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


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

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

Charlie Munger 

The key to success is the ability to fake sincerity.

Many humorists

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

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

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


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


Uniform (Im)Prudent Investor Act- Waaaaaaaaaaaaaaaaaay Out of Date

World Clock by

4/28: Righting the ‘Fiscal Ship’ A new online game from the Brookings Institution and the Wilson Center requires players to maintain the US national debt at its current level while meeting three major policy objectives.

3/28" Consumers in stock
Gary Halbert

Since peaking in 2007, US households have shrunk their holdings of stocks, mutual funds and equity ETFs (exchange traded funds) by a record 18.6% or over $2 trillion in total.

This has been the largest equity liquidation in history and well surpasses the 10% liquidation during the decade from 1979 to 1989. The largest decline has been in direct individual ownership of stocks,

, younger Americans are the most likely to have exited the stock markets. By age, Americans under age 35 are the most likely to have fled the market. The percentage of young people with money in stocks has fallen 14 points since 2007, to only 38%.

since 1980, the stock market as measured by the S&P 500 Index, has appreciated more than four times the average home price increase in the 10 largest metropolitan cities in the US, according to Forbes.

The Bottom Line: Barring a huge surprise between now and this Friday, we will be in the second-longest bull market in history. Yet stock ownership by Americans is near the all-time record low, with over $2 trillion in shares liquidated since the peak ownership in late 2007. Something is very wrong with this picture.

In 2007 when the stock markets peaked, 65% of Americans owned stocks in one form or another. Yet today, that number has fallen to only 52% according to the latest Gallup poll. Despite the fact that the major stock indexes are near their all-time highs, millions of Americans have been on the sidelines since 2008-2009.

4/28: Not good news

Australian dollar hit hard by weak data


Bets on rate cut grow after inflation slows unexpectedly

4/28: You should short Florida.

Animated map of what Earth would look like if all the ice melted

4/27: Council for Disability Awareness and Life Happens


"Risks of Stagnation in the Euro Area" Free Download
IMF Working Paper No. 16/9

HUIDAN LIN, International Monetary Fund

This paper discusses the risks of stagnation over the medium term in the euro area. It examines the consequences of longer-term growth trends that predate the crisis and the progress made in addressing the crisis legacies of high unemployment and debt. The paper illustrates in a downside scenario, how low potential growth and crisis legacies leave the euro area vulnerable to a negative shock that tips the economy into a prolonged slowdown.

4/27: Long Term Care has cost life companies massive amounts of losses primarily because of the very low lapse rates (people terminating the policy before need)


PacLife in talks to buy Genworth term-life platform, office

By Katherine Chiglinsky

Genworth CEO Tom McInerney has sold businesses after suffering losses on its long-term care insurance coverage.





Hamdamov Omonulla Ne’matillaevich

In this article you will learn what methods of financial risk management exist in the practice of management, how to build a system of risk management and carry out a phased analysis of effectiveness of introduction of the control system. The article includes the following main parts:financial risk management system, objectives of risk management at the enterprise, classification of risk in risk management system, methods of financial risk management, models of assessment of financial risk of company, stages of creation of the own risk management system, example of mechanisms of accounting and control in the risk management system, influence of risk management system to investment attractiveness. Key words: financial risk, management, methods, models, economic value added


4/27:How Do You Measure Which Retirement Income Strategy Is Best?

EFM- This has pretty charts and graphs covering 30 years of retirement with Monte Carlo, Kahneman and Tversky and on and on. All sorts of strategies to figure out what one is to do  to decide how much to take out.
And this is pretty much what software may do- though it is extremely difficult to take a program apart to see what is going on. But as stated many, many times, to look a retirement projections longer than 5 years is absurd. Actually there will be some major issues normally occurring during the five years.

What is the easiest to work with in the real world. Once you have your asset base established, just divide the amount by the years left that you determined as the lifetime. If it was 30 years, take out 1/30 in the first year, second year 1/29 etc..

