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)

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

 Paul Volcker

“The events of the past few years have revealed limits in economists’ understanding of the economy..."

“Extreme economic events have often challenged existing views of how the economy works and exposed shortcomings in the collective knowledge of economists,”

Janet Yellen

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

'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

Arrogance diminishes wisdom

Fail with honor rather than succeed by fraud

Obi Wan Kenobi

. 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

There is an important methodological point here — distrust conclusions reached primarily on the basis of model results. Models are estimated or parameterized on the basis of historical data. They can be expected to go wrong whenever the world changes in important ways.
Larry Summers

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

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


Many aspects of investing are fun, but your future wealth isn’t a game. You should manage it in the most cold-blooded fashion. Emotion, pride, ego, dreams, and nightmares have nothing to do with the process, although some investors rely on little else. It is in this sense that volatility really matters

Peter Bernstein

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 supposd 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 Twainn

A wise man can learn more from a foolish  question that a fool can learn from a wise answer

Bruce Lee

     The power to understand and predict the quantities of the world should not be restricted to those with a freakish knack for manipulating abstract symbols...

Brett Victor

In the absence of regulation, someone will always be willing to exploit our irrational tendencies, leading to a “phishing equilibrium” in which individuals are harmed.

Phishing for Phools; George Akerlof and Robert Shiller

“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

US Debt Clock
Simply Amazing= includes almost all statistics you would need globally+
12/6: Buybacks

Buybacks have been the dominant driver of demand for stocks since 2009. And total activity in 2016 is set to total $450 billion,

20% of the S&P 500's earnings per share will come from buybacks. By shrinking the amount of stock outstanding, earnings are boosted on a per share basis.

12/6: Check this out. The link will remain above the bar above

US Debt Clock
Simply Amazing= includes almost all statistics you would need globally+

12/6: Fear this

Survey of American Fears, as reported in an October 12 article in Science Daily. Based on responses to questions about 65 potential fears from more than 1,500 adult participants, here are the top 10 things Americans fear:
  1. Corruption of government officials (same top fear as 2015)
  2. Terrorist attacks
  3. Not having enough money for the future
  4. Being a victim of terror
  5. Government restrictions on firearms and ammunition
  6. People I love dying
  7. Economic or financial collapse
  8. Identity theft
  9. People I love becoming seriously ill
  10. The Affordable Health Care Act/”Obamacare
    11. Unable to catch large bass

12/6: Social security from Social Security Made Simple

“Does the SS earnings test apply to spousal benefits? If so, how exactly does that work?”

For those unfamiliar with the Social Security earnings test, the general idea is that if you claim Social Security benefits prior to full retirement age and you work while you’re entitled to those benefits, the earnings test can result in all or part of your benefits being withheld if your earnings exceed a certain threshold.

Then, when you reach full retirement age, your benefit is adjusted upward to account for months in which you received no benefit or a reduced benefit due to the earnings test. For example, if you claimed 36 months early but the earnings test resulted in benefits being withheld for 24 of those months, when you reach full retirement age your monthly benefit will be adjusted to what it would have been if you had only claimed 12 months early rather than 36.

Whose Benefits Can Be Withheld?

One question I see frequently is whether Spouse A’s earnings can affect Spouse B’s benefits. And the answer is, yes, sometimes. Specifically, as a result of the earnings test, your earnings prior to full retirement age can result in withholding of:

§ Your retirement benefit,

§ Your benefit as a spouse or widow/widower,

§ Anybody else’s benefit based on your work record (e.g., your spouse’s benefit as your spouse or your child’s benefit as your child).*

Your earnings cannot, however, result in withholding of anybody else’s own retirement benefit.

Whose Age Matters?

For application of the earnings test, it is only the age of the person with the earnings that matters.

Example 1: Arthur is 64, and his wife Betty is 68. Arthur has filed for retirement benefits, and Betty has filed for a spousal benefit based on Arthur’s work record. Arthur is still working. The earnings test can still reduce Betty’s benefit as a spouse even though she has reached her full retirement age. The key point is that Arthur is the one with earnings, and he hasn’t reached his full retirement age.

Example 2:  Connie is 68, and her husband Daryl is 64. Daryl is receiving a spousal benefit based on Connie’s work record. Daryl is still working. His earnings can reduce his benefit as her spouse, even though she has reached full retirement age. Again, the key point is that Daryl is the one with the earnings, and he is the one who hasn’t yet reached full retirement age.

In either of the above examples, if the younger spouse was not working and it was the older spouse (the one beyond full retirement age) who was working, the earnings test would have no effect.

Benefit Adjustments at Full Retirement Age

When you reach full retirement age**, your own benefit (whether it’s a retirement benefit, benefit as a spouse, or benefit as a widow/widower) gets adjusted as necessary to account for months in which the earnings test resulted in your benefits being withheld. Nobody else’s benefit gets adjusted at that time.

So, in our Example #1 above, when Arthur reaches FRA, his benefit will be adjusted, but Betty’s will not be.

Example 3: Edward is 62, and his wife Francesca is 64. Francesca is receiving spousal benefits on Edward’s work record. Edward is still working. When Francesca reaches full retirement age, her benefit as a spouse gets adjusted upward based on the number of months in which the earnings test resulted in a reduced benefit or no benefit. It does not, however, get adjusted again when Edward reaches full retirement age, even if the earnings test results in additional months of withholding from her spousal benefit in the interim.

*Exception: Your ex-spouse’s benefit on your work record will not be reduced as a result of your excess earnings if you have been divorced for at least 2 years.

**People claiming widow/widower benefits also have a benefit adjustment calculation that occurs at age 62, in addition to the one that occurs at full retirement age.

