Podcast Show Notes #161 – Medicine and Finance in Venezuela

What is it like to train and practice medicine in Venezuela? Dr. Postalian emailed me a while ago saying, “if you are interested in learning about medicine in a completely crazy and destroyed economy like Venezuela, let me know.” We have talked about medicine and finance in other countries, but they're usually very developed countries. I thought it would be interesting to talk a little bit about growing up and training for medicine, and particularly finances, in a mixed economy like Venezuela. Besides discussing what it is like to train and practice medicine in Venezuela we talk about hyperinflation. Hyperinflation is devastating to live through, but academically very interesting. Most of us have never lived in a country that experienced any sort of hyperinflation. We discuss how that affected his physician parents, their incomes and savings. How does that experience affect his investing strategy now? Venezuela was doing great, best economy in Latin America, bright future and everything, but it fell apart. Dr. Postalian reminds us not to take anything for granted.

This podcast is sponsored by ERE Healthcare Real Estate Advisors .  Collin Hart, CEO of ERE, has been a guest on my show and specializes in representing leading physician groups in structuring sale and leaseback transactions on their clinical and surgical center real estate. ERE is a real estate brokerage, but takes an advisory approach, expertly positioning their clients for a real estate sale as part of succession planning surrounding their practice real estate investment.  If you're contemplating a partnership with a hospital, health system, or private equity, understanding certain real estate principles can help ensure that you maximize the value and security of your real estate.  You can learn more about ERE on their website or you can reach Collin directly at [email protected] or call him at (702) 839-8737.

Quote of the Day

Our quote of the day today comes from “The Millionaire Next Door“, that classic by Stanley and Danko who said,

“Among all major high-income producing occupations, physicians have a significantly low propensity to accumulate substantial wealth”.

Here at the White Coat Investor, we are doing what we can to change that.

Medicine and Finance in Venezuela

Dr. Postalian is an interventional cardiology fellow in Texas. He came to the US for residency after doing medical school in Venezuela. We discuss his experience growing up there. He felt like it was pretty normal.

“At the time I remember distinctly that in all the school classes we were told that Venezuela was a country that was en route to development. Things were looking up at the time, the late 90s and 00s.”

He is the son of two physicians. So he came from a comfortable middle to upper-class family.

Medical Education System

Medical training is 6 years of medical school plus one year of rural practice. This year is necessary if you want to stay and practice in Venezuela. But for those leaving the country that additional year of rural practice wasn't mandatory. Medical school starts right after high school. Getting in was tough with a low acceptance rate. But there was no cost to the students.

“I went to a big medical school. There are not that many medical schools in Venezuela. It was a very rigorous training. I came to notice that once I came to U.S that I was maybe too aggressive, sort of like a tough love mentality. It was very traditional in a sense, very “French”. The hospital had the big wards. They were separated by gender. We had the male ward and the female ward and rounds with a big team and we learned all the acronyms that history has to offer.”

It was a public school. At the beginning of his training, they had everything they needed. But by the end, they had issues finding things they needed. During medical school, he participated in protesting the government. When he graduated, maybe 15% of students left Venezuela to practice medicine elsewhere. But now he only has one friend left in Venezuela. Most of them go to other countries in Latin America and then a big chunk goes to Spain and then the rest to the U.S.

What made him decide to come to the U.S.?

“Well, I graduated around 2012, and at the time things were sort of stable. But you could tell that some of the political decisions that were being made were not going to pan out well in the future. And I thought to myself, “Well, if I stay and I don't leave, then it's going to be harder for me to leave if something happens. But if I leave then I can come back because the degree is recognized by Venezuela if I were to go in the U.S”. My initial intention was to come here and train and go back. And I still want to do that, but obviously right now it's not a great time.”

Did he have any trouble matching in the U.S. match into a residency here?

“I went through the process. I took the steps. I studied from Venezuela while I was working at the rural hospital. I also worked at some other private clinics at the time. It didn't take very long. I think I had a rather smooth process as it seems relatively fair to me.”

Economic Conditions in Venezuela

About the time Dr. Postalian left Venezuela, Nicolás Maduro came to power, and things in Venezuela have been pretty wild since then. He says that Maduro was dealt a bad hand initially. The guy that was in charge before him, Chávez, started really changing the constitution and nationalizing companies. A lot of money was squandered because the oil price was very, very high in the early 2000s. They didn't really feel the economic impacts of it being gone until later when Chávez had died and Maduro took power.

“Things really exploded with hyperinflation, extreme poverty. Also, from the other side of the government, control and surveillance, lack of gas, power and water during this time.”

Hyperinflation in particular is devastating to live through, but academically very interesting. How did it affect his parents, their incomes, their savings, etc.?

“When I was little inflation was high. I can't remember a specific number, but if I have to spin it out, maybe 10%-15%, which of course, is very high by U.S. standards, but everything was sort of titrated to that level of inflation. Things were kind of cruising but after 2012 or so, it really started getting bad. While I was in Venezuela still, they took three zeros out of the currency. And it's funny the way it's labeled by the government.