Additionally, all programs offer only a by and hold and a Monte Carlo strategy (?) is to show what the odds are that the asset amount will diminish. I don't care what the odds are- I think the odds are high that we will all have our heads handed to us by 2020.

I have- for about 20 years- offered a very simple method to avoid it.

More on that to come   


Top 10 Ways for Caregivers to Spend Dollars Wisely

By Kris Maxham, Staff Writer

Many caregivers grapple with financial choices that can allow them to continue providing care, support their loved one’s needs and keep them safe. Here are some actual ways that caregivers have wisely invested their dollars:

There are many options available to support the role of the caregiver. Spending dollars where they will matter the most can be the key to a caregiver’s capacity to endure and to the well-being of the care receiver.

4/27:No, Robos Still Can’t Act as Fiduciaries, Attorney Contends

Melanie L. Fein, the former senior counsel to the board of governors of the Federal Reserve, says FINRA’s March guidance on robos for B-Ds actually bolsters her argument that robos do not provide fiduciary advice.

The Financial Industry Regulatory Authority (“FINRA”) recently issued a report on robo-advisors entitled “Report on Digital Investment Advice.” The report addresses the various features of robo-advisors and highlights investor protection concerns and regulatory issues that may arise from their use by investment professionals and individual investors. The report implicitly raises the question of whether robo-advisors meet the fiduciary standard of care applicable to broker-dealers and investment advisers. The report suggests that, on a stand-alone basis, robo-advisors do not meet a fiduciary standard when they advise individual investors. The report supports the view that human judgment by a trained financial professional is a necessary element of the fiduciary standard. This paper analyzes the findings and implications of the FINRA report in light of the fiduciary standard of care and poses questions that need to be answered by regulators concerning the fiduciary standard to which robo-advisors — as well as investment advisers and broker-dealers — will be held in the future.


Recovery Room Kit

By Hana Kim


Three years ago, my mom underwent major surgery to remove a brain tumor. The day of her surgery felt like the longest day of my life. Because she didn’t have any family members in the area, I was going to be her primary caregiver. She worried how I would be able to handle things by myself. It was an emotionally draining experience, but I had prepared myself for the long wait.

Prior to the surgery, I prepared a backpack filled with items that I would need for the long day. To help with my mom’s recovery, I needed to remain strong, both physically and emotionally. My backpack was my recovery room survival kit.

If someone you love will be undergoing major surgery, it might be helpful to have your own survival kit. The day of surgery can be a traumatic experience for both the patient and the caregiver. If you make adequate preparations, you can make yourself as comfortable and alert as possible.

My own kit included the following essentials:

Notepad and pen: The patient will receive a lot of instructions regarding post-operative procedures such as medications and wound care. You and the patient may experience information overload. It will be helpful to jot down notes as soon as the nurse or doctor gives you those instructions. If certain instructions are vague, ask follow-up questions before the patient is discharged.

Chocolate or energy bar: You may be so stressed that you will forget to eat. You will need to keep your energy level up. A piece of chocolate has enough caffeine for a temporary boost. An energy or protein bar has enough calories to substitute for a small meal. You can also carry a bag of nuts or a banana. If you don’t have an appetite for cafeteria food, keep some snacks in your bag.

Bottled water: This may seem obvious, but water is an essential. You don’t want to dehydrate yourself with too much coffee or soda. Also, you don’t want to pester the nurses for a glass of water. Right after surgery, the patient will not be able to take water for a few hours. However, you still need to keep yourself hydrated.

That one phone number: As a caregiver, you need to remain physically and emotionally strong. When you’re feeling overwhelmed, don’t forget to ask for help. Everyone has that one phone number to call. It can be a family member, friend, or mentor. You don’t have to do everything by yourself. When I thought the pressure was too much, I called my best friend to share my fears and anxieties. Just a five minute conversation can work wonders.

