Master Financial Education
Financial Planning Daily Commentary 2016
The  most intensive and extensive on the Web
E. F. Moody


I have asked EF Moody to provide a brief example of what he has actually found on behalf of a client who engaged his services to review the insurance contracts which funded the client's estate plan. You will be amazed. In my 30 years in the business, I have never seen an authoritative, objective, prudent expert speak so clearly on the use of insurance. What Errold can do is unique in the industry.

Steven Winks

Secretary of State John Kerry - In America,  "you have a right to be (as) stupid (as) you want to be."
(But too many Americans are abusing the privilege)

Why did our systems fail and why will they continue to do so?  From Paul Volcker

"our economics are based on “an unjustified faith in rational expectations, market efficiencies and the techniques of modern finance"

You must not believe everything you think

Stephan Thomas Vitas

You are entitled to your own opinion. You are not entitled to your own facts.

Kevin Kind

Words  are chosen in order to influence us as manipulable objects, not to inform us as autonomous subjects.

Stephen Colbert

language intentionally designed to influence rather than inform is now ubiquitous in the business of sports and politics and markets
 Why? Because it works.

Ben Hunt

Hatred is too strong an emotion to waste on someone you don't even like

Dr. Who

Be careful who you call your friends. I'd rather have four quarters than one hundred pennies.

 Al Capone

Investing is not easy. Anyone thinking that it is, is stupid

Charlie Munger

There is no sense in being precise when you do not know what you are talking about

        John von Neumann

“ . . . there is always a well-known solution to every human problem — neat, plausible, and wrong.”

 Henry Louis “H. L.” Mencken

“As skill improves, performance becomes more consistent, and therefore luck becomes more important.”
Michael Mauboussin

“in preparing for battle, I have always found that plans are useless but planning is indispensable.”

Dwight Eisenhower

'The Federal Reserve is a giant weapon that has no ammunition left'

Former Dallas Federal Reserve President Richard Fisher

The reason the professors teach nonsense is that if they didn’t, what would they teach the rest of the semester?

Teaching people formulas that don’t really work in real life is a disaster for the world.”

Charlie Munger

“The expected rarely occurs and never in the expected manner.”

– Vernon A. Walters

Nations rise and fall with the quality of their leaders, and their leaders succeed and fail based upon who they are at their core – what they believe, how they think, and what they do. Nothing shapes a leader or a society like their education or lack thereof. Let me be clear: when I refer to an education, I’m not referencing earning a degree, I’m talking about developing a rich intellect – they are not always one and the same.

Mike Myatt

 "If you see fraud and don't shout fraud, you are a fraud"

Nassim Taleb

“We really can’t forecast all that well, and yet we pretend that we can, but we really can’t.”

Alan Greenspan

. I do not base my forecasts on mathematical models or some finely honed methodology, but on my sense of where the economic world stands today and where I think it might likely be in the near future.

Actually, I’m going to spend the first few pages demonstrating that the mathematical models used to forecast GDP and all sorts of interesting economic events are basically nonsense.

John Mauldin

The essence of investment management entails the management of risk, not the management of returns.

                                                                                                                                                             Benjamin Graham

“For the foreseeable future any risks from tracker funds are far outweighed by their ability to offer cheap, diversified funds to retail investors. The real problem is not the rise of Vanguard and the other tracker funds; it is the rotten deal that retail investors have received from the fund-management industry for far too long.”
The Economist

“If you are not confused about the economy, you don’t understand it very well.”

Charlie Munger

The least competent are the most certain of their skills

Dunning-Kruger effect

"In equity markets, high-frequency traders (HFTs) ... account for a larger share of transactions. "Indeed, trading in the U.S. nowadays is concentrated at the beginning and the last hour of the trading day, when HFTs are most active; for the rest of the day, markets are illiquid, with few transactions."


The key to success is the ability to fake sincerity.

Many humorists

“I think the reason why we got into such idiocy in investment management is best illustrated by a story that I tell about the guy who sold fishing tackle. I asked him, “My God, they’re purple and green. Do fish really take these lures?” And he said, “Mister, I don’t sell to fish.”

Charlie Munger

It’s difficult to put in the hard work of reading a great work of literature, when we spend our time writing in 140 characters. 

Mark Myatt

…the current culture of education has displaced parents as the primary instructors of children in favor of professionals who try their best to recreate the home environment at school; has the federal government rather than the community determining the structure of equal educational opportunity; has deserted the idea that memorization trains the brain; has fostered a loss of literacy by replacing the study of original writings with abridged textbooks; and has created a populace unable to engage in reasonable discourse. We have rejected the historically successful model of rigorous, classical education in favor of entertainment and job training.”
Leigh Bortins

“You cannot manage returns but you can manage risk 

Peter L. Bernstein

“What you think is much less important than how you think.”
Philip Tetlock

“Doubt is not a pleasant condition, but certainty is absurd.”


Make everything as simple as possible, but not simpler


“We observe the world how it is today and make these very simple projections and turn them into a terrible scenario. “This approach fails to take into account that the world is changing.”

World Bank’s Social Protection and Labor Global Practice.

The most glaring problem with current risk tolerance questionnaires is its failure to add any perspective and context to what the risk score means.

Brian Leitner

Markets are supposed to be be based on informed consumers making rational choices. Instead, the point of marketing is to create uninformed consumers who will make irrational choices often against their best interests 

Noam Chomsky

Facts do not cease to exist because they are ignored.
Aldous Huxley

A lie can travel halfway around the world while the truth is getting its boots on.

Mark Twain

“Essentially, all models are wrong, but some are useful.”

 George E.P. Box

A Single Death is a Tragedy; a Million Deaths is a Statistic


There are decades where nothing happens; and there are weeks where decades happen.


Great spirits have always encountered violent opposition from mediocre minds 

Albert Einstein


World Clock by

7/27: Polices stops on blacks and whites


401(k) Participants Want Help Knowing What to Save

By Rebecca Moore
Page 1 of 2

Two-thirds of participants surveyed said helping them know how much more they should be saving or how much they should have in their retirement plan today is a very effective way for an employer to encourage them to save.

Major reasons 401(k) participants cite for not saving more money now for retirement are having to pay off debt (49%); not earning enough (36%); and having other spending priorities (26%), according to a survey by J.P. Morgan.

Many participants know they are not saving enough—68% say their 2015 contributions were below where they should have been. In addition, 81% say they are interested in doing financial planning for retirement, but nearly half (45%) do not have a plan.

However, 48% of participants admit they simply do not spend enough time thinking about and planning for retirement. The survey also found many participants may not be fully engaged in managing their 401(k) accounts—28% have never rebalanced their 401(k) account, 31% have never made a change to their initial choice of investment options, and 18% have never increased their contribution amount.

Individuals vary in what motivates them to save, but 67% agree that helping them to “understand their numbers”—how much more they should be saving or how much they should have in their retirement plan today to ensure a financially secure retirement—is a very effective way for an employer to encourage them to save. At least half (52%) look to their employer to provide a viewpoint about how much to contribute to their plan, while 41% think they should be notified if they are not saving enough.

Only 38% are very or extremely confident in their knowledge about how much to put into their 401(k) each year to be on track to reach their retirement goals. Only 34% are very or extremely confident in their knowledge about how to estimate how much they will have in their 401(k) at retirement if they continue saving at the same level, and only 30% in how much monthly income their savings will provide in retirement.

EFM- It is not that difficult to project what is needed at retirement. The key is to have clients do a formal retirement budget. Without that, the process fails at the get go. (And as stated in all my critiques, a retirement plan has a limited amount of success in producing the desired retirement. Why? Because stuff happen- births, deaths, illnesses etc. Further, all the inputs for returns, actuarial lifetimes. inflation are guesstimates at best. But you have to start somewhere and the budget  is mandatory.)

Don’t Delay Planning
By Sheri L. Samotin

Due to medical and other technological breakthroughs, people are living longer these days. Because of this, many people wrongly assume that they can put off getting their affairs in order for a few more years. However, exactly the opposite is true.

While living in a time with wonderful medical advances means that many of us can expect to live to a ripe old age, the scary reality is that we often didn’t plan for that long life. The nest egg that we put away for our retirement years ago was probably designed to last for twenty years or so, taking us from the historical retirement age of sixty-five to our mid-eighties, if we were lucky.

The reality is that for many such people, their planning will have them come up short since they may live well into their nineties. Making matters worse, many older adults assumed that the equity in their homes would cover their final years, but with the collapse of the residential real estate market over the past few years, that may no longer by true.

Everyone is also aware of the roller coaster that is the financial marketplace. The best time to start planning is when you are young enough to take steps that can have a positive impact on the outcome, but many of us don’t.

