PhD, MSFP, MBA, LLB, BSCE

Registered Investment Adviser 

Life and Disability Insurance Analyst

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DAILY COMMENTARY FOR THE WEEK OF

July 5, 2009

 THESE COMMENTS AND WEB LINKS ARE OFFERED FOR A COUPLE WEEKS AND THEN DELETED. YOU HAVE TO COME HERE OFTEN TO BE SURE YOU GET ALL THE NEW STUFF SINCE I TEND TO UPDATE DAILY. (MOST OF THE LINKS ARE THEN ADDED TO OTHER PAGES ON MY SITE AND SOME OF THE COMMENTS MAY BE EXPANDED ON IN OTHER SECTIONS.)

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Sample Pages

Book Review

No Nonsense Finance eBook

My material clearly defines the 100% indicator of a recession and what to do.

From a industry journalist: "It is wonderful - full of very sound advice, and in your typical no nonsense style, you've made sure the reader knows what is what. As usual, you have pulled no punches, and spared no illicit or immoral activity and/or schemes. Good for you. Investors need a healthy dose of reality, sans the sugar-coating."

Industry dialogue: From noted author Rick Ferri. "I GUARANTEE this book is worth every penny. For a little bit of insight into who E F Moody is, go to the widely acclaimed EFMoody.com website. You will not be disappointed."

From a reader: Errold Moody is unusually well qualified to write a book about financial planning. He enjoys more credentials than nearly anybody in the field. In my opinion, no one can be an expert in all the subjects covered. Mr. Moody comes as close as possible.

From a reader: I am studying for my MS in financial planning. I use information from your site to stimulate my appetite in contrast to the traditional texts used in the course. Your site and book rocks!

Yale: As stated, my book is not for industry. Generally, they don't like it since it shows a lot of the warts that exist. That said, others find it very useful. I acted as an expert witness on a major case.  One of the attorneys found it useful. He also had this to say: "I showed it to another expert of ours, David ........, who is a Yale professor. He thought it was great and said he was going to order a copy. And he is going to require it for his students."

From a reader: Thank you for writing the informative and refreshingly honest No-Nonsense Finance. Unfortunately, I found myself described amongst the pages as the uneducated investor who takes advice from a friend, hires a planner and a broker and loses 60% of her money. Ouch. Luckily, yours is the first publication that actually explains what went wrong and how to take more grounded steps going forward.  Your book (and website) have helped me begin to understand many important principles for prudent investing. Thank you again for your dedication to making Finance and Investing accessible for the rest of us.

From a reader: I am in middle of reading No Nonsense Finance and think it is one of the best financial books I have read to date. Due to watching my monthly statements continue to remain stagnant and the absence of any calls from my various brokers, I decided to take matters into my own hands and become my family's self-proclaimed CFO. First step was a financial plan from a CFP which turned out to be a 68 page piece of crap with relatively no validity or specific recommendations.

From a reader: Read part of Moody's book last night and this morning. Moody covers the 2000-2002 years so well and I really needed to see someone knowledgeable address it. You certainly never see anything in any magazines or from CFPs providing any real information.

From a reader: Your book arrived, wow, must say it has had a major impact on my perspective. As I read and absorb the information, I gain clarity on all levels.

My direction or approach has shifted, taking into consideration my own ignorance as well as the misleading information & handling of my funds. Understand the importance of being prepared to take responsibility for my own actions, along with taking time to gather information necessary to present my case in any forum.

Your book has become an important tool for me, confident I will gain satisfaction if presented properly.

Thank you for putting the information together in such a way that makes sense, especially when life doesn't!

From a reader- I picked up your book last year, read it, put it down and picked it back up during the last couple of months.  I would first like to say your writing is indeed hilarious and I have enjoyed every minute spent reading it. !

From a reader: I've read parts of your book & have been reviewing your web site & frankly ----WOW!!! What you are saying is beginning to open my eyes & making some sense to me , However it also struck fear in my heart -knowing how stupid I've have been all these years.

From a reader: I most especially enjoyed your tapes. I also bought your book and read it cover to cover. I have been profoundly enlightened. Thanks. I also share your cynicism and caution about getting financial advise.

Another reader: I purchased your book to investigate issues related to long term care and it was very helpful.

From a reader- This weekend (2009) I finally finished your book No Nonsense Finance   I just wanted to let you know how much I enjoyed it, especially the chapters where you shared your experience and insight with some of the cornerstones of financial planning (estate planning, insurance, basis, and the investing pyramid).
 
As you may recall, I completed the required CFP courses, and I felt your book was what I should have learned.  You did a great job of explaining the major concepts of financial planning and sharing your experience about the different things a person needs to be aware of. I especially enjoyed the depth of your insights, gathered from a career of "being in the trenches."
 
I hope you plan to write some more books.  I would especially love to see books that focused on a single financial planning topic.  With all the financial fluff in the media and the difficulty of finding a competent planner, your books would become an invaluable asset in any investor's library.

* Of course I am not going to print the couple responses from people who hated it. But I will tell you this- they wanted/expected me to provide the "exact" triggers that would tell you what, when and where to invest. If you want that, try Rich Dad/Poor Dad, or some other piece of sophomoric claptrap. Or ask some CFP, Suze Orman, whoever. None of them have ever been taught the risks of investing.

(Hint- see Inverted Yield Curve) 

And no, I have no intent in writing another book. It did not make a difference. 