If you are going to be a caregiver, be prepared and bring your own essentials. In my mom’s case, the actual procedure lasted about five hours. She was awake by the time they rolled her into the Intensive Care Unit. I waited in the hospital lobby until they allowed me to see her. When I walked into her ICU room, I wasn’t sure what to expect. She looked up, saw me, and waved. I waved back, and I knew everything was going to be okay


Thoughts of Mortality May Inhibit Annuity Use:

Researchers from the Carroll School of Management at Boston College conducted several studies that found the task of choosing an annuity increases mortality salience by forcing people to consider their own death, and motivates consumers to escape thinking about their mortality by avoiding the annuity option. Read more »


"Are Online and Offline Prices Similar? Evidence from Large Multi-Channel Retailers" Fee Download
NBER Working Paper No. w22142

ALBERTO CAVALLO, Massachusetts Institute of Technology (MIT) - Sloan School of Management

Online prices are increasingly being used for a variety of inflation measurement and research applications, yet little is know about their relation to prices collected offline, where most retail transactions take place. This paper presents the results of the first large-scale comparison of online and offline prices simultaneously collected from the websites and physical stores of 56 large multi-channel retailers in 10 countries. I find that price levels are identical about 72% of the time for the products sold in both locations, with significant heterogeneity across countries, sectors, and retailers. The similarity is highest in electronics and clothing and lowest for drugstores and office-supply retailers. There is no evidence of prices varying with the location of the ip address or persistent browsing habits. Price changes are un-synchronized but have similar frequencies and average sizes. These results have implications for National Statistical Offices and researchers using online data, as well as those interested in the effect of the internet on retail prices in different countries and sectors.

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

4/26:How to find the best pet insurance plan for your clients

When Consumer Reports investigated pet coverage, they found many policies may not be worth the cost over many years for a generally healthy animal. However, if someone is unfortunate enough to have a pet with a costly chronic condition or illness, or a young animal in need of major care, a pet owner could get a positive payout from pet insurance if their pet develops the condition while covered''

4/26  Very interesting and gives and idea of how bad some sorts are. Curious was number 11- fishing. Number one was  ......................

20 sports that cause the most injuries

4/26" And another one bites the dust

MetLife to suspend individual disability sales

General FAQ
Why is MetLife making this decision?
The U.S. Retail business is focused on creating a smooth path during this time of
transition. This path not only involves the intricacies from a corporate perspective,
but also the unwinding of many legacy systems and implementation of new systems.
Due to the complexity, we made the decision to halt new business in order to
streamline this process and emerge a stronger, more efficient business. As stated
previously, this impacts the fully underwritten IDI business only. The GSI business
under our Group Benefits umbrella will continue uninterrupted.

  1. The Risk Anomaly Tradeoff of Leverage




Malcolm Baker ; Mathias F. Hoeyer ; Jeffrey Wurgler

Higher-beta and higher-volatility equities do not earn commensurately higher returns, a pattern known as the risk anomaly. In this paper, we consider the possibility that the risk anomaly represents mispricing and develop its implications for corporate leverage. The risk anomaly generates a simple tradeoff theory: At zero leverage, the overall cost of capital falls as leverage increases equity risk, but as debt becomes riskier the marginal benefit of increasing equity risk declines. We show that there is an interior optimum and that it is reached at lower leverage for firms with high asset risk. Empirically, the risk anomaly tradeoff theory and the traditional tradeoff theory are both consistent with the finding that firms with low-risk assets choose higher leverage. More uniquely, the risk anomaly theory helps to explain why leverage is inversely related to systematic risk, holding constant total risk; why leverage is inversely related to upside risk, not just do wnside risk; why numerous firms maintain low or zero leverage despite high marginal tax rates; and, why other firms maintain high leverage despite little tax benefit.




4/25: Fees- according to Morningstar, the median expense ratio for actively managed mutual funds is 1.2 percent. For index funds it is about 0.5 percent.

4/24:Most fraud victims are too ashamed to go to the authorities (FA Magazine)

Just under 60% of victims of fraud felt too much shame to actually report the crime to authorities, according to a survey by the American Institute of Certified Public Accountants, writes Ted Knutson at Financial Advisor Magazine.

"Nearly 40 percent of victims said they didn’t report thefts because they blamed themselves, while 18 percent said they were too embarrassed to contact the police and others about the crimes," Knutson reports.