Here’s what we are facing. Statistics tell us that at least 70 percent of people over sixty-five years of age will require assistance with activities of daily living at some point during their lives, and typically this will continue for three years, including one year of full-time or nursing home care. One year of paid care at home, assuming you need periodic personal-care help from a home health aide (the average is about eighteen hours a week) will cost almost $20,000 per year, based on current national statistics. Multiply that by two years, and you are looking at $40,000 just for this one expense. The current average cost for a semi-private room in a nursing home is $75,000 per year, bringing the average expected total bill for care up to nearly $125,000 per person. (You adult children in your fifties and sixties would benefit by exploring purchasing long-term-care insurance while you are still young enough and healthy enough to obtain it for a reasonable premium.)

Planning ahead might also help you decide when to stop working and when to begin taking your Social Security benefits. This is a complicated decision and depends a lot on your income while you’ve been working, the lifestyle you envision in retirement and the assets and insurance you have to draw upon in your later years. Doing a little analysis might help you determine that it is prudent to continue working a bit longer than you might otherwise have planned.

Finally, living longer might mean that you are living without your spouse for many years. If you’ve assumed you will have two Social Security payments and perhaps two pensions, you might be surprised at how dramatically things change (and how immediately) when you lose your spouse. I always advise clients to plan a budget that is comfortable on one retirement income to protect the surviving partner from a significant change in lifestyle following the death of the other spouse. Of course, one way to plan to mitigate this is through the use of life insurance or the accumulation of assets that can be liquidated to help pay living expenses.

Planning ahead is always a good idea, but even more so now that we have to plan for longer and longer periods of time. However, we’ve all met that person who carries on about how worried he is about the future or who talks about being afraid of what will happen to her. How often do we find ourselves thinking (or saying), “Why don’t you stop talking about it and do something?”

Why is it so hard to overcome worry and fear, make a plan,
and then act on it? 
Some people seem to need to have something to worry about. We can call them the “worry warts.” They seem wired to worry, and if there isn’t something worth worrying about, they’ll create something.

But let’s assume that we are talking about the rest of the population—those who don’t want to worry about their future, but can’t seem to figure out how to stop.

The most important thing that each of us needs to do is to start planning. Making a plan is a huge step in reducing worry because the simple process of thinking through what you will do if this or that happens can make the unknowns feel less daunting. But once you’ve made the plan, you need to put it into motion. This is where so many get stopped in their tracks. The plans are made and neatly bound and placed in the file cabinet or bookshelf, never to be looked at again.

Let’s say that part of your plan is to slowly go through and streamline your belongings, because you have given a deposit to move to a senior living community and you realize you will have a smaller home with less storage space. With good intentions, you tell yourself that you will get the clean-out done over the next few months. You try, really you do, but you’re just so busy with the grandchildren, a cruise, and your book group. Suddenly months have gone by and you’re in a panic, staying up at night worried about where everything will fit in your new home when you move in just a few days.

The easiest way to guarantee that you implement your plan is to build in some accountability. Set deadlines and milestones for yourself, and then enlist someone to make sure that you accomplish them.

For example, in this case, if you had hired a professional organizer or a senior move manager, that person would have kept you on track. You did the first part by setting a deadline, but you weren’t able to hold yourself accountable.

A good professional will make sure that you execute your plans and achieve your milestones. He or she might have to engage in some tough love at times, but you’ll be glad in the end. There’s a reason why weight-loss programs that require you to weigh in post consistently good results, and why working with a personal trainer helps most people who engage the services of one to stay with their exercise plans.

Dealing with the business of life is no different. If you want to worry less, make a Life Transition Plan and implement it. And if you want that to happen, hold yourself accountable.

Taking the time to plan ahead for your own or your parents’ long-term-care needs will reduce the inevitable stress when the time comes. You will have an idea of the resources that are available to help yourself or your parents, and you will have prepared for how to pay for it. If you as an adult child have siblings, it helps if you are all on the same page regarding how each of you will contribute to your parents’ care, whether it is financially or by providing hands-on care.

So where do you begin?
No matter if you are the older adult or the adult child, you must both begin at the same place—acknowledging the fact that time is passing and soon enough you will be facing the finish of what has hopefully been a long and fulfilling life for you, or a life well-lived for your parents.

7/27: Where weed is smoked


Tips for Coping with Cognitive Impairment
By Christian Wilson

Caring for an individual with memory problems can be difficult and stressful. Even more stressful, however, is realizing a loved one—or yourself—may be beginning to show the signs of memory issues or mild cognitive impairment (MCI). This can lead to both worry and denial, since MCI is considered a very early stage of dementia. It’s important to note that a person who has developed MCI won’t necessarily develop dementia or Alzheimer’s disease, though those who do develop MCI are at a much higher risk for further impairment.

What is mild cognitive impairment?
It’s often classified as a change in cognition, essentially the way a person thinks. Cognition includes memory and the ability to understand and comprehend one’s environment. Unfortunately, while it can be an ambiguous condition and there isn’t a consistent way to diagnose MCI, there are several recognizable symptoms to look for.

These symptoms can include:

Diagnosing mild cognitive impairment.
Because MCI is a more ambiguous condition, diagnosing it can be a challenge for doctors and health care providers and oftentimes won’t receive the proper response. Since much of the MCI diagnosis process is based around observation, it can take an extended period of time to come to a firm conclusion. Blood testing can be done, as well as neurological tests and brain imaging. Blood tests can determine vitamin B-12 deficiency and hypothyroidism, both of which can produce symptoms of MCI. If these conditions are discovered, treatment can improve symptoms; and if symptoms improve, then the individual isn’t likely afflicted with MCI.

Caring for patients.
So, if you’re in the position of caring for someone diagnosed with MCI, what can you do?

Educate yourself.
If you’re providing care for a person or loved one with MCI, the better educated you are about the condition, the better you’ll be able to provide positive care. It can be as simple as knowing and understanding the signs of MCI or preparing for the possibility of caring for a person with a worsening condition.

Monitor and assess.
Observe the individual and look for signs of improvement, stability, or decline. Being aware of their current state of mind will determine how you care for them. If they improve, your role may eventually be reduced. If their condition declines, the quicker you will be able to respond, which will result in greater likelihood the patient will be able to receive proper treatment, especially if the MCI begins to be manifested as dementia.

Create a positive environment.
Make sure the person has plenty to do. An active mind is a healthy mind and keeping their mind and body active is often the best thing a caregiver can do. This can include reading a book or playing games (both video and board), visiting a museum, as well as going for a walk or hike. Additionally, having patience will contribute to a more positive environment and reduced stress.

Diet and exercise.
A change in diet can help to ease and reduce the signs of MCI. Include more fruits and vegetables, while decreasing the high fat and high sugar foods. Increase the person’s intake of omega-3 fatty acid supplements and vitamin B (particularly if a change in diet rich in these nutrients is not enough). Coupled with a healthy diet, regular exercise has been shown to have a very positive impact on the brain and cognitive function. Ensure the person participates in physical activity, such as gardening, swimming, or walking, on a daily basis.

7/27: What one FED director is saying about interest rates.

Ms. Brainard’s case for caution combines the idea that the domestic economy is not ready for higher rates, with something new and controversial: that the Fed should care about other countries.

The American economy, until recently, seemed impervious to all but the largest global shocks. But the integration of financial markets has increased the importance of events elsewhere. The rest of the world plays a growing role in determining American mortgage rates.

“The world has just changed fundamentally,” Ms. Brainard said at a New York conference in February. “What China does matters to the U.S.”

In placing greater weight on the global economy, Ms. Brainard has argued that the Fed needs to consider the impact of its decisions on other countries. She said at the February conference the Fed might achieve better results by coordinating with other central banks.

7/27: Blowin in the wind- Unintentional Pediatric Exposures to Marijuana in Colorado, 2009-2015

 in Colorado the rates of marijuana exposure in young children, many of them toddlers, have increased 150 percent since 2014, when recreational marijuana products, like sweets, went on the market legally.

When children get their hands on the goodies they can become lethargic or agitated, vomit and lose balance, triggering a hospital visit or a frightened call to a poison center. A handful of patients were admitted to intensive care units and intubated.


"It's Tax Not Trade (Stupid)" Free Download
USC CLASS Research Papers Series No. CLASS16-20
USC Law Legal Studies Paper No. 16-22

EDWARD J. MCCAFFERY, USC Gould School of Law

Globalization, trade and other free market policies increase wealth. But the gains from trade are not being evenly spread among all citizens. People and politicians rage against foreigners. But it is the United States tax system, not trade, that ought to change, and wealthy Americans, not workers world-wide, who should be sharing the wealth. And it is the form of tax, not just its rate structure, that must reform, so that capital at last bears a meaningful share of the burden.


