: this website started in 1996 and I have done the
Daily Commentary since that time. I used to do more reports and
commentary here but it simply seemed more important from
around the early 2000s to present some of what I review every day
and let the readers figure out the relevant issues themselves. Of
course investments are covered but long term care, economics, life
insurance, arbitrations et al command the bulk of a planners
capabilities- though generally it's nothing more than lip service,
Not so here.
: There is a lot
more to discuss but at this point I will give you a look at one of
the most important videos you will ever see- and that should
change the industry regarding the "illusive" element of risk. You
will need a financial calculator Note- these were not
initially designed for brokers but the material would not be much
10/31: GDP good
product -- the value of the production of goods and services
in the United
States, adjusted for price changes -- increased at an annual
rate of 3.5
percent in the third quarter of 2014, according to the
estimate released by the Bureau of Economic Analysis. In
quarter, real GDP increased 4.6 percent.
BUT Greenspan says buy gold.
10/31: not good
year, China has been on a strong economic mission to guide
its economy out of
its reliance on low cost manufacturing and exports and into
a more domestic
consumption-based model. The success of this transition is
seen as key to
maintaining the country’s growth rate, and in turn, the
solvency of its huge
networks of banks, trusts, and credit entities. New data has
consumption, and while somewhat confusing, points out that
China’s level of
consumption is falling. Major retailers in China, including
and Colgate-Palmolive, all saw their quarterly sales decline
with Unilever seeing a 20% fall year on year. In total, the
top 100 retailers
in China have only seen their sales rise 0.1% this year, and
for the third
quarter, sales dropped significantly, reversing gains of the
first and second
quarters of 2014. However, Chinese government data, which
many expect is
heavily biased and manipulated, reported that through the
consumption spending grew 12% this year. Experts agree that
if the figure continues
to grow, it will be in the single digits, rather than the
chunky 15% growth
rates seen previously.
have largely recovered from the selloff two weeks ago, but
are still very low, and according to industry analysts,
Treasuries are seeing
huge orders from funds. Many speculate that since Treasuries
more liquid than many credit products, funds are rotating
heavily into them in
advance of what they see as a high level of redemptions set
to hit their
businesses. Additionally, the undeniable wariness that the
market selloff has
put into investors seems to be leading many to close out
equity positions and
take gains, moving cash into safe sovereign bonds for a
future they see as
increasingly sluggish, with low growth and low inflation.
The head of fixed
income ETFs at Van Eck Global summed it up this way, saying
“the more fund
managers add Treasuries to their corporate bond portfolios,
either as a hedge
or as liquidity substitute, the more pressure we will see on
to drop. That may be the reality of the next couple of
Times guest writer, Satyajit Das, who is a former banker and
written a very intriguing essay in today’s publication. Das
argues that a
complex mix of regulation, sovereign creditworthiness, and
illiquidity are set
to conspire to bring about a new crisis. Das makes a
compelling case that as the
new capital rules for banks have incentivized such firms to
hold sovereign debt
as collateral, banks have become overexposed to sovereigns.
Das’ crisis map
unfolds with the first step as a sovereign credit downgrade.
Once this happens,
banks will automatically take losses on their balance sheets
and on their
derivatives contracts (in the form of CVA scores) and will
be forced to post
more collateral, this time being compelled to hedge their
sovereign exposure by
shorting government bonds or currencies. The decreased
swaps will flow the system to all counterparties, forcing
everyone to hedge,
and thus both accelerating the decline of prices in
sovereign bond markets, but
also radiating into all asset classes, as the use of
creative hedges grows
alongside lower liquidity in some areas. All of these issues
will be greatly
exacerbated by herd behaviour, low credit liquidity due to
regulations, and the
huge similarity of risk models between financial
institutions. Ultimately, the
shocks will spread to the wider economy through higher
extremely tight credit, and weakness in investment and
of children in the United States living in poverty.
the share of U.S. children living in poverty has actually
increased by 2 percentage points since 2008. Overall,
24.2 million U.S. children were living in poverty in 2012,
reflecting an increase of 1.7 million children since 2008. "Of
all newly poor children in the OECD and/or EU, about a third
are in the United States,"
|Finding Balance for the Caregiver
16 Stress Reducing Strategies
By Lisa Bailey
When my husband Phil’s colorectal cancer returned
in October of 2006, this time in the liver and
lungs, I found myself stressed to the max.
With my full-time job as a kindergarten teacher, my
commitment to my adult children and grandchildren,
and keeping tabs on my teenage daughter, adding
compassionate caregiving to my life’s work demands
from me an incredibly difficult balancing act.
The following sixteen coping strategies have helped
me in my attempts to live a balanced life.
Because caregiving is such a universal task, faced
by nearly all of us at one time or another, I hope
you find these strategies helpful as well.
- Make all choices from a solid base of integrity.
I try to make medical and personal choices from
the base of my Christian faith, which helps free
me from second-guessing myself.
- Be clear about today’s reality. Don’t imagine
things are worse than they are. Enjoy the
good parts of today and don’t let worries for
tomorrow take over your emotions and thoughts.
- Talk honestly to family and friends. Honest,
frequent communication with close family and
friends from the start of diagnosis is much easier
than trying to play catch-up later. I discovered a
wonderful, free Internet service at
caringbridge.org which has allowed me to
create a Web site to communicate regularly about
- Expect and prepare for tough talks. Family
and friends process the news about a serious
illness at their own pace. They will not accept
the reality of the illness on a schedule that
meshes with yours. This means that sometimes
family and friends will not understand the tension
of your caregiving lifestyle, especially at first.
This requires a difficult conversation about what
the illness is, how it will be treated, and what
kinds of side effects will be expected from the
treatment and the disease itself. It is helpful to
have a family conversation with the doctor
present.This provides an opportunity for questions
to be answered accurately.
- Learn the medical lingo. It will help you
as a caregiver and a medical advocate to learn the
lingo surrounding your loved one’s illness. The
Internet is a helpful resource, but you need to
learn what Web sites can be trusted and what Web
sites have a hidden agenda. I have included a list
of trusted Web sites I have used for medical
information. However, even with a trusted
Web site, don’t believe everything you read. Not
all information will pertain to your loved one’s
situation and you can worry yourself into a frenzy
over some Internet information you have
read. Ask questions of the doctors and
nurses. Check the accuracy of your information if
you are at all troubled or in doubt.
- During treatment, pain or pain medication might
do some talking. Be aware that pain, stress
and pain medications will release the patient from
their social “filter” and they can and probably
will say some interesting and difficult things at
times. Actually, caregivers do this, too, as
stress lifts our social filters at unexpected
times—forgive yourself as well when this happens.
Listen and be compassionate as best you can.
Children and teenagers will need help
understanding the changes in their loved one’s
personality, especially to know that the changes
are not permanent.
- Control what you can control. Lots of articles
about stress-management advise letting go of
control; however, I have found that being in
control of some areas of my life has greatly
reduced my stress.
- Get help with housework—paid or
unpaid. Help with household chores has
helped to make our home a cleaner refuge for
Phil as he recovers and a sanctuary for
- Get help with yard work—paid or
unpaid. Our backyard is our vacation
destination this year; we eat most meals on
the deck, enjoy the variety of birds that
visit our birdfeeders, play cards, do art work
and garden. Help with yard work makes
this vacation destination possible.
- Prepare meals in advance and freeze
them. I do bulk cooking and freeze
- Keep bills and insurance paperwork organized
so there are fewer financial surprises. Make
necessary phone calls to insurance companies,
and pay bills, or call to arrange payments, on
- Plan your work; then work your plan.
Be efficient at your outside job and in taking
care of home stuff. Don’t let things
- Do three things every evening before
you go to bed—laundry, dishes and take out the
garbage. The morning will be much more of a
- Let go of what you cannot control. For me, this
means “let go and let God.” I carry a scripture in
my pocket from Jeremiah 29:11 which says, “For I
know the plans I have for you,” declares the Lord,
“plans to prosper you and not to harm you, plans
to give you hope and a future.” Cancer is
what it is; I cannot change that, but I can and do
trust God for our future.
- Nest. Everyone, especially people who are
recovering from illness or injury and their
caregiver, needs a comfy chair—a place to relax
and rejuvenate. Make a comfortable nest for your
loved one and for yourself by adding afghans,
pillows, fresh flowers, candles, books and great
music to your comfy chair area. This is important
to do both at your home and at the hospital should
there be an extended stay there.
- Make comfort food. Think about what your
patient is hungry for, and then consider the
details—digestibility, comfort, correct textures,
temperature and presentation. A
compassionate and informative book that I found
helpful as I prepared food for Phil following
chemotherapy and surgery is Laurel’s Kitchen
Caring: Recipes for Everyday Home Caregiving, by
Laurel Robertson, with Carol Lee Flinders and
Brian Ruppenthal, R.D. Laurel speaks with
such love for both the patient and the caregiver
and her encouraging voice revives my spirit for
caregiving, especially in providing good nutrition
- Enjoy life today. During my husband’s
chemotherapy treatments, our world becomes pretty
small. We find that watching television is
an important diversion, and we have become fans of
shows we probably never would have discovered
without some enforced downtime. We also play cards
and Monopoly, put puzzles together and rent many
movies. I found a new interest in sewing,
knitting and watercolor painting. Phil, a
drummer, has never stopped his daily drumming
practice or working at his business from
home. We try to enjoy simple pleasures
everyday. We remember that Phil is a person
with interests, not just a cancer patient.
And I, too, am a person with interests; not just a
cancer patient’s caregiver.
- Journal for yourself. There are so many
ways to re-center yourself, but none works as well
as journaling, in my opinion. Even if you
have never kept a journal, starting one now will
help you clarify feelings, manage the stress and
plan the work you need to do as caregiver.
- Keep a vision for the future. None of us
comes here to stay; we know that. But we
also know that we can “grow until we go,” and we
should. One scripture that came right to
mind when Phil was first diagnosed with a
recurrence of cancer was “Where there is no
vision, the people perish.” Proverbs. 29:18 KJV.
We make plans for our future.
- Give. While I have learned through Phil’s
illness to receive the gifts of help,
encouragement, prayer and love from other people,
Phil and I continue to enjoy giving as part of our
marriage. We enjoy praying for other people,
talking to other patients in the waiting rooms,
encouraging others as much as possible through
conversations both in person, in email and through
good, old-fashioned snail mail. Giving keeps us
feeling emotionally and spiritually full and is
always worth the effort.