The currency that we have is the Bolívar.  They took three zeros off of it and they called it “Strong Bolívar”. The new one. Okay it is stronger because it's now one as opposed to a thousand. But then some years went by, they went and take another three zeros out of the currency. But before they were able to implement it, they made it five zeros and now this is the “Sovereign Bolívar”. It's better than the previous one. Anyway, that actually happened. They've taken up first three zeros, then additional five zeros.

The hyperinflation is extremely bad for the economy. For example, prices for goods would increase by the hour. If you go in the morning to buy a carton of milk, it's a different price than it is in the afternoon. Physician visits at some points, they were basically $1 to $2 per visit. That's what he would charge. Now it's a little bit higher, but still is very low compared to the U.S. standards.”

His father was lucky and smart. When he was in his high production years, he exchanged everything to U.S. dollars when he could. Then they implemented the currency control, and you couldn't do that legally. But by then he had at least some reasonable amount of money that would allow them to survive the crisis. But most people's savings were stolen or destroyed.

His father is a neurologist and his mom is in plastics. She's working less now.  Of course, patient volume for plastic surgery went down. It's not an essential service. In Venezuela, it used to be a big business back in the 90s. His dad is still working. He goes to the office.

“It's a different set up than the U.S. Right now, of course, it's all destroyed, but when it worked, it is him and an assistant/secretary. That's it. It was very, very streamlined, very straight forward. Sometimes I see that and I would hope that the U.S. will be a little bit closer to that.”

Witnessing hyperinflation through his and his parents' experience, does it make him want to do anything special in his portfolio here to guard against inflation?

“It has actually. I have not acted on it, but I can't deny that I've had some urges to buy weird stuff like diamonds and whatnot. Of course, I read your book and listen to the podcast and I know that's not a good idea. When I see what happened in Venezuela, we thought we were fine, everything was going to be nice and peachy. Not many people bought U.S. dollars because it was deemed unnecessary at the time. Once I see instability, like this coronavirus thing, well, maybe I should cash out. What if the FDIC doesn't cover my deposit? Those sorts of ideas that maybe don't happen to other people do occur to me.”

Now, some Bitcoin and other cryptocurrency advocates may argue that yes, you guys in the U.S. dismiss us because you have pretty stable currency. But if you were in other countries, like Venezuela, you would find the ability to maintain the value of your currency and take it with you elsewhere relatively easily to be more valuable. Dr. Postalian said,

“Bitcoin, even as volatile as it appears, it's probably way more stable than the Venezuelan Bolívar to be honest. And I do know for a fact that Venezuela was one of the hotspots of Bitcoin production because the energy was so cheap so they just got a bunch of really powerful GPU video cards and they started running Bitcoin farms and a lot of people were in a business over there.”

When you talk to Bill Bernstein, he talks about four big risks in investing. He dismisses volatility – stocks going up and down – as almost not even worth paying attention to, at least in the long run. He talks about inflation; deflation like we saw in the Great Depression, and the economic devastation that comes with that; confiscation, when the government just takes assets and you just lose everything because the government took it; and then devastation, such as what you might see in post-World War II Japan or Germany.

Those are really the big risks in investing. Given the percentages of that happening over the years, your risk of that is not insubstantial so, it is not a bad idea to keep in mind assets that might do well in that sort of an extreme scenario and dedicating some small portion of your portfolio to them.

Some people use precious metals like gold, other people get into Bitcoin and cryptocurrencies. Others kind of take a perspective to have some of their assets not denominated in dollars. They have them in yen or euros or pounds or whatever. I think keeping your portfolio diversified so that some assets will maintain their value, at least in the long run, in an inflationary environment is pretty wise.

Because if you've got 90% of your portfolio in nominal bonds and you come into any sort of hyperinflationary scenario, it's basically going to wipe you out. Whereas your real estate and your stocks, at least in the long run, should be able to charge more to their customers and keep up somewhat more with inflation. But keep in mind there is a significant risk for your portfolio and it may be worth some thought when designing your asset allocation.

Health Care in Venezuela

If you read Wikipedia, it will tell you that Venezuela is a mixed economy. Basically, part government-controlled / socialistic/communistic and part capitalistic. Is the health care system government-controlled or more of a capitalistic model or some sort of mix?

“It is a mix. Venezuela has two parallel systems. One is the public health system, which is free and there are big and small hospitals in every city. And then the private health system, which is totally private clinics and hospitals that are built by private enterprise. The salaries, of course, are very different depending on which one you worked. But it was seen as almost a duty to work in a public hospital as well as the private one, which was basically needed to do to survive.”

Physicians might work in the public hospital in the morning and then run their private offices in the afternoon. He said that worked well for a while, this basically universal healthcare with government-run hospitals. If you wanted expedited treatment or you wanted nicer facilities, you could go for the private one. He said that for many years the public system was good enough and maybe even better with the staff and supplies than the private one. But more recently it is basically unacceptable.