"Searching for Our Fiscal Soul (Presentation Slides)" Free Download
USC CLASS Research Paper No. CLASS16-18
USC Law Legal Studies Paper No. 16-20

EDWARD D. KLEINBARD, USC Gould School of Law

This is an extended version of a presentation made at TEDx Livermore 2016, the theme of which was the Economics of Empathy. Searching for Our Fiscal Soul argues that democracy is an exercise in empathy towards fellow citizens we do not know, and, if we did, might not like. We express that empathy through government spending, because that is how we actualize values that are important enough that we are willing to pay for them. This is our fiscal soul in action. Whether measured against the values we all routinely recite, or against the social environments achieved by peer countries, the fiscal soul of the United States is in peril. The remedy lies in understanding the value of a complementary economy, in which government spending is properly reframed as purchasing investments and insurance that private markets do not, and cannot, reach.


"Oil Prices and the Global Economy: Is it Different this Time Around?" Free Download
USC-INET Research Paper No. 16-21

KAMIAR MOHADDES, University of Cambridge - Faculty of Economics and Politics, University of Cambridge - Girton College
USC Dornsife Institute for New Economic Thinking

The recent plunge in oil prices has brought into question the generally accepted view that lower oil prices are good for the US and the global economy. In this paper, using a quarterly multi-country econometric model, we first show that a fall in oil prices tends relatively quickly to lower interest rates and inflation in most countries, and increase global real equity prices. The effects on real output are positive, although they take longer to materialize (around 4 quarters after the shock). We then re-examine the effects of low oil prices on the US economy over different sub-periods using monthly observations on real oil prices, real equity prices and real dividends. We confirm the perverse positive relationship between oil and equity prices over the period since the 2008 financial crisis highlighted in the recent literature, but show that this relationship has been unstable when considered over the longer time period of 1946-2016. In contrast, we find a stable negative relationship between oil prices and real dividends which we argue is a better proxy for economic activity (as compared to equity prices). On the supply side, the effects of lower oil prices differ widely across the different oil producers, and could be perverse initially, as some of the major oil producers try to compensate their loss of revenues by raising production. Taking demand and supply adjustments to oil price changes as a whole, we conclude that oil markets equilibrate but rather slowly, with large episodic swings between low and high oil prices.

7/25: You must read the whole article. As usual, I provide certain excerpts that I hope makes you want more. But everyone needs to read this in its entirety.

“How can anyone do that to their family members?”

Doctors die differently
Unlike most sufferers of terminal disease, medical professionals tend to eschew treatment and focus on making the best of the time remaining to them. This is not because they want to die but rather because they know the limits of modern medicine. (Cancerworld)

This hard-hitting blogpost by Ken Murray, a retired Los Angeles family doctor, helped open up discussions about why doctors routinely administer treatments to dying patients that they would adamantly refuse for themselves

doctors don’t want to die; they want to live. But they know enough about modern medicine to know its limits. And they know enough about death to know what all people fear most: dying in pain, and dying alone. They’ve talked about this with their families. They want to be sure, when the time comes, that no heroic measures will happen – that they will never experience, during their last moments on earth, someone breaking their ribs in an attempt to resuscitate them with cardiopulmonary resuscitation (that’s what happens if CPR is done right).
The above scenario is a common one. Feeding into the problem are unrealistic expectations of what doctors can accomplish. Many people think of CPR as a reliable lifesaver when, in fact, the results are usually poor. I’ve had hundreds of people brought to me in the emergency room after getting CPR. Exactly one, a healthy man who’d had no heart troubles (for those who want specifics, he had a ‘tension pneumothorax’), walked out of the hospital.

7/25: A true statement but very, very incomplete. Read my posts at Linkedin.

How The End Of History Illusion Creates Problems For Goals-Based Investing

The essence of the End Of History Illusion is that it suggests we have remarkably little insight into our personality and preferences in the future. Even as we recognize how much we’ve changed in the past, we project the future to basically just be the same as today (with perhaps a little more gray hair). We literally can’t seem to visualize our future beyond anything we’ve ever already known.

And even though the End Of History Illusion does appear to decline with age – i.e., we’re ‘less wrong’ in our predictions of our future selves when we’re older – it’s still not because we get better at predicting our future selves, it’s merely because we actually change less so when we predict we won’t change anyway, we’re not as far off.

From the perspective of goals-based investing, though, this has potentially profound implications, in a world where it’s increasingly popular to try to tie investments and portfolios to specific future goals. It’s one thing to save for “retirement”, but another to save for a particular retirement home, specific vacations, or a long-desired boat. Because the research suggests that those retirement preferences are much more likely to represent what we want today than what we actually want in the future.

EFM- It is not just what the person that changes but all the outside influences of births, deaths, illness and every other facts of life. For all the retirement issues I have addressed for decades, any numbers based on a 25 or 30 retirement are, hopefully close for 5 years. Everything with estimated numbers are a crap shoot., .

7/25: Not too bright

Americans have grown more confident about their financial acumen since the market meltdown that ended in 2009. Yet they seem to know less about the subject than they did then.

And most people didn’t even know much about it in 2009.

A FINRA study suggests that misplaced self-confidence is putting millions of people at risk. They are vulnerable to major missteps — and to exploitation by industry pros who may not have their best interests at heart.

Over all, the study found that most Americans have “relatively low levels of financial literacy.” It included the results of a six-question quiz on fundamental financial issues that may be taken online.

An alarming aspect of the study is that although most people knew very little, they felt great about what they knew — or thought they knew. “Americans tend to have positively biased self-perceptions of their financial knowledge

The study found that 76 percent gave themselves a “very high” rating on financial knowledge in 2015, compared with 73 percent in 2012 and 67 percent in 2009. And while 81 percent of Americans rated their own financial behavior positively, the study found a “potential disconnect between perceptions and actions in day-to-day financial matters.”

In 2009, the prices of homes and most other assets had fallen sharply, foreclosures were rife and unemployment was soaring. People had been taking financial risks, and they paid for it. In that period, as an example, only 24 percent of home buyers paid more than than 20 percent of the purchase price as a down payment.

7/25 The QUIZ    See how you do

National Financial Capability Study

7/25:The Behavioral Economics Guide 2016- not an easy read

Herbert Simon, one of the founders of behavioral economics, held that heuristics were rational tools in situations of uncertainty. In AI, heuristics are used to make computers smart, yet in some
corners of behavioral economics, heuristics are still seen as the reason why people aren’t smart.The catch phrase is that heuristics are “sometimes” useful but often lead to serious errors. That is
so true that it cannot be wrong. But the same truism applies to all complex models, from Pareto/NBD to multiple regression to Bayes. The fact that complex, fine-tuned algorithms tend to fail in  situations of uncertainty should be a take-home message from the last financial crisis, where ratings, risk weighted measures, and value-to-risk computations failed. Fine-tuning can make a system fragile and at the same time create illusions of certainty.
Harry Markowitz was awarded the Nobel Memorial Prize in Economic Sciences for his mean-variance investment portfolio. When he made his own investments for retirement, he presumably
used his optimization method, wouldn't you think? In fact, he used a simple heuristic known as 1/N: distribute your money equally over the N options. Robert Merton, by contrast, stuck to his fine
-tuned optimization technique, which worked well until something unexpected happened; the resulting disaster of Long Term Capital Management is history.
To rethink behavioral economics, we need to bury the negative rhetoric about heuristics and the false assumption that complexity is always better. The point I want to make here is not that
heuristics are always better than complex methods. Instead, I encourage researchers to help work out the exact conditions under which a heuristic is likely to perform better or worse than some
-tuned optimization method. First, we need to identify and study in detail the repertoire of heuristics that individuals and institutions rely on, which can be thought of as a box of cognitive
tools. This program is called the analysis of the adaptive toolbox and is descriptive in its nature.
Second, we need to analyze the environment or conditions under which a given heuristic (or complex model) is likely to succeed and fail. This second program, known as the study of the
ecological rationality of heuristics (or complex models), is prescriptive in nature. For instance, relying on one good reason, as the hiatus rule does, is likely to be ecologically rational if the other
reasons have comparatively small weights, if the sample size is small, and if customer behavior is unstable. Such a systematic study needs to be informed by two methodological principles.

7/24: THEORY:

“I don’t think enough investment professionals today appreciate the contributions made by academics in the investment management profession. Far too many investors spend their time criticizing these theories because they don’t provide a perfect roadmap or explanation of the inner workings of the financial markets.”***

Criticism of academic finance comes from those who view its prescriptions as at odds with their chosen business model. In Pragmatic CapitalismCullen Roche writes:

“In fairness, most of the criticism of modern finance comes from the high fee active investing community who sells the hope of ‘market beating’ returns in exchange for the guarantee of high fees. They criticize things like the Efficient Market Hypothesis (EMH) because they need to sell the idea that they can beat the market and still charge high fees. I obviously reject that whole notion of trying to ‘beat the market’ and emphasize the importance of low fees.”