The survey also found that around a quarter of respondents who reported being defrauded personally knew the perpetrator of the crime.

EFM- Years ago I asked teh head of an arbitration company what he thought the statistics were for people who actually filed an arbitration. He said about 5%. I agreed.

4/24 F.B.I. Says Killing Man Was Justified, but Not Shooting His Tire:"

This has nothing to do with money and so on. It simply reflects a world gone a little screwy.

  1. Is increasing inequality harmful? Experimental evidence




Fehr, Dietmar

Increasing inequality is commonly associated with social unrest and conflict between social classes. This paper reports the results of a laboratory experiment to study the implications of rising inequality on the tendency to burn others' income. The experiment considers an environment where higher earnings are typically associated with higher effort and varies how fair and transparent this relationship is. The findings indicate that increasing inequality does not per se lead to more money burning. Rather, it depends on whether the increase in inequality can be unequivocally attributed to exerted effort. If subjects can tweak the income-generating process in their favor, money burning is substantially higher. Low-income subjects are more likely to burn others' income and most of the money burning is aimed at subjects with higher incomes.


inequality,money burning,fairness


C72 C92


4/24: This is going to be very messy.

Robos Aren’t Fiduciaries

The state is concerned that robo-advisors can’t deliver appropriate advice because their recommendations are based on questionnaires that investors fill out, often without the robo providing any verification for accuracy

the DOL, the SEC and Finra are all scrutinizing robos and their ability to deliver due-diligence-based, conflict-free advice,

4/24: And more

FINRA: Robo-advisors can't be fiduciaries (Financial Planning)

A white paper by former Federal Reserve senior counsel Melanie L. Fein argues that a recent FINRA report suggests that robo-advisors are unable to act as fiduciaries, reports Andrew Shilling for Financial Planning.

Shilling quotes Fein's paper, arguing "the best interest of the client requires the advisor to conduct some degree of portfolio analysis when providing investment recommendations. Without portfolio analysis, the advisor cannot be confident that the investment advice is appropriate for an individual client."

4/24" Labor Force details

4: 24

Some of the countries hit hardest by the financial crisis might not recover fully for several more years (Project Syndicate)

Harvard finance professor Carmen Reinhart analyzed IMF projections of GDP growth in the US and several European countries to determine the depth of post-crisis economic damage and the amount of time needed to recover to pre-crisis income levels. Reinhart found that while the US and Germany recovered relatively quickly, countries like Italy and Greece might not return to pre-crisis output levels until well into the next decade.

Reinhart observed that this could reflect differences in the debt crises that led to recessions in those countries: "The anemic recovery in many advanced economies (even when compared to other severe crises) owes much to the prevailing 'extend and pretend' approach to debt. European banks since the crisis have largely been kept busy buying government debt and evergreening (in Ponzi-scheme fashion) private pre-crisis loans. As difficult as the foreclosure episode was in the US, it enabled borrowers and banks to adapt to the collapse of the housing bubble and to move on."

4/24:For Low-Income Earners, the Recession Never Ended

Dollar General’s representatives made a compelling presentation that the company’s consumers never really exited the recession, and in fact, their situations have gotten worse. Inflation is outpacing wage growth for these low-income earners.

“Caution is especially warranted because, with the federal funds rate so low, the [Federal Open Market Committee] FOMC’s ability to use conventional monetary policy to respond to economic disturbances is asymmetric. If economic conditions were to strengthen considerably more than currently expected, the FOMC could readily raise its target range for the federal funds rate to stabilize the economy. By contrast, if the expansion was to falter or if inflation was to remain stubbornly low, the FOMC would be able to provide only a modest degree of additional stimulus by cutting the federal funds rate back to near zero.” — Fed chair Janet Yellen (Central Bank)

Six out of 10 Americans have less than $1,000 saved. They have not received a direct benefit from rising capital markets.