Dr. Paul Spiegel of the Johns Hopkins School of Public Health, who also works for Human Rights Watch, says the magnitude of the health crisis in Venezuela is quite dire. In fact, NPR reported that things are so bad that according to the report that Dr. Spiegel put together and other sources, patients who go to the hospital need to bring not only their own food but also medical supplies like syringes and scalpels as well as their own soap and water.

Dr. Postalian confirmed that is a true statement.

“Patients do have to bring their own supplies and a lot of times there is no gauze, no alcohol. And it is sort of stressful for both the patients, the doctors, the nurses, everybody involved. The worst part is that it's a problem that has no end in sight, at least not at the moment. And they not only have to source the basics. For example, if somebody needs a pacemaker, you've got to find the pacemaker somehow. If you need a hip prosthesis, you got to find the prosthesis.”

I asked where families get these supplies. For the smaller things, there are vendors around that sell them. But for the bigger things like pacemaker and hip prosthesis, the process sounded like buying it on the underground market.

Now practicing in the U.S. he is most thankful for the stability. As far as the biggest fault with the U.S. system,

“I don’t want to get obviously political, this is just a general opinion, but my feeling is that if a country is successful and rich, there are a few things that I think are reasonable to offer to the population once you reach that point. One of them would be free or low-cost reasonable education, reasonable welfare, reasonable system to take care of the elderly and reasonable low-cost or free healthcare system. Even if you have a parallel private one that might be more expensive. And then after you cover those four points then “capitalism for all”. That is what I think; it would be nice if the health care coverage could be expanded here in the U.S. But how to get there is the question.”

Definitely anyone who thinks there is a quick fix to that just doesn't understand the problem. It is very complicated.

Ending

The guys running Venezuela now are definitely not democratic and don't have the support of the population. Dr. Postalian pointed this out to say that sometimes outside help is not entirely unreasonable in a situation like this. And don't take everything for granted.

“All it took in Venezuela was for some thugs with really bad managing capabilities to come to power somehow. And then things went south extremely quickly. Even when we all thought we were doing great, best economy in Latin America, bright future and everything fell apart. So, yeah, don't take everything for granted.”

Thanks to Dr. Postalian for coming on the podcast.

Full Transcription


Intro:
This is the White Coat Investor podcast where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high-income professionals stop doing dumb things with their money since 2011. Here's your host, Dr. Jim Dahle.

Dr. Jim Dahle:

This is White Coat Investor podcast number 161 – Medicine and finance in Venezuela. This podcast is sponsored by ERE Healthcare Real Estate Advisors. Colin Hart, CEO of ERE, has been a guest on my show and specializes in representing leading physician groups and structuring sale and leaseback transactions on their clinical and surgical center real estate. ERE is a real estate brokers, but takes an advisory approach, expertly positioning their clients for real estate sale as part of succession planning surrounding their practice in real estate investment. If you're contemplating a partnership with a hospital health system or private equity, understanding certain real estate principles can help ensure that you maximize the value and security of your real estate. You can learn more about ERE on their website, ereadv.com, or you can reach Collin directly at [email protected], or call him at 702-839-8737.

Dr. Jim Dahle:
All right. Our quote of the day today comes from “The Millionaire Next Door”. That classic tone by Stanley and Danko who said, “Among all major high-income producing occupations, physicians have a significantly low propensity to accumulate substantial wealth”.
Dr. Jim Dahle:
Here at the White Coat Investor, we're doing what we can to change that. We're recording this on May 20th. It's going to run, starting on June 4th. It's been a pretty wild last couple of months, both in the markets as well as in medicine itself. A lot of you are going broke. Incomes are down dramatically. ER volumes are down 30% to 50% across the country.
Dr. Jim Dahle:
Many practices were pretty much closed completely for a month and are still well below their usual volumes. A lot of you have had to go to telehealth, which although it's nice you can get paid for that at least something. The problem is you're usually not paid nearly as much and it's much harder to do procedures obviously through telehealth. For some specialties it's almost impossible to do any sort of a useful exam as well. A lot of challenges out there for doctors and other high-income professionals. We're with you. We're doing what we can to support you. Let us know what else we can do here at the White Coat Investor to help.

Dr. Jim Dahle:
For those of you who are truly at on the front lines, particularly in places like New York and New Orleans, Detroit, etc. Thank you for what you do. It is a scary thing. We're hearing about doctors getting sick. Some doctors dying from it and they really had to sacrifice. So, thank you for that.
Dr. Jim Dahle:
We're kind of getting into that season here in June where people are buying homes, when people are getting disability insurance. If you need help with financial professionals, part of what we do with the White Coat Investor is connect you with the good guys in the financial services industry.
Dr. Jim Dahle:
We have recommended providers for physician mortgages. These are mortgages that you put 0% to 5% down, don't pay private mortgage insurance, and they acknowledged the fact that you don't yet have pay stubs and have a big fat student loan burden. So, they're used to working with you, getting you a mortgage despite those concerns without having a down payment or paying PMI. You can get that under the recommended tab at whitecoatinvestor.com for physician mortgage loans.
Dr. Jim Dahle:
Same thing for insurance agents. If you need a good independent insurance agent to help you sort out your options for disability or term life insurance. We have some great people that have helped hundreds and hundreds of White Coat Investors get their insurance in place, so check that out as well under the recommended tab.