From the Economist- “For the foreseeable future any risks from tracker funds are far outweighed by their ability to offer cheap, diversified funds to retail investors. The real problem is not the rise of Vanguard and the other tracker funds; it is the rotten deal that retail investors have received from the fund-management industry for far too long.”

***- It is necessary to understand- at least read- theoretical positions. The problem that I have found is that the ability to work in real life is quite flawed and it is necessary to then 'massage' the theory to wok at all. But then it becomes something else entirely. For those in the know, the smooth Gaussian curve for risk is viable for a certain risk where everything is defined. But using this for variable numbers just doesn't work. But that has not deterred academicians from teaching it as though it can work in real life. They are unwilling to show the lousy roadmap of life which has thousands of risks that must be addressed. 

7/24: DOOOOOOOOM???? Britain just got its first concrete sign that the British exit from the European Union, or Brexit, will crush the nation's economy after a grim set of PMI data released by Markit on Friday morning showed a "dramatic deterioration" in the economy since the UK voted to leave the EU.

The PMI, or purchasing managers index, figures from Markit are given as a number between 0 and 100.

Anything above 50 signals growth, while anything below means a contraction in activity — so the higher the better.

EFM- this is going to be dicey for quite a while. Our elections won't help- particularly if Trump is elected. Messy, messy, messy

7/24: FACTS?? Don't tell me the facts.

. The evidence from behavioural scientists has long debunked the concept of “homo economicus”, or “economic man”. Economic man is a rational, independent agent who makes decisions in his own best interest, after having examined all the available information. Economic man is who we build our economy, and much of our government policy, around. And yet, economic man does not exist. Rather, we find that sentencing is affected by how recently judges have eaten. Our energy consumption is affected by what we are told our neighbours are doing. So, given this compelling evidence, why does economic man continue to stick around?

“If you just look from a behavioural perspective, you can’t sell an argument simply on the basis of evidence,” says Paul Dolan, Professor of Behavioural Science at LSE, who dismisses the idea that facts can win a campaign as “a silly thing to think.” Rather, he explains, campaigners should appeal to our “system one”: behavioural economics-speak for our gut reactions. “It’s all narratives, and stories, and emotions, and appealing to visceral reactions that wins the day. Boring evidence is just not the way to win an argument.”

And this is the best example:......The brexit campaign seemed instinctively to understand. “People in this country have had enough of experts”, Michael Gove now infamously declared a few weeks before the referendum. And how we scoffed, before lining up the OECD, the Bank of England, the IMF and the World Bank to all warn people about the dire consequences of voting to leave the EU. We told them that the pound would crumble, the economy would fail, and all our EU perks would be taken away. How could we possibly lose? Very simply, Dolan points out, because your average person on the street doesn’t have a clue who exactly any of those bodies are or what they do. On the other hand, James Dyson, a prominent Leave supporter, has a name and a face. We know him. We buy his products. He’s one of us. And this is important, because another finding from behavioural science is that who the messenger is has a significant impact on whether or not the message is believed.

Meanwhile, the Remain camp’s facts, though facts they have certainly proven to be, were poorly chosen. As Dolan points out, “What does it mean that there’s an economic downturn, or the pound might fall, or the growth rate might drop from one per cent to another? It doesn’t resonate in any meaningful way with people.”

Eric Kaufmann, Professor of Politics at Birbeck, found that contrary to all the think-pieces in the immediate aftermath of the referendum result, Leave voters were not motivated mainly by economics, but by identity. Indeed, greater than income, class, age, education, ethnicity, even voting intention (including those who intended to vote UKIP), the number one predictor of a vote to Leave was if a voter supported the death penalty. What has the death penalty got to do with Brexit? Pretty much nothing, directly. But as Kaufmann concludes, what this correlation demonstrates is that people were voting on the basis of values. And values are not facts. They are feelings. Deeply held feelings about who we are, and what kind of world we want to live in.

Let Brexit be a watershed in political campaigning in the UK and finally strike the death-knell for economic man. Let the political elite understand what populists have traded on for a long time: people are not automatons. People are flesh and blood, heart and soul, and we aren’t moved by numbers alone. We live on stories. We thrive on emotion. We want to laugh, to cry, to rage. So if the political establishment wants to prevent a slide to ever increasing extremes it needs to learn the lesson that Brexit has taught us so starkly: learn to speak to people’s hearts as well as their heads. Otherwise, we may find ourselves headed for some very dark political times indeed.

7/24: Luck?? Campbell Harvey  
“Researchers in finance, whether practitioners or academics, need to realize that they will find seemingly successful trading strategies by chance. We can no longer use the traditional tools of statistical analysis that assume that no one has looked at the data before and there is only a single strategy tried. A multiple-testing framework offers help in reducing the number of false strategies adapted by firms. Two sigma is no longer an appropriate benchmark for evaluating trading strategies.

EFM- two sigmas represents a smooth standard deviation Guassian where 95% of all things happen.


It really is a lot more spread out  where there are far more things that will happen. 1987 ring a bell??? That was about 23 sigmas- in essence an impossibility.

7/24: And another behavior analysis via Brexit

So why did 17 million people defy the ‘experts’, who prophesised a decade of doom, gloom and misery? What made the British electorate vote for a step into the unknown? Ultimately, our brains, and how they are wired, were crucial to Leave’s success. If we turn to behavioural economics and some cognitive biases that affected voting behaviour in the referendum, we gain some clarity on what resonated with the voting majority and why.

Confirmation bias. This is a tendency individuals have to interpret new evidence as confirmation of their own beliefs or theories. It’s a bias whereby we know what we want to believe, so we mould and interpret stimuli or information we are given to fit pre-existing beliefs. 

While Remain were keen during the campaign to point out the inaccuracy of the weekly £350 million payment to the EU, Leave were still able to distort those facts to suit a particular narrative i.e. even if the figure was lower than £350 million after the rebate, they insisted that it was still too much and would be £0 in the event of Leave.

Framing. ‘Project Fear’ became a soundbite used by Leavers to lambast perceived scare-mongering Remainers about their bleak narrative. Here, Leave used the framing effect for competitive gain: essentially, better judging how people would react to various scenarios and information presented, based on how it was presented.

Although Brexiters criticised Remainers for playing on people's fears, they themselves actively leveraged anxiety and insecurity centrally within their story. An example would be Leave's leaflet highlighting the alleged future reality that Turkey would join the EU. The leaflet showed a map highlighting Turkey in red, positioned next to Iraq and Syria with no other European countries in sight, even though Turkey also shares its borders with Bulgaria and Greece. 

Effective marketing using framing combines what is to be gained with what can be avoided. Leave posited that staying in the EU would mean population overload ( hence should be avoided ) but the gain from leaving would be greater – reclaimed autonomy, freedom and control.

This also plays into Leave’s use of the decoy effect. Known alternately as an asymmetrically dominated choice, it occurs when people’s preference for one option over another changes as a result of adding a third, similar, but not so attractive, option.

For example, people are more likely to choose a nice pen over a small cash option if there is a third option of a less elegant pen! When voters were faced with choosing between Brexit ( lead largely by Boris and Gove ), Remain ( led largely by the Cabinet of the day ) and a perhaps more extreme Brexit option led by UKIP – ‘’, the public voted for the least-worst Leave option. Rather like opting for the least-worst pen!

And last but not least, reverse psychology was used to maximum effect by Leave. The more I tell my young daughter not to do something, the more she is likely to defy her parents to see what actually happens.

Decision making hierarchies – whether it’s which party to vote for in an election, Remain or Brexit, through to what to buy in the supermarket – are becoming more irrational, as the role of heuristics changes in our social media age.

Now, more than ever before, to ensure the survival, credibility and essentially legitimacy of market research, we have to get to grips with new decision making practices. Let Brexit and the false assumptions made as to how people would actually vote be a key lesson for our whole industry, not just the political classes.

EFM- Read both of these. They can each offer different opinions on eh same subject. It's like looking at two different theories and where the analysts each think there reason is the one to work with. Peter Bernstein showed in Capital Idea and Capital Ideas Evolving that the theories in finance are forever changing and it is difficult to know in the interim  which is right.

In more simple terms, finance theory changes daily, as far as I am concerned. Instead of accepting somebody's algorithm et al, it is best to see if one can figure out teh most simple way of diagnosing the problem. Unfortunately, it takes a lot of time and research. And you really then have to undo the research as well.  These two reviews speak volumes.

