I had such poor luck with women that I decided to try something else. I mean, really, look at the contentment.
By me at least.  The cow was drugged,
Then we went to McDonalds

Berkshire Hathaway, Warren E. Buffett’s investment company, said on Friday that first-quarter profit tumbled 64 percent because of losses tied to derivative contracts.

5/4: No, we ave not turned the corner:  The Census Bureau reported that 2.9 percent of homes intended for owner occupancy were vacant at the end of the first quarter, a number that before 2006 had never exceeded 2 percent.

Now that is just plain funny!

5/4: Alzheimers: By 2050 11 million to 16 million Americans will have the disease.

However, from VERY personal experience, do NOT believe you are coming down with the disease if you misplace your keys, cannot remember someone's name (perhaps you never liked them anyway, so what's the problem?). As you get older, you have more things to remember. If you are in a stressful job or, in particular, if you are attempting to do many things at the same time, you are effectively guaranteed to misplace stuff. With some of the reports I do, my brain is spinning and the effort to remember my keys, where I put the stamps, why I put my underwear on my cat- are all just "extra stuff" that means very little overall. I am doing too many things. Nothing to be concerned about. 

5/4: The American economy lost 20,000 jobs in April, the fourth consecutive month of decline, in what many economists took as powerful evidence that the United States is almost certainly now ensnared in a recession. But some are saying the loss was not as big as expected so things "are getting better". I do not think so. 

Spending grew 0.1 percent in March when adjusted for inflation, after staying flat in February and recording a slight rise in January, the Commerce Department reported Thursday. At the end of last year, spending actually declined.

“What you’ve got here is a very dramatic consumer slowdown,” said Ian Shepherdson, chief United States economist at High Frequency Economics in London. “It’s much more severe than anything we saw in 2001,” he added, referring to the last recession.

Unadjusted consumer spending rose 0.4 percent in March, more than expected, but that figure does not take into account the immense price run-up in food and gasoline

Run, run I say!

The earnings rate for Series I Savings Bonds is a combination of a fixed rate, which applies for the life of the bond, and the semiannual inflation rate. The 4.84% earnings rate for I bonds bought from May through October 2008 will apply for their first six months after issue. The earnings rate combines a 0.00% fixed rate of return with the 4.84% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U). The fixed rate applies for the 30-year life of I bonds purchased during this six-month period. The CPI-U increased from 208.490 to 213.528 from September 2007 through March 2008, a six-month increase of 2.42%.

Bonds held less than five years are subject to a three-month interest penalty.

The cost of a semiprivate nursing home rose 4%, to $68,408, while the cost of an hour of care from a non-skilled home health aide held steady at about $19. 

The hourly cost of care by a skilled, Medicare-certified provider increased 18%, to $38.

Adult day care cost about $59 per hour

5/4: BofA Investment to disgorge $10 million
Banc of America Investment Services failed to disclose to clients that it favored two mutual funds affiliated with them. 

Virtually guaranteed issue if your client can answer NO to the questions below.

A. Do you currently receive kidney dialysis or require oxygen use or have you been diagnosed as having a terminal illness?(Terminal illness is defined as any illness diagnosed that would reasonably be expected to cause death within twenty-four(24) months.)    Yes or No

B. Do you require assistance to eat, bathe, dress or take your own medication or are you currently confined to a hospital, nursing home, mental facility or Hospice or have you been hospitalized two or more times in the past twelve months?   Yes or No

C. Has the proposed insured ever been diagnosed as having or been treated for AIDS (Acquired Immune Deficiency

Syndrome) or ARC (AIDS Related Complex) by a member of the medical profession, or tested positive for HIV antibodies as part of a test conducted for the purpose of obtaining insurance?   Yes or No

Any question answered “Yes” in this section will disqualify the applicant for the Express Issue Whole Life Policy.