No Nonsense Finance was published in Chinese in 2005.  If it didn't make sense in English, try this.

As of 2008, the only course on investments ever approved for continuing education by the California State Bar-

Practical Investment Theory and Application 

Seminars available for Law, Arbitration and Mediation Firms and Bar Associations throughout the U.S. 

If you deal in any securities or financial planning- as defendant or plaintiff- you need this.  It is mandatory education that you must know and a fiduciary requirement for any issue regarding investment suitability. 

 As of 2009, the only course on life insurance and annuities ever approved for continuing education by the California State Bar- 

Practical Life Insurance and Annuities Analysis and Application

Call 510 352-4127 for information.  

Investment Malfeasance and Breach of Fiduciary Duty

A report describing the fallacies of knowledge and competency from planners to B/D Firms, attorneys and arbitrators. And absolutely for consumers

Factual and objective. It is based on this solid premise: If you do not understand diversification by the numbers, you cannot determine risk. If you cannot determine risk, you cannot determine suitability.

Human (Ir)rationality, Marketing, and Investment Sophistication 

A formal paper on why so many people do the wrong things with investing and are marketed to continue to do so 

Equity Indexed Annuity

This report shows some of the difficulties in trying to figure out how they work

Irrevocable Life Insurance Trusts and Trustee Fiduciary Duty

John Hancock ILIT Policy Analysis This is the real life analysis that is referenced above.

I have asked Errold Moody to provide a brief example of what he has actually found on behalf of a client who engaged his services to review the insurance contracts which funded the client's estate plan. You will be amazed. In my 30 years in the business, I have never seen an authoritative, objective, prudent expert speak so clearly on the use of insurance. What Errold can do is unique in the industry.

Steven Winks

 Premium Financing  on  an $11,500,000 AIG Global Plus Index Life Insurance Policy

These can work but you better know how to analyze. Very few have a clue 

* How much is too much to pay for life insurance? 

 

7/5:: Obesity is going up (think pun): Last year there was a gain in obesity in 23 states and none going down.  Childhood obesity has tripled since 1980.

Excluding the very poor, the bulk of the obesity (pun?) is in the middle class. So now consider the comments about the inefficient markets, behavioral finance and so on. Wasn't  it obvious that if people refuse to understand that eating 24 twinkies at a sitting was going to creat problems,  they were never going to learn anything about investing?

That is grade school logic.

7/5: HOME SALES DOWN BIG – Department of Commerce reports that home sales declined in May nearly 33% below the same period last year. However, the number of newly constructed homes sold last month dipped only 0.6% during the same period.

7/5: FINANCIAL REGULATION OVERHAUL - The Obama administration released a white paper, Financial Regulatory Reform -- A New Foundation: Rebuilding Financial Supervision and Regulation, which is intended to serve as a blueprint for the overhaul of U.S. financial regulation.  Highlights include the Federal Reserve monitoring "systemic risk" in the economy; giving the FDIC the power to seize and resolve the problems of troubled non-bank companies that pose risks to the economy; creation of a National Bank Supervisor; increasing capital requirements for financial companies; creation of an independent Consumer Financial Protection Agency; and additional oversight of asset-backed securities, hedge funds, credit rating agencies and derivatives.

7/5:
   

7/5: FEDERAL WAGES – , the average pay per federal worker will leap from $72,800 in 2008 to $75,419 next year...all 14.6 million of them. That is up from about 12 million when George W. Bush took office.

7/5:

U.S. MORBIDITY AND MORTALITY UPDATE
Notifiable Diseases and Reported Deaths

Once again one of the most sought after statistics. Men use these a lot to pick up women. Try it and you will be as successful as I was.

7/5: US Economic data- monthly statistics The chart really shows how bad things have gotten. Unemployment in particular. Just a month ago theyt were talking about 10% unemployment by June of NEXT year. Now they are talking about THIS year.

7/5:

Myth: Increased Doses of Painkillers Cause Death By Jennifer B. Buckley

Many professional and family caregivers deem increasing the amount of prescription pain medication, for chronically ill people in pain, an unacceptable act. Terminally ill people are literally dying with an unnecessary amount of pain because of the negative stigma attached to administering surplus pain-killing opioids when needed. Many family caregivers and medical personnel are under the notion that upping doses of painkillers can be fatal. In addition, some believe pain medications like opioids, are a narcotic that is extremely addictive and includes heavy side effects. But, a new survey published in the July 29, 2000 issue of The Lancet suggests, “Increasing use of pain-killing opioids such as morphine in terminally ill patients does not shorten life.”  Researchers reviewed the cases 238 patients who died during palliative care in their institutions. The study was prompted by public and professional concern that the use of opioids for symptom control might shorten life. They retrospectively analyzed the pattern of opioid use in the last week of life; the daily doses were low. However, marked increases in opioids at the end of life did not significantly influence survival, frequency of unexpected death, or description of death.  The study challenges the myth that proper pain control for end-of-life care means killing the patient. According to Sandra Johnson, former president of the American Society of Law, Medicine and Ethics and expert in the area of health law, pain management and care for the elderly, “The problem is many people believe that pain medication, like opioids, are addictive and have terrible side effects. The fact is, the risk of addiction for someone who is receiving end-of-life care, is irrelevant and side effects aren’t severe and eventually clear up.” Some of the side effects attributed to opioids include constipation, blurred vision and lethargy and eventually, a person’s body will become acclimated to them.  Part of the problem in nursing and medical education is that much of the research on the effectiveness and safety of pain management is relatively recent and contradicts common knowledge of earlier pain control practices. Some professionals in the medical community think proper palliative or comfort care is euthanasia under a different name. In the Lancet report, Drs. Andrew Thorns and Nigel Sykes of St. Christopher’s hospicee in London said, “There is no connection between competent symptom control and euthanasia. It is possible to achieve good symptom control by using morphine competently, and you do not shorten people’s lives when you do that.” Also, physicians feel threatened by legal sanctions for treating patients in pain especially when the treatment relies on the use of controlled substances. The report recommends that if a doctor is seriously concerned about shortening a patient’s life, they should consult a specialist in the field of palliative care. Another myth concerning pain control is that over-the-counter pain medications, like ibuprofen, are much safer than opioids. This perception is incorrect and according to Ms. Johnson, “Large doses of ibuprofen are more dangerous and more harmful to the stomach and liver, than we realize. Over-the-counter does not mean safer.” Non-prescription pain relievers should be administered with caution and still may not relieve pain properly.  Suffering doesn’t have to be a necessary part of death. Ms. Johnson comments, “What we know now about pain management is that, 95% of cancer pain can and should be relieved through simple means, like morphine. In the past we were told not to medicate, that was then and this is now.” She believes that drugs do not hasten death but pain may hasten death. Through good hard information, like The Lancet report, the perception of treating pain by care professionals and the public could transform. Family caregivers may want to communicate with their doctors their interest in obtaining more information about certain pain medications; because it is possible not all care professionals have read the new research themselves. According to the study, our loved-ones do not have to spend the last days of their lives in pain any more.

7/5:  Education abroad   The site provides all sorts of info on various study opportunities overseas.

I personally know that the Berfle School of Finance, where I went,  you can earn a degree in just a month. I think it was located in Nigeria since I keep getting Emails from them that I can get some free money.
Wonderful people. 

7//5: Yield Curve Predictability, Regimes, and Macroeconomic Information: A Data-Driven Approach

Date:	2009-05
By:	Francesco Audrino Kameliya Filipova
URL:	http://d.repec.org/n?u=RePEc:usg:dp2009:2009-10&r=fmk
We propose an empirical approach to determine the various economic sources driving the US yield curve. We allow the conditional dynamics of the yield at different maturities to change in reaction to past information coming from several relevant predictor variables. We consider both endogenous, yield curve factors and exogenous, macroeconomic factors as predictors in our model, letting the data themselves choose the most important variables. We find clear, different economic patterns in the local dynamics and regime specification of the yields depending on the maturity. Moreover, we present strong empirical evidence for the accuracy of the model in fitting in-sample and predicting out-of-sample the yield curve in comparison to several alternative approaches.

7/5:

Date:	2009-05
By:	Kateryna Shapovalova (Centre d'Economie de la Sorbonne) Alexander Subbotin (Centre d'Economie de la Sorbonne et Higher School of Economics)
URL:	http://d.repec.org/n?u=RePEc:mse:cesdoc:09037&r=fmk
It is a common wisdom that individual stocks' returns are difficult to predict, though in many situations it is important to have such estimates at our disposal. In particular, they are needed to determine the cost of capital. Market equilibrium models posit that expected returns are proportional to the sensitivities to systematic risk factors. Fama and French (1993) three-factor model explains the stock returns premium as a sum of three components due to different risk factors : the traditional CAPM market beta, and the betas to the returns on two portfolios, "Small Minus Big" (the differential in the stock returns for small and big companies) and "High Minus Low" (the differential in the stock returns for the companies with high and low book-to-price ratio). The authors argue that this model is sufficient to capture the impact on returns of companies' accounting fundamentals, such as earnings-to-price, cash flow-to-price, past sales growth, long term and short-term past earnings. Using a panel of stock returns and accounting data from 1979 to 2008 for the companies listed on NYSE, we show that this is not the case, at least at individual stocks' level. According to our findings, fundamental characteristics of companies' performance are of higher importance to predict future expected returns than sensitivities to the Fama and French risk factors. We explain this finding within the rational pricing paradigm : contemporaneous accounting fundamentals may be better proxies for the future sensitivity to risk factors, than the historical covariance estimates.

7/2: Losses: The U.S. households have lost $6.4 trillionn  in net worth since the financial crisis began. Obviously a goo section might be in home prices but the remaining is in other investments that, were for the most part, liquid.  So they lost money they should not have. Think 401k . Three million Americans have lost jobs. About 10% by the end of the year.  

7/1: Consumer confidence declined quite a bit last month. It is again under 50.

7/1: Does Dollar Cost Averaging Work?  
No, it doesn't if you are looking to maximize return. Here is a proactive chart so you can punch numbers to your hearts content. 

7/1: IRS Blueprint:

What is an “IRS Blueprint”? Just as credit reporting companies keep exact details of someone’s credit history, the IRS keeps pretty thorough records on each and every taxpayer as well. These records have all sorts of powerful information such as:

1) is the IRS planning on auditing you?

2) has the IRS filed a return on your behalf?

3) does the IRS think you owe them money?

4) has the IRS conducted a criminal investigation on your taxes?

5) has the IRS filed a “secret” lien against your assets?

6) better yet, has the IRS “written off” your debt and given up on trying to collect it?

7/1:  

British Economy Suffers Worst Drop in 50 Years

Britain’s gross domestic product fell 2.4 percent in the first quarter of 2009 from the previous quarter. From a year earlier, the economy’s decline was the largest ever.

