Master Financial Education

Financial Planning Daily Commentary 2017
The  most intensive and extensive on the Web
  E. F. Moody


Trump Economics

60/40, 70/30 et al Prefabricated Allocations 

Target Date and Bond Funds

 Retirement Fiduciary Breach


World Clock by


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

United States Life Tables 2013

USA Facts

The Geography of U.S. Inequality




5/1: Dale Carnegie- “I am convinced now that nothing good is accomplished and a lot of damage can be done if you tell a person straight out that he or she is wrong. You only succeed in stripping that person of self-dignity and making yourself an unwelcome part of any discussion.” ” –

5/1: Become ​ a Living Donor

A friend of mine got a liver transplant a few years back. Touch and go before, touch and do after. But he is fine now and enjoying life. But if it was not for his wife helping every stage of the way, he would not have made it. .

5/1: Drowning in debt

Congress created the National Flood Insurance Program (NFIP) in 1968 to address the mounting costs of federal disaster assistance from flood damage and to make flood insurance more affordable for homeowners and small businesses in more than 22,000 flood-prone communities across the country.

The program essentially transferred the financial burden of flood risk from property owners to the federal government by offering policies with premiums well below market levels.

Despite repeated efforts to contain the cost of disaster response and encourage individuals and businesses to build outside of flood plains, government-subsidized insurance premiums haven’t kept up with the government’s risks.

FEMA owed the Treasury $24.6 billion for money borrowed to pay claims that exceeded premiums collected, a new report by the Government Accountability Office (GAO) states. Those funds include $1.6 billion that FEMA borrowed following a series of floods in 2016.

critics complain that the flood insurance program has gotten out of hand financially and that too often the government has subsidized the coverage of wealthy Americans or people who insist on building in areas prone to flooding.

 About 25 million people live in an area vulnerable to coastal flooding, while millions more live along inland waterways that also pose risks.

Congress originally authorized a borrowing limit of $1 billion for the flood insurance program and then increased it to $1.5 billion in 1996. However, following three catastrophic hurricanes in 2005, including Hurricane Katrina on the Gulf Coast, Congress amended FEMA’s borrowing authority three more times to more than $20 billion. Then, after Superstorm Sandy in 2012, FEMA’s borrowing authority was boosted to $30.4 billion

EFM- Will Trump lower the limits? Don't know since I have not heard anything. But with the ocean's rise coupled with more major storms, public flood insurance is doomed since the government cannot afford a select few to allow rebuilding where the odds for more flooding in teh future are 100%. The next time New Orleans gets hit might be the last time there will only be a select areas that rebuilt. The poor will get hammered again.

5/1: International Monetary Fund


The April 2017 Global Financial Stability Report (GFSR) finds that financial stability has continued to improve since last October. Economic activity has gained momentum and longer-term interest rates have risen, helping to boost the earnings of banks and insurance companies. Despite these improvements, however, threats to financial stability are emerging from elevated political and policy uncertainty around the globe. If policy developments in advanced economies make the path for growth and debt less benign than expected, risk premiums and volatility could rise sharply. In addition, a shift toward protectionism in advanced economies could reduce global growth and trade, impede capital flows, and dampen market sentiment. Getting the policy mix right is crucial. In the United States, policymakers should provide incentives for economic risk taking while guarding against excessive financial risk taking. Emerging market economies should address domestic imbalances to enhance their resilience to external shocks. In Europe, domestic banking systems continue to face significant structural challenges. Furthermore, there should be no rollback of the postcrisis reforms that have strengthened oversight of the financial system. The April 2017 GFSR also includes a chapter that examines how a prolonged low-growth, low-interest rate environment can fundamentally change the nature of financial intermediation. In such an environment, yield curves would likely flatten. Combined with low credit demand, this would lower bank earnings, particularly for smaller, deposit-funded, and less diversified institutions, and presenting long-lasting challenges for life insurers and defined-benefit pension funds. Another chapter assesses the ability of country authorities to influence domestic financial conditions in a financially integrated world. It finds that, despite the significant impact on domestic financial conditions of global shocks, countries retain influence to achieve domestic objectives—specifically, through monetary policy.

5/1:Declining Mobility and Increasing Inequality

One of the defining features of the “American Dream” is the ideal that children have a higher standard of living than their parents. We assess whether the U.S. is living up to this ideal by estimating rates of absolute income mobility the fraction of children who earn more than their parents – since 1940.

We measure absolute mobility by comparing children’s household incomes at age 30 (adjusted for inflation using the Consumer Price Index) with their parents’ household incomes at age 30. We find that rates of absolute mobility have fallen from approximately 90% for children born in 1940 to 50% for children born in the 1980s. Absolute income mobility has fallen across the entire income distribution, with the largest declines for families in the middle class. These findings are unaffected by using alternative price indices to adjust for inflation, accounting for taxes and transfers, measuring income at later ages, and adjusting for changes in household size.



Feature or Service Independent Living Communities Assisted Living Nursing Home Alzheimer's Care 
Cost Per Month  $1,500 - 3,500 $2,500 - 4,000 $4,000 - 8,000 $3,000 - 7,000
Meals Per Day  Meal Plan Options 3+ 3+ 3+
No Yes Yes Yes
Personal Care* No Yes Yes Yes
Mobility Assistance No Yes Yes Yes
Accepts Wheelchairs Yes Yes Yes Yes
Alzheimer's/Dementia Care No Varies Varies Yes
On-Site Nurses* No Varies Yes Varies
Transportation  Most Yes Most Yes Yes Yes
Incontinence Care No Yes Yes Yes
Housekeeping  Varies Yes Yes Yes
Personal Laundry Varies Most Yes Yes Yes
*Personal care and on-site nurses may be available through a third party.