- Take good care of yourself. Eat good food,
exercise a little, rest well and learn to say no
to outside demands. See your doctor and
dentist for checkups. Get away from the house now
and then—even if it is just to the laundromat to
do the bulky wash.
- Release yourself from expectations for
perfection. As humans, we all experience finitude,
our “feet of clay” when we do not have infinite
energy, wisdom or capabilities to manage our
lives. This is normal. Get through each day as
best you can, and don’t dwell on mistakes.
10/31 What problems do the elderly have
1. Ending up with wet or soiled clothes.
This problem affected 43 percent of the study
participants who needed help with going to the bathroom.
2. Getting stuck inside.
This problem affected 30 percent of the study
participants who needed help with going out.
3. Having difficulty going to places in their own homes or
This problem affected 26 percent of the study participants
who needed help with moving around their homes or buildings.
4. Making a mistake when taking medicine.
This problem affected 19.9 percent of the study participants
who needed help with taking medication.
5.. Going without bathing, showering or cleaning.
This problem affected 12.9 percent of the study participants
who needed help with bathing or cleaning.
6 Having to stay in bed is just the sixth most common bad
outcome. That "adverse consequence" has affected 11.5 percent
of the people who need help with getting out of bed.
My Sad, Sad & Happy, Happy Story
By Patsy Robertson
Today I hate my
bipolar because I feel depressed and very sad. But
it will not last. I will soon be happy again.
I skipped one or two doses of my medication and
that always throws me into a
miserable sad depression. As I drove to my
psychiatrist's office today to pick up
my Eskalith & Concerta I became
vividly aware that I thought about dying. But that
will not last. I will soon be happy again!
I was diagnosed
with Major Depression/Bipolar & ADD in 1994 when
I checked myself into the hospital for a week. I was
broken mentally & physically unable to work or
get out of the bed for that matter.
This was not the
first time I had been treated for depression in my
life. The first time I was a young mother
under a great deal of stress from an abusive
husband. I was first hospitalized for two weeks and
then one week shortly after my coming home the first
time. I was not given medication. A beautiful young
mother was my room mate. She got to go home on a
weekend pass to see how she would cope at home. She
never returned because she killed herself. This left
a very strong impression on me. I decided then that
I would run to my doctor anytime I felt the
same feeling of depression coming on.
That seemed to
work until around 1985 when a traumatic episode
between my [new] husband, my daughter & I
happened. I went to a psychiatrist for help because
I recognized the exact same feelings I had when I
was in the hospital. The feeling of hopelessness
& darkness. My psychiatrist was the first to
tell me about anti-depressants and how it would be
trial & error to discover the right medication
for me. I was very pleased to know he understood my
depression. I began taking Desyrel & still
it every night before going to sleep.
My father died in
1993, my mother moved in six months later. My
daughter-in-law had a mastectomy at seven months
pregnant when diagnosed with breast cancer. I was
five years breast cancer free at the time. My grand
son was delivered c-section & almost died when
his lungs collapsed. My husband lost his "big
important corporate job" after surviving 3 buy-outs.
He & my mother freaked out because their lives
were not going as planned. Everything began falling
apart, I thought I was going crazy - it seemed
everything was my fault. Oh! My middle child came to
us for help with a "crank" addiction.
I knew I needed
help. I found a physiatrist & therapist
that I really liked. I began taking an
additional anti-depressant. I worked very hard at
being strong. I wanted to keep everyone & myself
happy. I loved my job. But it was getting harder to
pretend everything was OK. I was a special events
coordinator at a country club. I directed PGA golf
tournaments, tennis tournaments, weddings, golf
outings, holiday parties for the club members and
booked corporate meetings & golf outings. I
worked with a lot of celebrities & the press. I
had to get well. I could not allow anyone to know
how sick I was. The mental began making me
physically ill. I could barely walk at times. I had
sores on my head & in my mouth. I
was broken physically & emotionally.
When I wasn't at
work, I was in bed. I would rest or sleep until it
was time to go back to work. I became
a work-a-holic because it was fun until I
couldn't figure out what to do next. I always had
10-12 event files on my desk. I could not
figure out which file to open first. I became so
overwhelmed that I would take a walk around the club
house. I would visit the pro-shop & the dish
washers - anyone I could find to talk to early in
the morning. Then I would go back to my desk &
try it again. I actually fired my assistant because
she made a mistake. This is something I am ashamed
of. I was trying to protect myself because she had
to be better at my job than I was in order to
protect me. She was a wonderful person but I would
never have fired her under normal circumstances. I
was not operating with a normal mind & I knew
it. But I thought it would go away. I couldn't loose
brought the food & beverage manager into
the office to assist me. I knew I wasn't fooling
anyone. I had always been super on the job and I
could barely function on the job now.
My boss called me
into his office one day & very kindly suggested
I needed help. He gave me the name & phone
number of an intake counselor at a wonderful
facility here in Atlanta. I went right away and this
was the beginning of some very scary times for me
but after ten years I am doing better than I ever
dreamed I would or could.
difficult part for me was how my family responded to
my "mental illness" to my "depression" to my
"Bipolar" and I've never told them about ADD! ha!
There is nothing funny about what I have been
through or what I have to do now but I have found a
sense of humor is necessary for me.
My oldest son
told me that depression is not a medical illness
while his wife said "yes, it is." My daughter called
me "Elvis" because of all the meds I was taking. She
will never know how much I would like to dump the
meds. It is work to keep your medication organized
& refilled. Then you have to remember to take it
at a certain time each day & usually with food.
Most people don't understand how important
anti-depressants are to me.
Every single time
I decide to skip a pill or run out of a prescription
& skip a pill I find myself thinking about
dying. I want to die. Then I remind myself that it
is skipping the meds that cause me to feel this way.
I am convinced 100% that if I stopped
taking my meds I would want to or try to kill
myself. I don't want to die, I want to live! I am
beginning to feel so much better now. I am not going
back where I was. I am not ashamed nor do I feel
weak for taking my meds. I feel smart, I feel like I
am enabling myself to attend my grand children's
graduations & weddings. What would they think if
I gave up? That keeps me going to my shrink more
than anything on this earth.
It is very
difficult being bipolar. I have to take Concerta now
to "wake me up" because the Eskalith makes me so
flat. But by sticking to the regiment I am beginning
to reap some real benefits. I have a group of ladies
in my home every Thursday night for a Bible
study. I hadn't entertained in my home since 1998!
They are new friends and they accept me just the way
I am & I them too! It is so wonderful.
I began writing a
book in 1982. I am now writing again. With this
"Bipolar/ADD mind" of mine it is a challenge! But I
don't care if I never get it done, I am so happy I
am writing again. I did put the book together in a
large binder. That is a major achievement for me.
There are days that I look back over the last one to
three days and it seems I floated through them. I do
get tired when I have a string of mania days. I was
mania most of my life now that I look back on it but
without the drops. The drops are painful I think
because I try to analyze them too much. But I have
to remind myself even as I write this that the drops
usually come when I miss my medication. In a perfect
world they would make it easier to get the
medications. There are such tight restrictions on
Concerta for example that I have to drive all the
way to my doctor's office to get a new prescription
every 30 days. This should be easy, but for me it is
not very easy. My daughter is allowed to pick it up,
but sometimes I forget to give her & my doc
If not for the
researchers, the doctors & the trials I would
have no hope. I am able to live a good life again
because I have fought hard to keep my mind and I
seek out good psychiatrists to help me. I am
fortunate because I have a family doctor who insists
I go to my shrink for my psychiatrist medications.
It is not easy. It is very hard battle but it is a
fight worth fighting.
The Assistant Secretary for
Planning and Evaluation (ASPE) is the principal advisor to the
Secretary of the U.S. Department of Health and Human Services
on policy development, and is responsible for major activities
in policy coordination, legislation development, strategic
planning, policy research, evaluation, and economic analysis.
10/30: Once in awhile humans do good
The Espanola giant tortoises, a species that can live for over
100 years, had numbered in the thousands but dropped to 15
by 1960 due to human
exploitation, the study said. Between 1963 and 1974,
conservationists brought the 12 female and three male surviving
giant tortoises into captivity. Over 1,500 of their offspring
have since been released onto the island, and the species’
survival no longer requires human intervention.
10/30: I have been saying this for years
some of the most supposedly financially knowledgeable people --
mutual-fund managers -- don't make better financial
decisions than other
people, according to anew study by Michigan
State and Notre Dame
researchers, as reported in
It's the latest evidence that a years-long
campaign to help
normal Americans achieve "financial literacy" is
ineffective at best
and misguided at worst. As the Atlantic notes,expert
and forecasters in other fields have been derided for
decades as no
better than dart-throwing monkeys.
When it comes to getting ordinary people to know more about
finance, however, the consensus has been that this time it’s
different. On the
surface, it’s a well-intentioned and uncontroversial
mission: Helping people
help themselves by making better decisions. And there's
plenty of evidence that
people have a scary lack of financial knowledge: One study
found that just a third of Americans
would correctly answer
three simple financial questions.
questions are models of transparency compared with the
consumers often face when making even the simplest financial
goal of making people financially literate seems to imply
that it's the
individual’s responsibility to safely navigate what is
inscrutable financial language.
The same companies who create the problem of financial products
Americans can’t understand push financial literacy as the
instance, Bank of America thinks the key is an online course.
The financial industry’s self-regulatory organization has an
devoted to investor
But financial literacy in this
gauzy, generalized form simply
doesn’t work. The Cleveland Fed found no
“conclusive support that any
benefit at all exists” from financial education as it is
Shocking no one who has been to high school, one study showed that
taking a financial
literacy class in high school does nothing to improve
And a study by
researchers at the Brookings
Institution could not find “strong evidence that financial
have had positive and substantial impacts."
In a 2011 presentation titled “The Financial Education Fallacy,” Lauren Willis,
a professor at Loyola Law School, shot down the idea that
would have made better mortgage choices and would have
precautionary savings to weather the recession" if they'd
financially educated. Straightforward consumer protections,
like putting limits
on how many single stocks people can own in retirement
accounts, are most
effective. Financial education is no substitute for
financial regulation, she
There is evidence that giving people specific information about
a specific product (say, about credit card debt for people who
are interested in
applying for a credit card)works better.
It’s not easy, given the mountain of details involved. But single-serving
consumer information is likely to be far more helpful than
vague goals of getting
Americans to solve their own financial problems by
thinking them through.