Dr. Jim Dahle:
All right. We have a very special guest today. I have been looking forward to this podcast for a while and I think you're going to find it very interesting. Our special guest today is Dr. Alexander Postalian. Did I pronounce that right?
Dr. Alexander Postalian:
That was perfect. That should tell people to its “Postalian – The Stallion”.
Dr. Jim Dahle:
Postalian – The Stallion. Awesome.

Dr. Alexander Postalian:
Patients love it but my wife hates it.

Dr. Jim Dahle:
He is an interventional cardiology fellow. In fact, by the time you hear this, in a few weeks, he'll be just about graduated and out practicing as an interventional cardiologist. But for right now he's at the Texas Heart Institute. Alex, welcome to the White Coat Investor podcast.
Dr. Alexander Postalian:
Thank you. Thank you. Thanks for having me.
Dr. Jim Dahle:
He actually approached me a little while ago with an email where he said, “If you're interested in learning about medicine in a completely crazy and destroyed economy like Venezuela, let me know”. And I said, “That sounds really interesting”. And so, I thought, “Hey, let's get this guy on the podcast. We've talked about medicine and finance in other countries, but they're usually very developed countries”. And I thought it would be interesting to talk a little bit about what medicine and growing up and particularly finance in kind of a mixed economy like Venezuela would be like.

Dr. Jim Dahle:
Let's get into this. Let's just start at the beginning. Let's start with your childhood growing up in Venezuela. What was that like?
Dr. Alexander Postalian:
Well, I was born in 1987. So, I guess late 80s early 90s and was pretty normal around that time. I went to school, food on the table. I had fun, no major political issues going on around me. At the time I remember distinctly that in all the school classes we were told that Venezuela was a country that was en route to development. Things were looking up at the time, the late 90s and 00s.
Dr. Jim Dahle:
As you were growing up there, it just seemed pretty normal to you. Obviously, your English is excellent. Did you learn English in school in Venezuela?
Dr. Alexander Postalian:
I did. I came to the U.S. for tourism a few times, but I think it was mostly Google, movies to look up, papers and whatnot. Everything's in English. But yeah, education is in Spanish. Medical school and all that. Some people are surprised to hear that. I don't know why.
Dr. Jim Dahle:
Now your family is relatively well to do. You are the son of two physicians. How did your life differ from that of the average Venezuelan while you were growing up?

Dr. Alexander Postalian:
Both my parents didn't have much growing up. I would say we were okay but kind of tight by the time I was born. I was born somewhere in the middle between them going from nothing to being a little more comfortable. Of course, there is a high proportion of poverty in Venezuela, a way more than the U.S. But during the 80s and 90s I would say the middle class was the largest segment of the population. Yeah, we were middle-class maybe by the end a little bit higher before I came to the U.S. But it wasn't a big difference.

Dr. Jim Dahle:
Yeah. Tell us what it was like to go to medical school in Venezuela. What is the medical education system like there?

Dr. Alexander Postalian:
I had a great time during medical school, but just for folks that don't know how things work in smaller countries. It's six years of medical school plus one year of rural practice, which is almost necessary if you want. Well, it's definitely necessary if you want to stay and practice in Venezuela. If you want to leave now and that seems like most people end up doing that. You don't really have to do that year.
Dr. Alexander Postalian:
And it's right after high school. I had a great time during medical school. I went to a big medical school. There are not that many medical schools in Venezuela. It was a very rigorous training. I came to notice that once I came to the U.S that I was maybe too aggressive, sort of like a tough-love mentality. It was very traditional in a sense, very “French”. The hospital had the big wards. They were separated by gender. We had the male ward and the female ward and rounds with a big team and everyone got aggressively and we learn all the acronyms that history has to offer. Which works for medical jeopardy actually. Some of that when I was here.
Dr. Alexander Postalian:
And the infrastructure, when I started was okay, it’s a public school. We had what we really needed at the beginning, but by the end, we had some issues finding no reagents and it's just with the anatomy lab. And right now, I hear they have to suspend a lot of the classes. They just can't do it.

Dr. Jim Dahle:
Was it competitive where there are a bunch of people being flunked out or did most of the people that started finished like in the U.S. medical schools?