One must remain active in retirement

12/6: MPT    Meir Statman   Conceived in the late 1950s, standard finance, aka modern portfolio theory, was established in the “anorexic” era of finance, while second-gen behavioral finance looks for a “muscular fit finance,”

12/6: "Oh! What a tangled web we weave, when first we practice to deceive"

However, in my experience, financial firms often don't really do what they say they are doing. On more than one occasion I was able -- though facing resistance -- to delve deeply into the facts of what a financial firm was doing either by examining its computer code or its transactions, and found that it was completely different from what they said they were doing. This may be due to organizational disconnects, such as a programmer not understanding what he/she is being asked to do because the person specifying to the programmer what they want in a calculation is inept at doing so. For all I know this may have changed because there is now, at least nominally, more technical expertise in the finance field, but again from my experience I don't feel that this expertise is really competent to do sound mathematics -- many PhDs in quantitative finance, for example, seem to have absorbed some high-level formulas but don't understand the underlying probabiity theory.

12/5: Big Difference in purchase- none in risk aversion

  1. The effect of olfactory sensory cues on economic decision making




Andreas C. Drichoutis (Agricultural University of Athens) ; Varvara Kechagia (Agricultural University of Athens)

Several studies show that sensory cues influence consumer decision making processes. While scent is a key component of a market's physical environment, it has received far less attention in the academic literature as compared, for example, with visual cues. In addition, most of the studies that examine the e ect of ambient scents fail on one or both of these criteria: to properly control the in infuence of nuisance factors and/or to elicit preferences under real monetary incentives. We collected data from a laboratory experiment where we varied on a between subjects basis the dispersion of a citrus fragrance. We then elicited subjects' willingness to pay for two unbranded products | a mug and a chocolate | by having subjects participate in a 2nd price Vickrey auction. We also elicited subjects' risk preferences using lottery choice tasks. Our results show a statistically and economically signi cant e ect on subjects' willingness to pay: valuations increased between 37% - 43% for subjects who were exposed to a citrus scent as compared to the control group. We do not nd a statistically signi cant effect of the citrus scent on subjects' risk aversion.


scent cues; fragrance; olfactory; willingness to pay; risk preferences; risk aversion; laboratory experiment


C91 D44 D81 D87


12/5: I thought females would be more prone to sacrificing

  1. Antisocial Attitudes, Gender and Moral Judgments: An Experimental Study




Juergen Bracht (University of Aberdeen [Aberdeen] - University of Aberdeen) ; Adam Zylbersztejn (GATE - Groupe d'analyse et de théorie économique - UL2 - Université LumiŹre - Lyon 2 - Ecole Normale Supérieure Lettres et Sciences Humaines - CNRS - Centre National de la Recherche Scientifique)

We study questionnaire responses to moral dilemmas hypothetical situations in which sacrificing one life may save many other lives. We demonstrate gender differences in moral judgments: male participants are more supportive of the sacrifice than female participants. We investigate the importance of the previously studied source of the endorsement of the sacrfice: antisocial attitudes. First, we elicit the individual proneness to spiteful behavior using an incentivized experimental game. We demonstrate that spitefulness can be sizable but it is not associated with gender. Second, we find that gender is associated with moral judgments even when we account for individual differences in antisocial attitudes. Our results suggest that the performance of many institutions (related to the distribution of wealth or punishment, for instance) may be affected by the gender of the decision-makers. Abstract We study questionnaire responses to moral dilemmas hypothetical situations in which sacric-ing one life may save many other lives. We demonstrate gender dierences in moral judgments: male participants are more supportive of the sacrice than female participants. We investigate the importance of the previously studied source of the endorsement of the sacrice: antisocial attitudes. First, we elicit the individual proneness to spiteful behavior using an incentivized experimental game. We demonstrate that spitefulness can be sizable but it is not associated with gender. Second, we nd that gender is associated with moral judgments even when we account for individual dierences in antisocial attitudes. Our results suggest that the performance of many institutions (related to the distribution of wealth or punishment, for instance) may be aected by the gender of the decision-makers.


gender,moral dilemmas,moral judgments,spite,antisocial attitudes,experiment



12/5: Finding one, two and three standard deviations

I need to find one, two and three standards deviations above the mean over 14.88 and one,two and three below this mean. The standard deviation in this equation is 2.8


Since you know the standard deviation and the mean, you simply add or subtract the standard deviation to/from the mean.
1st standard deviation above = mean + standard deviation = 14.88 + 2.8 = 17.68
2nd standard devation above = mean + 2standard deviation = 14.88 + 2.8 + 2.8 = 20.48
3rd standard devation above = mean + 3standard deviation = 14.88 + 2.8 +2.8 +3.8 = 24.28
1st standard deviation below = mean - standard deviation = 14.88 - 2.8 = 12.08
2nd standard deviation below = mean - 2standard deviation = 14.88 - 2.8 - 2.8 = 9.28
3rd standard deviation below = mean - 3standard deviation = 14.88-2.8-2.8-2.8 = 6.48
12/5: How the mighty have fallen

Sears is on the brink of catastrophe as stores closures loom and top execs flee the company

Next might be JC Penney

  1. Nudging Online Security Behaviour with Warning Messages: Results from an Online Experiment




René van Bavel (European Commission - JRC) ; Nuria Rodríguez-Priego (European Commission - JRC)

This study is part of a larger effort to better understand online behaviour. We tested the effect on peopleČŘ™s security behaviour of different ways of warning them about cybersecurity threats with an online experiment (n=5,065) in Germany, Sweden, Poland, the UK and Spain. Participants had to make a purchase in a mock online store, and their behaviour was observed through 4 behavioural measures. Results show that making users aware of the steps they can take to minimise their exposure to risk is effective in generating more secure behaviour, as posited by protection motivation theory. Gain and loss-framed messages, and a message with a male anthropomorphic character, also had some effect on behaviour compared to the control group. The study included a questionnaire. Results suggest that more risk-averse participants will exhibit more cautious behaviour and that, on the whole, warning messages did not affect their knowledge of how to prevent cyber-attacks. Warning messages based on behavioural insights might not increase consumers' knowledge, but they can help improve their experience and build online trust.