Personal finance author Helaine Olen has called financial literacy “both a
failure and a sham.” This conclusion deserves to be
managers are making dumb decisions, it’s time to admit that
average Americans generally more financially literate is not
a useful goal.
Starting with clear-cut consumer protections and unbiased
specific financial products is far more helpful.
(Im)Prudent Investor Act- way out of date
For the very few that will read five pages,
take a gander at commentary on why this rule is
antiquated. It is a very sophomoric regulation that is
open to serious errors in interpretation primarily since those
rendering an opinion are clueless to the real life
fundamentals of investing.
I don't care if they are from the industry, government, are
litigants, judges, the Tooth Fairy, et al. One of the most
obvious missteps is the continuing lack of specificity to
RISK, If you cannot get that right (and they can't since risk
of loss is not taught) then the entire review of prudence is
Times economic commentary
but shows the many different
commentaries by economists
"We need more time to evaluate whether we should be doing any
updating. And I would say the financial
market movements have not been triggered by very many real
Boston Federal Reserve President
The real art
of conversation is not only to say the right thing in the
right place but to leave unsaid the wrong thing at the
-- Lady Dorothy Nevill,
10/29: Must be bad
overseas if Sweden is doing it"
bank cut interest rates to zero – a record low – as it stepped
up its increasingly desperate fight against deflation.
10/29: Just an example
Slowing a lot overseas, including china.
The economic situation in Europe has deteriorated, the
unemployment rate in the US has fallen below 6%, and the Fed
looks poised to conclude its quantitative easing program this
Volatility has returned to markets, with the S&P 500
recently declining more than 9% before sharply rebounding, while
the bond market had one of its most volatile days in history as
the US 10-year yield fell 37 basis points in just a few
And in the background of all of this is the declining price of
oil, which on Monday fell below $80 a barrel for the first time
in over two years, and a Russian economy that is looking at a
dramatically depreciating ruble.
EFM- U.S. fracking has hurt a number of oil exporters and that
will destabilize many foreign countries that have little to fall
back on. U.S. consumers are seeing the benefits but we could end
up on the downside as our exports will drop. Another recession?
Don't know but a major correction is now quite possible. again, as
an investor one must accept a 10% to 15% drop in the market. But
it starting to get dicey as regards DCAD noted above. If you have
not viewed that video yet, I sure would take a look now. .
1. In 2013, the average size of new houses built
increased to an all-time high of 2,679 square feet
(see blue line in top chart), and the median size new
home set a new record of 2,491 square feet (see red
line in chart). Over the last 40 years, the average home has increased
in size by more than 1,000 square feet, from an
average size of 1,660 square feet in 1973 (earliest year
available from Census) to 2,679 square feet last year. Likewise,
the median-size home has increased in size by almost
1,000 square feet, from 1,525 square feet in 1973 to
2,491 last year. In percentage terms, the average home size has
increased by 61.4% since 1973, while the median home size
increased by 63.3%.
2. Meanwhile, the average household size has been declining,
from 3.01 persons per household on average in 1973 to a
new record low of 2.54 persons per household last year,
a reduction of almost one-half person per household over the
last 40 years (see brown line in top chart).
With the average new house in the US getter larger in size at
the same time that American households are getting smaller, the
square footage of living space per person in a new home
has increased from 506.6 to 980.7 square feet using the median
size home, and from 551.5 to 1,054.7 square feet using the
average size home. In percentage terms, that’s a 93.6% increase
using the median home size and a 91.2% increase using the
average home size. In either case, the average amount
of living space per person in a new home has almost doubled in
just the last forty years – that’s pretty amazing.
3. What about the cost of new homes over the last 40 years? On
a per square foot basis using median home prices and median
square footage, the inflation-adjusted price of new
homes has been relatively stable since 1973 in a range between
about $105 and $125 per square foot (see bottom chart
above). And the price of just under $106 per square foot for new
homes in 2013 was almost 16 below the peak of $125.50 per square
foot for a new home in 2004, and also below the cost per square
foot in every year during the 1970s and 1980s, and below every
year of the 1990s except 1992 and 1993.
10/26: Skin in the game
of the main aims of the current round of US financial
regulations was to ensure that banks had “skin in the game” as
it concerned loan risk. Regulators believe that the
overwhelming levels of securitization which occurred leading
up to the Crisis made banks highly complacent above giving out
loans, as they stood to lose little if they defaulted. The
Dodd-Frank act sought to correct his by forcing lenders to
hold at least 5% of the risk of a loan on their balance
sheets. However, a small loophole, which provided that super
safe mortgages did not need any part held by banks, has
blossomed and overgrown the intent of the law. According to
Barney Frank, the architect of the Dodd-Frank Act, the US’
most comprehensive set of financial reforms for several
decades, “the loophole has eaten the rule, and there is no
residential mortgage risk retention.” This means that despite
years of regulations, there is virtually no system in place to
contain explosive securitization levels and rampant
over-lending besides the wisdom of mortgage-backed securities
buyers, who have shown little restraint in the past.
10/23: Not a good sign with china
real estate figures have just hit the tape, and the results
are very poor. Prices fell for the sixth straight month, and
overall, prices dropped in 69 out of 70 major markets. The
country is currently suffering from chronic oversupply, and
reticence by buyers. Chinese property has been falling for
several months, but the market was hoping for some turnaround
in these figures, as the government has been continually
reducing lending and borrowing requirements in an effort to
boost the sector. Most startlingly of all, the figures were
accompanied by data on real estate investment which showed
that, astoundingly, investment in new property capacity
expanded 12.5% in the first three quarters of this year,
meaning builders are pouring more and more money into the
sector despite the dire outlook. Agents in the country say
that they have been disappointed by what has been a very weak
pick up in demand on the back of the government easing lending
and borrowing rules.
With commodity prices falling this far and fast, maybe it does
bode well for consumer economics.
Across a wide range of commodities, prices
and sometimes falling fast. The Bloomberg
commodity index – which acts as a benchmark for commodity
investments – fell to its lowest level in five years this week. Prices
are being pushed down
supply of most commodities and a weakening global economy,
including a slowing China, the world’s largest consumer for many
of these raw materials. Whether it is oil, corn, iron ore, coal,
cotton or copper, prices are falling quickly.
world has seen several rounds of quantitative easing (QE) over
the last six years in the US, UK, and Japan, mostly with
little to moderate success, but the most effective round yet
might be just beginning. The global decline in commodities
markets globally, which has seen prices drop in nearly every
market from food, to metal, to energy, will have a hugely
positive effect on nearly all consumers, no matter their
geography or economic power. Significantly lower commodities
costs, as we are seeing now, put real money back in the
pockets of consumers, and free up disposable income which can
be out into other areas. The IMF estimates that the declines
we have seen so far will automatically boost GDP by 0.5%
globally, and if sentiment grows, could raise this figure to
1.2% growth. According to economists, the current price falls
mean that 1% of the world’s GDP flow back to consumers from
commodities producers, and generally, half of this money will
be spent. This means that roughly $320 bn will flow back into
other areas of the economy, boosting growth. Such price drops
will affect countries differently, with big producers like the
US, Brazil, Russia, and Saudi Arabia seeing the least
benefits. Net importers gain the most, though, in the case of
the US, lower oil prices could lead to much larger consumer
spending, which might be a net positive.
this article on risk and the comments
Here is my reply
Yes I do have a better way. It is direct, non emotional and, in my
mind, easy to communicate. I will only consider those 50/55 and
older at this point and only for the middle class. Yes the very
rich can use the fundamentals but the assets of a business et al
are too messy for this review. Most of the time what I am
suggesting is for those that will not have a taxable estate.
First and foremost a very detailed budget needs to be done. I have
one of the most detailed ones for middle class- I have not
liked what I have seen so far with standard questionnaires. There
are two sections. One for those not yet retired and next to it is
the estimated while retired. Each section is reviewed with
the client to reflect areas that may be questionable. (Health care
costs are tough.) You can get involved with innumerable numbers
after that- inflation, returns, time etc. to figure out what the
“lump sum” will be needed at retirement. N (time) reflects
their actuarial lifetime plus a fudge factor. (Minimum 5 years).
The return, i, may offered with two or three estimates. Inflation
is done about the same. And with a HP12c or similar, you can
determine a few scenarios of present value for the client. The
idea of doing tons of these strains credulity- stay focused to
being conservative or middle of the road. Also one should be aware
that when looking out 30 years or so the current analysis is
fraught with divorce, illness, and so many other factors where it
makes the numbers game intrinsically flawed.
The client does NOT pick what they want to do, has done before or
hoped to do in the future. The planner has to do the analysis
since only they have the skills and knowledge (chuckle). Want to
impress? Do a couple on the HP in front of the client. If you are
solely dependent on a software program to do the basics, you will
not be able to do a formal risk of loss addressed below. (Why?
There are no software programs to do risk of loss. )
Anyway, compare the PV with the asset base available and, voila,
you now may not need to invest anything since there is enough
assets already. Or the retiree needs to take a LITTLE risk. That
may be attainable. A shortage? Well the best thing to do is have
them reduce the budget. If not, one can increase the return
(perhaps) by taking more risk. But the budget determines the risk,
not the questionnaire.
In any case, no budget? No client.
Now to the fun part. Let’s just look at risk. And assume we are
just looking at the client questionnaire to see the risk comfort
zone identified by the consumer. There is nothing in the industry
set as a standard mainly because 1) they are stupid or 2) they
know that the number computed might scare consumers into just
buying CDs or doing nothing. But you can still do the job through
direct comparisons. This is somewhat simplistic due to the obvious
constraints but let’s say the consumer decides they do not want to
lose anything. End game since you do not have an investor. How
about a conservative entity. In such regard any investor should
accept a 10% to 15% loss in equities since that is the amount of a
normal market correction. If they cannot handle that, no investor.
So maybe a conservative investor has to be willing to take a 20%
to 25% hit. Moderate risk= probably something close to 30%
to 40% drawdown. Aggressive is probably closer to 40% to
60%. Speculative is up to 80% and is reflective of the dotcom
mania. (I am not using any outliers on a standard deviation
curve). This is just equities since the bonds will have a lower
standard deviation to determine overall risk, but they may also be
losing money every year for quite some time. So you lower the
overall risk but have a negative return? Illogical but I leave
that for another time.
Does that sound reasonable/? Then what’s next? Just figuring out
what might happen to the portfolio/allocation with a major
As a note, standard deviation/volatility is NOT risk ipso facto.