Dr. Alexander Postalian:
No, it is really competitive. This is when I did it because I think things are a little bit different now. Getting into medical school was really, really tough. I think the acceptance rate was well below 3% or something because there's not that many medical schools and it's at no cost to you essentially.
Dr. Alexander Postalian:
Something that I didn't mention about the experience of what a medical school is that, well, to me it was kind of normal, but there was a time in Venezuela where there were a lot of political protests and my University took a big role in protesting the government and whatnot when they shut down a TV network. I went to several of those and I threw rocks at police and we lost a little bit of time training, but at the time it seems it's amazing how things are going to become normal when you were slowly exposed to the point that I don't even remember about all these protests that I took part in. Well, it was in medical school. My wife is a dentist and she lost a year because of the same issues.

Dr. Jim Dahle:
Of your class, how many of them decided to stay in practice in Venezuela? How many went somewhere else?

Dr. Alexander Postalian:
Right when I graduated, I would say maybe 15% left. But right now, I only have one friend left in Venezuela.
Dr. Jim Dahle:
They've all left. What a brain-drain, huh?

Dr. Alexander Postalian:
Literally my entire class. I can't think of someone right now specifically that stayed there expect that friend of mind. Most of them go to other countries in Latin America and then a big chunk goes to Spain and then the rest of the U.S.

Dr. Jim Dahle:
What made you decide to come to the U.S.?

Dr. Alexander Postalian:
Well, I graduated around 2012 and at the time things were sort of stable. But you could tell that some of the political decisions that were being made were not going to pan out well in the future. And I thought to myself, “Well, if I stay and I don't leave, then it's going to be harder for me to leave it if something happens. But if I leave then I can come back because the degree is recognized by Venezuela if I were to go to the U.S”. And my initial intention was to come here and train and go back. And I still want to do that, but obviously right now it's not a great time.

Dr. Jim Dahle:
Did you have any trouble matching in the U.S. match into a residency here?

Dr. Alexander Postalian:
I went through the process. I took the steps. I studied from Venezuela while I was working at the rural hospital. I also worked at some other private clinics at the time. Hey, it didn't take very long. I think I had a rather smooth process as it seems relatively fair to me. It wasn't that bad.

Dr. Jim Dahle:
Now about the time you left Venezuela, Nicolás Maduro came to power and things in Venezuela have been pretty wild since then. What can you tell listeners about the economic conditions in Venezuela over the last seven years?

Dr. Alexander Postalian:
It is true that, I guess I could say feces hit the fan when Maduro came to power. But actually, he was dealt a bad hand from before. The guy that was in charge before him was Chávez and he's the one that started really change the constitution and nationalizing companies. A lot of money was squandered because the oil price was very, very high in the early 2000s. We didn't really feel the economic impacts of what was it being gone until later when Chávez has died and Maduro took power.
Dr. Alexander Postalian:
Things really exploded with hyperinflation, extreme poverty. Also, from the other side of the government control and surveillance, lack of gas power and water during the time. Right now, it's hard to believe, but it's a little bit more stable than it was maybe a couple of years ago. And I'm amazed that I hope people can still manage that.

Dr. Jim Dahle:
Hyperinflation in particular is devastating to live through, but academically very interesting. I don't think the vast majority of my listeners have ever lived in a country that really experienced any sort of hyperinflation. Can you talk a little bit about how that's affected your parents, their incomes, their savings, etc.?
Dr. Alexander Postalian:
Yeah, yeah. When I was little inflation was high. I can't remember a specific number, but if I have to spin it out, maybe 10%-15%, which of course, it's very high for U.S. standards, but everything was sort of titrated to that level of inflation. Things were kind of cruising but after 2012 or so, it really started getting bad. While I was in Venezuela still, they took three zeros out of the currency. And it's funny the way it's labeled by the government.
Dr. Alexander Postalian:
The currency that we have is the Bolívar, which is the name of one of our liberator's. Let's put it that way. They took three zeros off of it and they called it “Strong Bolívar”. The new one. And okay, it's stronger because it's now one as opposed to a thousand. But then some years went by, they went and take another three zeros out of the currency. But before they were able to implement it, they made it five zeros and now this is the “Sovereign Bolívar”. It's better than the previous one. Anyway, that actually happened. They've taken up first three zeros, then additional five zeros.
Dr. Alexander Postalian:
The hyperinflation is extremely bad for the economy. For example, prices for goods would increase by the hour. If you go in the morning to buy a carton of milk, it's different price then it is in the noon or in the afternoon. Physician visits at some points, they were basically $1 to $2 per visit. That's what he would charge. Now it's a little bit higher, but still is very low compared to the U.S. standards.
Dr. Jim Dahle:
Did they have much savings going into that hyperinflationary period?
Dr. Alexander Postalian:
My dad was lucky and smart, I guess because when he was in his high production years, he exchanged everything to U.S. dollars when he could. Then they implemented the currency control and then you couldn't do that, I guess legally. But by then he had at least some reasonable amount of money that would allow them to survive the crisis. But most people's savings were stolen or destroyed.
Dr. Alexander Postalian:
Just for reference, I left and I didn't close my cell phone accounts and I had to pay this amount of monthly, which was, let's say it was like $10 to get the line open. I kept bugging my dad to close the account, but he didn’t do it because he needed my ID and whatnot. And I realized that what was being charged, it's about $0.000001 of money.
Dr. Jim Dahle:
You figured at that point you just leave it open, huh?
Dr. Alexander Postalian:
Yeah, exactly.
Dr. Jim Dahle:
Now your dad was a neurologist, your mother was in plastics. How was her practice affected by these economic conditions?