7/24: BONDS"
........breaks down fixed-income returns into compensation for shouldering three types of risk:
  1. Bondholders receive compensation for assuming credit risk. The more likely the issuer is to default, the greater the credit risk premium.
  2. Investors collect a premium for holding bonds with less liquid futures.
  3. Longer bonds pay more because there is greater risk that interest rates will rise over a more expansive time span, lowering the price of the bonds.
7/24: Nudges That Fail  Cass R. Sunstein* 

Abstract  Why are some nudges ineffective, or at least less effective than choice architects hope and expect? Focusing primarily on default rules, this essay emphasizes two reasons. The first involves strong antecedent preferences on the part of choosers. The second involves successful “counternudges,” which persuade people to choose in a way that confounds the efforts of choice architects. Nudges might also be ineffective, and less effective than expected, for five other reasons. (1) Some nudges produce confusion on the part of the target audience. (2) Some nudges have only short-term effects. (3) Some nudges produce “reactance” (though this appears to be rare) (4) Some nudges are based on an inaccurate (though initially plausible) understanding on the part of choice architects of what kinds of choice architecture will move people in particular contexts. (5) Some nudges produce compensating behavior, resulting in no net effect. When a nudge turns out to be insufficiently effective, choice architects have three potential responses: (1) Do nothing; (2) nudge better (or different); and (3) fortify the effects of the nudge, perhaps through counter-counternudges, perhaps through incentives, mandates, or bans. 


"Time to Rethink Monetary Policy in Emerging Economies: Touching the Tip of an Iceberg" Free Download
KIEP Research Paper No. World Economy Update-16-06

IL HOUNG LEE, Korea Institute for International Economic Policy
Korea Institute for International Economic Policy
Korea Institute for International Economic Policy

Emerging economies are struggling to keep their growth momentum alive in the face of waning global demand. Yet, they are partly handicapped by the loss of monetary policy independence and greater exposure to potential capital reversal. Against this background, a comprehensive review of all their policy options are in order, including both macro policy instruments, micro measures, and global safety net aimed at attaining the best possible solution to escaping global recession.

7.24" Not looking good

7/24:Employee financial stress causing huge employer headaches

Employees who have manageable financial stress include those who have a handle on their cash flow, have an emergency fund and pay their bills on time. Those with unmanageable financial stress usually live “paycheck to paycheck, with expenses exceeding their incomes and/or with large debt balances and no emergency savings,” the report says.

“People with high levels of stress are more likely to suffer heart attacks and are more likely to have digestive problems and hypertension,” Meyer says. “Forty-four percent suffered from migraines. It’s almost like financial stress syndrome.”

At highest risk are women under the age of 30 who have minor children at home and make under $60,000 a year — with a whopping 54% reporting high or overwhelming financial stress.

Thirty-nine percent of all women making less than $60,000 a year have unmanageable financial stress, according to the report, as do one-third of people with minor children at all income levels.


"Family Disadvantage and the Gender Gap in Behavioral and Educational Outcomes" Free Download
CESifo Working Paper Series No. 5925

DAVID H. AUTOR, Massachusetts Institute of Technology (MIT) - Department of Economics, National Bureau of Economic Research (NBER), Institute for the Study of Labor (IZA)
Northwestern University, National Bureau of Economic Research (NBER)
Northwestern University
Division of Neonatology, Department of Pediatrics
Massachusetts Institute of Technology (MIT)

Using birth certificates matched to schooling records for Florida children born 1992 – 2002, we assess whether family disadvantage disproportionately impedes the pre-market development of boys. We find that, relative to their sisters, boys born to disadvantaged families have higher rates of disciplinary problems, lower achievement scores, and fewer high-school completions. Evidence supports that this is a causal effect of the post-natal environment; family disadvantage is unrelated to the gender gap in neonatal health. We conclude that the gender gap among black children is larger than among white children in substantial part because black children are raised in more disadvantaged families.


"Liquidity Transformation in Asset Management: Evidence from the Cash Holdings of Mutual Funds" Fee Download
NBER Working Paper No. w22391

SERGEY CHERNENKO, Ohio State University (OSU) - Department of Finance
Harvard University

We study liquidity transformation in mutual funds using a novel data set on their cash holdings. To provide investors with claims that are more liquid than the underlying assets, funds engage in substantial liquidity management. Specifically, they hold substantial amounts of cash, which they use to accommodate inflows and outflows rather than transacting in the underlying portfolio assets. This is particularly true for funds with illiquid assets and at times of low market liquidity. We provide evidence suggesting that mutual funds’ cash holdings are not large enough to fully mitigate price impact externalities created by the liquidity transformation they engage in.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at

7/21: World Fitness Test-  very good

I have an equivalent age of a 14 year old  hampsster

7/20: Bears repeating

The following quote by Leigh A. Bortins sums up the crossroads we currently face as a nation:

“…the current culture of education has displaced parents as the primary instructors of children in favor of professionals who try their best to recreate the home environment at school; has the federal government rather than the community determining the structure of equal educational opportunity; has deserted the idea that memorization trains the brain; has fostered a loss of literacy by replacing the study of original writings with abridged textbooks; and has created a populace unable to engage in reasonable discourse. We have rejected the historically successful model of rigorous, classical education in favor of entertainment and job training.

7/20: Murders


More states working to shift long-term care to home setting

States increasingly are studying and implementing plans to help seniors get long-term care at home rather than in nursing homes. Miller Trusts are available for people in more than a dozen states who are seeking home-based care and have income levels that disqualify them from Medicaid.

7/19: Reality Check

  1. Are Correlations Constant? Empirical and Theoretical Results on Popular Correlation Models in Finance




Adams, Zeno ; Fuess, Roland ; Glueck, Thorsten

Multivariate GARCH models have been designed as an extension of their univariate counterparts. Such a view is appealing from a modeling perspective but imposes correlation dynamics that are similar to time-varying volatility. In this paper, we argue that correlations are quite different in nature. We demonstrate that the highly unstable and erratic behavior that is typically observed for the correlation among financial assets is to a large extent a statistical artefact. We provide evidence that spurious correlation dynamics occur in response to financial events that are sufficiently large to cause a structural break in the time-series of correlations. A measure for the autocovariance structure of conditional correlations allows us to formally demonstrate that the volatility and the persistence of daily correlations are not primarily driven by financial news but by the level of the underlying true correlation. Our results indicate that a rolling-window sample corre lation is often a better choice for empirical applications in finance.


Change-point tests; correlation breaks; dynamic conditional correlation (DCC); multivariate GARCH models; spurious conditional correlation


C12 C52 G01 G11


  1. The Asset Management Industry and Systemic Risk: Is There a Connection?




Lopez, Claude ; Markwardt, Donald ; Savard, Keith

In the aftermath of the financial crisis, new legislation and regulation have pressured banks (and insurances) to reduce their size, leverage, and riskier lines of business in order to avoid another too-big-to-fail debacle. Nonbank financial intermediaries have naturally taken up some of that slack and, not surprisingly, regulatory scrutiny has turned toward these intermediaries to evaluate whether they could pose similar risks to financial stability that banks did pre-crisis. Owing to their stunning growth in the past decade, focus among nonbank intermediaries is now centering on asset managers, which include firms offering mutual funds, exchange-traded funds, hedge funds and private equity funds. This report explores whether there is a demonstrable link between the asset management industry and systemic risk. Key points: Systemic risk is distinct from run-of-the-mill financial or operational risk, an important difference when determining whether the sector poses a risk to the broader financial system with the potential for negative spillovers into the real economy. Because asset managers do not take on nearly the same level of leverage and do not guarantee balances on customer accounts as banks do with deposits, it is unlikely that the industry is the epicenter of (or creating) systemic risk in the financial system. Theoretically, however, they hold the potential transmit or amplify systemic risk in the system based on unique risk factors such as herding and liquidity mismatches. One major regulatory concern is the mismatch between asset management firms offering investors highly liquid investment terms for funds investing in highly illiquid assets, which could create fire sale scenarios that negatively impact financial markets. A close look at the role of high-yield debt markets suggests that major disruptions to the sector’s funding environment could have a significant impact on the real economy. However, even during periods of acute i nvestor outflows, high-yield mutual funds have managed liquidity risk effectively to-date, and high-yield ETFs have actually been a supplemental liquidity source for institutional investors. In a post-crisis world, regulators have as much power (if not more) than financial firms’ shareholders. Considerations must include: i. The dynamic relationship between financial regulation and financial activity ii. The necessity of proper fiscal and monetary policies to complement prudential oversight iii. The reality that financial markets are connected globally .


systemic risk, asset managers, macroprudential policy, financial stability


E6 F4 G1 G2


7/18:How Senior Care Impacts Families Financially, Emotionally and in the Workplace

(EFM- Talk about a mess. Tough to plan around, and difficult to budget for)

When it comes to work, 36% of employees have asked for time off or workplace flexibility to accommodate for senior care needs. Additionally, 36% of employees say that concerns about their parent(s) or aging loved ones has affected their performance at work, and 34% have made work adjustments as a result of caring for aging loved ones.