They are one of many risks that will occur but I use this to do
Let’s say you will invest for 9 years. Say the standard deviation
of the equity section of the portfolio is 30% (use historical SD,
not current (still too low). As another note, I do not like to use
historical numbers if I can avoid them, but I have no choice here.
The SD drops by the square root of the number of years. 30/3= 9%.
So over time, the SD goes down. DO NOT USE THIS TO EXPRESS RISK
What about if something went wrong and you did nothing? Take 1
minus SD for the number of years to the power of the number of
years, (9). That represents how much money is LEFT at the end of
that period. You can do the numbers for 15 years or so but I think
the variables are far too unsettled and it’s not worth the
bother. Go ahead and do the S&P 500 for 5 years with an
initial SD of 20%. You will end up with 63% as what would be left.
That is 37% lower than what you expected. (I cannot go into detail
for every issue or interpretation here.) Then look at the equity
losses for 2000. 44%. Look at the losses for 2008 top to bottom.
57%. In short, using the S&P 500 for 100% of the portfolio can
result in a 50% loss calculated/anticipated at the end of
the period. Is that conservative?? Not even close. So maybe you
use only 25% of the portfolio for equities. Well it sure could
/would be a lot better depending on the risk of the other assets.
(As I said, it will take more that I have time for here to address
Is that the end? Not even close.
If it was necessary to use 100% equities to make a retirement, et
al., could the retiree take a 50% hit because that is essentially
what the industry says you HAVE to since the industry does allow
any leeway to just sitting there. And therein is the
fallacy/fraud/ineptness with such rule of thumb. Just look at the
devastation in 2000 and 2008. No way were retirees could do that
in the past messes nor certainly could they so it with this next
mess. Right now advisers are trying all sorts of gimmicks to
correct their incompetence by adding non correlated (supposedly)
assets. This is a discussion in itself but recognize this per
Professor Diebold of Wharton School, “The dirty little secret of
diversification is that the only thing that goes up in a
down market is correlations” And from Taleb Co-association
between securities is not measurable using correlation," because
past history can never prepare you for that one day when
everything goes south. "Anything that relies on correlation
is charlatanism." .
If you are not going to try to alter those losses, then the
investor/401k participant has to be told that their $100,000
account will lose $50,000. You now have changed the game of
investing by informing the investor of the potential loss but also
by stating or inferring that you are going to simply rely on past
statistics of “the market always comes back”. You are going
to do nothing.
(As regards rebalancing see Michael Edesess)
In short, you now know what to do. You can determine the
allocation that a consumer must take for retirement (or other) and
explain simply what exposure there is. Due to this economy I tend
to use rough numbers for one year since 1) I feel that a mess is
not that far off and 2) as stated, going out 15 or 30 years just
Risk questionnaires should use a risk of loss similar to that
above. Then we all talk the same language. The numerical risk of
loss is done in more detail in two videos at
efmoody.com/gripes.html. These were not made with CE credit in
mind so view accordingly
Is that all? No because there are ways to limit the losses
unemotionally and objectively but that is another review
altogether. But even more important for retirement success.
10/26: Doesn't seem to be working though
plumbed new depths against the dollar on Thursday after reports
that the country’s biggest oil company made a request for more
than Rbs2tn of state cash that could add to the already acute
pressures on the currency.
10/26: All fall down
the face of near deflation, and widespread recession, Eurozone
ETF’s listed in the US have just seen their largest outflows on
record. According to Markit, just this month, Eurozone ETFs have
seen outflows of over $3 bn, compared with net outflows of $2.2
bn in August, which were already the largest to ever occur since
the ETFs’ creation a decade ago (the worst times of the Eurozone
debt crisis included). Part of the issue is the weaker Euro,
which led investors away, but much of it was simply worries over
growth. Interestingly, despite its strong growth, the UK has not
been able to escape outflows either, and British ETFs saw $700m
declines. Likewise, European equity funds have seen major
withdrawals recently, with $5.7 bn flowing out just last week.
Yet the US is better with its fabricated economy.
Retirement Plan Deferral Limit Increases
October 23, 2014 (PLANSPONSOR.com) - The Internal
Revenue Service (IRS) announced cost of living adjustments
affecting dollar limitations for pension plans, 401(k)s and
other retirement-related items for tax year 2015.
The elective deferral (contribution) limit for employees who
participate in 401(k), 403(b), most 457 plans, and the federal
government’s Thrift Savings Plan is increased from $17,500 to
$18,000. The catch-up contribution limit for employees aged 50
and over who participate in 401(k), 403(b), most 457 plans, and
the federal government’s Thrift Savings Plan is increased from
$5,500 to $6,000.
Effective January 1, 2015, the limitation on the annual benefit
under a defined benefit plan under Section 415(b)(1)(A) remains
unchanged at $210,000. For a participant who separated from
service before January 1, 2015, the limitation for defined
benefit plans under Section 415(b)(1)(B) is computed by
multiplying the participant's compensation limitation, as
adjusted through 2014, by 1.0178.
The limitation for defined contribution plans under Section
415(c)(1)(A) is increased in 2015 from $52,000 to $53,000.
The annual compensation limit under Sections 401(a)(17),
404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from
$260,000 to $265,000.
The dollar limitation under Section 416(i)(1)(A)(i) concerning
the definition of key employee in a top-heavy plan remains
unchanged at $170,000.
The dollar amount under Section 409(o)(1)(C)(ii) for
determining the maximum account balance in an employee stock
ownership plan subject to a five-year distribution period is
increased from $1,050,000 to $1,070,000, while the dollar amount
used to determine the lengthening of the five-year distribution
period remains unchanged at $210,000.
The limitation used in the definition of highly compensated
employee under Section 414(q)(1)(B) is increased from $115,000
The dollar amount under Section 430(c)(7)(D)(i)(II) used to
determine excess employee compensation with respect to a
single-employer defined benefit pension plan for which the
special election under Section 430(c)(2)(D) has been made is
increased from $1,084,000 to $1,101,000.
- Ten percent of older individuals experiencing cognitive
decline said they had recently experienced fraud.
- As cognitive difficulties increase, this study confirms that
seniors were more likely to have been victimized.
- Confirming a finding reported in a previous blog post, over-confident older
people were more vulnerable to fraud.
- Fraud victims in self-assessments also report that they’ve
become slightly more likely over time to take on risks, which
also makes them more vulnerable to fraud.
- But people who’ve managed to avoid fraud have less tolerance
for fraud than they once did
10/23: Good for Them
new survey of baby boomers, from those in their late fifties
and above has shown some very interesting and relevant
insights into how they handle their wealth. Opposed to
generations before, 71% of those aged over 60 say that they
intend to spend nearly all their wealth and leave little or
none to the next generation. This fact runs contrary to
generations of people who were keen on devising long-term
plans to preserve and grow their family’s wealth. In their
lifetime, the baby boomers have benefitted from vast wealth
gains flowing from a long-term housing boom, massive
privatization, and a water tight pension system. Even though
they are getting older and retiring, politicians are still
very focused on their attention as they both command huge
amounts of capital—good for campaign contributions—and are
very active in polls—85% of boomers vote regularly.
10/23 Is QE light like the CFP light
many months of announcements and discussion, the European
Central Bank has finally launched its QE-light campaign with
targeted purchases of Eurozone covered bonds and asset-backed
securities. The bond-buying began on Monday, but quantities
are unknown. The ECB says it will announce how much it has
bought in the previous week every Monday as long as the
programme is running. The exact bonds already purchased are
unclear, however, “purchases included at least two Spanish
issues, one German and one French”, and were supposedly with
durations of two to six years. They are thought to have been
bought from BNP Paribas and Societe Generale. The ECB
announced the programme last month as a means to combat
recession and disinflation. Markets, however, are convinced
that the measures will not be enough to boost the Eurozone’s
economy, and many are calling for full scale quantitative
Art of Compassionate Communication for Elder
By: Jill Sarah Moscowitz
“No one can ever be fully prepared for the
challenges of care-giving. The tasks and
responsibilities involved can be demanding, even
more so when caregivers themselves are frail, have
been thrust into their role unexpectedly or
reluctantly, or must care for someone who is
uncooperative or combative.” - The Merck Manual of
Health and Healing
Caregivers can face overwhelming physical,
financial, and emotional demands as a function of
their service. In the face of these challenges,
communication can sometimes be difficult. This
article presents techniques for compassionate
communication, as well as ideas for caregiver
self-care and empowerment.
Communication is a process that allows a cyclical
exchange of information through speaking and
listening. However, as we all know, communicating
is not as simple as that. Effective communication
requires clarity from the person who is speaking
and openness and attention from the person who is
listening. This takes great commitment.
And to be compassionate, the communication should
touch the heart. Compassionate communication can
be understood through a breathing exercise. Put a
hand on your heart; this is the center of
compassionate communications. Notice your state of
well-being. Imagine your whole being is entirely
cared for. Take a breath in, and imagine this as a
listening breath. Allow the breath to be touched
by your heart, to be oxygenated and returned out.
As you breathe out, imagine this as a speaking
breath. And so is the cycle of breath and
communication – incoming breath – touched by heart
– and out going breath.
Compassionate communication includes:
2.Speaking with Clarity
3.Listening with Openness and Attention.
Compassionate communication begins with an
awareness of your own well being because when we
focus on our well-being we create a space for the
well-being of others around us. We create a space
for authentic listening and speaking.
Identify Needs and Values. To create a dialogue
of compassion, become familiar with your needs,
values, expectations, and motivations. How did the
role of caregiver come to you? Was it out of
choice, obligation or circumstance? Does this role
fulfill an underlying need or value to give or to
feel appreciated? What other needs or values may
be present for you? Perhaps there may be the need
or value for connection, sense of purpose, or
financial security. Marshall B. Rosenberg, Ph.D.
describes a list of “universal needs and values”
that all humans share. To become familiar with
this list visit
Options for Meeting Needs and Values. Once you’ve
identified some of your core needs and values, you
can evaluate how you might have these needs met.
It’s possible that your needs are met through care
giving. It’s possible that you hope or expect
these needs to be met through care giving, but
they are not. Clarify for yourself what your
expectations and motivations are and then
determine what is realistic for this relationship.
Use the “here and now” in your determination,
rather than remembering how things were at one
time or how you wish things to be. Consider all of
the ways your needs and values can be met,
including but not limited to this relationship.
2. Speaking with Clarity
We all have many years of experience in speaking,
but may not have skills in expressing ourselves
with clarity. Here are some suggestions:
Use “I” statements. Probably the easiest tip for
compassionate communications is to use “I”
statements. These statements begin with the word
“I” and they clearly express something about our
own view, not something about the other person.