cybersecurity, nudging, online behaviour, behavioural economics


12/5: Gamblers curse

  1. Gamblers or Investors? An Experiment on the Almost-Winning Outcome




Christine Choirat ; Daniela Di Cagno ; Arianna Galliera

Near-miss outcomes are real-life situations which increase the perceived probability of the occurrence of future successes. The Almost-Winning (AW) bias is the well-known cognitive bias that makes individuals unable to distinguish between situations in which near misses signal ability and situations in which near misses are completely meaningless, in the sense of being unrelated to future (likelihood of) winning. The empirical and neurological evidence shows that a near-miss increases gamblers’ willingness to play: AW triggers a dopamine response similar to winning, in spite of no actual reward. Therefore, in a chance game, a sequence of AW outcomes easily generates an “irrational” willingness to continue playing, and might become a key factor in the development and maintenance of certain betting habits. We implement an experimental setting aimed at checking the relevance of the AW bias among ordinary students on order to evaluate its potential strength in absence of gambling pathologies. Two treatments are implemented in two different frames, an investment game (IG) and a slot machine game (SM), which try to avoid persistence at gaming.


experiment, gambling, decision making under risk and uncertainty


C91 L83 D81



A Geriatric Psychologist’s Perspective on Aging Parents:

5 Steps to Take During a Visit

Spending quality time with loved ones is usually something you look forward to. But when you have aging parents or loved ones, going home to see them can sometimes signify a rather different, and at times, stressful experience.

You may already have an inkling that Mom, Dad or a favorite aunt or uncle is having trouble with everyday life, but sometimes seeing changes in family members after months - or maybe years - of not seeing them can be disquieting. People change in their later years, and sometimes they can decline in health and spirit faster than you expect.

A Place for Mom expert and geriatric psychologist Dr. Melissa Henston provides some guidance on how to not only spot common problems, but tips on how to deal with any issues to get your elderly loved one the help they need.

1. Notice When Something is “Off”

You can spot problems the minute you drive up to your loved one’s house, Henston says.

“There are a whole bunch of warning signs that are easy to spot. For example, the exterior of the house has peeling paint, or the driveway isn’t shoveled or the walkway isn’t treated. Once you enter the home, newspapers are still in plastic wrap and mail is piled up. Maybe the house isn’t as clean as normal or has an odor. You can usually tell when something is 'off'."

Having a grandmother who suffered from Alzheimer’s in tandem with working in the nursing home practice in her ‘previous life’ (during college), Dr. Henston has a personal connection to the elderly. She decided from a young age that her primary focus in psychology would be issues in aging, and she has devoted her practice to improving the lives of the elderly, informing families about the signs that their loved ones need help, and helping find the right care options for each unique situation.

Since a health crisis in the elderly can escalate quickly and catch everyone involved off guard, it’s important to not ignore signs that something may be wrong. Ideally, families will have conversations with their children or loved ones about getting their affairs in order and end of life care well in advance of having any issues, but here are some signs to be cognizant of when visiting aging loved ones:

Henston emphasizes the importance to noting anything out of character or outside of normal behavior. She remembers personally having the discussion of green eggs and ham with her own father. “I told my dad, ‘Dad, you can’t eat this stuff. Ham isn’t supposed to be green.'"

If health or happiness seems to be compromised, it’s time to have a conversation and address problems.

2. Approach the “Tough Conversation” with Care

Tread delicately when it comes to discussing retirement plans or end-of-life care. Henston comments, “Typically you need to look for the opening and opportunity, rather than just jumping in. Don’t try to take control. Try to get a natural conversation going.”

Remember that parents still consider you their child. You need to respect this relationship. Here are a few tips for setting the right ambiance for a positive and effective talk:

12/4 More on dementia
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.

12/4: Oversold or overbought

“First, the market has moved from extremely oversold conditions to extremely overbought in a very short period. This is the first time, within the last three years, the markets have pushed a 3-standard deviation move from the 50-day moving average. Such a move is not sustainable and a correction to resolve this extreme deviation will occur before a further advance can be mounted. Currently, a pullback to the 50-day moving average, if not the 200-dma, would be most likely.”


EFM- I do not use these charts but every so often you need to be aware.

12/4: TECH BLACKOUT - There is a one in eight chance that the Earth will be hit by a huge solar storm by 2020 which could potentially leave the world without Internet, phone service and many more services that modern-day humans rely on. The powerful event would likely be as huge as the Carrington Event, which occurred in 1859. That solar storm was so powerful that its southern auroras could be seen as far north as Queensland in Australia. Today, in a modern world so dependent on technology, the implications would be far more severe.

EFM- Maybe it could incapacitate the world and we can all start ovrr. What? No Twitter? No Facebook??

Interesting nonetheless. If it doesn't happen by 2020 do the odds go up to 50%? Let me twitter that.........

12/4: Long term care-

 Consumers neglect financial risk associated with long-term care. Even well-heeled consumers with some understanding of long-term-care issues are unlikely to have taken action to reduce their LTC financial risk, according to a survey by Lincoln Financial Group. Fewer than 30% of adults with household incomes above $150,000 and substantial investable assets have purchased financial products to cover LTC needs. .

EFM= people do not like to think of death or incapacity/ They still say to a spouse- please don't put me in a nursing home.  Of course, Alzheimers can negate all of that. Extremely hard to take care of this disease beyond  the second level.