6/30: Retirement??: Ten percent of Americans polled recently who have retirement savings have added bank savings and CDs to their portfolios in the past six months because of the economic downturn. People are as likely to have added to stocks and mutual funds in their personal savings (8%) as to have moved personal savings out of stocks and mutual funds (9%), but more than one-in-five Americans polled (22%) say they have no personal savings and three in ten (30%) have no retirement savings.

6/30:  Madoff got the well deserved maximum sentence. While I have empathy but not an awful lot of sympathy. There is no way that anyone could have ever provided a flat 12% annual return. You NEVER give anyone like that all your money. 

6/30: 401K plan fees
Good stuff from the Department of Labor. From there it all goes downhill. Pay cheap fees, fine. But to be told that  by the end of "x" period you will have so many dollars is a fraud. It IS true that you might, but it will be by luck. You actually could have more. But the point for retirement is to gather a minimum amount no matter what. And you cannot do that with 40%+ losses. But people never paid attention to that and have used advisors with no more than a CFP. Sorry, CFPs are not taught risk. Never have been 

6/30: Fulfilling Fiduciary Obligations Can Present Challenges for 401(k) Plan Sponsors

6/29: Effective Strategy in the Face of Uncertainty

By now, most investors and managers have become painfully aware of the difference between risk and uncertainty.  In decisions involving risk, it is assumed that the full range of possible future outcomes and their associated probabilities are known in advance and remain constant over time.  The great majority of economic and investment theory is based on the assumption that they involve decisions in the face of risk.  Unfortunately, in most real world decisions, neither the full range of possible outcomes, nor their associated probabilities are known in advance - and they have a nasty habit of changing over time.  In the real world, economies and markets pass through regimes of high uncertainty and inflation, in addition to periods of normal growth.  "Unknown unknowns" that aren’t even on our radar screen -  Taleb's "black swans"  -- can suddenly appear and have a great impact on the outcomes of our decisions.  To put it bluntly, most real world decisions are made in the face of uncertainty, not risk.

EFM- What you are reading is why so many people lost  money. It IS assumed or it WAS assumed by almost all that things remain constant. I have NEVER felt that the status quo was simply that and you can look at my book or material at this site. But the point is not about Taleb since the ability to determine a purely random event is impossible. Think October 1987, Think 9/11. But there are times where you ARE able to do stress testing. An inverted yield curve tells you an inflation is coming. Do you really want to stress test your allocation in a recession. Don't you think that a bunch of things might fail. Don't you think you could lose a bunch of money. Don't you think a recession is UNCERTAINTY??   

I do not want to try and sail in a hurricane. Maybe I will make it. Maybe the winds will get me to my destination in a heartbeat. But the overall odds are against me and I will probably sink.

6/29: LTC:  The cost of long-term care continues to climb. Indeed, research from the Genworth 2009 Cost of Care Survey* found the average median yearly rate for a private nursing home room in the United States to be $74,208, compared to $62,415 in 2005, a 4.27% compound growth rate.

6/29:  

Russia Facing Long Recession, World Bank Says

By ANDREW E. KRAMER

The bank’s new projection showed that the Russian economy would contract by 7.9 percent this year and not recover to precrisis levels until at least 2012.

EFM- that usually means they become more aggressive in order to still look powerful

6/29: FINRA wants to change the suitability rules and request comments. Here is mine. they won't like it but I doubt they have a single entitiy in their main offices that could use a financial calculator. 


June 27, 2009

Marcia E. Asquith
Office of the Corporate Secretary FINRA 1735 K Street, NW Washington, DC 20006-1506

RE: Proposed Consolidated FINRA Rules Governing Suitability and Know-Your-Customer Obligations

I have the unique background of teaching almost all the securities licensing courses in the past (4, 6, 7, 86, 22, 24, 27, 63, etc) as well as acting as an securities arbitrator, expert witness and more. A resume is attached for validation. Beyond that I am almost assuredly the only one who replies who definitively defines suitability on a real world application, not just with words.

I have also approached the NASD/FINRA for over 15 years in regards to investor protection via broker knowledge. Without such fundamental training, suitability cannot be determined.
 
I  note that the material states, “NASD Rule 2310, addressing suitability obligations, and Incorporated NYSE Rule 405,4 addressing know-your-customer obligations, are critical to protecting investors.”

While an acceptable plaudit, it has no meaning. None of the brokers via a series 7 (the most common broker license) have ever been taught the fundamentals of investing. I have independently taught that such fundamentals include alpha, beta, standard deviation, diversification (by the numbers), correlation, risk of loss and more. I estimate that over 85% of RIAs are equally dumbstruck by even the most rudimentary elements of risk and reward.  In such regard, how is one to “know thy customer???” The agent can get all types of info from a naive and unsophisticated investor and then what?- protect them from what? Unknowledgeable competitor advisers? Well, you won’t have anyone left.

FINRA also seeks comment on whether it should propose expanding suitability obligations to all recommendations of investment products, services and strategies made in connection with a firm’s business, regardless of whether the recommendations involve securities.

That goes without saying. Effectively all the investment plans, retirement analyses and certainly any variable life and annuity illustrations I have seen to date, regardless of the size of the B/D, are deceptive at best and fraudulent at worst. The prime example involves the use of the term and numbers of standard deviation that is used to supposedly indicate something reflective of what risk is (wrong). Almost all the computerized plans are incorrect and deceptive. AIGs index life policy is backtested to use a 17.53% annualized return each year for the next 50 years. FINRA will now demand that indexed products be suitable? And no broker is trained on the use of a financial calculator? Well this will be interesting.