For example “I am finding it hard to believe what
you are saying” Notice the difference between the
“I” statement and the following “You” statement.
“You are lying!” When we start sentences with the
word “You” we tend to put the other person on the
Use observations, not evaluations. An observation
is a statement of fact, similar to what might be
recorded on a video camera. For example, the
statement “Aunt Ann has been talking on the phone
for one hour”. An evaluation is a statement of
fact with an added value (a judgment of good or
bad). The statement “Aunt Ann talks too much on
the phone” is an evaluation.
Speak Authentically. There are times when we
choose to protect those we love from the truth
about our feelings. We are the best judges of the
impact of such non-disclosures. It’s possible that
when we choose not to share our feelings, an
opportunity for distance not closeness is created.
Although it may feel very risky, the loving and
heart-centered sharing of your feelings may be a
beginning to more open communications. Sharing of
feelings could begin with a sentence like “When
you said [insert the Observation], I felt [insert
the feeling].” See Marshall B. Rosenberg, Ph.D,
(http://www.cnvc.org/nvc.htm) for more tools for
Know many realities exist. If a group of five
people go to the same movie and each is asked the
question “what happened in the movie”, we would
get five each different stories. Each person’s
story is based on the unique backdrop of each
person’s perceptions. Many times our perceptions
are based on our values or experiences. Remember,
your reality belongs to you. Another person’s
reality belongs to them. Neither reality is
“right” or “wrong.” We simply perceive and
interpret things based on our own values.
3. Listening with Openness and Attention
Many communication breakdowns occur because of
difficulties in listening.
Waiting is not Listening. So often in our
conversations we are “waiting to speak” while the
other person is talking. We are formulating our
ideas in response to what is being said. We become
engaged in our own thoughts and their importance.
Anxiously waiting for the other person to stop
talking, we find that we are not listening.
Avoid Unspoken Stories. Another pitfall in
listening is when we interpret rather than listen.
While the other person is speaking, we create a
story about what is being said. For example, a
simple statement like “I think you look very nice
today” can be incorrectly interpreted to mean,
“Today, unlike any other day, you look very nice.”
So, you can see how easy it is to create your own
a story about someone’s communication.
Active Listening. Listening is truly an art. It
is a skill that can be acquired. One way to
practice this skill is through active listening.
Active listening is a technique in which the
person listening re-states his or her
understanding of what the speaker has said, before
introducing their response to what has been said.
For example; “What I heard you say is …,” followed
by “Does that sound about right?
Reframe Hostile or Difficult Communications. It’s
possible that the person you are caring for may
speak to you in anger. It may be helpful to
consider that their anger may be due to their own
frustrations, and not about you. For example, “You
are no good! You never help me!” This
statement might be reframed: “What I hear you
saying is that you are wanting help and it feels
like I am not helping now. Is that what you meant
to say?” In hostile or difficult communications,
it is sometimes helpful to involve a third neutral
person to help with this type of communication.
At the very heart of compassionate communication
is our desire to be collaborative in our
communications – to hold a balance between our
needs and the needs of the other. This is
particularly important for caregivers who are so
often looking after the needs of the other.
10/21 From a reader Mr. Moody while I'm going to school
to get my CFP, do you have any recommendations on how to gain
experience in the field of finance?
I wish there was a magic bullet of some type but it still
seems that either you become appointed with a large brokerage
firm to learn some of the ropes (mainly selling products that
few might comprehend to people who could use something
else.) In part that is cynical- mostly it is real life.
Or you could latch on to a fee planner for a few years as
perhaps another way to get started. You wouldn't get caught up
in most of the sale hype, That said, it is still about how
much Asset Under Management that will determine your supposed
'rung on the ladder''.
You didn't specifically ask about increasing knowledge while
getting experience (though I assume it was part of your
request) but I will tell you this. Financial planning,
properly done, requires a HUGE commitment to reading and
research- far more than the industry will ever let on since
there is no way they can provide it. The CFP is good but far
from good enough. I got mine 30 years ago and it was necessary
but I still didn't know that much. Got the Masters 23 years
ago. Much better of course but since 1995, the world economics
and finance has changed dramatically. Many of the revered
theories never were tested so you got to keep your eyes and
ears open to the entities who are very very good. Read Peter
Bernstein, Mandlebrot, some of Taleb's commentary; Mauldin and
Ben Hunt for economics and more, I like Edesess stuff
etc. Keep an open mind to change- which means don't let your
ego tell you what to do. I have to change my insight and
orientation regularly as I read some of those that have
a lot more expertise in their respective areas.
In short (though I wasn';t) you are not going to get that good
by just "working" because so many changes occur and you must
try and keep up. Maybe there are some courses or institutions
that are cutting edge though I am not aware of any.
The videos will give good real life (non marketing,. non
brokerage) insight and a firm is requesting that I do some for
Entire US Economy Depicted In Emoji
Interesting visual but a little tough to comprehend.
Worth it though
10/21: Washington Posts commentary on the market and economy..
I tend to lean towards Larry Summers
The wave of panic that knocked down international stock
markets on Wednesday subsided
the end of the week, with equities recovering most of
their lost value. But is the tide coming in?
If selling continues, it may be that investors are starting
to buy the gloomy thesis of secular stagnation, according to
which the world will
struggle to avoid a long period of disappointing
growth -- decades, or more. On this view, an aging
global society, the end of a certain kind
of technological innovation, a
glut of saved-up cash moldering in banks worldwide, or
some other combination of factors will hobble the economy
for the foreseeable future. First it was Japan, next it will
be Europe, and then it will be all of us.
Academic economists don't all buy into this theory, with
one extremely notable exception. Larry Summers has
argued that secular stagnation is on the way, and that
there will be little central bankers can do to stop it.
They'll do they most they can -- keeping interest rates at
zero indefinitely, as they have been since the financial
crisis, with the goal of discouraging people from saving
money and encouraging them to borrow and spend.
If the global economy really is headed toward stagnation,
then Janet Yellen and the Federal Reserve might have no
choice but to keep interest rates there for a while longer,
and maybe a little longer after that, and maybe even...
wry column on Saturday, Robert Shiller basically
accuses Summers of giving investors Ebola (in a metaphorical
sense, of course):
markets are driven by popular narratives, which don’t need
basis in solid fact. True or not, such stories may
be described as “thought viruses.” When they are pernicious,
they are analogous to the Ebola virus: They spread by
In other words, Summers hasn't
the academy, but he just might have won over the
market. Shiller warns that Summers's pessimism about the
economy could become a kind of self-fulfilling curse as
squeamish investors pull back from the market, and less
money trickles into the real economy.
If the stock market continues to wobble this week, that
doesn't necessarily mean that Summers is right. It could
just be that he's very persuasive. We
won't know for years. In the meantime, the central
bankers of the world, especially in Europe, must do
everything in their power to prove him wrong.
What is global market turbulence telling us?
extraordinary volatility in all financial asset
classes in the past week can only be described as
ominous. On Wednesday, the US ten year treasury,
perhaps the most liquid financial instrument in
the world, traded at yields of 2.21 per cent and
1.86 per cent within a matter of hours. This type
of volatility in the ultimate “risk free” asset
has previously been seen only in 2008 and other
extreme meltdowns, so it clearly cannot be swept
under the carpet.
EFM the statistical odds of that much movement is far beyond
the fluid standard deviation curve.
10/19: The FED may delay because of the fragile
The US Federal Reserve should carry on with its asset
purchases in October, said James Bullard of the St Louis Fed
on Thursday, as he became the first policy maker to call for
a central bank response to recent market turmoil.
“Declining inflation expectations are a serious matter for
a central bank,” . He said the Fed could “pause at the
October meeting”, wait for more data, and then cease
purchases in December if the economy looks strong.
10/19: For the first time
For the first time ever, mutual funds have surpassed banks
as the largest holders of corporate and foreign bonds,
holding 13 percent of these securities.
group of market watchers, led by the IMF, has signaled the
alarm over high yield bonds. A handful of large asset
managers, including Pimco, Fidelity, BlackRock, and Dodge
& Cox, hold an eye-popping proportion of high yield
bonds, and that poses an unequivocal threat to credit
markets. In many bonds, such as auto financier Ally
Financial, or student loan company SLM, managers like
Pimco control as much as 30-50% market share. This
commanding position creates severe issues for both the
managers and the markets, as most of their holdings are
highly illiquid and only held by one another, meaning in a
period of stress, perhaps similar to the one we have just
seen, the managers would very likely be unable to offload
the bonds without extraordinary losses. This is a major
concern because it would incite panic across credit
markets, but further, because individual managers would
therefore be very unlikely be able to meet redemption
demands from their own fund investors. If they cannot
liquidate the bonds quickly enough, or at prices high
enough, there is no way they could meet immediate
withdrawal demands. The same bond investors hold even
higher shares of bonds in European markets, including
heavily indebted sovereigns like Italy and Spain. Because
of regulatory constraints, banks are no longer major
market-makers in illiquid credits.
Very concise and interesting
are sooooooooooo stupid
EVEN if we grade on a very
generous curve, many Americans flunk when it comes to
financial literacy. Consider this three-item quiz:
• Suppose you had $100 in a
savings account and the interest rate was 2 percent a
year. After five years, how much do you think you would
have if you left the money to grow? More than $102,
exactly $102 or less than $102?
• Imagine that the interest rate
on your savings account was 1 percent a year and that
inflation was 2 percent. After one year, would you be able
to buy more than, the same as or less than you could today
with the money?
• Do you think this statement is
true or false: “Buying a single company stock usually
provides a safer return than a stock mutual fund”?
Anyone with even a basic
understanding of compound interest, inflation and
diversification should know that the answers to these
questions are “more than,” “less than” and “false.” Yet in
a survey of Americans over age 50 conducted by the
economists Annamaria Lusardi of George Washington
University and Olivia S. Mitchell of the Wharton School of
the University of Pennsylvania, only
a third could answer all three questions correctly.
This is particularly troubling given the inherent complexity
of our modern economy. Whether in taking out a student
, buying a house or saving for retirement
people are being asked to make decisions that are difficult
even if they have graduate training in finance and economics.