Pimco Liquidates Arnott-Run Smart Beta Fund

Research Affiliates fund trailed 87% of peers in past 3 years; assets had fallen to $316 million from $4.2 billion at peak

EFM= see how easy it is to find SMART beta???

Yes, smart beta can work. But did the manager pick the correct area to focus on??? And we then can turn our attention to 'luck'.


Restaurant industry starts to pay the price for overindulging

Statistics indicate that restaurant visits in the United States declined in 2016 for the first time in years, which suggests that the supply of eateries has outstripped demand.

EFM- Or the price is too high and/or they simply cannot eating out. I would pick this as the greater contribution.

5/1: Although 92 percent of Americans aged 18-29 are online, only 42 percent of Americans 65 and older are occasionally using the Internet or email, according to Live Science and the Pew Internet and American Life Project.

4/30: Big turnaround with first quarter gdp

There's a bunch of economic news out. Here's what you need to know:

If you do not exercise, you will need a shower curtain (or whatever that is) to cover your girth

The number of obese is now so great in the Western Hemisphere that the world's axis has changed

France GDP growth slows to 0.3% in Q1


French economic growth lost momentum at the start of 2017, despite evidence that the eurozone’s second largest economy has proven broadly resilient to political risks as it headed for a key presidential election.

France’s quarterly GDP growth clocked in at 0.3 per cent in three months to the end of March, down from 0.5 per cent at the end of 2016 and below a median forecast predicting growth of 0.4 per cent from economists surveyed by Bloomberg. GDP growth in the fourth quarter was however revised up from 0.4 per cent.

EFM- this is not just about France. Britain has similar lack of growth. If politics prevails and Le Pen wins in May, she will try to get France out of the EURO. With two major players out, the Euro could collapse. That would push a fragmented Europe into a recession that would likely be lengthy

4/30: So how are we doing???? Not so good

If growth stays this way The FED has few resources to make things better. They needed a higher interest rate in order to drop the rate and push money into the system. The tax changes could help but the ENORMOUS (and growing) deficit will put us in a nasty hole which might never get filled.
There  never was a chance via Trump that GDP could be as high as 4%. Nope and a 3% growth is not going to happen anytime. Add France, Britain et al and we have a dicey global economy. North Korea might pull us all down.  


The Minsky cycle is economist Hyman Minsky’s model on how credit cycles lead to boom and bust.

The model begins in a period of calm when only the most creditworthy investments get funded. This causes the economy to pickup and lenders to ease lending standards and fund more investments causing the economy to boom. This boom make the economy look really strong, so creditors fund investments that are not creditworthy, which leads to major defaults (this peak is known as a Minsky moment). High defaults cause creditors to dramatically tighten lending standards leading to a credit crunch. This credit crunch concludes with a recession or depression. The cycle then restarts.




4/30: Arguing (Carnegie)

: “You can’t win an argument. You can’t because if you lose it, you lose it; and if you win it, you lose it. Why? Well, suppose you triumph over the other man and shoot his argument full of holes and prove that he is non compos mentis. Then what? You will feel fine. But what about him? You have made him feel inferior. You have hurt his pride. He will resent your triumph.”

“Our first natural reaction in a disagreeable situation is to be defensive. Be careful. Keep calm and watch out for your first reaction. It may be you at your worst, not your best. Control your temper. Remember, you can measure the size of a person by what makes him or her angry. Listen first. Give your opponents a chance to talk... Look for areas of agreement. When you have heard your opponents out, dwell first on the points and areas on which you agree.”

Patriotism over nationalism George Orwell wrote that patriotism is open and optimistic​, ​whereas nationalism is a darker force, rooted in superiority and paranoia. ​ This can be seen in Europe where nationalists have destabilised the postwar liberal order. France’s Emmanuel Macron is bucking the trend, however, and is the first politician to make the case for patriotism​.

EFM- Seems spot on. Macron needs to win over Le Pen

When Stroke Happens

By Jennifer Bradley, Staff Writer


Strokes, or “brain attacks,” disable Americans more than any other disease. With an interruption of blood to the brain, a stroke may have similar symptoms; but as everyone’s brain is different, so are the effects of each person’s stroke.

There is no rhyme or reason to the severity of strokes or to the recovery a person may need to undergo. Stroke damage can affect a loved one’s entire body and cause a wide range of disabilities, from mild to severe. Paralysis, difficulty thinking and speaking, as well as a multitude of emotional issues are just some of the challenges a caregiver can expect to see a loved one experience post-stroke.

Learning to help through this transitional period with optimism and organization will make life easier, and happier, for both caregiver and loved one.


Even though each loved one has a different experience after a stroke, they have one thing in common: life is changed in some way or another. It’s important a caregiver know which type of stroke their loved one is facing, so symptoms, precautions and/or treatments can be tailored accordingly.

There are two kinds of major strokes. The most common, an ischemic stroke, is caused by a blood clot which blocks a brain’s blood vessel. The other, a hemorrhagic stroke, is caused when a blood vessel breaks and bleeds into the brain.

A different stroke, commonly known as a “mini-stroke,” is the TIA, or Transient Ischemic Attack. These should be taken as seriously as a major stroke because they are usually a precursor of what’s to come. The only difference is that in a TIA, the blockage in the blood vessel is temporary and the incident lasts less than five minutes— usually a minute.

Many strokes are not preceded by a TIA, but one-third of people who experience a TIA will experience a major stroke within a year. There are many new technologies available today to help prevent serious damage if the stroke is caught early on. Knowing the symptoms and signs may spare a loved one from permanent brain damage. Professionals say “time lost is brain lost” and that if a person is even suspected of having a stroke, call 911 immediately and don’t wait for symptoms to clear up.