As far as I am concerned, such activity, which invariably includes any type of retirement income plan, budgeting and so on, has always fallen under the purview of suitability since the selection for the investments to be used requires scrutiny of not only how it works for the intended purpose, but whether they will work at all. So why not expand the suitability limits? It will make my job easier overall in showing the limited to nil competence of the brokerage community. But you need to realize that it will further denigrate the status of FINRA for refusing to instruct licensees on the fundamentals.

Information Gathering Regarding the Proposed Suitability Rule
Proposed FINRA Rule 2111 contains a number of minor changes regarding the gathering and use of information as part of the suitability analysis. For instance, the information that must be analyzed in determining whether a recommendation is suitable would include not only information disclosed by the customer in response to the member firm’s or associated person’s reasonable efforts to obtain it, but also information about the customer that is “known by the member or associated person.” The proposal also requires members or associated persons to make reasonable efforts to obtain more information than is explicitly required by NASD Rule 2310 (e.g., age, investment experience, investment time horizon, liquidity needs and risk tolerance).

The words are nice but investment experience is a wasted request when put into the real world. As stated to Shapiro years ago, consumers may have bought various investments over the years but generally without any true insight to what was going on or what they should have done. I repeat the fact that there is literally no consumer who knows what diversification is by the numbers. If you cannot determine diversification you cannot determine risk. If you cannot determine risk, you cannot even remotely identify suitability.  Of course I took liberty with the comments about the knowledge of diversification by consumers- but not by more than 0.0005%. That said, the understanding to risk is nil.

Investment experience CANNOT be used as a guide to what they should have done over the same period. To have uneducated brokers use this as a rationale or crutch is a breach of duty.

It is within this same commentary that ‘risk tolerance’ is a joke. I have NEVER seen any type of investment plan that has defined risk properly. A recent major B/D firm- as with effectively all others- has no clue to risk tolerance and to suggest that they can  transfer the risk tolerance to an individual who cannot properly spell it is ludicrous.

Further: Whether the firm or associated person has a reasonable basis to believe that the institutional customer is capable of analyzing the risks of investments independently, both in general and with regard to particular transactions and investment strategies involving a security or securities;
And how do you propose to determine such capability?

Because the “FINRA Institute at Wharton provides an understanding of the foundation, theory and practical application of securities laws and regulation. Participants learn from Wharton faculty, senior regulators and industry practitioners, and earn the distinct designation of Certified Regulatory and Compliance Professional (CRCP) upon successful completion of the program”?
And the point is what?  There is no practical application of use of product. There is nothing on a financial calculator. After all, you would have  all know about the fraud of a 17.53% projection and would have curtailed it, right??

No matter, Professors Herring and Diebold of Wharton noted this recently when asked if risk can be measured accurately: Dick Herring: “I think the last year shows that we can't, that there are lots of things we can't quantify very successfully and that we became overconfident in the things we could quantify. We've made great strides in risk analysis, risk measurement, and aggregating risk. But we've tended to focus most of those efforts on things that are relatively easy to manage. And even some of those relations broke down. We simply didn't have enough data. Our techniques were not good enough. We weren't using enough forward information and, unfortunately, this crisis has blame that can be shared across the entire spectrum of participants, from regulators to participants in securitizations and even to risk managers themselves.

Francis Diebold: I think that's right. That reminds me of our project on the known, the unknown, and the unknowable that we've done here at Wharton at the Financial Institutions Center in conjunction with the Sloan Foundation. What we focused on and really came to realize more intensely was that there's a whole spectrum of risks ranging from market risk to credit risk to operational risk to legal and reputational risk and things beyond that. Some are comparatively easy to model, which isn't to say they are easy, but they're comparatively easy. Others are really challenging and basically we're not good at at all.”

But the fundamentals of risk analysis can be taught. However not to brokers since one needs a financial calculator. Such capability has never been required for licensees.

Supposedly, ‘The  proposed FINRA know-your-customer obligation, proposed FINRA Rule 2090, captures the main ethical standard of NYSE Rule 405(1). Firms would be required to use due diligence, in regard to the opening and maintenance of every account, to know the essential facts concerning every customer (including the customer’s financial profile and investment objectives or policy’.

I will agree that the words are acceptable. But the whole emphasis on know the customer is a fraud due to the continuation of a severely bankrupt knowledge base to any licensee from the time I started instruction in the 1980s  to now.  The position taken in the mid 90s by NASD that increased knowledge would slow sales and would never be allowed remains. Shapiro’s statements that FINRA is a procedural entity and not a substantive one (2004) continues to reflect the dearth of ethical responsibility to consumers. Brokers do not even know what diversification is.

Finra has provided nice words. The theory is valid. But it cannot back them up with any industry elements since it refuses to even expose licensees to any of the fundamentals of investing. Add any credentials from Wharton or Harvard or whatever. Compliance over entities that are effectively clueless to the proper use of product is absurd. Unless and until the necessary knowledge is mandated, changes in a rule like this per se will provide little, if any, benefits to the consumer.

Why bother??