Policy Description Express Issue Whole Life

Issue ages 45-80

$2,000 Minimum - $50,000 Maximum

Graded Death Benefit in first 2 years Full face amount beginning 3^rd year

First year return of premium plus 12%

Second year return of premium plus 24%

ADB included in first 2 years (full death benefit for accidental death)

Sample annual premium rates per thousand face amount*

Non Tobacco

Age                  45         50         55         60         65         70         75         80

Male     $          37.68    45.40    55.53    73.45    98.08    125.35  160.00  208.33             

Female $          31.40    37.06    44.43    57.59    75.45    98.31    128.02  166.67

Tobacco

Age                  45         50         55         60         65         70         75         80

Male     $          47.10    59.59    76.36    105.55  147.12  188.03  240.02  312.49 

Female $          39.25    48.64    61.09    82.79    113.16  147.48  192.01  250.00 

* Add $50.00 policy fee. Premium rates and/or availability of product may be changed without prior notice.

Four Asset Portfolio vs. S&P 500, 1972-2007

REITs, commodities, stocks, and bonds 

S&P 500- yellow

Inflation black

Four Asset- green

4/29: Asia is doing O.K.- for now: Japan's Nikkei briefly surpassed 14,000 for the first time in two months as Asian stock markets rose on the back of refreshed optimism about recently battered financial shares

4/29: Oil goes to $120 and the market goes UP. Dweebs

4/29: the FED will probably drop rates another .25%, but it will have to stop after that. Inflation is going up , up and UP.

*Ushers will eat latecomers.

4/29: Comments on Fiduciary to the NY Times

4/29: Houses: (Yahoo) Sales of new homes plunged in March to the lowest level in 16 1/2 years as housing slumped further at the start of the spring sales season. The median price of a new home in March, compared with a year ago, fell by the largest amount in nearly four decades. The Commerce Department reported Thursday that sales of new homes dropped by 8.5 percent last month to a seasonally adjusted annual rate of 526,000 units, the slowest sales pace since October 1991. The median price of a home sold in March dropped by 13.3 percent compared with March 2007, the biggest year-over-year price decline since a 14.6 percent plunge in July 1970. The dismal news on new home sales followed earlier reports showing sales of existing homes fell by 2 percent in March. Housing, which boomed for five years, has been in a prolonged slump for the past two years with sales and home prices falling at especially sharp rates in formerly boom areas of the country

I can fly!!!!!

4/28: Financial Diet (Times)  In March, Americans spent less on women’s clothing (down 4.9 percent), furniture (3.1 percent), luxury goods (1.3 percent) and airline tickets (1.1 percent) compared with a year ago. 

4/28: Derivatives:  (Times)  Derivatives are privately negotiated and often complex financial contracts theoretically designed to limit risk. Their value is derived from an underlying basket of assets, like stocks, bonds or loans. Advocates say that derivatives, used wisely, foster economic activity. Critics contend that as derivatives trading has boomed over the last decade, it has led to high-octane speculation more akin to gambling than to sensible hedging of financial risk.

Once again I point readers to what should have been obvious. If the market is up or at least flat, many "theoretical" concepts will do just fine. But when situations finally hit, the theory may not work at all. Want validation? Long Term Capital. 27 PhDs and 2 Nobel Laureates had "theoretically" determined what to do under "any" financial conditions. Then  the world changed and the programs could not keep up. and a $6 billion bailout

4/28: DECEPTION AND LYING BEHAVIOR LINK-Attempts have been made to define what lying actually is and these definitions vary. On the whole they consist of the idea of a false communication that is to the benefit of the communicator. A number of reasons are given as to why people lie including to make a goodimpression, to avoid punitive action or for the purpose of gaining an advantage.

1) Defining deception or lying.
2) Why and when do people deceive or lie?
3) What are some of the individual differences in lying?
4) What are the types of deception (lying)?
5) How and why do children practice deception?

There is also the question of whether lying is always wrong and indeed it is not. Zeltzer (2003) emphasises the value of lying or not be totally honest in ones dealing with others as a form of lubrication of socialisation. Telling a white lie, or “therafibbing” can be of value.