Throwing the financially
illiterate into that maelstrom is like taking students
currently enrolled in driver’s education and asking them to
compete in the Indianapolis 500.
paper by three business school professors — Daniel
Fernandes of Erasmus University in the Netherlands and the
Catholic University of Portugal, John G. Lynch Jr. of the
University of Colorado and Richard Netemeyer of the
University of Virginia — presents a discouraging assessment
of attempts to teach people how to deal with money. Their
article uses a technique called meta-analysis, looking at
results from 168 scientific studies of efforts to teach
people to be financially astute, or at least less clueless.
The authors’ conclusions are clear:
over all, financial education is laudable, but not
particularly helpful. Those who receive it do not perform
noticeably better when it comes to saving more, for example,
or avoiding ruinous debt. Even more depressing, the results
of efforts aimed at low-income people are particularly weak.
Those who need the help most seem to benefit the least.
shouldn’t fool ourselves into thinking that adding a
household finance class to a high school curriculum will
in itself create knowledgeable consumers who can
understand today’s wide array of financial products.
It would be premature to conclude
that all efforts at improving financial literacy are futile.
But it is a fair conclusion that simply doing more of the
training commonly used now will not produce significant
10/19: just-in-time education. Because learning decays
quickly, it’s best to provide assistance just before a
decision is made.
education decays over time; even large interventions with many
hours of instruction have negligible
effects on behavior 20 months or more from the time of
intervention. Correlational studies that measure
financial literacy find stronger associations with financial
behaviors. We conduct three empirical studies,
and we find that the partial effects of financial literacy
diminish dramatically when one controls for
psychological traits that have been omitted in prior research
or when one uses an instrument for financial
literacy to control for omitted variables. Financial education
as studied to date has serious limitations that
have been masked by the apparently larger effects in
correlational studies. We envisage a reduced role
for financial education that is not elaborated or acted upon
soon afterward. We suggest a real but
narrower role for “just in time” financial education tied to
specific behaviors it intends to help. We
conclude with a discussion of the characteristics of behaviors
that might affect the policy maker’s mix of
financial education, choice architecture, and regulation as
tools to help consumer financial behavior.
The financial services industry — either on its own or as
required by government regulators — needs to find ways to make
it easier for people to make sound decisions
10/19: Lower net worth
10/19 Everbody felt that oil prices would rise with all the
10/19: Very bad Greece and possible contagion
the wider market selloff, Greece has suffered a
particularly volatile period. Interest rates on the
country’s ten-year bonds have spiked in the last week,
soaring from around 6.5% to near 9% now, a level many
believe represents an unsustainable borrowing cost. Equity
markets in the country dropped 8% in just two days.
Meanwhile, German bonds touched new lows, hitting near
0.7% on ten-year bunds. Investors are increasingly worried
about Greece, because the party leading in the polls is in
favour of enforcing at least 50% haircuts to the country’s
bonds holders in an effort to cut the country’s debt,
which is currently 174% of GDP. Fears over Greece have
also reignited worries over other Eurozone periphery
countries and Italy saw its borrowing rates rise 40 bp on
Thursday morning alone. The Eurozone is in the midst of a
recession, with near deflation, and little prospect of
breaking out of the malaise because of serious political
disagreements over the proper course of action.
10/19: And more of the mess
Times Columnist Gillian Tett has written an insightful
article on the links between the recent market selloff and
the important reality of liquidity. Tett explains that
liquidity has been hurt by four factors, and all of them
helped exacerbate market volatility over the last few weeks.
Firstly, most market investors are holding the exact same
views, which has left everyone caught by surprise. Last
week, 100% (truly) of surveyed economists said they believed
interest rates would rise soon—this helps explain the
like-mindedness of investors. Secondly, and leading on from
the first point, asset managers have adopted a severe herd
mentality, and are all buying and selling the same assets at
the same time, which makes rises and falls much steeper.
Thirdly, computer programs and algorithms, despite
purporting to boost market liquidity, have actually made
things worse. Most of them operate in a similar fashion to
one another, and because they can function at lightning
speed, move markets even faster downward than in the
phone-based days. Finally, and perhaps most critically,
regulations have forced large banks out of the market-making
space in many products. This means that there is simply not
enough liquidity in trading to handle the volume of bonds in
the market at an adequate level, leading to heavy losses.
The chief risk officer of Goldman Sachs, Craig W. Broderick,
warned at the I.M.F. meetings last week that the asset
management firms that now hold the bulk of these bonds had not
yet been tested in terms of how they would react to a market
shock.The chief risk officer of Goldman Sachs, Craig W.
Broderick, warned at the I.M.F. meetings last week that the
asset management firms that now hold the bulk of these bonds
had not yet been tested in terms of how they would react to a
Especially vulnerable, I.M.F. economists say, are companies in
which one manager and one investment view hold sway over a
wide family of funds. That can lead to a situation in which
numerous funds companywide accumulate concentrations in the
debt of a certain company, sector or country. When retail
investors are driving the investment money coming in and
flowing out, the dangers are compounded.
of Cash Flow and Cash Flow Calculations Guide
10/16: Ruble Rubble
The Russian ruble has collapsed to a record low against a
basket of dollars and euros despite intervention by the
central bank to prop it up. The Russian central bank has spent
much as $1.75 billion from the country's foreign
currency reserves to support the ruble
, buying it on
currency markets in an attempt to prop up its price,
10/15: Big data explained
the last few years, the world has been flooded by so-called
big data, or large data sets culled from a wide variety of
sources. The idea of using massive amounts of data to solve
issues has been highly touted, promising to cure all evils
from healthcare to financial markets. However, despite a
decent amount of interest and promises made, fund managers,
from private equity to hedge funds to mutual funds, have
been scratching their heads with what to do on the topic.
Fund managers have reportedly been amazed with the data they
can obtain, from corporate sales, to Twitter data, to search
term analysis, but many simply do not know how to put them
altogether into a usable investment strategy. Many funds,
such as Schroders, say they are “fascinated” by the
possibilities, but have “nothing set in stone” as to how to
use the technology. This lack of uptake is worrying the same
managers, as they fear that asset management could quickly
come to be dominated by tech giants like Google, Facebook,
and Amazon, who have a great degree of expertise in using
big data to make decisions. “I suspect that [Google’s
artificial intelligence] people could clone an asset
management stalwart before breakfast”, says an FT commenter.
10:15: China's problem (oxfwd_
the fourth year in a row, US investors in Chinese-focused
equity funds have withdrawn money from the space. This year,
over $1.1bn was withdrawn from funds focusing on China,
meaning the space lost 20% of its capital. European
investors have withdrawn money as well, but not to such an
extent. Investors have become disgruntled with China’s
corruption, ailing real estate market, high indebtedness,
and its weakening economic outlook. Investors have also been
unhappy with the Chinese equity market’s volatility, down
6.8% last year, but up 16% this year. Because of a lack of
institutional investment in the country, the market is still
driven by retail trades, making it much more volatile. The
development will hurt large Chinese fund houses’ efforts to
penetrate western markets. Such businesses, which are
dominant in China, have been trying to attract AUM from
western sources, but have been unable to do so because of
the negative outlook for the Chinese economy, and a
generally distrusting view of the fund businesses
We will not see 3% however in 2015 or 2016
10/15: US oil exports
forty years the US has adamantly stuck to its policy of a
crude oil export ban. However, as the country has once again
become awash in black gold, companies are having more and
more success chipping away at the blockade. Several weeks
ago, a shipment of American crude oil left harbour in Texas,
destined for South Korea. The shipment represents a major
step towards exporting, as it was the first ship to leave
port with light liquid hydrocarbons, a category of oil which
has historically been referred to as “crude” because of its
only minute differences to the benchmark resource. Such a
substance, like many others that the US Commerce
departments’ new policy allows, is only very lightly
refined, and the process of doing so can be done right at
the wellhead in little time with low costs. This means that
much of Texas’ new oil is now exportable. Since refined
petroleum products, like gasoline, are already allowed to be
exported, the government says this is not a change of
policy. However, in reality, it represents a fundamental
shift, as an estimated 300,000 barrels a day are now
eligible to be exported.
I wonder if fracking will not cause significant problems. there
have been lots of earthquakes and ground water pollution. Mother
Earth may really get pissed and force a shutdown.
10/15: Where Not To Die In 2015
Person Disability Insurance
Active portfolio management involves the selection of securities
and market timing in an attempt
to provide value to fund investors. It has been suggested that
periods of falling securities prices provide
opportunities for expert managers to locate underpriced
investments. The notion that active managers are
better able to earn their management fees during recessions is
cited in the literature (Moskowitz ,
Kosowski , Glode ) as a justification for holding
actively managed funds within a portfolio.
This assertion has been subject to little scrutiny. In this
article, we estimate the performance of active
equity portfolio management across business cycles.
Our study attempts to answer two simple questions. Is active
portfolio management performance
superior in recessions relative to passive investing, and to what
extent is performance persistent across
business cycles? Our findings suggest that active portfolio
management is not superior to a passive
investment strategy in either expansions or recessions. We also
find that persistence is weak across
business cycles. Collectively, the findings support a low cost
passive investment strategy for retail
investors across all business cycles.
EFM- all critiques of active management tend to reflect the first
sentence. And that is fine for most purposes IF the consumer can
handle major losses without difficulty AND that the market will
always some back- or at least in enough time to make the consumer
whole once again. But middle class cannot accept huge losses under
a buy and hold nor accept the fact that the market will gain
enough in a relatively short period of time to make up such
losses. With the latter, the retiree is spending money for
retirement and waiting for the eventual gain. Probably will simply
lose out. Period
What to do? View DCAD above. Simple no brainer. .
the U.N. said that an estimated 180,000 Iraqis have fled Heet
since it fell earlier this month to the radical Islamist group
Kim Jong Un has bad feet
Ebola is scaring America
The Pope has softened views on homosexuality
And so on
But Putin and the Ukraine don't really get mentioned now,
Needs Children Turning 18 Years Old
By Lori K. Murphy, Esq., Bean, Kinney
& Korman, P.C.
A single mother of an adult child visited me to
prepare her estate plan. During our first
meeting, she shared that her 24-year-old adult son
lives at home and has a mental impairment. He
recently needed a new physician and my client
requested to direct his medical care. In response, the
new physician asked for her son’s medical power of
attorney. My client was thrown for a loop–she
had always directed his medical care and no one before
had asked for a power of attorney. Later, she
determined this was because her son had the same
medical treatment team since he was a young boy and
the team knew her son’s medical condition and that his
mother directed his care. Now that new care was
needed, the physician’s office properly sought the
mother’s authority to direct care and she needed to
determine how to continue to help him. Our
discussion turned from her own estate planning to one
about guardianship, conservatorship and powers of
In no legal field have I been challenged more than in
representing families with special needs
children. Over the past 14 years, I have had the
pleasure of working with families with estate planning
efforts, including those who have children with Down
syndrome, autism spectrum disorder, spina bifida,
birth injuries and other conditions impacting a
person’s mental capacity. A topic many families
are passionate about is determining how to attend to
the less-abled child after he or she attains the age
of 18 (the age of legal majority) and whether a
guardianship and conservatorship is appropriate.