6/29: Effective Pain Management
1. By Cheryl Ellis, Staff Writer
In both acute and chronic health conditions, pain is top on the list of concerns for patients, caregivers and physicians. Effective pain control improves the individual’s state of mind and ability to move through the healing process. There are a variety of options for pain control, and doctors work toward addressing side effects that can occur with pain medications.
Coming to terms with being in pain, acute or chronic, is a hurdle for many folks who grew up learning to “put aside” pain. Individuals who have been vocal about pain levels and received negative responses may feel angry, refusing treatment as an expression of emotional pain.
Fortunately, pain control centers, physicians and other healthcare personnel have become more aware over the years. Asking about pain levels during office visits is as common as checking vital signs.
TYPES OF PAIN
Acute pain can occur at the same time chronic pain is experienced. The euphemism “breakthrough pain” is one type of acute pain an individual can undergo. This pain can occur because of movement or activity, but it can also happen when the body has involuntary movements, such as expelling gas or muscle twitches. Medication can be prescribed for the “break” in pain that around the clock medicating provides.
Breakthrough pain may occur in the same area as the chronic pain, but not always. Noting the events leading up to the episode of breakthrough pain can help caregivers adjust activity levels if needed. In some cases, the area in pain and/or the event that contributes to it cannot be pinned down. Recording episodes, including seemingly random incidents, will still help when pain management is reviewed.
When pain resurfaces before the next scheduled dose of medication and isn’t associated with a voluntary or involuntary action, the physician can be notified to examine the timing and amount of around the clock medication. Noticing the time of pain onset and keeping a record can help the doctor make a decision about keeping pain relief consistent. Caregivers will find their loved one complains at or about the same interval of time prior to their next dosage.
Chronic pain is consistent and “stable.” While there may be some fluctuating of intensity, it is “reliable” in its characteristics. Medication for this type of pain is generally around the clock to provide continuity of relief. Over time, medications are adjusted to account for changes in the pain cycle, including a patient’s tolerance to a given dosage.
AGE DOESN’T MATTER
Children and adolescents with cancer or AIDS experience pain just as deeply as an adult. They may be better equipped to admit to pain and track where they are hurting, as opposed to adults who may have dementia as a hindrance to assessment.
Physicians have a specific protocol, or pathway, to follow when managing pain for adults and children. When dealing with “pain psychology,” caregivers will learn to watch facial expressions, body positions and other gestures to determine if their loved one is understating their pain level. Kids may not want to worry their parents, or be afraid of a visit to the doctor or hospital. As the healthcare experience continues, parents become more attuned to what their child is feeling, and may find that personnel involved in their child’s care are able to help them understand what is typical at different stages of treatment.
While the same is true for caregivers of adults, the adult-to-adult psychology can have a wider range of variation. Children helping their parents through a health crisis may take time to relate to them on an adult-to-adult level, and parents may attempt to mask their fear and pain by amplifying “Parent Mode.” When possible, ask the doctor to allow for some time alone with the parent, to allow them to express their needs without feeling “weak.”
Relationships of every kind are challenged when there is a health problem, and relationship dynamics should be evaluated at the time of diagnosis by loved one and caregiver. Understanding that there will be changes in any relationship is a first step toward coping with those changes, and making them positive ones.
PAIN MANAGEMENT IS A SCIENCE
Over the decades, the perspective on managing pain has widened. Healthcare practitioners and patients have a closer relationship in deciding pain management routes, incorporating “natural” and prescribed medications and “alternative” methods of pain relief.
Pain management was once considered “doping up” the patient in some circles. Today’s viewpoint incorporates consistent pain relief with keeping the patient alert and functioning.
The variety of conditions that require pain management has created a demand for an accurate “science” to provide help based on condition and individual need. The World Health Organization has a “ladder” for managing cancer pain. Level One uses non-steroidal anti-inflammatory medications (such as aspirin) and “adjuvant,” or supplementary medications that have a secondary effect of controlling pain by eliminating a side effect. As pain increases with cancer progression and/or treatment, professional caregivers step to the next level of pain management. By Level Three, opiates are incorporated and the adjuvant medications are there to assist with opiate side effects.
OPIATES AND PAIN CONTROL
In the classic film “The Wizard of Oz,” the Wicked Witch deters Dorothy and her friends by creating a field of poppies they must walk through before reaching the Emerald Castle. Dorothy and the Lion fall asleep until the Good Witch intervenes with snowflakes to wake them up, and the crew moves toward their destination.
The poppy plant is used to create opiates such as morphine and codeine, which relieve pain, but also make the individual sleepy or lethargic. The effects of “Opiates from Oz” are shorter lasting than those administered for those in chronic pain. Since alertness is a factor in complying with pain medications, patients may be unwilling to try them, looking to “natural” remedies instead.
The brain has receptors that recognize both opiates and endorphins. Endorphins are “feel good” chemicals produced naturally in the brain, and have an analgesic effect. While they are preferable to medications, both acute and chronic pain sufferers may not produce sufficient quantities of endorphins to dull or eradicate pain. Even simple pain relievers like acetaminophen or aspirin may not do the trick, and pain control must include opiates.
Morphine and its opiate cousins can be given by mouth or intravenously. In some cases, morphine can be delivered by a nebulizer, dispersing the drug into an aerosol that can be inhaled. The lungs also contain receptors for opioids, absorbing and processing the medication.
Caregivers should be aware that any medication delivered by nebulizer can disperse through the room. Taking precautions when it comes to room ventilation and proximity to the patient will help the caregiver with unwanted exposure to medication. The concern for precautions has less to do with a “secondary high” for the caregiver than with residuals of the medicine showing up in their urine if drug tested.
The type of morphine nebulized is the intravenous type without preservatives. When given by aerosol, morphine can activate histamines and constrict breathing passages. The goal of morphine by aerosol is to alleviate difficult, painful breathing rather than bring it on, so doctors may order an aerosol treatment with medication to keep the airways open prior to nebulized morphine. There is a specialized, single dose nebulizer that delivers morphine to the lungs. The medication “strips” look very similar to the ones used to test blood sugar, but contain the correct medication dosage. Aerosol particles do not “fly” around because of the design.
TOLERANCE IS NOT ADDICTION
Caregivers and loved ones may worry that tolerance means addiction, but they are not the same. Over extended periods of time, the dosage of the medication may need to be increased because the individual has developed a tolerance to the medication, or there has been a rise in pain levels. Doctors work to use the lowest effective dosage to keep the patient alert and pain free.
Medication dependence occurs when there is a physical reliance on the medication and withdrawal symptoms (that are specific to the drug class) occur. There may be tolerance present, but the withdrawal symptoms are noted if the medication is suddenly removed and/or levels of the medicine in the bloodstream decrease.
When addiction is present, caregivers and medical personnel notice that the patient may “lose” prescriptions, and/or take their medications at inappropriate times. A number of other behaviors may be present, including behavioral changes that include isolation from family members.