Here are the main symptoms of a major stroke and TIA:

1.       Sudden numbness or weakness in face, arms or legs, especially on one side of the body
2.       Sudden confusion, trouble speaking or understanding
3.       Sudden trouble seeing
4.       Sudden trouble walking as well as dizziness, loss of balance or coordination
5.       Sudden, severe headache

First Time Around

Not all strokes are caught in time. If a loved one is alone at the time of the attack, too much time may elapse before a call for help can be placed.

For caregivers who find themselves in the new world of caring for a loved one who just suffered a major stroke, there are a few things first-timers should now. From the initial trip to the hospital and through the recovery process, it’s important to take notes and keep records. The “Stroke Caregivers Handbook” from Stroke Awareness for Everyone (SAFE) recommends using two notebooks or three-ring binders with folders: one for notes for encounters with medical professionals and the other for records, correspondence, receipts and bills.

It’s important to keep an up-to-date list of mediations, dosages and when prescriptions were filled. At each and every medical appointment, that information will be requested.

One particular piece of advice this handbook offers is to not pay any bills from medical providers until the claims are completely processed through the insurance. If a caregiver pays any portion of the bill, it essentially says that the payee takes full responsibility and revokes any ability to appeal the insurance in the future, if necessary.

There are a few symptoms a loved one can expect to face early on after a stroke. The first is aphasia, or difficulty communicating. This could range from complete loss of speech to the occasional difficulty finding a right word. Those with aphasia are mentally competent, thus making this a frustrating disorder for caregiver and loved one.

Another common symptom is subluxation of the shoulder on the stroke-affected side of a loved one’s body. This causes dead weight and needs to be supported so the shoulder does come out of its socket.

Breakdown of overall skin integrity and loss of bladder and bowel function are also symptoms present in those newly diagnosed with a stroke.

Depression and a wide gamut of emotional issues are something a caregiver must be aware of and tread delicately through with their loved one. It’s normal for a person to mourn the loss of their “old” self and caregivers should learn to practice empathy instead of sympathy, reminding a loved one that they are still alive and have much to offer, just in a new way.

The “New” Normal

After a major stroke, most people spend time in a hospitalbecoming stable enough to move on for rehabilitation,either at a special facility or home, depending on thecaregiver’s availability and circumstances.

The “Stroke Caregivers Handbook” says that most caregivers who have been through this phase will not even consider outpatient therapy to begin with because a loved one will be very weak and need more assistance initially than they think.

Insurance companies may dictate where and how long a loved one can remain at a rehab facility, but caregivers are important advocates in these situations.

A loved one must begin to accept a new “normal” after a stroke. Many times, it’s hard to know what physical and mental limitations will improve with continued therapy. Only time will tell.
The first thing to address at home is a loved one’s safety, especially in the bathroom. A loved one may also come home with a new set of habits which were formed around a different level of care, and most likely, the ability to move around in a secured environment. Caregivers must help establish a new routine within the living quarters available to their loved one, as well as availability of a caregiver. This also may mean meals are at different times than at the rehab facility and treats are not always served at 7 p.m., for example. A caregiver needs to decide which habits can be kept and which need to be tossed.

A caregiver will also be facing a change in routine and have a shock to their “normal.” The main thing is to accept reality and progress as it comes, even though it may not lead back to the way things were before the stroke. Family and friends may not understand and therapy visits will become less and less, leaving the caregiver and loved one to wade through the post-stroke life alone. There is hope and joy to be found in each situation, however.

Don’t worry, be happy

Depression is a very real side effect of a stroke, for both caregiver and loved one. Honesty about emotions is a first step to dealing with them and moving forward.

Studies show that an optimistic attitude reduces the risk of stroke overall, but affirmations and positive thinking are just as important after a stroke.

Frustration and discouragement will be normal, but even small victories should be celebrated and empower caregivers and loved ones to go the next step. A big hurdle is the embarrassment associated with not being able to function as before, especially in public. Caregivers should encourage public outings because it will lessen the likeliness of depression and lonely thoughts.

Positive thinking and expecting the best, not the worst, promotes health and prevention of future strokes. It also helps a caregiver keep their best health and attitude, for their new role and any others they may have.

Strokes are complex and affect both loved one and caregiver in a multitude of ways. With good organization, awareness and attitude, it can be handled in a way that leaves both fulfilled and enjoying life, whatever it may bring

A recent study has found that women who carry a little extra weight, live longer than the men who mention it.

4/27:Heavy hitters only but shows what can be done

Lump Sum Coverage
Permanent Total Disability (PTD)



A group of 5 executives wanted to provide an additional lump sum disability benefit in the event of a permanent disability. Designed a $5 million lump sum tax free benefit for each executive payable in addition to ongoing monthly benefits.



The lump sum program can be utilized to provide benefits for:


  • Individual needs
  • Buy sell coverage
  • Keyman coverage



In addition to the monthly income replacement benefits, lump sum benefits are available which are payable in addition to all other disability benefits.


Lump sum coverage is payable following 180 days or 365 days of disability where the insured is deemed permanently disabled and cannot return to his occupation. All benefits are tax free.


  • Up to 10 times annual compensation can be insured for personal needs
  • Coverage for Keyman and/or Buyout needs will be issued based on valuations


4/27: Health care costs during retirement..

According to research from the Employee Benefit Research Institute (EBRI), a 65-year-old man would need $127,000 in savings while a 65-year-old woman would need $143,000—thanks to a longer projected lifespan—to give each of them a 90 percent chance of having enough savings to cover health care expenses in retirement.

And while 80 percent of those with a high school diploma or less say they haven’t run the numbers, those who spent more time in school have spent even less time doing the calculations—with 81 percent of those with some college and 82 percent of those who graduated college saying they have not estimated medical costs.