Dr. Alexander Postalian:
Yeah. My dad is neurologist and my mom in plastics. She's working less now. She's doing more hobbies and what she likes like theater and writing. And obviously income is not great so I guess she thought it's not really useful to keep chugging along. Of course, patient volume for plastic surgery went down. It's not an essential service. In Venezuela it used to be a big, big business back in the 90s, I guess. A lot of people got nose jobs and other jobs routinely. And it was sort of expected to come of age.
Dr. Alexander Postalian:
And my dad is still working. He goes to the office. It's a different set up than the U.S. Right now, of course, it's all destroyed, but when it worked, it is him and an assistance/secretary. That's it. It was very, very streamlined, very straight forward. Sometimes I see that and I would hope that the U.S. will be a little bit closer to that.

Dr. Jim Dahle:
If you read Wikipedia it'll tell you Venezuela is a mixed economy. Basically, part government-controlled / socialistic, communistic, whatever, part capitalistic. How would you describe the health care system there? Would you describe it as government-controlled or as more of a capitalistic model or some sort of mix? How would you describe it?

Dr. Alexander Postalian:
It is a mix. Venezuela has two parallel systems. One is the public health system, which is free and there are big and small hospitals in every city. And then the private health system, which is totally private clinics and hospitals that are built by private enterprise. The salaries of course are very different depending on which one you worked. But it was seen as almost a duty to work in a public hospital as well as the private one which was basically needed to do to survive.

Dr. Alexander Postalian:
So not only my parents but many of the docs I know they worked in the morning in the public hospital and then in the afternoon that went and run their private offices. And that worked well for a while. It’s basically universal healthcare with government-run hospitals. If you need it, but then if you want expedited treatment or you want maybe nicer facilities, you would go for the private one. And during many years that public system good enough and maybe even better than it was staff and supplies in the private one. But more recently it's gone to the ground to one that it’s just totally basically unacceptable.

Dr. Jim Dahle:
Do people buy insurance or are they just paying cash if they have it in the private system?

Dr. Alexander Postalian:
There was insurance and there is insurance, but I would say that at least from my personal experience, the majority, if it's for a visit or a small procedure tends to be cash. If you were hospitalized or something, then maybe that's one of those situations where they would pull insurance.

Dr. Jim Dahle:
Let's go back just for a minute to hyperinflation. Just witnessing that firsthand through your own experience as well as through watching what's happening with your parents. Does that make you want to do anything special in your portfolio here to guard against inflation?

Dr. Alexander Postalian:
It has actually. I have not acted on it, but I can't deny that I've had some urges to buy weird stuff like diamonds and whatnot. Of course, I read your book and say let's do a podcast and I know that's not a good idea. Of course, when I see what happened in Venezuela as well, we thought we were fine, everything was going to be nice and peachy. Not many people bought U.S. dollars because it was deemed unnecessary at the time and now those are the ones that are like “Okay. Well, maybe, I don’t’ know”. Once I see instability, like this coronavirus thing, well, maybe I should cash out. What if the FDIC doesn't cover my deposit? Those sorts of ideas that maybe don't happen to other people that occur to me.

Dr. Jim Dahle:
Now, some Bitcoin and other cryptocurrency advocates may argue that yes, you guys in the U.S. dismiss us because you have pretty stable currency. But if you were in other countries like Venezuela, you would find the ability to maintain the value of your currency and take it with you elsewhere relatively easily to be more valuable. Do you see a lot of people in Venezuela that are having interest in crypto currencies?
Dr. Alexander Postalian:
Bitcoin even as volatile as it appears, it's probably way more stable than the Venezuelan Bolívar to be honest. And I do know for a fact that Venezuela was one of the hotspots of Bitcoin production because the energy was so cheap so they just got a bunch of really powerful GPU video cards and they started running Bitcoin farms and a lot of people were in a business over there.

Dr. Jim Dahle:
Let's talk a little bit more about practicing medicine down there. Dr. Paul Spiegel of the Johns Hopkins School of Public Health and he also works for Human Rights Watch, says the magnitude of the health crisis in Venezuela is quite dire. In fact, NPR reported that things are so bad that according to the report that Dr. Spiegel put together and other sources, patients who go to the hospital need to bring not only their own food but also medical supplies like syringes and scalpels as well as their own soap and water. What do your parents say about that?