12/4: Heavy Hitters

Here's how much you need to earn to be in the top 1% of every US state

12/4: a new report says advisors plan to abandon 'mass-market' clients because of DOL rule
  • Two-thirds (64%) of advisors view the impact of the fiduciary rule on mass-market investors as largely negative. And 60% believe the fiduciary rule will have a negative impact on at-retirement clients.
  • A third (35%) of advisors will likely add an automated advice service to their business because of the fiduciary rule.
  • Six in 10 advisors (62%) say they will increase ETF recommendations in their retirement accounts due to the rule.
  • 60% of advisors say they will decrease allocations to non-traded REITs and 57% say they will limit offering variable annuities in retirement accounts due to the fiduciary rule.
  • Three in four advisors (74%) think the fiduciary rule will be expanded to nonretirement accounts.
  • In the long term, 55% of advisors believe, commission on retirement accounts will eventually be banned. Twenty-four percent of this group believe commission on all accounts will be banned.
  • Almost half (45%) of advisors believe investors would rather have cheaper, non-fiduciary advice than more expensive fiduciary advice.
  • Over a third (36%) of advisors plan to hire additional staffers as a result of the rule, and 86% plan on working more hours per week.
  • Nearly all advisors (95%) see the financial advice industry moving toward a model based on transparency and full disclosure.


Each additional 1 percent of investment fees and costs reduces an investor's end return by approximately 17 percent over a twenty year period.

Correlation and interest rate rise

12/4: Jobless rate fell to a nine-year low of 4.6 percent as the U.S. added 178,000 jobs in November
And the market has gone nuts


12/4: America's Infrastructure
Great stuff on where fracking takes place


"Inflation Dynamics During the Financial Crisis" Fee Download
NBER Working Paper No. w22827

SIMON GILCHRIST, Boston University - Department of Economics, National Bureau of Economic Research (NBER)
Brandeis University
Board of Governors of the Federal Reserve System
Federal Reserve Board - Division of Monetary Affairs

Using a novel dataset, which merges good-level prices underlying the PPI with the respondents’ balance sheets, we show that liquidity constrained firms increased prices in 2008, while their unconstrained counterparts cut prices. We develop a model in which firms face financial frictions while setting prices in customer markets. Financial distortions create an incentive for firms to raise prices in response to adverse financial or demand shocks. This reaction reflects the firms’ decisions to preserve internal liquidity and avoid accessing external finance, factors that strengthen the countercyclical behavior of markups and attenuate the response of inflation to fluctuations in output.



q/w:w"Preferences for Truth-Telling" Free Download
CESifo Working Paper Series No. 6087

JOHANNES ABELER, University of Oxford
University of Nottingham
Amherst College

Private information is at the heart of many economic activities. For decades, economists have assumed that individuals are willing to misreport private information if this maximizes their material payoff. We combine data from 72 experimental studies in economics, psychology and sociology, and show that, in fact, people lie surprisingly little. We then formalize a wide range of potential explanations for the observed behavior, identify testable predictions that can distinguish between the models and conduct new experiments to do so. None of the most popular explanations suggested in the literature can explain the data. We show that only combining a preference for being honest with a preference for being seen as honest can organize the empirical evidence.

12/4: Millennials


A Century of Stock-Bond Correlations


The correlation between movements in equity prices and bond yields is an important input for portfolio asset allocation decisions. Throughout much of the 20th century, the correlation between equity prices and government bond yields in the United States and other countries, including Australia, fluctuated but tended to be negative. However, stock-bond yield correlations have been largely positive since the late 1990s, rose strongly during the global financial crisis and have since remained at a high level for a prolonged period. The more recent period of positive correlation in part reflects the pronounced and persistent effect of the financial crisis on the economic outlook, though it may also owe in part to an increase in the importance of uncertainty about real economic activity in driving both government bond yields and stock prices. Changes in US monetary policy look to have exerted an opposing force on the correlation at times, driving it lower


12/4:Caring for Her Elderly Parents 24/7

Don't know how she does it but it would be impossible if one had Alzheimers. 

12/4: Back to square one with Alzheimers

the failure of the study has ramifications well beyond Lilly’s sprawling corporate campus in downtown Indianapolis. The trial was one of the biggest tests of the amyloid hypothesis, which holds that Alzheimer’s is caused by the build-up in the brain of a sticky plaque called beta amyloid.

For the past 25 years, neurologists have coalesced around this theory, believing it offered the best chance of finding a treatment for the nearly 44m people who suffer from Alzheimer’s worldwide. In the absence of a medical breakthrough, the number of people aged over 65 with Alzheimer’s is forecast to nearly triple to 13.8m by 2050 in the US alone, according to the Alzheimer’s Association. Drugmakers followed suit, spending billions of dollars researching drugs designed to clear beta amyloid.

“The problem with Alzheimer’s is we still don’t really know or understand how the disease happens,” says Dr Amit Roy, a founding partner at Foveal Research. “We do see changes in the brain like plaques, but it could be an association not a cause.”

The focus on medicines that target beta amyloid is akin to developing a “drug for lung cancer that targets yellow fingernails”, Dr Roy argues. “The amyloid hypothesis has been around for a long time and it always fails,” he adds. “It looks nice but it’s unproven, and it falls over again and again.”

12/1: Well this will put me to sleep

three effects of not-enough sleep: mortality, since shortened sleep has been linked to about half of the leading causes of death in the U.S., including cardiovascular disease, accidents, diabetes and hypertension; productivity, since sleepy workers are less productive and more likely not to show up; and hindered development skills and educational achievement, which affects lifetime earnings.

The U.S. loses the most from its sleepy citizens. The researchers calculated that sleep-deprived workers cost the country’s economy about 1.2 million working days a year and up to $411 billion, about 2% of the GDP. Japan was the second most affected, losing about the same percentage of its GDP, followed by Germany and the U.K. Canada had the best sleepers, but still lost 1.4% of its GDP to too-little sleep


12/2: Slippery slope all over again???

The oil club is dizzy with its own success after a harmonious meeting in Vienna, where it surprised the world by agreeing to its first production cut in eight years. Crude prices up 12%? Check. Saudi Arabia and Iran in agreement? Check. OPEC and Russia working together? Check. The big question now is whether all these cuts will be implemented. Meanwhile, crude is up over $50 a barrel, lifting energy shares in its slipstream.