The distinction between misinformation and disinformation becomes especially important in political editorials, and advertising contexts where deliberate efforts are made to mislead, deceive, or confuse an audience in order to promote personal, religious, or ideological objectives. The difference consists in having an agenda. This bears comparison with lying because ‘lies’ are assertion that are false, that are known to be false, and that are used with the intention to mislead (Fetzer, 2004). They are also meant to confuse. As already mentioned earlier, deceiving oneself can also culminate into the fear of deception. Barnes (2004) indicates that the term ‘lie’ has a broad range of meaning; like many other recent writers on lying, not all forms of deception are lying and it is cited that a dictionary definition of a lie is but one component of what is the 57intention to deceive; the other component being a statement that the liar believes to be untrue.

Participants reported telling their serious lies to get what they wanted or to do what they thought they were entitled to do, or to avoid punishment. Lies also occurred to protect oneself from confrontation, in an attempt to appear to be the type of person they wish they were, to protect others, and to hurt others. The degree to which the liars and the targets felt distressed about the lies differed significantly across these different types of lies. Similar results were obtained by Grover (1997) in an earlier study indicating that self interest was the major reason for deception or lying.

EXCEPTIONAL ARTICLE

4/28:  Peter Bernstein on the recent financial debacle (WSJ)  How long do you think this whole process will take, before we get back to normal?

Mr. Bernstein: Longer than people think. The people who think we will have turned in 2009 are wrong. There has to be a respite along the way. Nothing goes in one direction forever. But it will take longer than people think. If that weren't the case, I would be talking entirely differently. I would be saying, "What an opportunity we have got." And I just can't believe that the opportunity is here yet. There is too much to unwind.

WSJ: Can you explain the reason you think it will take a long time?

Mr. Bernstein: We have to go back to a moment when people have the courage to borrow and lenders have the courage to lend. Until credit is going up instead of down, you can't have growth. Housing has got to be a very important part of that; it always has been. You have to reach a point where somebody says, "This house is cheap, I am going to buy it," or where some businessman says, "This is a great opportunity for us to expand our business. Everything is available to us."

If China goes into a recession, God knows. The Iraq war and the whole situation with terrorism, we really don't know where that is going to come out. There are so many things that have got to get buttoned down before you say that the future looks good enough to take a risk.

4/27:  Home prices: Yale University economist Robert Shiller, pioneer of the widely watched Standard & Poor's/Case-Shiller home price index, said there is a good chance housing prices will fall further than the 30 percent drop in the Depression of the 1930s. Home prices nationwide already have dropped 15 percent since their peak in 2006, he said.

1. The Prudent Investor Act requires ILIT Trustees to set expectations as to the performance of Trust-Owned Life Insurance (TOLI) holdings that are appropriate and reasonable in relation to the assets, the purposes of the trust, and the skills of the trustee. For the purposes of setting such reasonable expectations as to the performance of TOLI holdings, do you generally consider the rate of return on TOLI holdings to be ... (check only one)

1. The Prudent Investor Act requires ILIT Trustees to set expectations as to the performance of Trust-Owned Life Insurance (TOLI) holdings that are appropriate and reasonable in relation to the assets, the purposes of the trust, and the skills of the trustee. For the purposes of setting such reasonable expectations as to the performance of TOLI holdings, do you generally consider the rate of return on TOLI holdings to be ... (check only one)   the rate of return calculated on the death benefit received versus premiums paid. the rate of return on invested assets underlying policy cash values which are generally used to cover underlying cost of insurance charges (COIs), fixed administration expenses (FAEs), cash-value-based "wrap fees" (e.g., M&Es) and premium loads.

2. Section 7 of UPIA specifically requires ILIT Trustees to "only incur costs that are appropriate and reasonable in relation to the assets, the purposes of the trust, and the skills of the trustee". For the purposes of justifying policy expenses as reasonable and appropriate, do you generally consider the costs of a TOLI holding to be ... (check only one)

2. Section 7 of UPIA specifically requires ILIT Trustees to "only incur costs that are appropriate and reasonable in relation to the assets, the purposes of the trust, and the skills of the trustee". For the purposes of justifying policy expenses as reasonable and appropriate, do you generally consider the costs of a TOLI holding to be ... (check only one)   the premium. the policy expenses as to cost of insurance charges (COIs), fixed administration expenses (FAEs), cash-value-based "wrap fees" (e.g., M&Es) and premium loads underlying and generally used to compute TOLI premiums.