Rather than diagnose your family member, bring concerns to the family physician to evaluate the situation. What seems like dependence or addiction may be the response to changes in pain level, tolerance or other factors that the doctor must evaluate. Behavioral responses such as anger or depression may be due to poorly controlled pain, especially if the pain control journey is just beginning.
AIDS AND THE PAIN EXPERIENCE
With better medications and awareness on the part of doctors and patients, individuals diagnosed with AIDS are receiving improved care. The pain experience varies from one person to another, even in the AIDS journey.
Neuropathy (“nerve damage”) affects an estimated 20 million Americans according to The Neuropathy Association. Damage to the nerves can create burning and sometimes “stabbing” pains in the feet.
In some cases, anti-cancer and retroviral treatments may create their own painful side effects, some of which can be balanced by other medications, including antidepressant therapy.
This immune deficiency virus makes patients of all ages susceptible to yeast infections, throat and mouth sores and other viruses that can attack the body. Bacterial infections are experienced, too, and require antibiotics as the doctor decides.
The AIDS patient may have skin eruptions, and these sores or rashes contribute to pain and require treatment. For example, Kaposi sarcoma is a skin lesion seen in the AIDS patient that initially doesn’t cause pain, but as it becomes worse, pain can be extreme. While Kaposi is not considered “curable,” it can be treated by an oncologist or dermatologist with experience in this area.
Mouth sores or other conditions affecting the mouth can hamper eating, whether the foods are acidic or not. Physicians are familiar with this aspect of the challenges of living with AIDS, and may recommend supplements in addition to other treatment for thrush or mouth sores. Accommodate your loved one’s choices in whether or not to eat at given times, and oversee that medications are taken when ordered, even if alternate routes must be prescribed.
In some cases, individuals with AIDS may have a concurrent infection with the Hepatitis C virus, which also challenges pain management and treatment. When doctors assess for pain in the AIDS patient, they look for other causes of pain, even if the pain felt is typical for an AIDS patient. Hepatitis C is one possibility for a “co-infection,” but other conditions such as cancers of organs or blood may be present.
Treating the root cause of pain (such as mouth or ear pain from infections) is the doctor’s priority, which is the reason why patients may be at the doctor or hospitalized frequently. The choice is to act quickly to stop infections from causing more problems.
CONTROLLING PAIN IN CANCER
The National Cancer Institute (www.cancer.gov) offers an online booklet to assist cancer patients and their caregivers with pain management.
“Cancer pains” may arise from chemotherapy or radiation, creating nerve damage or phantom pain from body parts that have been removed. Radiation can cause painful “sunburn” during treatment.
Whenever there is surgery performed, temporary pain may be experienced because skin and organs are cut and maneuvered around. Post-surgical pain fades with time and appropriate management, which may include physical therapy and resuming daily activities.
The growth of cancer within the body contributes to pain, also. As cancer is being treated, therapeutic levels of controlling the growth are sought; but patients may still experience pain while waiting for the abnormal cells to be eradicated. This is where pain control offers a great deal to assist in stress reduction and continuing patient compliance with therapy. It’s difficult to ask a loved one to continue with treatment when pain makes them feel they aren’t getting better, and the goal is to quickly assess the level of pain to begin pain control. It makes the treatment much easier to cope with, for caregiver and loved one.
Differential pain assessment in cancer is important also, to help the treatment team to discern if new pain is from cancer that has moved to a new area, or if there is an acute condition that must be addressed (such as appendicitis or gall bladder stones). It may seem unlikely that cancer patients may experience an acute episode of pain unrelated to their cancerous process, but it is possible. It may help to keep a written record of pain to offer feedback to the physician during visits, or if a call must be placed after hours.
Swelling, itching and rashes cause pain, and while minor when compared to pain from cancer, they can actually make it harder to tolerate pain levels if the minor pain is left unaddressed.
COMPLEMENTARY PAIN TREATMENTS
Biofeedback has been around for some time, and there are competent technicians able to instruct patients in controlling their breathing and heart rate. The technique has worked well for persons who have an ability to focus on these measurable parameters, which can help reduce pain and the anxiety that comes from being in pain.
Massage therapy can work in almost any case to reduce pain and improve the relaxation effect. It is not necessary to “work” the area where pain is felt to provide comfort and a sense of healing.
Patients with swelling from radiation or surgery (such as removal of lymph nodes) can look for a lymphedema therapist, who is trained in proper technique for massaging swollen areas as well as the rest of the body.
Reflexology can be performed on the hands or feet to help release tense areas which may be related to painful spots. The body in pain will tense itself in a variety of ways in response to pain, and by relaxing one part of the body by massage, the rest of it can follow.
Massage can be combined with biofeedback, imagery or other alternative therapies (such as aromatherapy) to diminish stress response.
WORKING WITH OPIATE SIDE EFFECTS
Constipation arising from opiate medications is a frustrating consequence for caregiver and loved one. A common misconception is that fiber and exercise will address all types of constipation. When opiates are given, the bowels are slowed down; the result is constipation, which occurs in many people who take opioid/opiates.
The buildup of waste in the intestines creates discomfort in all people. In general, suggestions to alleviate and control constipation include increasing water intake to soften food passing through the digestive tract, and exercise, which helps muscles “massage” the internal organs. The intestines made “sleepy” by opiods can be helped by these two suggestions, but more help may be needed; especially when pain hinders the ability to move.
Fiber is an excellent “homespun” cure to deal with constipation, and as long as the individual has a somewhat hearty appetite, salads and vegetables can be given as snacks and meals. When appetites are poor or finicky, fiber bought at the health food store can be sprinkled on easy-to-consume foods (like pudding or baby food). Fiber is helped by fluid intake, and those who are having trouble keeping up with their liquids may prefer “fun fluids,” such as snow cones and popsicles.
Caregivers and loved ones may be reluctant to continue pain medication when constipation is the result. The key to working with this side effect is to allow for the body’s changing ability to pass waste as usual. Constipation may also be a result of compressed nerves or other factors that are at work in a health challenge. Continuing medications is important, but advise the doctor about constipation and the success of any home remedies. Combining simple fixes like diet and exercise with physician-prescribed solutions may be what is needed.
Laxatives and slow-release magnesium are over the counter remedies that are helpful, but should not be used without speaking to the doctor. Overuse of laxatives can create or increase constipation in the long run.
There are prescribed medications which work to counteract the effects of various drugs. “Antagonist” medications are given at the doctor’s discretion. Discussion of possible medications to counteract medication effects can be done when there are problems noted, but as always, caregivers must give as much information possible to the doctor so he can be guided.
PAIN CAN HAVE POSITIVE EFFECTS
If an area is completely numb from treatment, pain may be an indicator that the area is “coming back to life,” however uncomfortably. When pain is addressed within a reasonable time, corrective measures can be taken to alleviate it. This assists the body in healing, and helps loved one and caregiver enjoy their time together as they move toward the next step in recovery.