12/2: It's long, it's about death and dying. So enjoy

Aging in Different Cultures Around The World

“Respect your elders.” Many people hear this sentiment, but what does it actually mean?

When examining a universal human experience such as aging, it can be both interesting and helpful to see how people in other and places and times approached the topic. For example, today people are living much longer across the world, so people’s perspective on aging is different. However, some cultures treat their elderly with more respect and dignity than others.

Many cultures view age 65 as senior status, or officially “getting old.” However, the connotation of what this means as a member of society is viewed differently. For example, in Japan, seniors are highly respected and even celebrated. Japan even has a national paid holiday called “Respect for the Aged Day” to show appreciation for seniors, and there’s a “no-elderly-left-behind” attitude to celebrate everyone. China and India also honor their elders. Most countries have an appreciation for their elders, but unfortunately ageism is present in some cultures.


While America’s seniors are arguably happier and healthier than ever before, they are still subject to prejudice and stereotyping. Unfortunately, some younger people perceive anyone with wrinkled skin or gray hair as old, and many elders report feeling ageism among society and the workplace. While many families and religions honor and value their elders, America is one of the places around the world where seniors are not always given the respect they deserve.

On a positive  note, America is starting to take action to honor seniors and provide for them, especially as the aging baby boomers reach senior status at record numbers each day. Many religions in America regard the elderly with the dignity and appreciation, and good samaritans volunteer to help the elderly at senior centers or senior living communities. Society is taking measures to remember that senior citizens are knowledgeable people who have lived through both the heartache and jubilation of life, shown through Senior Citizens Day and Older Americans Month.

Elders have something to contribute to society in the wisdom they’ve gained from their life histories, even if it’s a story about life or history. American is also putting a lot of focus on preventative care for seniors. State-of-the-art senior living communities have evolved to support the need for a rapidly aging population.


Respecting the elderly is part of the actual law in China. In fact, elderly parents in China can sue their grown children for both emotional and financial support. Companies are also required to give workers time off to see their parents. Given the dense population and growing elderly population this makes sense, as families need to take care of elders so as not to put the economy in jeopardy.

China is projected to have 636 million people over age 50 by 2050, or nearly 49% of the population— up from 25% in 2010, according to a report in USA Today.

While obligation is one of the driving factors to care and show dignity toward elderly, the Chinese culture has always stressed respect toward elders. So practices of honor and kindness toward seniors is normal life in China.


The Japanese culture values the elderly. Appreciation for elders has been engrained in families and their children, making Japan one of the most kind places in the world for seniors.

Many Japanese families have several generations living under one roof. This arrangement is believed to be one of the many reasons the elderly in Japan live longer than any other population. In fact, there are more elderly citizens than young people in Japan as the population is comprised of more people over the age of 65 than any other group, according to the Administration on Aging.

Happiness and longevity, well into the latter part of life in Japan, have been attributed to strong community bonds, family and healthy living that includes plenty of exercise and healthy, low-fat diets. Honoring tradition to care for and respect family members, especially seniors, doesn’t hurt.


Older people are valued as asset in Scotland. Their voices are heard and they are supported to enjoy full and positive lives in family settings, according to a new program called “Reshaping Care for Older People.”

Scotland has pledged to hear the elderly, and the cultural thinking, and money, has shifted away from hospitals and toward preventative care. This paradigm shift has allowed this culture to value life, rather than treat ailments.

Scotland also adapts homes so that people can age and stay in them. Families do their best to care for their elderly loved ones, and keep them as valued members of society. Honoring old age has become a tradition.


The Vietnamese truly value the “respect your elders” sentiment. In fact, elders are considered the carriers of knowledge, tradition and wisdom in the Vietnamese culture.

Elderly grandparents live with their families for support and care, and they contribute to the household by preparing meals and caring for grandkids. Elders are considered the head of the family and their advice is valued to the point where they are the decision makers in the household.

In Vietnam, being old is considered an asset, not a liability; a shift of perspective that helps make a long life harmonious in this culture.

End-of-Life Practices in Different Cultures

End-of-life decisions vary drastically across cultures. Some societies do everything possible to keep their elderly alive. Other groups, however, see old members as a burden, and thus take steps to end their lives. Eldercide typically happens in communities that are either nomadic, or that live in harsh climates with limited resources.

A study in American Ethnologist, the Chukchi of Siberia practice voluntary death, in which an old person requests to die at the hand of a close relative when they are no longer in good health. Also, many native Americans in the U.S. and Norse tribes in Scandinavia follow similar practices to voluntarily choose to end life — so the elderly put themselves in an impossible situation — like setting out to sea on a solo voyage.

Some cultures use spirituality to try to extend lives. For example, the Greek island of Ikaria seems to have life-extending magic in its soil, according to The New York Times. In fact, residents of this small Mediterranean island are four times more likely than their American counterparts to live to 90, and they live on average 8 to 10 years longer after being diagnosed with cancer or cardiovascular disease. The practices in this Greek culture are to not rush through life, but instead savor every second. For example, they stay up late “eating Kalamata olives, drinking mountain tea and swimming in the crystal-clear water,” according to the Times article. The answer to this island’s longevity probably lies in its eating patterns and relaxed lifestyle, but nobody can definitively explain the magic behind this island of centenarians.

12/1: 60/40  split is a no no

Author examined the performance of such a mix over every three-year time period (using monthly return data) from the year 2000 until the end of last year. That's 157 different time periods of 36 months each. As it turns out, the balanced portfolio was not the "slam dunk" many retirees think it is. It only produced a positive three-year return 78% of the time. That may sound OK, and it is ... unless you are part of the 22% and were expecting to make money, not lose it, during your first three years in retirement. Perhaps more concerning is that the balanced portfolio achieved a 4% return only 66% of the time

I have chosen to bypass the standard balanced portfolio with a combination of stocks with above-average dividends, and investments that aim to hedge major stock-market risk of that stock portfolio

EFM- The author suggests that you take this risk questionnaire to see what your risk actually is   
About the fifth slide in, you get this

This has got to be one of the worst measures of "risk" I can think of. It has no reality. A loss of 17% in six months is a possibility but to measure the other side with making 17% is a breach of a brain. This makes no sense to me and is completely wrong headed. 17% in six months in this economy???????