When discussing this topic with clients, it is crucial
to consider both the cognitive capability of the child
and the parent’s perceived need to continue
involvement in the child’s financial life and medical
affairs. Other relevant factors include an
analysis of the pros and cons of guardianship,
conservatorship, agency under a financial power of
attorney, and agency under an advance directive/health
care power of attorney. Additional factors that
impact the analysis include whether the child needs
outside care, such as an assisted-living facility or
companion-care home, and the parent’s financial
In determining how to best help parents provide for
their adult child with special needs, it is important
to take into account the self-sufficiency of the adult
child. Here are factors to discuss when
tailoring a course of action:
- Whether the child is capable of communicating his
or her needs and wants regarding his or her care;
- Degree to which the child can adequately feed,
clothe and otherwise take care of his or her basic
- Whether the child is employed
outside of the home;
- Whether the child will require outside care (i.e.,
an assisted-living facility);
- Degree to which the child can understand the
effects and consequences of his or her actions; and
- Income and finances of the child and the child’s
It is crucial to take the adult child’s needs and
wants, if capable of expressing them, into account
when determining how to best provide for him or
her. Apart from moral sensitivities, Virginia
law provides that fiduciaries in charge of the child’s
care allow the child to participate in the process as
much as he or she is able. Further, if the child
has no input in the process, it could disrupt his or
her relationship with the parents, making the process
emotionally taxing on everyone involved.
Guardianships & Conservatorships
Run to the Courthouse
One way to provide continued care for special needs
children over the age of 18 is by securing a
guardianship and conservatorship. Adult
guardianship is the legal process in which a guardian
is appointed by a court to make personal decisions on
behalf of the adult child, including decisions about
where he or she lives and what medical treatment he or
she receives. In contrast, adult conservatorship
is a legal process in which a conservator is appointed
to make decisions about an adult’s financial world,
including property and estate. An adult’s
guardian and conservator are often the same person,
but need not be, and one does not have to seek the
appointment of both. If a guardianship and
conservatorship is sought by the parents, an official
opinion from a physician must be presented to a court
stating the reasons these are necessary.
Virginia law provides that a court order granting
guardianship be tailored to rectify the incapacity of
the individual. As a result, guardianship is a
particularly flexible system in Virginia: the court
order appointing a guardian can be as broad as
covering all decision-making or limited to specific
decision-making spheres, such as medical care.
Some parents welcome the child’s right to vote,
for example, and are pleased to learn that a court
order can provide that the adult child retains that
When a child does not have the cognitive ability to
direct his or her own financial or medical affairs, a
guardianship and conservatorship is appropriate.
The parents are relieved to know they can continue to
direct the child’s affairs after the age of 18 and
welcome the daily involvement. Most
parents of children with mental incapacity determine
that a guardianship and conservatorship is the right
thing to do for a child who cannot live independently.
However, guardianship and conservatorship are not
always the appropriate tools to protect individuals
with mental impairments. First, the cost to be
designated by a court as a guardian and conservator
can easily exceed several thousand dollars in legal
fees. Second, a guardian is required to provide
significant attention to the incapacitated
adult. Third, the guardian has to report at
least annually to the state as to, in part, the living
arrangements, mental, physical and social condition,
and the scope of services provided and whether those
services provide adequate care to the
individual. Furthermore, the guardian
directs the living arrangements and health care of the
incapacitated individual and often those decisions are
Conservatorships, in particular, require significant
maintenance. A full conservator is required to
post surety on a bond with the court, annually report
on all income received on behalf of the adult child,
and annually report on all funds expended on behalf of
the adult child to the local Commissioner of Accounts.
This means a conservator must collect and keep
records of all receipts, checks and bills so he or she
can account for all the child’s funds “to the
penny.” Without help from an accountant or
financial planner (which can be costly), this can be
time consuming. Many of my clients are working
parents, juggling the responsibility of raising
multiple children, including the special needs child,
so this additional work is burdensome.
Further, a guardianship and conservatorship can
infringe upon the child’s independence if it is not
tailored toward that child’s needs and level of
functioning. A child who is autistic, for
example, may be able to work, earn an income, ride
public transportation, and pay rent, and may not need
such parental control after the age of 18. Also,
the legal process of obtaining a guardianship and
conservatorship over an adult child may be a stressful
experience for such a child.
If a guardianship and conservatorship is the right
decision for a parent and child, the process is
typically instigated about six months before the child
turns 18. This provides sufficient time to
obtain the necessary medical, psychological, or
psychiatric opinions required, to seek the input of a
guardian ad litem (a person appointed to protect the
rights of the adult child), and to prepare the court
petition for appointment of guardian and conservator.
Powers of Attorney
Let’s get powers of attorney
An alternative to guardianship and conservatorship are
the powers of attorney. A power of attorney is a
legal document in which a person (the “principal”)
appoints an individual (the “agent”) to make decisions
and take action on behalf of the principal.
For our discussion purposes, an adult
child who has already attained the age of 18 would
execute powers of attorney as the principal and would
delegate authority to one or both parents as the
agent(s). The adult child would also name
successor agents if the parent was unable to attend to
the adult child’s affairs.
There are two types of powers of attorney used in lieu
of a guardianship and conservatorship: (1) Advance
Directive/Health Care Power of Attorney and (2)
Durable General Power of Attorney. The former
document allows an agent to make decisions about
medical affairs to include typical, daily health care
decisions as well as the serious end-of-life
decisions, and the latter document allows an agent to
make decisions about financial and administrative
affairs. Generally, if powers of attorney are
properly executed, a guardianship and conservatorship
is not necessary. Additionally, the cost to
secure powers of attorney is low in comparison to the
court-administered process of guardianship and
conservatorship and the ongoing cost is nil – there is
no annual reporting to a third party associated with
the powers of attorney (unless the adult child makes
that specific request).
The appointment of a power of attorney can be a wholly
private affair. So long as the adult child
demonstrates sufficient capacity, he or she can
execute the two powers of attorney and the
relationship between parent as caregiver and overseer
will be continued with little interruption after the
But only if there is capacity
However, powers of attorney can be executed by the
adult child only if he or she has sufficient mental
capacity. (For powers of attorney, “capacity” is
the term used rather than ability or
disability). In fact, determining capacity is
often the crux of the decision-making process of
whether to obtain a guardianship and conservatorship
or to request the child to execute powers of
attorney. No legal checklist exists that can be
used to determine whether a child meets the capacity
level required to execute a power of attorney.
Thus, it is often the most important thing an attorney
can do. Yet, many attorneys are uncomfortable
with making the assessment as it can be perceived to
cross into the medical arena of determining cognitive
Thus, if the adult child has a diagnosed condition
affecting decision-making capacity, it is important to
secure a medical opinion as to the adult child’s
mental capacity. If decision-making capability
is not a factor, then it is general practice that an
adult child with sufficient capacity must be able to
consciously understand (1) the nature of a power of
attorney; (2) the effect of signing a power of
attorney such as when the power begins and the subject
matter over which the agent can exercise control; (3)
the power of attorney can be limited or broad; (4) the
power of attorney can be revoked so long as the adult
child has capacity to do so; and (5) the power of
attorney continues even if the adult child becomes
incapacitated. However, in any case, the
attorney will want to meet with the adult child alone,
without the influence of his or her parents.
This allows the attorney to make the difficult
decision of whether the adult child has sufficient
capacity to execute the powers of attorney and that
the terms in the powers of attorney are directed by
the adult child.
An issue that needs to be acknowledged by the parents
is that if the adult child has sufficient capacity to
execute the powers of attorney in favor of his or her
parent, he or she can also execute powers of attorney
in favor of another person. An elderly woman
called me to express concern that her middle-aged
adult child with some mental impairment had recently
executed powers of attorney in favor of his
girlfriend. It was difficult to hear the elderly
woman express her concern that the girlfriend may take
advantage of her son. This is a real issue that
needs to be considered if powers of attorneys sound
like an easy, cost-effective solution to managing an
adult child’s care.
Even though executing a power of attorney comes with
its own complex issues, especially when adult special
needs children are slightly mentally impaired and the
determination of capacity is a close call, a power of
attorney is a far less invasive means of providing for
the care of a special needs adult child. It requires
almost no maintenance, unlike a guardianship and
conservatorship, and is a low-cost method to ensure
the continued care of the child by the parents.
When deciding whether to pursue a guardianship and
conservatorship of an adult child with special needs
or have the adult child execute powers of attorney, it
is imperative that the discussion includes
consideration of whether the child is receiving or
will receive public benefits (both Federal and local)
and whether the parent has completed his or her own
estate planning. Public benefits and the special
needs child go hand in hand with topics like
appointing Representative Payee for Social Security
payments, preparing special needs trusts, and the
relationship of the child to the parent’s own
In evaluating whether a guardianship and
conservatorship or powers of attorney are appropriate,
a parent should consider the adult child’s mental
capacity, the ability of the child to manage his or
her own affairs, and the deprivation of rights imposed
by a guardianship and conservatorship. If the
adult child has the capacity to execute powers of
attorney, then that is a good first step. A
formal guardianship and conservatorship may then be
sought later, but only if needed.
10/14: Global Economy DOWN
is expected to cut its estimate of global growth in 2014
from 3.4 per cent to a little over 3 per cent this week as poor
second quarter figures from Germany, Japan and other countries
weigh on the outlook. As recently as April, the IMF was
expecting 3.6 per cent growth this year, faster than the
Eswar Prasad, an economist and senior fellow
at Brookings, said: “The world economy is now being powered
mostly by the US
growth engine, a situation that is untenable for a
sustained and durable global economic recovery”.
10/14: Probabilities (Kahneman)
probabilities you need to keep several possibilities in your
mind at once. It’s difficult for most people. Typically, we have
a single story with a theme. People have a sense of propensity,
that the system is more likely to do one thing than the other,
but it’s quite different from the probabilities where you have
to think of two possibilities and weigh their relative chances
10/14: Active Management
Dougal Williams, CFA – 11 Oct 2014 21:23
Prof Ken French often reminds folks that identifying skill
is incredibly hard, indeed. For example, if you take a
manager who has outperformed by about 5% per year, but
experienced a similar level of volatility as the US stock
market, it would take roughly 64 years to say with
statistical significance that manager wasn't lucky.