Facts with unknown truth value (FWUTV) emphasize that although the estimation process treats the FWUTV’s as if they were facts known to be true,
the process of estimating the model reveals nothing about the actual truth value

4/27: What a difference in lifetimes. Did not think it was THAT much

The rich are living longer and taking more from taxpayers. Bloomberg cites a recent report from prominent scholars including William Gale and Louise Scheiner, which found the life expectancy gap between richer and poorer Americans has jumped to 12.7 years.

EFM- That changes the time for retirement and will impact the amount needed.

the poorest fifth of 50-year-old American men can now expect to live just past 76, six months shy of the previous generation. The richest 50-year-olds should make it almost to 89, seven years longer than their parents' generation.

4/27: Who pays Taxes

millions of Americans  don’t owe Uncle Sam a dime. According to 2016 data from the non-partisan Tax Policy Center, 44.3% of American households upwards of 76 million didn’t pay any income tax to the federal government last year. This year that number is expected to be roughly the same.

Most of these people aren’t paying income taxes because they either don’t have any income that is taxable (many fall below the poverty line), or because they get enough tax breaks so as to not owe the government money.

Common tax breaks include the child tax credit, the earned income tax credit (EITC), and the exclusion of some or all Social Security income, explains Roberton Williams of the Tax Policy Center.

Of course, this doesn’t mean that this group is completely tax exempt. According to Williams, “Roughly 2/3 of those paying no federal income tax work and pay federal payroll taxes that support Social Security and Medicare; about 60% of the rest are elderly and thus retired and not working; and most of the rest have very low incomes.”

4/27: Trump is generating  bad vibes. The numbers are staggering.

And Ivanka may be smart but she is out of her element.

In Germany, only 15 percent saw Mr. Trump as competent, and 87 percent called him bad for Germany, according to a January Infratest Dimap poll. Another Infratest Dimap poll found German trust in the United States had fallen from 59 to 22 percent since Mr. Trump’s election in November.

In the Britain, 50 percent called Mr. Trump “dangerous,” while 35 percent saw him as a “bigot,” a February poll by Opinium found. Crowds gathered in January in London to protest Mr. Trump’s planned visit.

Also that month, a Mainstreet/Postmedia poll found that 84 percent of Canadians say they disapprove of Mr. Trump. In a separate poll, by Insights West, 45 percent said they planned to boycott Trump-brand properties.

In France, 65 percent told Ipsos in November that Mr. Trump would be bad for French-American relations. Only 6 percent said they were enthusiastic about him. Also in November, a poll by Buendia & Laredo estimated that 74 percent of people in Mexico hold negative views of Mr. Trump.

These polls go on and on. Except in Israel, where Mr. Trump appeared to be viewed favorably.

4/26: Nasdaq Composite breaches 6,000 for the first time

Don't be impressed. Look how long it took to break even from 2000;

Today a man knocked on my door and asked for a small donation towards the local swimming pool. I gave him a glass of water.

4/26: Lengthy but good overview by Morning star.
 Factor Returns: The Theory
Factors are used to measure manager style, to disentangle style-based performance from skill-based performance, and to build and sell quantitative investment strategies. In addition to the capital asset pricing model, or CAPM, market factor, the value, size, and momentum factors are some of the more popular factors known to acad emics and practitioners since at least the early 1990s. Using the most common theoretical portfolio definitions, these four factors have shown quite impressive performance: the market, value, size, and momentum factors have delivered 8.2%, 2.6%, 3.6%, and 5.7% return a year, respectively, over the last 26 years! The low beta factor (also known as the betting-against-beta, or BAB, factor) discovered in the 1970s did not garner much popularity until recently, when it delivered an eye-catching 26-year return of 10.3%.4 Other factors that have become popular over the last decade—profitability, investment, and illiquidity—also showed fabulous historical returns of 3.9%, 3.2%, and 2.1% over the past quarter-century.

Such formidable numbers might suggest factor tilts are a ready path to higher returns as well as suggesting which factors are more likely to deliver outperformance going forward, and is the theory widely advanced as fact by a vocal quant community. This theory is also a product of data mining and selection bias. While theories can help advance our understanding of a subject, they are just idealized approximations of the real world built on a foundation of core—and often wrong—simplifying assumptions. No theory can fully capture how the real world works. Worse, the real world frequently presents us with objective facts and outcomes that contradict theoretical predictions.

Factor Returns: Theory Meets Practice
What if some factor returns earned by fund managers are far smaller than the historical theoretical factor returns imply, resulting in a return shortfall in investors’ real-world portfolios? In this case, the outputs of portfolio attributions based on theoretical portfolios will be inadequate and often misleading, and the investment process that takes theoretical factor performance for granted will favor factor tilts that fail to deliver in the real world. Ultimately, the knowledge that the returns achievable in practice differ starkly from the theoretical returns should urge investors to reconsider their factor allocation choices.

In practice, the long–short portfolios used to construct factor-return time series are not investable. The return histories for these paper portfolios ignore a startling array of costs associated with real-world implementation: trading costs, missed trades, illiquid stocks, commissions, management fees, borrowing costs for the short portfolio, and the use of stocks unavailable for shorting. To this list of return shortfall sources, we might add data mining and survivorship bias. By cherry-picking some factor histories, these factors can rise to the top of the popularity roster even when selected long after—and because of—the large returns they once earned

And it goes on 
Click here to read the full commentary

By the time you understand it all, it will be year 3000. It can work, obviously, but it may take a large effort for returns that might be just a flip of the coin. More important is the basic issue in not losing large amounts when the next recession hits.  Right now many of the issues are looking favorable for growth but we are NOT going to see 3%, You are never going to see 4%, Ain't gonna happen no way- even with the passage of his tax bill 


More than a million new apartments have sprung up across the US in a post-crisis construction surge. Now bankers who funded the boom are worried: have developers built too much?