And can we remind you that the population of those over 65 will double by 2050.

What will this mean for us going forward? We can only hope that families, workplaces and the government are listening and stepping up to prepare for this global care crisis.

Here are some of the survey's key statistics you should know about, as well as tips for what you can do to get your family and employer ready – and have your voice heard.

Important Survey Findings to Discuss at Home

Concerns and Stressors


Preferences and Planning for the Future

Senior Care in the Workplace

7/18: The Times says it all

"The market at last reached new highs this month. It may well continue to rally, but it will have to do so against a backdrop of weak corporate earnings, a less accommodating Federal Reserve and lingering uncertainty surrounding Britain’s vote in late June to leave the European Union"

7/18:   Very interesting on what the Europeans have accomplished

7/18: Poor

Those who make very little money in their first jobs will probably still be making very little decades later, and those who start off making middle-class wages have similarly limited paths. Only those who start out at the top are likely to continue making good money throughout their working lives.

“The probability of ending where you start has gone up, and the probability of moving up from where you start has gone down,” Carr said. For instance, the chance that someone starting in the bottom 10 percent would move above the 40th percentile decreased by 16 percent. The chance that someone starting in the middle of the earnings distribution would reach one of the top two earnings deciles decreased by 20 percent. Yet people who started in the seventh decile are 12 percent more likely to end up in the fifth or sixth decile—a drop in earnings—than they used to be.

7/18: 4% of patients consume 25% of Medicare spending

Of the 2.6 million Americans who died in this country in 2014, eight out of ten were enrolled in Medicare, the premier national health care program for seniors. However, the Kaiser study found that Medicare spent significantly more per capita on medical services and treatment for people in their late 60s and early 70s than on much older beneficiaries.

Indeed, the analysis concluded that per capita Medicare spending at the end of life actually declines with age – peaking at $43,353 for those 73 years old and then gradually declining to $33,381 for 85-year-olds and just $27,779 for people 90 and older.

Per capita Medicare spending was nearly four times higher for those who died in 2014 than others who survived -- $34,529 for the descendants to just $9,121 for those who lived

  1. Revisiting modern portfolio theory




Tenani, Paulo

This paper revisits Modern Portfolio Theory and derives eleven properties of Efficient Allocations and Portfolios in the presence of leverage. With different degrees of leverage, an Efficient Portfolio is a linear combination of two portfolios that lie in different efficient frontiers - which allows for an attractive reinterpretation of the Separation Theorem. In particular a change in the investor risk-return preferences will leave the allocation between the Minimum Risk and Risk Portfolios completely unaltered - but will change the magnitudes of the tactical risk allocations within the Risk Portfolio. The paper also discusses the role of diversification in an Efficient Portfolio, emphasizing its more tactical, rather than strategic character


7/17: MORE ON HYBRIDS - The average cost of health care is $394,954 for a 65-year-old healthy couple retiring this year, assuming they qualify for Medicare. Financial advisers are suggesting options for funding medical expenses, including an annuity with a long-term-care rider or a hybrid policy with cash value that combines long-term-care insurance and life insurance.

7/17: LONGEVITY FINANCIAL FEARS - An Allianz Life study found while 93% of Americans say they think positively about living longer, 70% say they feel financially unready for the prospect. With younger people, 79% of Generation Xers and 74% of millennials question if they are financially prepared for a longer average of 30 years longer than a century ago. 

7/17:  National Financial Capability Study
U.S. Survey Data
Some nice charts

7/17: TWO THIRDS FINANCIALLY ILLITERATE - Nearly two thirds of Americans can't calculate interest payments correctly, according to a new study by National Capability Study by the FINRA Foundation. One of the silver linings of the financial crisis was that it was supposed to have taught many Americans a lesson, albeit painful, about the dangers of debt, and financial issues in general. Apparently, the message, though, didn't get across. See Teaching the Financially Illiterate about Money.

EFM- And they are going to understand mutual funds, bonds, retirement budgets, ???????? Not a chance. 


DOL PRIMER - Kevin W. Mechtley of LifeHealthPro calls the fiduciary regs "the most significant industry game-changing development we have seen since the tax reform to annuities in the early 1980s." Here is a quick summary:

BIC & Annuity Products: Both fixed indexed annuity products and variable annuity products are subject to the new best interest contract (BIC) exemption. This shift to BIC Exemption (BICE) is expected to significantly increase the cost of compliance for advisors, which will, in turn, likely increase the cost of selling fixed indexed and variable annuity products. For its part, the DOL has, however, provided both a one-year implementation period and a delay period for the signing of a BIC exempt contract.

Fixed rate annuity products, by contrast, will continue to be sold under PTE 84-24, and advisors who sell these products do not need to comply with the best interest contract requirements.

Indexed annuities under BICE will require a written contract signed by a supervising financial institution, which could be significant in the event that carriers are unwilling to sign as a financial institution. Should this be the case, agents would be unable to sell those products, and insurance-only agents may choose to pursue a securities license in order to continue selling.

Best Interests First: At the heart of the new fiduciary standard is the DOL's attempt to ensure retirement advisors "put their clients' best interests first." Agents will need to consider not only the product itself, but also each client's unique financial circumstances. To carry out a fair and holistic evaluation, advisors will therefore need to take into account the annuity's charges and fees, its linked index or indices, participation caps, and the investment risk, among other factors. It is essential that advisors keep detailed documentation for each client. Moreover, offering a diverse array of annuity products will make it easier to meet the client's best interests and needs. 

  1. Differences Attract: An Experimental Study of Focusing in Economic Choice




Andersson, Ola (Research Institute of Industrial Economics, Sweden) ; Ingebretsen Carlson, Jim (Department of Economics, Lund University) ; Wengström, Erik (Department of Economics, Lund University)

Several recent models of choice build on the idea that decision makers are more likely to choose an option if its attributes stand out compared to the attributes of the available alternatives. One example is the model of focusing by Köszegi and Szeidl (2013) where decision makers focus disproportionally on the attributes in which the available options differ more, implying that some attributes will be overweighted. We test this prediction in a controlled experiment. We find that subjects are more likely to make inconsistent choices when we manipulate the choice set by adding new options that are unchosen, but affect the maximal difference in attributes among the options. Hence, our results suggest that there exists a focusing effect.


Individual decision making; focus; attention; salience; decoy; experiments


C91 D03 D12


  1. An Experiment on Information Use in College Student Loan Decisions




Darolia, Rajeev (Federal Reserve Bank of Philadelphia)

There is ample concern that college students are making ill-informed student loan decisions with potentially negative consequences to themselves and the broader economy. This paper reports the results of a randomized field experiment in which college students are provided salient information about their borrowing choices. The setting is a large flagship public university in the Midwest, and the sample includes all nongraduating students who previously borrowed student loan money (~10,000 students). Half of the students received individually tailored letters with simplified information about future monthly payments, cumulative borrowing, and the typical borrowing of peers; the other half is the control group that received no additional information. There are at most modest effects of the letter overall, which suggests that information alone is not sufficient to drive systematically different borrowing choices among students. However, some key student subgroups changed their borrowing in response to the letter, particularly those with low GPAs. There is also evidence of intended (more contact with financial aid professionals) and unintended (lower Pell Grant receipt) consequences of the letter.


Student Loans; Debt Letter; Financial Literacy; Payment Cards Center;


D83 H52 I22 I28


7/17: Dementia Care Dos & Don’ts: Dealing with Dementia Behavior Problems

EFM- If you are old, expect to get old or even know a person that is old- at some point, you will be impacted by dementia. Very tough to deal with- at least for me. The constant repetition of a non issue would drive me to distraction.

Dealing with Dementia Behavior

Communication difficulties can be one of the most upsetting aspects of caring for someone with Alzheimer’s or some other type of dementia — and it’s frustrating for those with the disease and for loved ones.

Although it can be hard to understand why people with dementia act the way they do, the explanation is attributable to their disease and the changes it causes in the brain.

Familiarize yourself with some of the common situations that arise when someone has dementia, so that if your loved one says something shocking, you’ll know how to respond calmly and effectively.

Common Situation #1: Aggressive Speech or Actions

Examples: Statements such as “I don’t want to take a shower!,” “I want to go home!,” or “I don’t want to eat that!” may escalate into aggressive behavior.

Explanation: The most important thing to remember about verbal or physical aggression, says the Alzheimer’s Association, is that your loved one is not doing it on purpose. Aggression is usually triggered by something—often physical discomfort, environmental factors such as being in an unfamiliar situation, or even poor communication. “A lot of times aggression is coming from pure fear,” says Tresa Mariotto, Family Ambassador at Silverado Senior Living in Bellingham, WA. “People with dementia are more apt to hit, kick or bite” in response to feeling helpless or afraid.

