WCI #161: Medicine and Finance in Venezuela

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 Dali. This is White Coat Investor podcast 161 Medicine and Finance in Venezuela. No more wading through dozens of books at the library, scrolling through hundreds of blog posts on dozens of blogs, or checking in daily with online forums trying to gain a financial the way the hobbyists do for a fraction of the price of hiring a professional financial planner. The Fire your Financial advisor online course will take you from feeling anxious and having no plan to having a written financial plan. You can follow the rest of your investing career as a professional and a retiree. This course is the material that should have been taught to you in college, medical school or residency, but never was. Fire your financial advisor also has a version eligible for CME credit. Get your financial life in order today. Go to whitecoatinvestor.com courses to sign up. You can do this and the White Coat Investor can help. All right, our quote of the day today comes from the Millionaire Next Door, that classic tome 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're doing what we can to change that. We're recording this on May 20th. It's going to run starting on June 4th forth. 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. Income's down dramatically, er, volumes down 30 to 50% across the country. 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. So 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. For those of you who are truly on the front lines, particularly in places like New York and New Orleans, Detroit, et cetera, thank you for what you do it is a scary thing. We're hearing about doctors getting sick, some doctors dying from it, and it really is a sacrifice. So thank you for that. 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 at the White Coat Investors connect you with the good guys in the financial services industry. So 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 acknowledge 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. So you can get that under the recommended tab@whitecoatinvestor.com for physician mortgage loans. 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. All right, we have a very special guest today. I've been looking forward to this podcast for a while, and I think you're going to find it very interesting. All right, our special guest today is Dr. Alexander Postalian. Did I pronounce that right?

That was perfect. I actually tell people to. It's Postalien the Stallion.

Postallion the Stallion. Awesome.

Patients love it, but my wife hates it. She's going to hate me when she hears this.

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.

Thank you. Thank you. Thanks for having me.

So 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. So 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?

Well, I grew up. Well, I was born in 1987, so I guess late 80s, early 90s. And it was pretty normal around that time. Went to school, foot on the table, 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. Then it's in the late 90s and 2000s that things started to go south.

You know, 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?

I did. I came to the US for tourism a few times, but I think it's mostly, you know, Google movies, having to look up papers and whatnot. Everything's in English, but education is in Spanish, medical school and all that. Some people are surprised to hear that. I don't know why.

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?

Both my parents didn't have much growing up. I would say things, you know, 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, you know, the. There's a high proportion of poverty in Venezuela, 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. So we were middle class maybe by the end, a little bit higher before I came to the US but it wasn't a big difference.

So tell us what it was like to go to medical school in Venezuela. What's the medical education system like there?

I had a great time during med school, but just for folks that don't know how things work in some other 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. And it's right after high school. I had a great time during med school. I went to a big medical school. There's not that many medical schools in Venezuela. It was a very rigorous training. I came to notice that once I came to the US that it was maybe too aggressive, sort of like, a tough love mentality. And it was very traditional, in a sense, very quote, unquote French. The hospital had big wards that were separated by gender, so we had the male ward and the female ward and rounds with a big team. And everyone got aggressively pimped. And we learned all the eponyms that history, you know, has to offer, which works for medical jeopardy. Actually, some of that when I was here, and then infrastructure when I started was okay. It's a public school. We had everything we needed at the beginning, but by the end, we had some issues finding no reagents and issues with the anatomy lab. And right now I hear they have to suspend a lot of the classes because they just can't do it.

Now, was it. Was it competitive? Were there a bunch of people being flunked out, or did most of the people that started finish, like in the US Medical schools?

No, it is really competitive. It's really. 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 acceptance rate was well below, like, 3% or something, because it's. There's not that many medical schools, and it's at no cost to you. Essentially, something that I didn't mention about the experience of going to 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 lot of a big role in protesting the government and whatnot. When they shut down a TV network, I went to several of those. I threw rocks at police, and we lost a little bit of time training. But at the time, it seemed. It's amazing how things can become normal when you're slowly exposed to them. To the point that I didn't even remember about all these protests that I took part in while I was in med school. My wife is a dentist, and she lost a year because of the same issues.

So, of your class, how many of them decided to stay in practice in Venezuela? How many went somewhere else?

Right when I graduated, I would say maybe 15% left. But right now, I only have one friend left in Venezuela.

They've all left. What a brain drain, huh?

Literally my entire class, I think. I mean, I can't think of someone right now specifically that stayed, except that friend of mine. Most of them go to other countries in Latin America. Then a big chunk go to Spain, and then the rest to the U.S.

So what made you 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 probably 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 go to the US and my initial intention was to come here, train, go back, and I mean, I still kind of want to do that, but obviously right now is not a great time.

Did you have any trouble matching in the US Match into a residency here?

I mean, 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 mean, I think I had a rather smooth process. It seemed relatively fair to me. It wasn't that bad.

Now, about the time you left Venezuela, Nicolas Madero 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?