Officials at the Federal Reserve ordered banks to set out how they would fare if commercial real estate (CRE) prices dropped 35 per cent and rental apartment values collapsed by more. While a simulated property downturn has long been part of banks’ annual “stress tests”, the Fed has made CRE risks a bigger focus this year, reflecting increasing worries that bubbles are forming in parts of US real estate.


Clinical Trials Demystified 

By Michael Plontz
(Page 1 of 2)

It seems that every time you turn on the television or open a magazine these days there is a new drug being touted as the new miracle cure-all. This is especially true of allergy and heartburn medications. How do scientists and researchers know what works and what does not work? Potential new drugs are first thoroughly evaluated in the laboratory with computer models. After this phase of testing is completed, additional research is then performed on laboratory. 

Eventually, the new drugs must be tested on human beings. This is done in a process called a clinical trial. It may sound as though a research facility is being sued, but it’s even more complicated than that.

It was in 1938 that the Federal Food, Drug and Cosmetic (FDC) Act was passed which made evidence of safety mandatory before marketing was possible. The Kefauver-Harris Drug Amendment passed in 1962, required that a drug’s effectiveness, as well as its safety, had to be proven. The Food and Drug Administration (FDA) makes the final decision.

So what is the process? Clinical trials, also known as investigational drug studies, are a carefully designed research study to determine whether new treatments or drugs are safe and effective. These trials involve using people, but only after extensive laboratory and animal testing show positive results.

Clinical trial protocol is a set of rules on which the trial is based. Basic protocol consists of the following information:

    Who may participate

    Test, procedure, medication and dosage schedules

    Length of study

Each clinical trial proceeds through four phases. In Phase I, scientists test a small group of 20-80 people for the first time. A procedure or drug’s safety is evaluated, a safe dosage range is determined, and side effects are determined. In Phase II, the number of participants is increased to 100-300, and safety and effectiveness are further evaluated. Phase III increases the amount of people tested to between 1000 and 3000. Safety, effectiveness and side effects are again monitored with special emphasis on safety. Phase IV occurs after the drug or treatment has been marketed. Information about their effect in various populations is evaluated as well as any side effects associated with long-term use.

“When dealing with people, let us remember we are not dealing with creatures of logic.

We are dealing with creatures of emotion, creatures bristling with prejudices and motivated by pride and vanity.”

Dale Carnegie


Partnerships for Health provides training classes and media designed to:

  • promote best practice in dementia care
  • enhance the wellness of people with dementia and their caregivers
  • improve organizational leadership
  • increase public awareness and knowledge
  • teach practical, hands-on skills caregivers need to create meaningful relationships with those they care for throughout the lifespan.




4/26: Another good sign

4/25: Trump plans to slash corporation tax rate to 15%

I don't know how this is all going to work with a budget deficit reaching the moon.

4/25: Needs repeating

Ivanka Trump, writing in the FT with World Bank president Jim Yong Kim, argues that world leaders should look to the potential of an underutilised female workforce as they seek to reignite global growth. 

"Only 55 per cent of women participate in the paid labour force globally and they continue to be an untapped source of growth. This is an invaluable asset with proven returns, but we have not invested the resources to unleash women’s full potential. The evidence is overwhelming that supporting women’s economic participation has enormous dividends for families, communities, and whole economies," write Mr Kim and Ms Trump, the daughter of President Donald Trump and a White House adviser. 

4/25: Banknine insurance

Are you prepared for a Long-Term Care event? See how a LTC event leaves the financial security of a family completely up to chance.



Percentage of people 65 and older who need LTC at some point*


Older people living with LTC needs who rely exclusively on family and friends*


Older people with LTC needs who supplement family care assistance from paid providers*



Elderly who have LTC needs and no family available who are in nursing homes*


Percentage of caregivers who are female&

1 in 4

Number of 65-year-olds who will live to be older than 90§


1 in 10

Number of 65-year-olds who live to be older than 95§


Median 2016 annual cost of a private nursing home room in the US


Median 2016 annual cost of a semi-private nursing home room in the US



Adults in their 40s and 50s who have a parent age 65 and older living with them and are caring for children+


Total estimated lost wages, pension, and Social Security benefits for the average female caregiverŗ


Percentage of Americans who underestimate the cost of in-home LTC

4/25: Google news

How Are Variable Annuities Taxed?

Posted: 24 Apr 2017 05:00 AM PDT

This is the second article in a three-part series about variable annuities. The first article discussed how variable annuities work. And the final article will discuss cases in which they do/don’t make sense as a part of a financial plan.

How a variable annuity is taxed depends on where it is held.

Variable Annuities within Retirement Accounts

If the variable annuity is held in a retirement account, the variable annuity is taxed (almost*) like anything else within that account. For instance, if one of the investment options in your 403(b) plan is a variable annuity, when you defer salary to contribute to the annuity within that plan, those deferrals will reduce your taxable income — and when you take money out of the plan it will be taxable as income.

Taxation of Nonqualified Variable Annuities

If the variable annuity is not held in a retirement account (i.e., it is a “nonqualified” annuity) it has unique tax characteristics.

First, earnings that occur within the account are not taxable while they remain in the account. That is, the account is tax-deferred much like a traditional IRA (but without the opportunity for a tax deduction when you make contributions).

This tax deferral is, generally speaking, a good thing, because it allows the account to grow more quickly. And the greater the expected return, the bigger this benefit is. (Because the greater the return, the greater the annual tax cost that you get to avoid via tax deferral.)

However, when earnings are distributed from the account they are taxable as ordinary income. If you’re using the variable annuity to invest in stocks, this is a big drawback relative to a taxable account, because it means that dividends and long-term capital gains that would have otherwise received beneficial tax treatment are instead taxed at a higher rate as ordinary income.

When your original investment is distributed from the account, it is not taxable. However, all distributions from the account are considered to come from earnings until there are no more earnings left in the account. (In other words, distributions are considered to come in the least favorable order.)