And why not take door 3? A 42% annual return for a $22,000 loss? This is so far from reality- or common sense- that you should run away. And it gave it the risk rating with a score of 50. Which implies what?? Darned if I know. Is that representative of an average investor? That it reflects average returns and losses??? Or...................

What a pile of crap

12/1: Up and down oil

12/1: You know you wanted to read this

Britain’s beefy banknotes A petition demanding the replacement of the UK’s new plastic £5 notes — which the central bank has confirmed contain animal fat — with a vegan alternative has attracted thousands of signatures. (Independent)


"Money Illusion and Household Finance" Fee Download
CEPR Discussion Paper No. DP11643

THOMAS ALEXANDER STEPHENS, University of Vienna – Department of Economics
University of Vienna, University of Copenhagen - Department of Economics, Centre for Economic Policy Research (CEPR)

We elicit money illusion and match it with financial and sociodemographic data from official registers on a quasi-representative sample of the Danish population. We find that people who are more prone to money illusion hold more of their gross wealth in nominal assets, including bank deposits and bonds, and less in real assets, including real estate and stocks. This bias is robust to controls for education, income, cognitive ability and other relevant characteristics. We further find that money illusion is a costly bias: 10-year portfolio returns are about 10 percentage points lower for individuals with high money illusion.

11/30: Roubini is a highly respected economistThe Taming of Trump

Donald Trump is a businessman who relishes the “art of the deal,” so he is by definition more of a pragmatist than a blinkered ideologue. Once in office, he will throw symbolic red meat to his blue-collar supporters, while reverting to the same supply-side, trickle-down economic policies that Republicans have favored for decades.


"Heterogeneity and Persistence in Returns to Wealth" Fee Download
CEPR Discussion Paper No. DP11635

ANDREAS FAGERENG, Statistics Norway
Einaudi Institute for Economics and Finance (EIEF)
Stanford University - Department of Economics
Stanford University, Centre for Economic Policy Research (CEPR)

We provide a systematic analysis of the properties of individual returns to wealth using twenty years of population data from Norway's administrative tax records. We document a number of novel results. First, in a given cross-section, individuals earn markedly different returns on their assets, with a difference of 500 basis points between the 10th and the 90th percentile. Second, heterogeneity in returns does not arise merely from differences in the allocation of wealth between safe and risky assets: returns are heterogeneous even within asset classes. Third, returns are positively correlated with wealth. Fourth, returns have an individual permanent component that accounts for 60% of the explained variation. Fifth, for wealth below the 95th percentile, the individual permanent component accounts for the bulk of the correlation between returns and wealth; the correlation at the top reflects both compensation for risk and the correlation of wealth with the individual permanent component. Finally, the permanent component of the return to wealth is also (mildly) correlated across generations. We discuss the implications of these findings for several strands of the wealth inequality debate.

11/30: Inverted Yield Curve
John Roberson, Evil Finance Guy

What if I told you that one indicator has predicted every US stock market crash since the great crash of 1929?

The most commonly used market crash indicator among traders I know comes from the interest rates of government-issued bonds. To try to make everyone else feel like we earn our money, we use a fancy term: The Inverted Yield Curve.

What does that mean? The US government issues bonds called Treasuries. With some of them the government doesn’t have to pay you back for a long time, say 10 or 30 years. With others the government has to pay you back in a relatively short period of time, say 1 or 2 years.

Ordinarily, if the government gets to keep my money for a longer period of time then I want to get paid more for it, right? But occasionally, the opposite happens. And this is such a shocking scenario that we really did feel like it warranted a fancy name.

Okay, you’re asking me. Why on Earth would smart finance guys who are in charge of billions of dollars be willing to get less for more?

Here’s one interpretation: Sometimes, the market tells us that investments will do a lot better over the long term than they will over the short term. Maybe you want any guaranteed return you can get for the short term, and once the market shakes out you’ll be more comfortable investing for the long term again. That is, things may not go so well in the next couple of years.

EFM: I've taught the series 7. Is the curve addressed? No
I took the CFP. Is it resourced as part of retirement planning, investing, etc   No
Was it mentioned in the CFA material. Yes to the best of my knowledge.
But nothing about  the use as an indicator. I found FED research in the mid 90's. Kept looking for additional articles/research. Nothing different. Would offer it in classes but prior to the Dotcom, everyone 'knew the world had changed, there wold be no more business cycles and on and on. In early 2000, there was an inverted curve. Harped on the history- though simply having been a 100% indicator did not guarantee it would continue that way. I changed allocation as necessary and watch the investors get hammered, Never saw an article on it. Comes late 2006 and another inversion. Went into a lot of CDs. Never saw an article on it then either. Trillions lost because of the lack of knowledge of advisors. Remember that none has to even HAVE nevermind be conversant with a financial calculator.

11/30 Gifts for those with Alzheimers and their Caregivers

There are currently more than 5 million people in the United States living with Alzheimer’s and almost 10 million caring for someone with the disease.  Therefore chances are pretty high that this holiday season, you’ll be buying a present for parents, grandparents, relatives or friends who have been touched by the disease.  

Holiday Gifts for Caregivers

Nearly one in four caregivers of people with Alzheimer’s disease and other dementias provide 40 hours a week or more of care.  Seventy-one percent sustain this commitment for more than a year, and 32 percent do so for five years or more.  One of the best gifts you can give someone caring for Alzheimer’s is something that relieves the stress or provides a bit of respite for the caregiver.