“This has resulted in the majority of Americans living on the bubble of economic uncertainty. 60% of Americans don’t have a savings safety net of $1000 and 20% don’t have a savings account at all. So as you will see, our customers simply haven’t received the benefit of the economic recovery. Households earning less than $52,000 have experienced negative wage growth . . . Only households in the top fifth quintile have seen any real income growth since the recession and most of that’s being driven by the top 5% of earners. So you can see that our core customers who were financially strapped before the recession are even worse off today.” — Dollar General (DG) EVP and chief merchandising officer Jim Thorpe (Retail)

Yellen acknowledged that real interest rates are already negative.

“The evidence on balance indicates that the economy’s ‘neutral’ real rate — that is, the level of the real federal funds rate that would be neither expansionary nor contractionary if the economy was operating near its potential —is likely now close to zero. However, the current real federal funds rate is even lower, at roughly minus 1-1/4 percentage point.” — Fed chair Janet Yellen (Central Bank)

4/24: Retirement assets

4/24: Interactive charts on everything   Exceptional

How the Recession Reshaped the Economy, in 255 Charts

4/24: What Would You Like to Ask DOL About the Fiduciary Regulation?

A free search site. PUT IN YOUR QUESTION and they will go to the DOL to get answer. Beats going directly  yourself

4/24:National Shared Housing Resource Center

Home Sharing is a simple idea: a homeowner offers accommodation to a homesharer in exchange for an agreed level of support in the form of financial exchange, assistance with household tasks, or both.

Home Sharing programs can offer a more secure alternative to other roommate options. Many programs have staff who are trained to carefully screen each program applicant through interviewing, background checking, and personal references.

4/24: This is a true representation of an indexed annuity. It is also a fraud upon the consumer. Know why????


4/24: Read this

Will Fiduciary Rule Spur New Lawsuits Against Advisors?

And this is my reply

After sending my book to the DOL in early 2012, I was contacted by two attorneys at the DOL. They said it was a "breath of fresh air", yada,yada. My ego inflated like a 200 pound puffer fish. But after more conversation went nowhere, I asked what they were going to do about increasing knowledge to advisors so the incompetence would not happen to begin with. I was told they were simply going to wait for the lawsuits to occur and that would send a message to the rest of the advisors to get better.

All the hot air rushed out and I recognized, once again, this was not going to turn out well. Four years later, nothing changed.

And if anyone thinks that securities arbitration is fair and impartial- I have never met a securities attorney who knew what diversification was by the numbers. Correlation?? Standard deviation???

Certain elements of the rule is fine and necessary (20%) Another 20% is OK. The 60% left is a sad copout and won't do much outside of lining the coffers of attorneys.

This is what Britain did. It requires that all advisers — whether they are independent or restricted — adhere to a code of ethics, complete at least 35 hours of continuing professional education annually and hold a “Statement of Professional Standing” certificate from an accredited institution attesting to their formal training and fulfillment of all requirements.

They are way ahead of us.

4/20: And another one bites the dust

MetLife Suspending DI Sales 

Effective September 1st 2016, MetLife will suspend all fully underwritten Individual Disability Income insurance sales.

4/20: Read about what happened in Britain and Australia when they changed the rules for advisors. I am writing commentary on the DOL rule but it is essentially a copout since no education/knowledge is truly demanded. This is what Britain demanded in part

The FCA raised the bar in terms of qualifications necessary to be licensed as a financial adviser. It requires that all advisers — whether they are independent or restricted — adhere to a code of ethics, complete at least 35 hours of continuing professional education annually and hold a “Statement of Professional Standing” certificate from an accredited institution attesting to their formal training and fulfillment of all requirements.

A study cited a recent survey conducted on behalf of the Association of Professional Financial Advisers in which 69% of advisers said they had turned away potential clients over the last 12 months, with 43% of those advisers saying that their advice services would not have been economic given the circumstances of those potential clients.

Specifically, the authority found that the proportion of advisory firms that ask for a minimum portfolio of more than £100,000 (about $142,000) has more than doubled, from around 13% in 2013 to 32% in 2015. The authority also found that 45% of firms very rarely advise customers on retirement income options if those customers have less than £30,000 ($42,600) to invest.a

4/20: Number of RIAs

Those who have a registered investment advisor license have always been required by law to act in clients' best interests, but they account for only 7% of all financial advisors.