Also, earnings distributions that occur prior to age 59.5 are subject to a 10% penalty, unless you meet one of a few exceptions:

§  You (the owner of the annuity) have died,

§ You (the owner of the annuity) are disabled,

§ The distributions are part of a “series of substantially equal periodic payments” over your life or life expectancy (or the joint lives/life expectancies of you and a joint annuitant), or

§ The distribution is allocable to your investment in the contract that occurred before August 14, 1982.

Finally, there’s no step-up in cost basis when you die.

Taxation of Nonqualified Annuities, after Annuitization

After annuitizing a nonqualified annuity (i.e., after you convert it from a liquid asset into a guaranteed stream of income, as discussed last week), payments from the annuity are taxed in the same way as payments from any other nonqualified immediate annuity. That is, part of each payment is nontaxable because it is considered to be a return of your basis (i.e., the amount that you put into the annuity), while the remaining portion of each payment is taxable as ordinary income. Eventually, if you live long enough to receive all of your basis back (i.e., the sum of the nontaxable portions of the payments eventually totals your basis), further payments will be entirely taxable.

Tax Planning Considerations

In summary, relative to investing in a retirement account, investing in a nonqualified variable annuity provides only tax disadvantages. It’s essentially the same as nondeductible traditional IRA contributions (i.e., the least desirable type of retirement account contribution) but with two big disadvantages:

1.       Distributions are considered to happen in a less favorable order, and

2.       There’s no opportunity for Roth conversions.

Relative to investing in a taxable account, investing in a nonqualified variable annuity has one tax advantage (tax deferral) and a list of tax disadvantages (distributions of earnings are taxed at ordinary income tax rates when otherwise they might be taxed at lower rates, there’s no step-up in cost basis when you die, and there’s the possibility of a 10% penalty on early distributions).

So when would a nonqualified variable annuity offer a net tax benefit relative to simply investing in a taxable account? The ideal set of circumstances would be something along the lines of:

§ You want to invest in an asset with high expected return and which does not receive very favorable tax treatment (e.g., high-yield bonds or REITs),

§ You do not have room for that asset in your retirement accounts,

§ You expect to hold the asset for a long time (such that the tax-deferral has many years to create significant value), and

§ You expect to deplete the asset during your lifetime rather than leaving it to your heirs (otherwise you’d want a taxable account so they could receive a step-up in cost basis).

Suffice to say, that situation is very uncommon. Most people have plenty of space in their retirement accounts to hold any high-return, tax-inefficient assets they want to own.

*I say “almost” here because a qualified variable annuity that has been annuitized has slightly different tax treatment than other things within a retirement account. Specifically, after reaching age 70.5, there is no need to calculate an RMD for the annuity. Instead, each year the payment from the annuity is simply considered to be the RMD amount.95-1+63

4/25:Only 8% of US Stock Funds in 401k Plans Beat Index over 15 Years

There’s a thundering herd moving out of active to passive funds with $638 billion moving into index funds over the past 12 months at the expense of active funds which lost $310 billion. According to P&I, a majority of assets in the top 100 DC plans were passive in 2015. Recently, BlackRock announced that it was going passive for dozens of active funds, mostly US equities, affecting $30 billion in assets.

Results by Vanguard are stunning gathering 8.5 times more assets than all active money managers combined over the last three years.

4/25: The disabled and the elderly face a big problem- lack of aides

Acute shortages of home health aides and nursing assistants are cropping up across the country, threatening care for people with serious disabilities and vulnerable older adults.

The emerging crisis is driven by low wages — around $10 an hour, mostly funded by state Medicaid programs — and a shrinking pool of workers willing to perform this physically and emotionally demanding work: helping people get into and out of bed, go to the bathroom, shower, eat and participate in routine activities, often while dealing with challenging behaviors.
America’s senior population swells to 88 million people in 2050, up from 48 million today, and requires more assistance with chronic health conditions and disabilities.

EFM: This will happen globally- first in Japan. Immigration might help us but I doubt the U.S. will let in very many at all. Some of the younger crowd looking for a job won't cater to this kind of work at such low pay but there will be little else to seek out. They will definitely feel they are entitled to better.. Robots would be excellent and cheap but they may not be available till 2040.

4/24: Risk Aversion vs. Loss Aversion: What is the Big Difference?
Well, they got it wrong. Risk is how much you can lose. It's not an aversion if you know what you are doing going into an investments (and universally no one tells you) and  the risk aversion means ????. I suppose it might mean how sorry you would feel with losing $45,000 out of $100,000. But in my terms it means divesting yourself of risk once a threshold meets are certain. About 12% is the cutoff point

4/24: The pro-E.U. Emmanuel Macron appears headed for a runoff with the far-right Marine Le Pen in the French presidential race

Why the headline??? If Le Pen wins France may leave the Euro. Then more countries will as well. This is a real ugly mess because the Euro could fall . Russia will look to extend power. China, North Korea as well. Worldwide recession at about 85%.

4/24: Is this an old article??? Didn;t say but the whole DOL stuff is to eliminate excess fees

Over 90% of Americans make this 401(k) mistake
Roughly 92% of 401(k) participants are unaware of the fees they pay in their plans, according to this article on Motley Fool, which cited a study by NerdWallet. This could mean many of them could lose a substantial amount of retirement savings, as many 401(k) plans charge hefty fees

EFM = If employees are NOT aware of that issue- well they are really behind the eight ball in determining what they should be doing 

4/24:  And more concern on TDFs :   Boston College
  • While nearly 60 percent of new 401(k) participants have savings in target date funds (TDFs), little research has looked under the hood of this investment vehicle.
  • This analysis uses a unique dataset with extensive information on the underlying mutual funds that TDFs hold.
  • The results show that TDFs:
    • often invest in specialized assets (e.g., emerging markets and real estate);
    • charge fees that are only modestly higher than if an individual investor assembled a similar portfolio on his own; and
    • earn returns that are broadly in line with other mutual funds.
4/24: TDF

Nearly all (97%) of consultants recommend target-date funds as the qualified investment default alternative (QDIA).

