETFs at financial-data provider FactSet.

He said other ETFs that have attracted investor money quickly include the iShares Exponential Technology ETF  and the SPDR DoubleLine Total Return Tactical ETF , but the first benefited from being a bespoke fund for well-known financial adviser Ric Edelman, while the latter comes from one of the investing world’s “superstar managers,” Jeffrey Gundlach.

Given its $1 billion in assets and expense ratio of 0.75%, the cybersecurity ETF generates revenue of $7.5 million. Chanin said the “majority” of that revenue goes to pay a wide range of partners and service providers, including index provider ISE. Still, with the recent success, he has been able to move his office to Manhattan from New Jersey, where he was raised.

But other ETF providers are threatening to grab a piece of the action, with First Trust and Direxion recently filing for cybersecurity-related ETFs.

Although launching the first cybersecurity ETF looks smart at this point, other ETF providers had reasons to hold back.

Concerns about the cybersecurity ETF

The PureFunds ETF isn’t as targeted a play on cybersecurity as many investors may think, said FactSet’s Nadig. He notes the fund holds some big tech companies that aren’t 100% focused on cybersecurity, such as Cisco and Juniper . It holds 31 tech stocks overall, according to data.

The fund also sports a sky-high valuation, with a price-to-earnings ratio above 660, according to an calculation that takes into account the components that are losing money. In addition, niche ETFs are by nature on the risky side. “You’re talking about a portfolio of 30-odd stocks with a lot of microcap exposure,” Nadig told MarketWatch.

Chanin counters that the ETF offers a diversified way to invest in a volatile, growing industry, as it helps people avoid having to bet on a single company. He also notes that cybersecurity spending can be on a different cycle than outlays for other areas. Even in a less profitable year, a customer can’t necessarily cut back on cybersecurity investments, he noted.

Meanwhile, Nadig also cautions that it is possible that an investor with a large stake in the cybersecurity ETF could find it difficult to exit. “Right now it is the hotness and everybody’s piling in, but the volume on something like that could dry up tomorrow,” he said.

Written by Victor Reklaitis of MarketWatch

(Source: MarketWatch)