Dr. Alexander Postalian:
Well, that is a true statement. Patients do have to bring their own supplies and a lot of times there is no gauze, no alcohol. And it is sort of stressful for both the patients, the doctors, the nurses, everybody involved. The worst part is that it's a problem that has no end in sight, at least not at the moment. And they only have to source the basics. For example, if somebody needs a pacemaker, you've got to find the pacemaker somehow. If you need a hip prosthesis, you got to find the prosthesis.
Dr. Alexander Postalian:
I came from that and then I came to the U.S. and I saw that all these suture kits are made of metal, there are discardable. I was surprised. I’d totally sterilized and reuse them. For example, when you are putting a pacemaker and it doesn't fit in the pocket. They'll sit out and then you'd take the other one. But no one desensitized to that. But at the beginning I was like, well, yeah, there are really places where this could be useful.

Dr. Jim Dahle:
Yeah. Where do people go to get those supplies? You're sitting there in your hospital bed and you're told, “Hey, you need a hip prosthesis”. And I assume you're not getting up and walking out to get it, but you send your family member to get it. Where do they go?

Dr. Alexander Postalian:
Yeah, well there are some, I guess I want to say brokers that you have some information that they can help source it from outside. How they source it, I really do not know. As far as I know, there is no official presence of Medtronic and Boston Scientific in Venezuela right now. So, I don't know how they get it. But it happens and basically, it's a personal reference to this guy that can help you.

Dr. Jim Dahle:
Yeah, it sounds kind of a black market, doesn't it? The way you describe it.

Dr. Alexander Postalian:
Yeah, extremely.

Dr. Jim Dahle:
When I was in Honduras last summer, it was kind of the same way. You didn't get very many supplies from the hospital at all. The family was told, “Here's what you need”. They were given a list and they went out to procure it. But mostly they went across the street and there were all these private, they're almost like vendors in a little shack. There were probably 20 of them lined up side by side across the street that sold medical supplies. One of them would be selling kits and another one would have towels and another one would have this and that and splint supplies and whatever. And you had to go down there and buy your stuff and then bring it back into the hospital. But it doesn't sound like that system is quite so formal in Venezuela, at least right now, of having private suppliers right outside the public hospitals.

Dr. Alexander Postalian:
Yeah. Well I mean there was some of that that you were talking about, but mostly for the small things. They wouldn't sell you that pacemaker and hip prosthesis. But yeah, there was some of that.
Dr. Jim Dahle:
Interesting. Now that you practice in the U.S. I assume your job now, you said you're staying on there at the Texas Heart Institute. What are you most grateful for now that you're practicing in the U.S.?

Dr. Alexander Postalian:
Well, I guess in a word would be stability. It’s really a great feeling to know that or at least reasonably expect the future to be bright, which is something that is really hard to say if you live in a country like Venezuela. Even though I'm not done yet because I'm still dealing with immigration. So, stability with an asterisk (*).

Dr. Jim Dahle:
And you've had a pretty inside look now having done seven years of training in the U.S. You've got an inside look of the U.S. healthcare system. What do you see as his biggest failing?

Dr. Alexander Postalian:
I don’t want to get obviously political, this is just a general opinion, but my feeling is that if a country is successful and rich, there are a few things that I think are reasonable to offer to the population once you reached that point. One of them would be free or low-cost reasonable education, reasonable welfare, reasonable system to take care of the elderly and reasonable low-cost or free healthcare system. Even if you have a parallel private one that might be more expensive. And then after you recover those, I guess four points then “capitalism for all”. That is what I think it would be nice if the health care coverage could be expanded here in the U.S. But how to get there is the question.

Dr. Jim Dahle:
Yeah, definitely a hard route. Anybody who thinks there's a quick fix to that just doesn't understand the problem.

Dr. Alexander Postalian:
No, it's definitely complicated.

Dr. Jim Dahle:
All right. Let's talk a little bit about your financial life. How's it different than it would be if you had grown up here?

Dr. Alexander Postalian:
Honestly, in my specific case, I guess the big difference is that I would have student loans, which I don't. But I had a family that was supportive. I didn't have to work through medical school. That means I had lots of classmates that it’s just really, really hard to leave the country if you don't have at least some capital to buy the plane ticket and support yourself for a few months. In my case, it probably wouldn't have changed much, but for other people that primarily live in Venezuela, if they have lived here, they would be way, way better off.

Dr. Jim Dahle:
Yeah. It's one of those strange things about the U.S. physician training system here. You come from another country and you're dramatically more wealthy than your peers just because you don't have $200,000 – $300,000 – $400,000 in student loans. You actually get to start out closer to zero.

Dr. Alexander Postalian:
Yeah. My net worth is great. It was very close to zero exactly.

Dr. Jim Dahle:
Do you feel like there's an expectation for you now that you're coming out of residency and going to start making the big bucks to be sending money home to family?

Dr. Alexander Postalian:
Oh, you brought it up. I think it's going to be okay. I want to help family members that need it. Thankfully, I think as I mentioned, my parents, which are my closest family members are okay. My wife's parents actually live here in the U.S. They're also okay. But I definitely plan to contribute financially once things started gets stable on my end, make the big bucks as you say.