There is a caveat though. The fiduciary rule only applies to retirement accounts. So if you have a brokerage account and an IRA account with Merrill Lynch. Your Merrill Lynch broker needs to act in your best interests with your IRA account, but needs NOT with your brokerage account! 

4/19: FINRA Chief Sees Improvement in Final DOL Fiduciary Rule
"FINRA chief Richard Ketchum ... credited the DOL for making 'major steps forward' in allowing for more operational flexibility under the fiduciary rule, including the explicit permission for advisors to recommend proprietary products and some modifications to the best-interest contract exemption.... Ketchum said he is hopeful that the DOL will continue the dialogue with the industry and provide more clarifying guidance in areas like the types of compensation structures that are permissible under the regulation."

4/19 Alzheimers

If you get Netflix watch The Genius of Marian
5 stars


How to figure out how much you need for retirement



No matter what publications or surveys, invariably they state that the majority of upcoming retirees do not know how much money they will need at retirement. Well, I have taught this for a long time and decided to show you how it is done by hand.  Yes, you can use software programs on the web and they might help. I say ‘might’ since one has to know what numbers to put in and why- and also what the software is doing with them- next to impossible. You will find answers- even from major services like Vanguard, Fidelity, T Rowe Price- to be remarkably different. Some of you may have more convoluted issues- vacation homes, rental real estate, collectibles, businesses, and more. In such cases software programs with excel are needed- but you need to understand the basics before that is attempted. 

So here are the inputs: retirement budget, future inflation, actuarial lifetime and rate of return through the future. I will tackle the budget first. It easily is the most important. However, as I go over the fundamentals month after month, please note that, while the numbers are developed for lifetimes up to 30+ years after age 65, they are only guesstimates that will change substantially. I don’t think they will be that valid after 5 years maximum- too much happens. Deaths, illnesses, children, divorce, parents, just plain bad luck and much more. No matter how you develop the numbers, they are really an approximate guide to what the future might financially bring. But they are not cast in stone by any means.    

Budget and retirement budget: A full budget cannot be completely shown here due to the limited space. So here’s what you should do now. Until February 1, 2016, go to and scroll down and you will see two video links: Budget one and Budget two. I did these a while ago but both are valid. They are free. If you do not spend some time viewing these and implementing the basics, your retirement is screwed. (Click on the Daily Commentary to get an idea of what goes into my thought process on a host of issues.)

The budget is the main item to be revised if there is not enough current funds to last your lifetime. It is possible to adjust the other areas and while inflation will change with time- I doubt it will get beyond 4%/5% for a very long time given the realization by the bulk of world economies that letting it go to extreme has been shown to completely destabilize their economies and lead to major defaults. Your actuarial lifetime for a healthy person may be reasonably determined and not much you can do here. Obviously if health fails, the shorter time to live will require less of a kitty. The rate of return- don’t plan on what has occurred in the past decades. A 5% total for an allocation (which generally contains bond funds) is about as high as you can get.

  1. Homo Moralis: Personal Characteristics, Institutions, and Moral Decision-Making




Deckers, Thomas (University of Bonn) ; Falk, Armin (University of Bonn) ; Kosse, Fabian (University of Bonn) ; Szech, Nora (Karlsruhe Institute of Technology)

This paper studies how individual characteristics, institutions, and their interaction influence moral decisions. We validate a moral paradigm focusing on the willingness to accept harming third parties. Consequences of moral decisions are real. We explore how moral behavior varies with individual characteristics and how these characteristics interact with market institutions compared to situations of individual decision-making. Intelligence, female gender, and the existence of siblings positively influence moral decisions, in individual and in market environments. Yet in markets, most personalities tend to follow overall much lower moral standards. Only fluid intelligence specifically counteracts moral-eroding effects of markets.


homo moralis, moral personality, real moral task, markets and personality, trade and morals


D02 D03 J10


4/17: Fairsplit
Dividing assets in death, downsizing or divorce is stressful, time consuming and often emotionally destructive – We want to help divide things, not families.