The Gift of time:  Cost-effective and truly meaningful gifts are self-made coupons for cleaning the house, preparing a meal, moving lawn/shoveling driveway, respite times that allow the caregiver time off to focus on what he/she needs.

Gift Certificates: Give gift certificates for restaurants and laundry/dry cleaning services, especially those that deliver; computer/technology support; lawn care services;  maid services; personal pampering services such as messages, facials, manicures and pedicures.

Books: In addition to fictional and non-fictional books that a caregiver might enjoy, there are a number of books created to assist caregivers such as “The 36-Hour Day: A Family Guide to Caring for Persons with Alzheimer Disease, Related Dementing illnesses, and Memory Loss in Later Life,” by N.L.Mace and P.V. Rabins; “A Dignified Life: The Best Friends Approach to Alzheimer’s Care: A Guide for Family Caregivers,” by V. Bell and D. Troxel; and “Alzheimer’s: A Caregiver’s Guide and Sourcebook,” by H. Gruetzner.

Digital Video Recorder (DVR)/DVDs/CDs:  Purchase DVR/TiVo and years worth of services that will enable a caregiver to record favorite shows he/she may not be able watch,  purchase his/her favorite movies or music CDs for the caregiver to enjoy on their down time.

Holiday Gifts for People Living with Alzheimer's

Early Stage:  Approximately 2.5 million people currently living with Alzheimer’s are in the Early Stage of the disease, a period when they can live active, healthy lives, but may begin to notice subtle changes.  Here are some gift ideas for people living in the early stages of the disease.

Items to help remember things such as magnetic reminder refrigerator pads, Post-It notes, baskets or trays that can be labeled within cabinets or drawers, a small pocket-sized diary or notebook, erasable white boards for key rooms in the house, a memorable calendar featuring family photos – write special family occasions such as birthdays and anniversaries.

Items that may help with daily activities such as a memory phone that can store up to eight pictures with the names and contact information of family and friends, automatic medication dispenser that can help the person living with Alzheimer’s remember to take his/her medicine, nightlights that come on automatically when it gets dark, and clock with the date and time in large type.

Entertainment:  Plan an outing to a movie, play or concert, sporting event, museum or possibly an organized holiday shopping outing with friends and family, favorite musical CDs or CD with compilation of favorite tunes, VHS/DVD collection of favorite movies.  Also activities such as scrapbooking or other craft projects that are social in nature.

You might want to think twice before buying some gifts: Giving electronics may seem like a good idea to make life easier for someone with Alzheimer’s or dementia, but that isn’t always the case.  If you decide to give someone with the disease a new piece of electronic equipment, remember to review the operating instructions with them slowly and more than once.  Make a copy of the instructions for the person with the disease and  for yourself, so you can talk them through the process on the phone if you need to.

Moderate/Late Stage:  People in the later stages of Alzheimer’s generally need assistance with day-to-day activities as their memory problems continue to worsen.  Here are some gift ideas for people living in the later stages of the disease.

Items that provide sensory stimulation:  In the later stages of the disease sensory stimulation may bring back pleasant memories, so gift ideas include scented lotions, a fluffy bathrobe in his/her favorite color, a soft blanket or afghan to keep the person warm.

Clothes: Comfortable, easy to remove, easily washable clothes such as sweat suits, knits, large banded socks, shoes with Velcro ties, wrinkle free nightgowns, nightshirts and robes.

Music: Research shows that music has a positive impact on individuals with Alzheimer’s, bringing them back to good times, increasing stimulation and providing an opportunity to interact with family members.  So buy favorite CDs or burn a CD full of musical favorites.

Framed Photographs/Photo Collage: Copy photos of family members and friends at photo centers, insert the names of the people in the photo and put in frames or in a photo album created specifically for that person.

Safe Return: Enroll the person in the later stages of Alzheimer’s in the Alzheimer’s Association’s Safe Return, a nationwide identification program that provides assistance when a person with Alzheimer’s or a related dementia wanders and becomes lost locally or far from home.


US Q3 growth revised higher to 3.2%, beating estimates


US growth heated up more than initially thought in the third quarter, underscoring a brightening economy after a disappointing start to 2016.

The world's biggest developed market grew at an annualised rate of 3.2 per cent in the third quarter, according to a second reading on gross domestic product from the Commerce Department. That compares with Wall Street estimates of 3 per cent and a reading of 1.4 per cent in the second quarter.

EFM- that is a heck of a rate. But I do not believe it can be sustained, I'd be happy with 2%

  1. Exchange Traded Funds (ETFs)




Itzhak Ben-David ; Francesco Franzoni ; Rabih Moussawi

Over two decades, ETFs have become one of the most popular investment vehicle among retail and professional investors due to their low transaction costs and high liquidity, taking market share from traditional investment vehicles such as mutual funds and index futures. Research has shown that in addition to the benefits of enhanced price discovery, ETFs add noise to the market: prices of underlying securities have higher volatility, greater price reversals, and higher correlation with the index. Arbitrage activity is a necessary component in minimizing the price discrepancy between ETFs and the underlying securities. During turbulent market episodes, however, arbitrage is limited and ETF prices diverge from those of the underlying securities.


G12 G14 G15


  1. Stock Market Fluctuations and the Term Structure


Chunsheng Zhou

This paper uses the term structure of interest rates to explain the variations of stock prices and stock returns. It shows that interest rates have an important impact on stock returns, especially at long horizons. The hypothesis that expected stock returns move one-for-one with ex ante interest rates, which has been rejected strongly in other studies using short horizon data, is supported by long horizon data. The paper proposes, for the first time, a single measure---the present value of forward interest rates---to summarize the information of the term structure that is useful in characterizing the comovements of the equity market and the bond market, and finds that such a single measure explains a significant part of variation in dividend-price ratios. The paper also suggests that the high volatility of the stock market is related to the high volatility of long-term bond yields and may be accounted for by changing forecasts of discount rates. The findings of this paper are quite different from the typical findings of the previous work and may provide a reasonable economic explanation for the predictability of long-horizon stock returns.