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 Chavez, and he's the one that started to really change the constitution, nationalizing companies. And a lot of money was squandered because the oil price was very, very high in the early 2000s. So we didn't really feel the economic impact of what was being done until later. When Chavez died and Maduro took power, things really exploded with hyperinflation, extreme poverty also from the other side, government control and surveillance, lack of gas, power and water during a time right now, it's hard to believe, but it's a little bit more stable than it was maybe a couple years ago. And I'm amazed at how people can still manage that now.

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, et cetera?

Yeah, yeah. When I was little, inflation was high, I think. I mean, I can't remember a specific number, but if I had to spit it out, maybe 10, 15%, which is, of course, very high for U.S. standards. But everything was Sort of titrated to that level of inflation and 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 Bolivar, which is the name of one of our liberators, let's put it that way. They took three zeros off of it and they called it Strong Bolivar, the new one, okay, it's stronger because it's now 1 as opposed to 1000. But then some years went by, okay, we're going to 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 Bolly bar. It's better than the previous one. Anyway, that actually happened. They've taken out first three zeros, then an 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, buy a carton of milk, it's different price than if it is, you know, at noon or in the afternoon physician visits. At some points they were basically one to two dollars per visit. That's what he would charge. Now it's a little bit, it's a little bit higher, but still it's very low compared to US Standards.

Did they have much savings going into that hyperinflationary period?

My dad was lucky and smart, I guess, because when he was in his high production years, he exchanged everything to US 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 put on at least some reasonable amount of money that would allow him to survive the crisis. But most people's savings were totally destroyed. Just for reference, I left and I didn't close my cell phone account. And I had to pay this amount monthly, which was, let's say it was like $10 to keep the line open. And I kept bugging my dad to close the account, but he couldn't do it because he needed my ID and whatnot. And now I realized that what was being charged is about $0.00001amonth.

You figured at that point you'd just leave it open, huh?

Yeah, exactly.

Now, your dad was a neurologist, your mother was in plastics, right? How was her practice affected by these economic conditions?

Yeah, my dad is a neurologist. My mom, she's working less now she's doing more hobbies and whatnot. She likes 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. That used to be a big, big business back in the 90s. I guess a lot of people got nose jobs and other jobs routinely. It was sort of expected once you became of age. And my dad is still working, goes to the office and it's a different setup than the US 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 straightforward. Sometimes I see that and I would hope that the US would be a little bit closer to that.

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? 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 you basically needed to do to survive. So not only my parents, but many of the dogs I know, they worked in the morning in the public hospital and then in the afternoon they went and ran the 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 and you would go for the private one. And during many years that public system was good enough and it's maybe even better with the staff and supplies and the private one. But more recently it's gone to the ground to a point that is just totally basically unacceptable.

Do people buy insurance or they just pay in cash if they have it?

In the private system 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, it tends to be cash. If you're hospitalized or something, then maybe that's one of those situations where they were pull insurance.

Let's go back just for a minute, to hyperinflation. Does 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?

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. I. I mean, of course I read your books. I listened to your podcast, and I know that's not a good idea. Of course, when I see what happened in Venezuela, and I said, well, you know, we thought we were fine. We thought everything was going to be nice and peachy. Not many people bought US Dollars because it was deemed unnecessary at the time. And now those are the ones that are okay. Well, maybe, I don't know, once I see instability, like this coronavirus thing, I'm like, well, maybe I should cash out. What if the FDIC doesn't cover my deposit? Those are sort of ideas that maybe don't happen to other people. Occur to me.

Now, some bitcoin and other cryptocurrency advocates, you know, they may argue that, yes, you guys in the US Dismiss us because you have pretty stable currency, but if you were in other countries, you know, like Venezuela, you would find the ability to, you know, 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 having interest in cryptocurrencies?

I mean, bitcoin, even as volatile as it appears, it's probably way more stable than the Venezuelan Bolivar, to be honest. And I do know for a fact that Venezuela was one of the hotspots of bitcoin production because energy was so cheap. So they just got a bunch of really powerful GPUs, video cards, and they started running Bitcoin farms. And a lot of people were pretty successful with that.

Let's talk a little bit more about practicing medicine down there. Dr. Paul Spiegel of the Johns Hopkins School of Public Health and 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. What do your parents say about that?

Well, that is a true statement. Patients do have to bring their own supplies and a Lot of the times there is no gauze, no alcohol. And it's really 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, but for example, if someone needs a pacemaker, I mean, you got to find the pacemaker somehow. You need a hip prosthesis and you got to find the prosthesis. I came from that and then I came to the US and I saw that all these suture kits that are, you know, made of metal, they're discardable, they're. And I was surprised. We would have totally sterilized this and, and reuse it. And for example, when you put in a pacemaker that just doesn't fit in the pocket, you just dust it out and then you take the other one. Now I'm desensitized to that. But at the beginning I was, well, yeah, there's really places where this could really, really be useful.

Yeah. So where do people go to get those supplies? Right. 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?