EFM- THAT'S WRONG. Read my article above. TDF types are all over the board. The risk of loss is all over as well. Can just be terrible for retirees,
4/24: Why Economic Reforms Are Stalling Globally

Then, at the same time. the headline below comes out saying everything is rosy

4/23: economic recovery is at its strongest since the crisis

Brexit and Donald Trump were supposed to bring doom, gloom and trade wars to the global economy, if not famine and populism-fuelled pestilence.

EFM- I don't remember being that concerned but I did feel then as I do now that the party has been going on for too long.

4/23: The Downside of Managing Downside Risk

Read it- I will debunk it later.

4/23. The mind in the machine. More of artificial intelligence below.

The scientific method might be the single most powerful idea humans have ever had, and progress since the Enlightenment has been simply astonishing. But we are now at a critical juncture where many of the systems we need to master are fiendishly complex, from climate change to macroeconomic issues to Alzheimer’s disease. Whether we can solve these challenges — and how fast we can get there — will affect the future wellbeing of billions of people and the environment we all live in. The problem is that these challenges are so complex that even the world’s top scientists, clinicians and engineers can struggle to master all the intricacies necessary to make the breakthroughs required.

At its core, intelligence can be viewed as a process that converts unstructured information into useful and actionable knowledge. The algorithms we work on learn how to master tasks directly from raw experience, meaning that the knowledge they acquire is ultimately grounded in some form of sensory reality rather than in abstract symbols

AI must be used responsibly, ethically and to benefit everyone. We must also continue to be highly cognisant of both the utility and limitations of AI algorithms. But with rigorous attention to programs’ capabilities, and more research into the effects of the quality of the data we use as inputs and the transparency of their workings, we may find that AI can play a vital role in supporting all manner of experts by identifying patterns and sources that can escape human eyes alone.

4/23: GUIDE TO VA Benefits & Long-Term Care

4/23: Retail is dying:

The profile of today’s angry working-class voter is someone who has found that tickets to middle-class life have run out because manufacturing jobs they once could live on have given way to low-paying service jobs.

Now, even many of these service jobs are disappearing. A recent report in The Times documented the decline of suburban malls as online shopping advances. The e-commerce share of total retail sales has doubled roughly every six years since 2004, reaching 8.3 percent at the end of 2016. One result is that employment at retail outlets has fallen. Department stores and other general merchandise stores, like supercenters and warehouse clubs, have been hit especially hard, shedding 89,000 jobs from November through March.

The government needs to effectively manage inevitable change for the greater good.

The immediate need is to ensure a strong safety net for displaced workers, including unemployment benefits and continuous health care coverage.

The bigger challenge is to ensure greater pay and security for jobs that survive the upheaval and those that are created. Service workers are poorly paid and have few benefits because of intentional policy decisions, not impersonal forces.
EFM- I don't think that AI can bring us nirvana. It might 'take over' most functions of our society. With this influx and the changes in retail etc. more young people will be removed from any type of a true labor source and cause a social upheaval because they have become useless. .

4/23: Why Employers Should Care About the Cost of Delayed Retirements.”

 For each individual who cannot retire, the cost averages an extra $50,000 a year, representing the difference between the salary of an older worker and hiring a younger person, according to Prudential. The annual cost across a workforce is an additional 1.0% to 1.5% a year.
EFM= Yet I see article after article showing older workers are more dependable, smarter, better workers. Maybe it is the cost of health care?????

4/23: MPT and standard deviation- broken

One modern portfolio theory (MPT) pillar that is unquestionably broken is the use of volatility, specifically standard deviation, as a measure of risk. This initial error in MPT’s development is a major contributor to active investment management underperformance.

In the 1950s, academics recognized that hundreds of years of statistics research thinking could be borrowed to analyze the performance of investment portfolios — if some of the definitions could be bent to their aims. Once standard deviation was transformed into “risk,” the work of analyzing portfolios could begin and theories could be developed.

Harry Markowitz states, “V (variance) is the average squared deviation of Y from its expected value. V is a commonly used measure of dispersion. Also, “We next consider the rule that the investor does (or should) consider expected return a desirable thing and variance of return an undesirable thing. . . . We illustrate geometrically relations between beliefs and choice of portfolio according to the ‘expected returns — variance of returns’ rule.”

EFM- the article notes that variance is exactly what an investor wants- to be able to capture great returns. By the same token, real life has some major hits due to an unequal variance. But my position is simply avoid. these hits beyond a 12%.

Markowitz again- 
“[This rule] assumes that there is a portfolio which gives both maximum expected return and minimum variance, and it commends this portfolio to the investor.”

EFM- In real life, current volatility will bounce around a "norm"- however one wishes to define it. But this is now real life-
the gauge’s- (VIX , volatility index)  average level this year is at its lowest point in its 24-year history. Gee, that is not possible. It is an impossible occurrence given  today's mess of Trump, North Korea, Russia, Ukraine, GDP, USA debt, Trump again.and on and on. But I have always noted in this game- things simply do not have to make sense. Robert Shiller noted that

The implication is that stock price changes are largely driven by something other than changing fundamentals. Volatility is the result of investors’ collective emotional decisions. Shiller’s contention has withstood the test of time. Numerous studies have attempted and failed to dislodge it.