Ann Napoletan, who writes for, is all too familiar with this situation.

“As my mom’s disease progressed, so did the mood swings. She could be perfectly fine one moment, and the next she was yelling and getting physical. Often, it remained a mystery as to what prompted the outburst. For her caregivers, it was often getting dressed or bathing that provoked aggression.”

DO: The key to responding to aggression caused by dementia is to try to identify the cause—what is the person feeling to make them behave aggressively? Once you’ve made sure they aren’t putting themselves (or anyone else) in danger, you can try to shift the focus to something else, speaking in a calm, reassuring manner.

“This is where truly knowing your loved one is so important,” says Napoletan. “In my mom’s case, she didn’t like to be fussed over. If she was upset, oftentimes trying to talk to her and calm her down only served to agitate her more. Likewise, touching her–even to try and hold her hand or gently rub her arm or leg–might result in her taking a swing. The best course of action in that case was to walk away and let her have the space she needed.”

DON’T: “The worst thing you can do is engage in an argument or force the issue that’s creating the aggression,” Napoletan says. “Don’t try to forcibly restrain the person unless there is absolutely no choice.” Mariotto agrees: “The biggest way to stop aggressive behavior is to remove the word ‘no’ from your vocabulary.”

Common Situation #2: Confusion About Time or Place

Examples: Statements such as “I want to go home!”, “This isn’t my house.”, “When are we leaving?  “Why are we here?”

Explanation: Wanting to go home is one of the most common reactions for an Alzheimer’s or dementia patient living in a memory care facility. Remember that Alzheimer’s causes progressive damage to cognitive functioning, and this is what creates the confusion and memory loss.

There’s also a psychological component, says Mariotto:

“Often people are trying to go back to a place where they had more control in their lives.”

DO: There are a few possible ways to respond to questions that indicate your loved one is confused about where he or she is. Simple explanations along with photos and other tangible reminders can help, suggests the Alzheimer’s Association. Sometimes, however, it can be better to redirect the person, particularly in cases where you’re in the process of moving your loved one to a facility or other location.

“The better solution is to say as little as possible about the fact that they have all of their belongings packed and instead try to redirect them–find another activity, go for a walk, get a snack, etc.,” says Napoletan. “If they ask specific questions such as ‘When are we leaving?’ you might respond with, ‘We can’t leave until later because…’ the traffic is terrible / the forecast is calling for bad weather / it’s too late to leave tonight.”

“You have to figure out what’s going to make the person feel the safest,” says Mariotto, even if that ends up being “a therapeutic lie.”

DON’T: Lengthy explanations or reasons are not the way to go. “You can’t reason with someone who has Alzheimer’s or dementia,” says Ann. “It just can’t be done.” In fact, says Mariotto. “A lot of times we’re triggering the response that we’re getting because of the questions we’re asking.”

This was another familiar situation for Ann and her mother. “I learned this one the hard way. We went through a particularly long spell where every time I came to see my mom, she would have everything packed up ready to go–EVERYTHING! Too many times, I tried to reason with her and explain that she was home; this was her new home. Inevitably things would get progressively worse.”

Common Situation #3: Poor Judgment or Cognitive Problems

Examples: Unfounded accusations: “You stole my vacuum cleaner!” Trouble with math or finances: “I’m having trouble with the tip on this restaurant bill.” Other examples include unexplained hoarding or stockpiling and repetition of statements or tasks.

Explanation: The deterioration of brain cells caused by Alzheimer’s is a particular culprit in behaviors showing poor judgment or errors in thinking. These can contribute to delusions, or untrue beliefs. Some of these problems are obvious, such as when someone is hoarding household items, or accuses a family member of stealing something. Some are more subtle, however, and the person may not realize that they are having trouble with things that they never used to think twice about.

According to Napoletan,

“There came a time when I began to suspect my mom was having problems keeping financial records in order. At the time, she was living independently and was very adamant about remaining in her house. Any discussion to the contrary, or really any comment that eluded to the fact that she may be slipping, was met with either rage or tears. It was when she asked me to help with her taxes that I noticed the checking account was a mess.”

DO: First you’ll want to assess the extent of the problem. “If you’re curious and don’t want to ask, take a look at a heating bill,” suggests Mariotto. “Sometimes payments are delinquent or bills aren’t being paid at all.” You can also flip through their checkbook and look at the math, or have them figure out the tip at a restaurant.

The Alzheimer’s Association says to be encouraging and reassuring if you’re seeing these changes happen. Also, you can often minimize frustration and embarrassment by offering help in small ways with staying organized. This is what Napoletan did for her mother: “As I sifted through records to complete her tax return, I gently mentioned noticing a couple of overdraft fees and asked if the bank had perhaps made a mistake. As we talked through it, she volunteered that she was having more and more difficulty keeping things straight, knew she had made some errors, and asked if I would mind helping with the checkbook going forward. I remember her being so relieved after we talked about it.” From there, over time, Napoletan was gradually able to gain more control over her mother’s finances.

DON’T: What you shouldn’t do in these circumstances is blatantly question the person’s ability to handle the situation at hand, or try to argue with them. “Any response that can be interpreted as accusatory or doubting the person’s ability to handle their own affairs only serves to anger and put them on the defensive,” says Napoletan

7/17: How to Take Advantage of The Child IRA Under Current Laws

7/17: Index Monthly Performance Report (as of 6/30/16)

4 pages of info

  1. Risk and Loss Aversion, Price Uncertainty and the Implications for Consumer Search




Adriaan R. Soetevent (University of Groningen, The Netherlands) ; Tadas Bruzikas (University of Groningen, The Netherlands)

Do the choices of consumers who search for a product's best price exhibit risk neutral, risk averse or loss averse risk attitudes? We study how in a problem of sequential search with costless recall the relation between a consumer's willingness to pay for continued search and the level of price uncertainty depends on her risk preferences. Independent of the current best price, an increase in price uncertainty encourages continued search when consumers are risk neutral. However, we prove that theory predicts an inversion when consumers are either risk or loss averse. In those cases, an increase in price uncertainty only increases the consumer's willingness to pay (WTP) for continued search if the current best price is sufficiently low. We subsequently use this observation in an empirical test to identify between different risk preferences in a stylized problem of sequential search. In line with the inversion, we find that a reduction in price uncertainty decreases the WTP for continued search when the current best price is low but increases the WTP when it is high. While at odds with the assumption of risk neutrality, this finding is consistent with models of consumer risk and/or loss aversion. Moreover, the model parameters of risk and loss aversion that lead to the best empirical fit have values similar to those estimated for other decision domains.


consumer search; risk aversion; loss aversion; price uncertainty


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7/17: Standard Deviation

Even though they realize that investment returns are cyclical, volatility comes with the territory, a mental switch flips for everyone at some point. And the closer we get to retirement, the faster that switch flips, and typically at a lower level of loss than when we were younger.

EFM= The author notes that many investors have a problem with anything more than 5%. They are NOT investors. A market correction is 10 % to 15%. If you cannot handle that, you are not an investor

7/17: Caregiving and Forgiveness: When a Parent Has Wronged You

EFM- Tough stuff but real life

During her childhood, Tiffany Day’s mother was physically and verbally abusive. So the only child was rattled when her adult friends would tell Day how nice she was. Her single, divorced mother had changed over the years, Day admitted, but that did not erase what she had done. Then in January, her mom, 66, was diagnosed with Alzheimer’s disease.

Knowing that the disease would only progress, and Day would inevitably be getting more involved in her care — and more resentful — she decided to bring up the past. “I felt if I waited too long, I wouldn’t have that opportunity and would regret not having closure,” says the San Clemente, California, mother of two.

One day she just blurted it out. “My mother could have denied it again, but I was lucky,” says Day. “She apologized but didn’t really remember the harsher things she had done to me. It doesn’t matter. I am impressed she even said she was sorry. I got what I wanted. It’s not going to do me any good to pound in how mad I am. I can’t change the past, but talking to her about her behavior has made caregiving easier.”

Getting Rid of Anger While Caregiving

Forgiveness is complicated enough, but when you are taking care of a parent you feel has wronged you, it is even more difficult. You might think, Dad was miserable to me and now he wants me to lovingly care for him? It may seem inconceivable to you why Mom can’t see that her behavior was destructive. Or, do you feel guilty for your feelings, of wanting that closure, now that your parent is suffering?

These are important questions, but forgiveness is about you, not them. It is in your best interest. For one thing, caregiving and forgiveness gives your parent less power over you. It can also make you feel good for treating them well, or taking the high road — the way you wish to be treated and wish you had been. Of course, there may be situations where their treatment of you was, or is, so egregious that you cannot care for them.