Other (please specify)Other (please specify) Since an ILIT is for (almost universally) estate taxes the issue is the premium for a policy that provides insurance ONLY for the specified time frame.

4. The duty to investigate seeks to ascertain the relative appropriateness of TOLI holdings as they relate to both the trust objective and peer group products (i.e., are expected earnings reasonable for the appropriate trust asset allocation and are TOLI expenses reasonable for the trust objective and relative to peer group product holdings?).

Please indicate below whether such investigation functions are being performed internally, or outsourced to a third-party, or are not currently in compliance:

4. The duty to investigate seeks to ascertain the relative appropriateness of TOLI holdings as they relate to both the trust objective and peer group products (i.e., are expected earnings reasonable for the appropriate trust asset allocation and are TOLI expenses reasonable for the trust objective and relative to peer group product holdings?). Please indicate below whether such investigation functions are being performed internally, or outsourced to a third-party, or are not currently in compliance:   Investigation performed internally by comparing premiums, cash values and death benefits from inforce illustrations of current TOLI holdings to illustrations of hypothetical policy values for peer group products. Investigation expected from the agent/broker who sold/is servicing the policy. Investigation outsourced to third-party-administrator (TPA). Investigation includes comparison of cost of insurance charges (COIs), fixed administration expenses (FAEs), cash-value-based "wrap fees" (e.g., M&Es), premium loads and the performance of invested assets underlying policy cash values to industry benchmarks and best-available rates and terms. Not currently investigating whether current TOLI expenses are justified and/or whether expected performance of invested assets underlying policy cash values is reasonable.

Other (please specify)Other (please specify) Research first and foremost as to potential lapse problem prior to time frame specified. Only with a minimum 95% probability of lasting for term can one then focus on costs. That said, since there will be few policies to examine, the process can be streamlined

6. The Prudent Investor Act makes no distinction in the standard of care between investment trusts and ILITs. As such, while it is common for trustees of investment trusts to use written Investment Policy Statements (IPS), which of the following do you currently have for your ILIT? (check only one):

6. The Prudent Investor Act makes no distinction in the standard of care between investment trusts and ILITs. As such, while it is common for trustees of investment trusts to use written Investment Policy Statements (IPS), which of the following do you currently have for your ILIT? (check only one):   General Policy Statement of Suitable TOLI Holdings (e.g., holdings issued by insurers ranked in the top decile/top 10% for financial strength and claims paying ability, policy cash values allocations of no more than 10% to emerging markets, etc.) TOLI Investment Policy Statement (TIPS) defining trust objectives, expected holding period, risk tolerance/asset allocation, etc. Prudent Delegation Agreement clearly defining the relationship between the ILIT Trustee and the Insurance Advisor Delegatee. All of the above None of the above

Other (please specify)Other (please specify) Not managing- but the key focus must be to being sure the policy will be there as expected at death. "As expected" is not having to replace policy add more premiums due to volatility. If one is buying insurance for a stated purpose, then just buy insurance.

The NYT has an interesting perspective on the mortgage mess. This piece looks at the mortgage mess and by implication blames the whole thing on Moody's and the other bond-rating services S&P and Fitch. I agree with the notion that only the debt-rating services could have stopped this. I do not agree that they alone created it or bear all of the blame.

The article looks at one particular pool of 2,293 subprime mortgages with a total amount of $430 million. Faced with the decision as to how to package and sell this pool of mortgages Moody's divided the bonds sold into 12 tiers and gave the lowest yields to the people who would get paid first and the highest yields to the bonds taking the biggest risk. These folks would be paid only after the other 11 sets were paid. In a perverse way this makes sense but the crux of the problem was that the model which Moody's used to evaluate risk failed. Wait. The model failed miserably.