Comovement ; stock market ; term structure


11/29: The Arithmetic of Active Management     William F. Sharpe

If "active" and "passive" management styles are defined in sensible ways, it must be the case that

(1) before costs, the return on the average actively managed dollar will equal the return on the average passively managed dollar and

(2) after costs, the return on the average actively managed dollar will be less than the return on the average passively managed dollar

These assertions will hold for any time period. Moreover, they depend only on the laws of addition, subtraction, multiplication and division. Nothing else is required.

EFM- if you are wondering about the instantaneous computer trading- that is not active management. It's about correlation and probabilities. The movement of numbers

11/28: John Muldin's excellent commentary on our debt

11/28: Look at the changes at 2008. It will go way up with infrastructure ;payments. How do we pay for this


11/28: Manufacturing  Krugman

Krugman is essentially arguing that the manufacturing sector hasn't added jobs to the labor market in years past. Instead, improved equipment and automation has allowed US manufacturers to increase output. Thus even if manufacturing came back to the US, most of the plants would be automated anyway, producing a lower number of jobs than one might hope for.

EFM= It is pretty much recognized  that computers will take over most menial jobs which will increase unemployment no matter who wants it to change. But in the short time frame, you could put a lot people to work when to fix our infrastructure. But the deficit will GROW!!!!!!

manufacturing employment peaked in 1979.


Dispersion and Correlation: Which is “Better?”

 dispersion, which measures the average difference between the return of an index and the return of each of the index’s components.  In times of high dispersion, the gap between the best performers and the worst performers is relatively wide; when dispersion is low, the performance gap narrows.  Today’s dispersion levels are quite low by historical standards, which implies that:

Correlation is primarily a measure of timing.
  High correlations mean that things go up and down at the same time; negative correlations mean that they offset.  C and D always move in the same direction (hence the 1.00 correlation), while A and B always move in opposite directions (hence their -1.00 correlation).   But low correlation does not necessarily mean that the environment is favorable for skillful stock pickers.

Dispersion is a measure of magnitude.  It tells us by how much the return of the average stock differed from the market average.  In our hypothetical exercise, there’s no dispersion at all between A and B, and a considerable dispersion between C and D.  High dispersion gives skillful stock pickers a better chance to showcase their abilities.

Correlation is an essential tool in understanding portfolio diversification.  But as a measure of the magnitude of opportunity available to selection strategies – dispersion is the better metric.



"Boulevard of Broken Dreams. The End of the EU Funding (1997: Abruzzi, Italy)" Free Download
Bank of Italy Temi di Discussione (Working Paper) No. 1071

Bank of Italy
Bank of Italy

EU regional policies aim to push regions into self-sustaining growth. Successful interventions would imply a higher growth rate, not only during the treatment (when the region benefits from the transfers), but also after the expiry of the program (when the financing terminates). We investigate to what extent this happened in the case of Italy’s Abruzzi region, which entered into the Objective 1 (Convergence) program in 1989 and exited it in 1996 (without a transitional regime). More specifically we focus upon the post expiry period by implementing a synthetic control approach. Our results indicate that exiting the program had a negative effect on regional per-capita GDP growth. This result is a confirmation of the widespread evidence that during their implementation EU regional policies help boost the economic performance of the treated regions. However, additional evidence suggests that the permanent effect of the treatment is negligible: the policies fail to transfer the treated regions to a permanently higher GDP growth path.

11/28: Correlations

11/27 How fit are you really:

Free test

I am as healthy as a 47 year old sloth.

11/27: TDF growth

11/27: Recent survey on returns:

.........What they find is that one factor is very important — the length of a fund’s unbroken winning streak, defined as the number of quarters it has beaten Treasury bills. The more consecutive quarters a fund does better than T-bills, the more money goes to the fund.

This is strange, because it’s very easy to imagine a world in which this is a very bad indicator of performance. Suppose Fund A returns 0.1 percent in 99 out of 100 years, while fund B returns -0.1 percent half the time and 10 percent the other half. Fund A is going to generate much longer winning streaks than Fund B. But Fund B earns a much higher return on average. So using the length of a winning streak is irrational in this case.

What about the real world? Baquero and Verbeek find that the length of winning streaks doesn’t predict fund performance. Investors who put their money into hedge funds that have long unbroken runs of success are not getting a good deal.

11/27 They could sell some  of their ice. Oops- that is a declining resource.

Canada Is in an Economic Slump, but Some Investors Are Hopeful

For a nation dependent on natural resources, the global downturn around oil and other commodities hurt, but Prime Minister Justin Trudeau’s plan to spur growth has buoyed optimism

11/27: We cannot lose the trade FT

Donald Trump is just the jolt Europe needed. Too long coddled by the US, Europeans should welcome the president-elect’s admonition to stand on their own feet, says the FT’s Philip Stephens. Beyond its economic interest in European stability — the EU may have its troubles but it is America’s richest overseas market — the US has much to lose from a break-up of the alliance. (FT)

11/27  Tippimg Point  FT

Arctic tipping point A group of scientists has warned that the increasingly rapid melting of the ice cap risks triggering 19 “tipping points” in the region that could have catastrophic consequences around the globe. The Arctic Resilience Report found that temperatures in the Arctic are currently about 20C higher than expected for the time of year, which the scientists described as “off the charts”. The report warned that the changes could cause uncontrollable climate change around the globe. (Guardian)

11/27 Our middle class has gone nowhere And Britain will fare little better

Britons are digesting the news that they could face more than a decade of lost wage growth and will earn no more by 2021 than they did in 2008 as the workforce endures the worst period for pay in at least 70 years.  Private papers from former chancellor Geoffrey Howe warned of the ‘devastating effect’ of leaving Europe - back in 1980.