In general, it is psychologically and physically healthier to get rid of anger. Stress contributes to heart disease and other serious illnesses, including strokes and depression. In one study at the University of Tennessee, those who forgave easily made fewer doctor visits and had lower blood pressure than those who held a grudge.

Caregiving and Forgiveness

Forgiving a parent does not mean you suddenly have amnesia and forget. That’s not realistic. But it does mean letting go — as much as you can — of the deep, festering pain. “Forgiveness is like a gift from the gods. It helps us release the past so we can be fully present in the moment,” says John Chupka, a social worker and founder of The Forgiveness Center in Troy, New York. “You don’t have to wholly forgive a parent to care for them. The act of caring for them is forgiveness in itself.”

When is it most important to forgive? “If anger in your heart is interfering with good care, then taking the time to forgive is important,” notes Robert Enright, author of “8 Keys to Forgiveness and a psychology professor at University of Wisconsin-Madison.

Enright believes that we should forgive if we’re ready, but not be pressured into it. He suggests caregivers ask themselves:

“Are you so angry that this is getting in the way of your happiness? Do you want to leave a legacy of anger with your parent or would you like more from your relationship than that?”

Then decide your course of action — or inaction.

Keep these six forgiveness tips in mind:

1. Try looking at the situation differently.

While there is never an excuse for unkind acts, filmmaker Gayle Kirschenbaum began to see her mother differently during the course of making the documentary “Look At Us Now, Mother!” (with her mother Mildred).

Throughout her childhood, Mildred was an ultra-critical parent who was always disparaging her daughter — Gayle’s hair was “too curly,” she repeatedly told her she needed a nose job, and had wanted a son instead. To cope with the pain, Gayle changed her expectations of Mildred. “I forgave her by reframing how I looked at her. Instead, I saw her as a wounded child. I went digging into her past. When someone is being nasty to you, you better believe they are hurting,” he says.

2. Realize that they may not know they did anything wrong.

It may seem inconceivable to you, but they may be clueless that they showed blatant favoritism to your siblings or neglected you, or whatever else they did. Apologizing and making amends may be out of the question because they don’t realize their mistake.

3. Be kind to yourself.

Even if you forgive, you will probably still feel some hurt. Clearing the air does not erase history. You have every right to be upset by shabby treatment.

4. Be honest.

Did you play any part in the bad dynamic? Is it truly black and white? If you didn’t act your best, you may want to apologize and start the conversation. Would friends or other family members, or a professional, be more objective observers?

5. Focus on what’s good.

“I have a great life,” says Day. She has made positive personal choices as a result of her upbringing. “Everything I have is the opposite of what my mother had because I don’t want to be like her.”

6. Reframe your reaction.

Rather than focus on “How could Dad have done this to me?” reframe it with, “Why am I allowing him to torment me? How is this helpful to me?”

Are you angry about your parent’s behavior, past or present? Do you think it would help if you tried to forgive them? What has worked for you? Shares your story about caregiving and forgiveness with us in the comments below.

7/14:Men Feel More Educated About How to Plan for a Secure Retirement
That is true but the male ego can destroy it better due to male ego.
on broad topics such as addressing pre-retirement debt, men and women showed the same propensity to avoid taking loans or hardship withdrawals, at about 71%. When it comes to retirement plan features, men and women both placed the highest priority on a common workplace perk—an employer match on the employee’s contribution to the 401(k) or retirement plan being offered. It was ranked No. 1 by both sexes, followed by having investment options.

However, women are more likely to place higher importance on the employer match (64% vs. 61% of men), and men are more likely to place importance on investment options (29% vs. 21% of women).

Men think about retirement more frequently than women. Sixty-nine percent report thinking about it at least monthly, compared to 55% of women. Men are also significantly more likely to monitor their retirement plan more frequently. More than half do so monthly (53%), compared to 36% of women. While both men and women indicate that knowing their status against goals is important, men are more likely to say “very important” (54%) than women (48%). 


A primer from Resolve asset management

7/14: Well, this sucks..........

2016 has been the worst year for stock picking.

Active fund managers had their worst first half ever, with fewer than one in five beating a basic market benchmark

Correlations, or the tendency of stocks to move up and down together, had been falling but rose in June to 35 percent, a number that is still low compared with levels of 90 percent or higher in recent years but high enough to be disruptive.

"This makes the environment more challenging for active managers when stocks are more correlated with one another," BofAML said in a note. The firm noted that dispersion, or the difference in performance between sectors, also has remained narrow, further limiting opportunities for stock picking.

"While intra-stock correlations had been trending down for most of the year, they spiked again in the period surrounding Brexit as macro came back into focus," the note said. "Long-short alpha opportunity also remained scarce, another challenge to stock pickers."

"While intra-stock correlations had been trending down for most of the year, they spiked again in the period surrounding Brexit as macro came back into focus," the note said. "Long-short alpha opportunity also remained scarce, another challenge to stock pickers."

7/14: Living longer costs too much

93 percent of Americans are optimistic about the prospect of a lifespan that’s an average of 30 years longer than lifespans were 100 years ago

Money worries, as might be expected, are more pervasive among younger people — 57 percent of boomers say they feel financially unprepared for such an extended lifespan, while 79 percent of GenXers say the same thing. But despite the financial problems they already face, millennials are a shade more optimistic than GenXers about how they’ll survive financially during all those extra years, with 74 percent reporting that they feel financially unready.

when respondents were asked to finish the sentence, “following your dreams is all well and good, but you need to have …,” the top two barriers chosen were “enough money” (57 percent) and “a good financial plan” (50 percent). The biggest regret reported (or potential future regret for millennials) was not saving more money (52 percent); that ranked above not traveling more (38 percent) and not spending more time with their kids (32 percent).

7/13:Gundlach: The Once-in-a-Career Moment in the Bond Market

Since July 5, the yield on the 10-year Treasury has risen 16 basis points, from 1.37% to 1.53%. The previous low yield for the 10-year was 1.39% in July 2012.

The bullish sentiment in the bond market, Gundlach said, was from pundits who were calling for a 1% yield on the 10-year. But the return from that move would be too small to compensate for the risk of an adverse move in yields.

Gundlach said the probability of a Fed hike is down to zero for 2016, including the July, September and December meetings. There is a probability of one-third of a rate hike for the February 2017 meeting.

When cannibals ate a missionary, they got a taste of religion.

7/13: HIV coverage is possible

AGES 30 - 65






7/13:Americans Unprepared for and Worried About Retirement

the percentages of those who have planned for retirement or have a retirement account are little changed since 2009. In 2009 37% had tried to figure out their retirement savings needs, compared to 39% in 2015. Fifty-seven percent of Americans had employer-sponsored or individual retirement accounts in 2009, while 58% had them in 2015.

Respondents with lower income levels are much less likely to be prepared for retirement than those with higher incomes. Only 19% of those with incomes less than $25,000 have tried to plan for retirement, compared to 60% of those with $75,000 or more in income. Similarly, the likelihood to have a retirement account increases dramatically with income, such that only a small minority of respondents with less than $25,000 in income have a retirement account (18%), while a strong majority of respondents with $75,000 or more income have one (87%).

7/12: Hard to believe

US Treasurys still have some of the highest yields in the world

7/11: Click for a paper on Brexit and all sorts of  issues in planning and why the industry will keep offering services that don't work. For example, do you know that rebalancing doesn't work and never has????

Brexit Arises

 Run for the Hills and Sell Everything!!!

Sit There Like a Lump and Get Hammered

TDFs and Bonds are Awful

Dollar Cost Averaging Down

  1. Mind, Behaviour and Health - a Randomised Experiment




Alem, Yonas (Department of Economics, School of Business, Economics and Law, Göteborg University) ; Behrendtz, Hannah (Department of Economics, University of Edinburgh) ; Belot, Michele (Department of Economics, University of Edinburgh) ; Bíró, Anikó (Department of Economics, University of Edinburgh)

Behavioural attitudes toward risk and time, as well as behavioural biases such as present bias, are thought to be important drivers of unhealthy lifestyle choices. This paper makes the first attempt to explore the possibility of training the mind to alter these attitudes and biases, in particular health-related behaviours, using a randomized controlled experiment. The training technique we consider is a well-known psychological technique called "mindfulness", which is believed to improve self-control and reduce stress. We conduct the experiment with 139 participants, half of whom receive a four-week mindfulness training, while the other half are asked to watch a four-week series of historical documentaries. We evaluate the impact of our interventions on risk-taking and inter-temporal decisions, as well as on a range of measures of health-related behaviours. We find evidence that mindfulness training reduces perceived stress, but only weak evidence of its impact on behavioural traits and health-related behaviours. Our findings have significant implications for a new domain of research on training the mind to alter behavioural traits and biases that play important roles in lifestyle.


Health-related behaviours; Behavioural traits; Present Bias; Stress; Experiment.


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