Yeah, well, there are some, I guess I want to say brokers that you have some information, they can help source it from outside. How they source it, I really do not know. I mean, as far as I know, there's 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.

Yeah. Sounds kind of black markety, doesn't it? Yeah, that's the way you describe it.

Extremely likely.

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, you know, in a little shack. There were probably 20 of them lined up side by side across the street that sold medical supplies. You know, one of them would be selling or kits and another one would have towels and another one would have this and that and, you know, 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's quite so formal in Venezuela, at least right now, of having a private suppliers right outside the public hospitals.

Yeah, well, I mean, there was some of that that you're talking about, but mostly for the small things. I mean, they wouldn't sell you a pacemaker prosthesis, but yeah, yeah, there was some of that.

Interesting. So now that you practice in the US I assume your, your job now, you said you're staying on there at the Texas Heart. What are you most grateful for now that you practice in the US?

Well, I guess in a word would be stability. It's really a great feeling to know that or at least to 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.

And you've had a pretty inside look. Now, having done seven years of training in the US You've had an inside look at the US healthcare system. What do you see as its biggest failing?

I want to get obviously political and this is just a general opinion, but my feeling is that if a country is successful and rich, there's 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 a 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, I guess four points, then capitalism for all. I mean, that's what I think. It would be nice if healthcare coverage could be expanded here in the US the promise how to get there is. Is the question.

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

No, it's definitely complicated.

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?

Honestly, in my specific case, I guess the big difference is that I would have student loans, which I don't. But I mean, I had a family that was supportive. I didn't have to work through med school if, I mean, there's 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 currently live in Venezuela, if they have lived here, they would be way, way better off.

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.

Yeah, my net worth is great. It was very close to zero. Exactly.

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?

Oh, you brought it up. I, I, 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 US they're also okay. But I definitely plan to contribute financially once things start to get stable on my end. Make the big bucks, as you said.

Awesome. Well, Dr. Mostallian, thank you so much for coming on the White Coat Investor podcast and sharing your experience. I think it's, 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 year now of 25, 30, 35,000 podcast listeners, most of whom are doctors. Is there anything else you'd like to tell them now that you kind of have an open mic here to talk to them?

I am obviously biased, I guess, because I 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 US that sort of take the line of thinking, well, you know, Venezuela, it's true, you know, they're not doing so hard, but, you know, the government was chosen by the people. They're a sovereign country and that sort of thing. And I totally understand that and that that might be true at the beginning. However, I can decidedly and certainly say that the guys running the country are definitely not democratic. I have seen many things firsthand. Short example, you know, 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. It's clearly undemocratic. And I am certain that they don't have the support of the population. So I guess what I'm trying to say, sometimes outside help is not entirely unreasonable in a situation like this. And maybe one talk 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 come to power somehow. And then things went south extremely quickly. Even though when we all thought we were, you know, doing great, best economy in Latin America, bright future, and everything fell apart. So, yeah, don't take everything for granted.

Thank you for sharing that, Dr. Postalian. Thank you for coming on the White Coat Investor podcast.

Thank you for having me.

Boy, 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, you know, and when you talk to Bill Bernstein, he talks about four big risks in investing. He dismisses volatility, you know, stocks going up and down as almost not even be worth paying attention to, at least in his long run. But he talks about the four risks of investing. He talks about primarily inflation. You know, what you've seen in Venezuela, what you've seen in, I think it's Botswana has had hyperinflation. It's obviously happened in 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, you know, 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 town is simply flattened, 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, et cetera. 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. Now, some people use precious metals like gold. Other people get into Bitcoin and cryptocurrencies. Others kind of take a perspective to have some. Some of their assets not denominated in dollars. They have them in yen or euros or pounds or whatever. You know, 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 this is significant risk for your portfolio and may be worth some thought when designing your asset allocation. All right, as I mentioned at the beginning of the episode, if you are in the market for a physician mortgage or disability insurance, be sure to check out our recommendations. You can find those@whitecoatinvestor.com under the recommendations tab. No more wading through dozens of books at the library, scrolling through hundreds of blog posts on dozens of blogs, or checking in daily with online forums trying to gain a financial education the way the hobbyists do for a fraction of the price of hiring a professional financial planner. The Fire your Financial Advisor online course will take you from feeling anxious and having no plan to having a written financial plan. You can follow the rest of your investing career as a professional and a retiree. This course is the material that should have been taught to you in college, medical school or residency, but never was. Fire your financial advisor also has a version eligible for CME credit. Get your financial life in order today. Go to whitecoatinvestor.com courses to sign up. You can do this and the White Coat Investor can help. Thank you to those of you who've left us a five star review and told your friends about this podcast. Keep your head up, your shoulders back. You've got this and we can help. Stay safe out there. We're still in a pandemic and take care of your family, your patients, as well as your finances and we'll see you next time on the White Coat Investor podcast. My dad, your host, Dr. Dahl, is a practicing emergency physician, blogger, author and podcaster. He is 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.