60+ years to say with confidence it's skill, not luck.
Forget 64 years. Think about what our industry does
to managers who "ouperform" for 3 years, 5 years even 10
years--those "winners" are featured on the front page of
newspapers, grace magazine covers, and become the keynote
speakers at industry conferences. Money flows into
those mutual funds, advisors allocate to their funds /
separate accounts, and those same advisors tout their own
ability to pick-stock-pickers skill.
Just for a moment, check your ego, suppress your emotions,
detach your mind from your source of income and think
agnostically: SIXTY FOUR YEARS to say with confidence
that manager was indeed skillful, not just lucky.
Now tell me how good you are at picking winning managers
Lastly, studies comparing index vs. active performance
don't compare index performance the "average" manager.
They compare them to all managers. Every
credible study concludes the same: over short periods,
the relevant benchmark outperforms about 60% of active
managers; over 10 years about 70%; and over 20 years about
Interestly, the same long odds face those previous
periods' winners in the subsequent period. Past
winners are HIGHLY UNLIKELY to win again.
Yes, outperforming due to picking stocks / funds /
managers or through market timing is POSSIBLE but not
PROBABLE. Highly improbable, in fact.
10/14: Planners suck
Long will I Live
Simple 8 question form.
men live longer than single men
married men are more willing to die
- Life expectancy at birth for the U.S. population reached
a record high of 78.8 years in 2012.
- The age-adjusted death rate for the United States
decreased 1.1% from 2011 to 2012 to a record low of 732.8
per 100,000 standard population.
- The 10 leading causes of death in 2012 remained the same
as in 2011. Age-adjusted death rates decreased
significantly from 2011 to 2012 for 8 of the 10 leading
causes and increased significantly for one leading cause
- The infant mortality rate decreased 1.5% from 2011 to
2012 to a historic low of 597.8 infant deaths per 100,000
live births. The 10 leading causes of infant death in 2012
remained the same as in 2011
Much of the recent improvement in death rates and life
expectancy for population groups examined can be attributed to
reductions in death rates from major causes of death, such as
heart disease, cancer, stroke, and chronic lower respiratory
Although continuing declines in mortality have slowly reduced
longstanding gaps in life expectancy, differences in life
expectancy at birth and at 65 years between sexes persist (3).
rates in 2012 continued to decline among most groups
defined by sex, race, and Hispanic origin. Although changes in
mortality are relatively small from one year to the next,
long-term trends show the apparent progress in reducing
For example, the age-adjusted death rate in the United States
decreased 15.7% from 869.0 to 732.8 deaths per 100,000 standard
population from 2000 to 2012
DOW is now flat for the year
10/12: Life settlement
UL policy, insuring an 82 yr old male with a 9 year life
Cash offer of $325,000
Cash offer of $75,000 and $1,000,000 in Retained Death Benefit
Edesess on stocks for the long run
My reply: Nice job! And I agree with almost everything in
your conclusions since, by reading Peter Bernstein,
Mandlebrot, Pfau et al, I reached the same conclusions
save for one area. That of the "irrational investor"
I have taught DCAD- Dollar Cost Averaging Down for close
to two decades. It is designed for the average middle
class investor/401k participant. It simply means that one
must accept a correction of 10% to 15% but that is about
all. A precipitous decline (validated by other economics
of course) dictates a reduction of risk to avoid
(potential) large loses.
Also, I do NOT understand why more advisers did not
adhere to the inverted yield curve evident in 2000 and
2006. A 100% indicator of recession is not to be a
guarantee 100% in the future, but one is hard
pressed to dismiss it. Mauldin noted in Oct 2000 that
..." everytime we have been at these yield curve
levels for the last 40 years we have had a recession.:(Admittedly
it cannot be used anymore.)
looking at your chart, a RATIONAL investor would
actually sell out at roughly your points 1 for both
recessions. (Though one does not just do this at one
singular point but I am taking the liberty here),
And in regards to your point 2s- since pundits will
always say this is market timing and no one knows when to
get back in, etc,. etc- these actually correspond to what
I suggest for consumers in getting back in. It's
independent of me, you, Cramer, Snow white or any other
entity with "amazing insight", they actually are the
points I use for Dollar cost Averaging UP.
They are the dates of the press releases by the National
Bureau of Economic Research indicating when the trough of
each recession had occurred. On July 17, 2003,
they stated that the trough had been reached on Nov 2001.
On Sep 10, 2010, they indicated that the
trough had been reached on June 2009.
Coincidence with your chart of the irrational investor?
Possibly. No matter, I am unwilling to simply assume that
after these major downturns (and another coming up soon I
submit) that a reversion will occur. I am not willing to
base a decision on numbers from the age of the dinosaurs
nor dismiss the teachings on risk by Benrstein,
Mandelbrot, Taleb, Lo and more.
Middle class investors and retirees specifically, cannot
take the risk that the market does NOT come back- or does
not do so in some (undefined) timeframe. This focus also
negates a lot of the monte carlo "studies" on what to take
out.annually since there is a logical, rational
avoidance of deep losses. If you miss deep losses, you
will do better, period.
Further, the emotional impact of huge
losses is far greater than that caused by the losses
themselves. Marriages/family life can still exist.
Is this prefect?.Of course not and it is does require an
interpretation at times.(But arrogance and ego tend
to destroy rational thought.) However, does it
reflect real life? YES and that is different from all the
formulas and statistics one can muster. And it
is simple which is a major
factor for the bulk in the business that are clueless.
Remember that the fundamentals of investing have
never been taught to brokers nor RIAs nor
is the use of a personal financial calculator required by
same nor insurance agents.
See efmoody.com/gripes.html for videos on Risk
of Loss and for DCAD. DCA UP will be available next
week. (These were made for intelligent consumers, not the
industry, so view accordingly).
theory should not be so simple that it does not conform
Hussman- As much as investors seem to want to
believe that aliens from Xenon have brought some brave new
world, our valuation approach is consistent with a century
of market history and has not missed a beat even in recent
market cycles. We continue to view long-term prospects for
the stock market as dismal at present valuations.
bear market lows don’t occur very often, but when they do,
valuations typically average about 50% of pre-bubble norms.
While every bear market in history except the October 2002 market
low brought our estimates of prospective 10-year nominal returns
above 10% annually, I have no particular expectation that the
present market cycle won’t be like the 2000-2002 instance and end
without bringing valuations to that level. As always, the
strongest estimated return/risk profiles emerge when a material
retreat in valuations is coupled with an early improvement in
market action. There is no requirement that stocks must
retreat anywhere near historical norms over the
completion of the present market cycle. Nor, of course, can we
rule out a substantial move below those norms, which has regularly
occurred throughout history, including the period prior to the
1960’s despite interest rates that were quite low
10/12: Oil prices
are now at their lowest levels in almost four years, since
December 2010. Prices have fallen dramatically over the last
few months, and even more sharply recently. Yesterday,
America’s WTI crude prices fell an eye-popping 3.7%, and ICE
Brent, the world’s benchmark, fell 3.2%, with the former at
just $84.06/barrel. Prices have been falling steadily for
several months as demand has slowed alongside stagnating
growth, especially in China, and supplies have increased due
to new technologies, like fracking. However, yesterday fears
of a global slowdown, including both in Asia and in Europe,
where German industrial output numbers shrunk dramatically,
culminated in a heavy sell-off. Equity markets fell as well,
with the S&P 500 down 2.1%. Saudi Arabia cutting its oil
prices also led to declines, as many believe the moves signals
the beginning of a new OPEC price war. The market fall comes
despite news that China has been on an oil “buying spree”. It
is unclear whether such Chinese buying is because of organic
demand, or simply due to efforts to grow their strategic oil
the last month, much press, including in this publication, has
been given to the pending issues regarding emerging market
debt. EM debt issuance has surged alongside low rates, and
countries now have large debt piles, often in foreign
currencies (meaning they have exchange rate risk), and are
highly vulnerable to rising US rates. However, the IMF has
just signaled the alarm on another issue, which has not been
discussed as frequently—EM inflation. Inflation is rising
alongside the strengthening of the Dollar, and in markets like
Turkey and South Africa—two of the “fragile five”—inflation is
now near 10%, far above targets. Brazil has risen to 6.7% as
well. In addition to exchange rate risk exacerbated by asset
quality deterioration, higher inflation would accelerate bond
sell offs, send interest rates spiking, and make it even
harder for EMs to pay off foreign currency debt. Ghana, Kenya,
and Nigeria are also major EM markets with inflation problems
10/12: Much worse than I thought
is aware of the Eurozone’s current struggles—high debt,
recession, crushing unemployment, and near deflation. However, a
new piece has been published which shows the extent to which the
Eurozone is blackhole on the rest of the global economy.
Deutsche Bank strategist George Saravelos, this week published a
paper explaining that because
of high levels of fiscal austerity, the Eurozone is current
running the largest fiscal account surplus in the history of
the world, bigger than China’s in the early 2000s.
Essentially, the Eurozone is exporting, but imports have
entirely dried up, sapping demand for the rest of the world’s
goods. Little money is being invested. In the early 2000s,
China’s surplus was used to invest in US Treasuries, keeping
interest rates abnormally low, which ultimately led to the US
subprime crisis because of huge lending. This time, the
combination of Europe’s huge surplus, and possible quantitative
easing, are likely to lead to the “largest capital outflows in
the history of financial markets”, said Saravelos. Saravelos
believes the QE would not lead to a pickup of domestic demand in
the Eurozone, and would create huge rounds of capital flight to
markets with better interest rates or return prospects.
Ultimately, this action could see the Euro fall to 95 cents to
the Dollar, from its current 1.27
may become extinct (Elon MUSK)
advanced artificial intelligence could spell the end of humanity.
I don’t think anyone realizes how
quickly artificial intelligence is advancing. Particularly if
[the machine is] involved in recursive self-improvement ... and
its utility function is something that’s detrimental to
humanity, then it will have a very bad effect.
He went on to muse about just how serious the problem could be.
If its [function] is just something
like getting rid of e-mail spam and it determines the best way
of getting rid of spam is getting rid of humans ...
Series DGS7: 7-Year Treasury Constant Maturity Rate