What was wrong with Moody's model? I think that in fact the answer is very simple. There were two large mistakes. They seriously underestimated the effect that commingling stated income loans with fully documented loan had on foreclosure rates and the assumed that property values would keep rising. Constantly rinsing values allowed the inevitable to be delayed and when values stopped rising everyone got concerned.

Moody's and lenders may say "Well, poor us, we were the victims of a multitude of cases of loan loan fraud in which applicants overstated their income." That is a bad joke. I do not believe that Moody's or lenders were ever unaware of the extent to which stated income was overstated income. A Mortgage Asset Research Institute study that found 90 percent of stated-income borrowers reported incomes higher than those found on file with the Internal Revenue Service and almost 60 percent of the stated incomes were exaggerated by more than 50 percent. Moody's should have had a clue.

Stick a knife in my neck and I will shove a horn up your butt

0

How I really make my money

4/23:  The tax extenders bill includes six provisions that are of great importance to philanthropy. These provisions would be effective from January 1, 2008 until December 1, 2009. The six provisions are:

1. IRA Rollovers -- IRA owners over age 70? may transfer tax-free up to $100,000 directly to qualified charities.

2. Conservation Gifts -- The appreciated property limit is raised to 50% (100% for qualified farmers and ranchers) and the carry-forward is extended to 15 years.

3. Gifts of "Apparently Wholesome Food" -- The charitable deduction is increased to the lesser of twice the basis or basis plus half of appreciation.

4. S Corporation Gifts -- Gifts of appreciated property by S Corporations have more favorable basis rules.

5. Gifts of Book Inventory -- An enhanced deduction is available for publishers making gifts of books to schools.

6. Payments to Charities by For-Profit Subsidiaries -- Payments for items such as rent will not be unrelated business income if the payment is at fair market value.

4/23: Groups React To FINRA VA Rule Delay
Insurance industry groups are welcoming an announcement that the Financial Industry Regulatory Authority has delayed indefinitely implementation of parts of its new variable annuity marketing rule because it plans to propose amendments to the controversial provisions in the near future.

Nothing like delays and procrastination to help the public

4/23: Oil- Crude oil rose to a record $119.90 a barrel in New York as the dollar dropped to an all-time low against the euro.

Readers will note that I said $4 gasoline by this summer quite some time ago. Well maybe $4.25- even $4.50. Unless interest rates RISE the dollar goes lower and the price of oil goes higher.

4/23:  Applicable Federal Rate of 3.2% for May -- Rev. Rul. 2008-24; 2008-18 IRB 1 (18 Apr. 2008)

The IRS has announced the Applicable Federal Rate (AFR) for May of 2008. The AFR under Sec. 7520 for the month of May will be 3.2%. The rates for April of 3.4% or March of 3.6% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments, the lowest AFR is preferable. During 2008, pooled income funds in existence less than three tax years must use a 4.8% deemed rate of return.

And, it states that “any producer who advertises himself or herself as holding special status due to training or advanced education must provide documentation of expertise, such as a course syllabus and proof of successful completion of the course of study or training.”

EFM- Still won't work. Who is going to review the syllabus and will they know what is needed? Very doubtful. A minimum standard is the use of a finanical calculator- and no state requries that .  

Why I am no longer allowed at the beach

4/22: Hit and miss??:  (Times) CONVENTIONAL wisdom recommends that investors start with a high allocation of stock in their portfolios when they are young and reduce it as they approach retirement.

The professors performed elaborate computer simulations for hypothetical individuals investing for retirement. Each earner is 35 years old and trying to amass $1 million (in 2006 dollars) by age 65, in 30 years’ time. They differ in how they divide their portfolios between stocks and bonds.

They also differ in how the stock and bond markets perform during their decades of investing. For each year and individual, the professors picked randomly from the 80 years from 1926 to 2006. That means, for example, that the period over which an investor is trying to amass wealth could turn out to be like the 30 years beginning in 1929, a period when the market barely beat inflation — or like the 30 years beginning in 1974, a span when stocks provided stellar returns.