So not only does volatility capture both undesirable down price movements along with desirable up movements, it is mostly driven by the collective emotions of investors and has little to do with fundamental risks. Since emotions are transitory and much of the resulting effect can be diversified away over time, volatility fails as a risk measure; 

EFM- Volatility IS a risk- but just one of many. It is NOT risk ipso facto. Can one get it to work for the real world? Yes, but that requires an interpretation of as many issues as the human brain can address with the recognition that risk CANNOT remain static.. So it's not perfect? Agreed- but where are the comments on the risk questionnaires where no one has a clue to all the human heuristics and dumb rationalizations entered by consumers and analysts alike.

some maintain that since investors enter and exit funds based on strong short-term upsurges and short-term drawdowns, volatility represents business risk for the fund. But why should fund business risk be intertwined with investment risk? There need to be separate measures since the risk faced by investors and funds is distinctly different.

possible Risk Measures

So if volatility as risk is flawed, how do we measure investment risk? The metric should focus on the chance of permanent loss — investment value dropping to zero, for example — or the opportunity cost of underperforming a benchmark.

EFM- the Risk of Loss is the best measure- how much the investor is willing to lose given a buy and hold 'strategy'. One can easily determine where the client fits in 'conservative, moderate, aggressive, etc.  definitions. No wondering about artificial intelligence, miscellaneous hubris and  heuristics and the always utilized Ouija Board.

the truth is investment risk is complex and multifaceted, so no single number could suffice, much less an emotionally driven statistical measure like standard deviation.

Academics have little meaningful insight into measuring risk. This hasn’t exactly endeared a professor to department colleagues or to some of his students. In essence, he was saying that the research on measuring risk conducted at hundreds of academic institutions over the decades has largely been fruitless.

No discipline likes to admit such monumental failure. But this is where we are in finance today.

EFM- OK, you can get a reasonable measure of risk of loss given a recessionary economy. When the risk of loss is greater than a correction, then eliminate the risk. The 10% to 15%  bar been valid for decades and I think it will be for some time yet. In any case, the investor should and can easily circumvent large rages losses of 2000   (49%) and 2008 (57%). Or just sit there like a lump and suck  up losses that you may never be able to get back.


Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?

Robert J. Shiller

NBER Working Paper No. 456 (Also Reprint No. r0188)
Issued in February 1980
NBER Program(s):   ME 

This paper will develop the efficient markets model in Section I to clarify some theoretical questions that may arise in connection with the inequality (1) and some similar inequalities will be derived that put limits on the standard deviation of the innovation in price and the standard deviation of the change in price. The model is restated in innovation form which allows better understanding of the limits on stock price volatility imposed by the model. In particular, this will enable us to see (Section II) that the standard deviation of p is highest when information about dividends is revealed smoothly and that if information is revealed in big lumps occasionally the price series may have higher kurtosis (fatter tails) but will have lower variance. The notion expressed by some that earnings rather than dividend data should be used is discussed in Section III, and a way of assessing the importance of time variation in real discount rates is shown in Section IV. The inequalities are compared with the data in Section V.

4/23: Overvalued stocks
Comments and views of some heavy hitters

years of low interest rates have bloated stock valuations to a level not seen since 2000, right before the Nasdaq tumbled 75 percent over two-plus years. That measure -- the value of the stock market relative to the size of the economy -- should be “terrifying” to a central banker,

Stocks are trading at unsustainable levels. A few traders are more explicit, predicting a sizable market tumble by the end of the year.

margin debt -- the money clients borrow from their brokers to purchase shares -- hit a record $528 billion in February, a signal to some that enthusiasm for stocks may be overheating.

 U.S. stocks sit 2 percent below the all-time high set on March 1. The S&P 500 index is trading at about 22 times earnings, the highest multiple in almost a decade, goosed by a post-election surge.

dividends and buy back shares. About 30 percent of the jump in the S&P 500 between the third quarter of 2009 and the end of last year was fueled by buybacks, according to data compiled by Bloomberg Intelligence. The manager says he has been shorting the market, expecting as much as a 10 percent correction in U.S. equities this year.

4/23: From a woman age 92 to one of her nephews,"“Don’t live this long. Really, don’t do it.”

4/23: USA Facts

USAFacts is a new data-driven portrait of the American population, our government’s finances, and government’s impact on society. We are a non-partisan, not-for-profit civic initiative and have no political agenda or commercial motive. We provide this information as a free public service and are committed to maintaining and expanding it in the future


4/23: Felons and insurance

As life insurance professionals, we often get the question, “Will a felony conviction result in a “life Sentence” decline when trying to obtain a life insurance policy?”  The short answer is “yes, no, and maybe so”. The true decision will be made based upon the details of the conviction. 


Those with a criminal history are immediately considered high-risk. Roughly one-third of adults in the United States have a criminal record according to the Department of Justice. The consequences of this are numerous and far-reaching including the ability to obtain life insurance.


There are a great many factors that drive the underwriting of a life insurance policy.  If your client has criminal history, it is best to disclose it up front.  Higher amounts often require a background check and if a criminal past exists and was not disclosed, the case may not be seen in the proper light.  There are several reasons that history of felony conviction results in a higher life insurance premium and a non-preferred risk class.  Many applicants with a history of incarceration suffer from poor health caused by the stress of jail time and the poor health care that is received while incarcerated.  The possibility of a contractible disease is also higher amongst the prison population and there is a much higher likelihood of substance abuse and addiction. The highest risk of all is the likelihood of re-incarceration. According to the bureau of justice,

4/20: Well, at least they are not drinking a lot and driving. Then again.....


Effects of Alcohol on the Brain

4/20: VIX is low, low, low

The volatility crisis approaches What gives with Wall Street’s “fear gauge”? The Chicago Board Options Exchange Volatility Index, or Vix for short, should be reflecting the potential peril for markets —

4/20: Too much debt

A debt binge has left a quarter of US corporate assets vulnerable to a sudden increase in interest rates with the ability of companies to cover interest payments at its weakest since the 2008 financial crisis by one measure, the International Monetary Fund has warned