Very interesting for beneficiaries  

4/17: How Come It’s Still Harder to Become a Hairdresser than a Financial Adviser?
I sent this to Jason Zweig, WSJ

 For over two decades I have fought the battle to right the many wrongs from the industry. And while the professors offered a decent effort, it still misses the point. The fundamentals of investing have never been taught to brokers or RIAs. I had a good pass rate for the series 7 (long time ago) but there was nothing on diversification, standard deviation, correlation etc. There is nothing on risk. And anything now on retirement does not include the necessity  of insurance and annuities.

Anyway, the bulk of RIAs simply took the knowledge of the 7 (Myself included in 1985) to file become a ‘fiduciary’.


I got a CFP in 1984 and said “I don’t think I know that much”. I was right. A Masters in Planning in 1991. Much, much better but still lacking a lot of real life applications. NO matter, the advent of the internet and personal computers(1995) - and then Google- opened up knowledge bases that changed everything. That and the continual changes in  tax laws and the real bugaboo of economics gone haywire. . From 2000 forward, the old focus on theories were dropped on their heads. The overwhelming amount of products buried most advisers- and does so today.


In short, the professors should have covered the lack of instruction at almost all points in the profession. RIAs fill out forms. The CFP is one college semester on money. Check is better, But, for financial planning, a degree of a bachelors or masters in planning is the minimum starting point CFA is better for just investments.  I assume you know all this but the basic level of investing advice is nil.


And you have the issues that standard deviation is NOT risk ipso facto. One cannot do an asset allocation without correlation but where does on get it? And over what period of time. Even with that, you’d have to figure out the correlation amongst and between each. I suppose some ‘wealth managers’ may have the software, but for the middle class- not a chance. Rebalancing does not work save for an isolated specific. The Modern Portfolio has been almost completely misapplied .  Dollar Cost Averaging doesn’t work about 2/3 of the time. And it goes on……


And though you have heard this from me years ago- does a fiduciary have to be legal? No, not as long as you can get away with it. Every investment adviser is an RIA through the state or SEC. If one becomes a fee financial planner, about 35 states require licensing for insurance advice and that is particularly true now when insurance and annuity products can have LTC elements. You also have life settlements. If the education is so bad in investments, it is much harder with insurance. Maybe the legal system won’t delve into this area simply because they are clueless. (Never met an attorney that knew what diversification  was- and that include those doing securities arbitration).


There are a number of issues I have delved into but the question for most consumers is what does ‘this have to do with the DOL’s position’? Everything because the DOL did not spell out what should be done or what one has to know. (Actually the IRS has  to do the enforcement.) One would assume that learning how to use a personal financial calculator would be a minimum. Nope- and that is simply illogical and egregious. But now we have the legal system with a huge number of cases that will be processed incorrectly and, worse yet, litigated poorly. (As we all know, consumers are reticent/scared  to initiate a case. And they take low settlements just to avoid being harassed by the system)


The DOL’s effort was needed to correct  as host of issues. They did address the conflicts of interest with commissions. I will let others like or dislike. But they did nothing to address the woeful lack l knowledge regarding investments. Using standard deviation as risk is still taught by some universities. Mathematically, rebalancing by William Bernstein, does not work in the real world. The 4% withdrawal rule- forgettabotit.   Risk of Loss???- there are no numbers to clearly identify  risk. TDFs are scheduled for losses for many retirees.


Not a necessarily good review of brokers et al without clearing addressing the fact that there is no real life application in the licensing material. That, in essence kills the new rules because RIAs have no knowledge base to act as fiduciaries. Lastly, the prominent agencies- given much publicity for their holy than thou attitude- and accepted by the bulk of journalists- are illegal and acting with impunity.


Consumers were due so much more.


(Want to see what brokers et al should be reviewing. Go to EFMoody and click Daily commentary)