By running their simulations thousands of times, and by assuming the future will be like the past, the professors calculated the odds that any given strategy would succeed. Consider, for example, an investor whose portfolio at age 35 has 78 percent allocated to stocks and 22 percent to bonds, and that the equity portion declines gradually so that, at age 65, it is just 40 percent.

Such a scheme is typical of what many financial planners recommend, and is similar to what has been adopted by the so-called life-cycle funds, or target date maturity funds, that mutual fund families in recent years have created. Assume further that this investor contributes $11,000 each year to this portfolio. This would be enough to enable it to reach $1 million by the time he is 65 — provided the stock and bond markets each year perform exactly in line with their long-term averages.

Yearly returns aren’t the same as the long-term averages, though. Based on actual market returns, what are the odds that this investor will succeed? The professors calculate them to be quite low — only 29 percent. Furthermore, the odds aren’t that high that this investor will even get close: the probability of his portfolio being worth at least $750,000, or 75 percent of his goal, is just 62 percent.

4/22:  BofA woes: BofA takes $1.9 billion in write-downs
Bank of America Corp. reported a 77% decline in first-quarter earnings, to $1.21 billion, or $0.23 cents a share

4/21: Scotland has woes too: The Royal Bank of Scotland is planning to raise significantly its target for capital reserves as the lender responds to growing pressure from regulators and investors for banks to hold more capital. Wanna guess why?

4/21: Excuses excuses. Europe's biggest casualty of the subprime crisis explained how its elaborate risk detection procedures failed to detect that it had built up more than $70bn in potentially dangerous positions.

It's one thing to say you picked a fund that did not work. It's another thing for an entire corporation to state it did not have anyone at the helm- all the way to the boileroom- that had any idea that the ship was heading right into a reef. I once again point to Long Term Capital- 27 PhDs and 2 Nobel Laureates that  could not set up programs that took into account the volatility of the human element. 

In essence if you have a flat economy/market where there are NO extremes most programs will work, albeit still with certain uncertainties. It is the extremes that cannot be accounted for that needs to be addressed INITIALLY and a method to deal with them once the situation happens. However, the male ego (yes, that is exactly what I mean) does not allow most humans to see what what they had done was not working and to do anything to avoid a calamity. So it is "stay the course". 

So we had the DotCom. And we have the credit mess. And we have huge deficits. And Congress wanting to reduce taxes some more. Won't work.

Creepy

4/20: Merrill bleeds billions, cuts 3,000 jobs
Merrill Lynch & Co. Inc. reported a first-quarter loss of $2 billion, or $2.19 per share - its third consecutive quarterly loss

Ah, but remember what their CEO said last July. 'We're merrill Lynch and we know how to manage risk." 

From 1980 to 2004, the assets of stock funds increased 90 times, from $45 billion to $4 trillion. During that same period, fees paid by investors and collected by fund managers via fund management companies soared from $288 million to $37 billion. What’s more, the fund managers received their fees regardless of whether the prices of the stocks they selected went up or down.

Not surprisingly, mutual funds continue to multiply like rabbits. By the beginning of 2007, there were about 4,800 mutual funds with $6 trillion invested in stocks and $3 trillion more invested in bonds and money market funds.

4/20; I spoke with a friend of mine that moved to Oregon about 10 years ago for a better life- at least to beat the San Diego traffic (HORRID!!) But his wife got early onset Alzheimers at age 51. She is now in a wheelchair and is essentially incommunicado. He is still taking care of her at home but he is also going downhill. Caregivers have to watch out for themselves. I think he will have to institutionalize her soon if just to retain some of his on sanity. 

My mother has been institutionalized for over 10 years. She remembers nothing. 

Lousy way to die. 

4/20:  As readers might remember I am a trustee for a client who died in Riverside. It's one of the worst areas in the U.S. for real estate foreclosures- though this house is in a fine neighborhood and looks like a model home. but the last sale went puff because the buyer could not get financing. I knew it would be tough but I had hoped to avoid a listing. The property was appraised for $445 in January. I "sold" it for $425. Probably cannot