Dr. Jim Dahle:
Awesome. Well, Dr. Postalian, thank you so much for coming on the White Coat Investor podcast and sharing your experience. I think the audience would find it really interesting to kind of peer behind the door and see what it's like elsewhere, both a different economic system as well as a different healthcare system. But you've got the ear now of 25,000 – 30,000 – 35,000 podcast listeners, most of whom are doctors. Is there anything else that you'd like to tell them now that you kind of have an open mic here to talk to them?

Dr. Alexander Postalian:
I am obviously biased I guess because I have lived there. I saw the destruction of the economy and it affected my family directly. But I guess a couple of things that I could mention is that I see some folks here in the U.S. that sort of take the line of thinking, “Well, Venezuela. That's true. They are not doing so hard, but the government was chosen by the people. They're a sovereign country”. And that sort of thing. And I totally understand that and that might be true at the beginning.
Dr. Alexander Postalian:
However, I can decidedly and certainly say that the guys running the country are definitely not democratic. I have seen many things first hand. Short example, when an opposing party wins, the majority of Congress seats, they created a parallel Congress that now has the power and the other Congress has no power. That sort of thing is clearly undemocratic and I am certain that they don't have the support of the population.
Dr. Alexander Postalian:
I guess what I'm trying to say, sometimes outside help is not entirely unreasonable in a situation like this and maybe when you are talking about Venezuela, just keep that in the back of your head. And then the second thing is that don't take everything for granted. All it took in Venezuela was for some thugs with really bad managing capabilities to come to power somehow. And then things went south extremely quickly. Even though when we all thought we were doing great, best economy in Latin America, bright future and everything fell apart. So, yeah, don't take everything for granted.
Dr. Jim Dahle:
Thank you for sharing that. Dr. Postalian, thank you for coming on the White Coat Investor podcast.
Dr. Alexander Postalian:
Thank you for having me.
Dr. Jim Dahle:
Well, that was quite a tale. I'm not sure I've quite experienced anything like that. It does make you think a little bit about hyperinflation. And when you talk to Bill Bernstein, he talks about four big risks in investing. He dismisses volatility – Stocks going up and down as almost not even be worth paying attention to at least in the long run.
Dr. Jim Dahle:
But he talks about the four risks of investing. He talks about primarily inflation. What you've seen in Venezuela, what you've seen in I think Botswana had hyperinflations. Obviously, it happened at other places and times in the world. Deflation like we saw in the great depression and the economic devastation that comes with that. It's also talked about basically confiscation when the government just takes assets and you just lose everything because the government took it. And then of course devastation. Such as what you might see in post-World War II Japan or Germany where the tail is simply flat.
Dr. Jim Dahle:
And that those are really the big risks in investing. And that given the percentages of that happening over the years, your risk of that is not insubstantial. That it becomes more so than the risk of running out of money using a 4% safe withdrawal rate, etc. And so, it's not a bad idea to keep that in mind. Assets that might do well in that sort of a kind of extreme scenario and dedicating some small portion of your portfolio to them.

Dr. Jim Dahle:
Some people use precious metals like gold, other people get into Bitcoin and cryptocurrencies. Others kind of take a perspective to have some of their assets not denominated in dollars. They have them in yen or euros or pounds or whatever. I think keeping your portfolio diversified so that some assets will maintain their value, at least in the long run in an inflationary environment is pretty wise.
Dr. Jim Dahle:
Because if you've got 90% of your portfolio in nominal bonds and you come into any sort of hyperinflationary scenario is basically going to wipe you out. Whereas your real estate and your stocks, at least in the long run, should be able to charge more to their customers and keep up somewhat more with inflation. But keep in mind there is a significant risk for your portfolio and maybe worth some thought when designing your asset allocation.
Dr. Jim Dahle:
All right. As I mentioned at the beginning of the episode, if you were in the market for a physician mortgage or disability insurance, be sure to check out our recommendations. You can find those at whitecoatinvestor.com under the recommendations tab.
Dr. Jim Dahle:
This episode was sponsored by Collin Hart of the ERE Healthcare Real Estate Advisors. ERE is a real estate brokerage but takes an advisory approach, expertly positioning their clients for a real estate sale as part of the succession planning surrounding the practice of real estate investment.
Dr. Jim Dahle:
With the continuing challenges created by Covid-19 and given the lack of liquidity in the stock market, ERE wants to let you know that opportunities still exist in strategically monetizing your practice real estate, providing a more certain exit strategy in an uncertain environment. You can contact Collin directly at [email protected], or call him at 702-839-8737.
Dr. Jim Dahle:
Thank you to those of you who have left us a five-star review and told your friends about this podcast. Keep your head up and your shoulders back. You've got this, and we can help. Stay safe out there. We're still in a pandemic. Take care of your family and your patients as well as your finances. We'll see you next time on the White Coat Investor podcast.

Disclaimer:
My dad, your host, Dr. Dahle, is a practicing emergency physician, blogger, author, and podcaster. He’s not a licensed accountant, attorney or financial advisor. So, this podcast is for your entertainment and information only and should not be considered official personalized financial advice.