629:  The Graying of the AIDS Epidemic
 
People are aging with HIV. The introduction of highly active antiretroviral therapy (HAART) more than a decade ago has allowed people to live with the illness that was once almost certainly fatal. But the problems associated with growing older have introduced a new set of challenges.

While the virus is “not a death sentence,” it’s “not a cake walk” either, said Dr. Kelly Gebo, a doctor and researcher at Johns Hopkins Bloomberg School of Public Health. She treats many infected patients over age 50. “The medications have toxicities and are not easy to take,” she explained.

Among the issues older people face are weaker immune systems that have a harder time fighting off infections, toxic side effects from medications, and co-morbid diseases that may stem, at least in part, from the aging process. “They appear to be prematurely aging,” said Gebo, noting that people over 50 have higher rates of malignancies, as well as cardiovascular disease and strokes.


New Face of AIDS

This older group represents a new face of the HIV/AIDS epidemic. About 29 percent of all people with AIDS (acquired immunodeficiency syndrome) in the United States are age 50 and older. (AIDS is the serious disease that can develop from the human immunodeficiency virus, better known as HIV.) In some cities, as many as 37 percent of people with AIDS are in this age group.

Meanwhile, the rates of HIV/AIDS among older people are 12 times higher for blacks and five times higher for Hispanics compared to whites. Also, in the last decade, AIDS cases in women over 50 were reported to have tripled; heterosexual transmission rates in this age group may have increased by as much as 106 percent.

These adults represent the first generation of older adults living with HIV. Most are in their 50s, but some are in the 60s, 70s, 80s and even 90s. Also, while some of these cases are newly acquired, most are people who have been living with the disease long-term, perhaps 10, 15 or 20 years or more.

“We are working with the first-ever generation of older people growing old with HIV,” noted Karen Taylor, director of advocacy and training for the organization SAGE (Services & Advocacy for GLBT Elders).


Lack of Education, Awareness

One reason why this older cohort is succumbing to the illness is because of lack of understanding, education and testing of older adults, several resources say.
Many older people, because of divorce or the loss of spouses, are dating again. They may not realize the risk of contracting HIV because they were not raised in the “safe sex” era. Older women, in particular, may believe they are immune to the virus because they are beyond childbearing age. (Older women actually may be more susceptible because of a decrease in vaginal lubrication and thinning vaginal walls that can put them at higher risk during unprotected sexual intercourse.)

But health officials and doctors have not effectively communicated the message. Little HIV prevention education is targeted at older people. Most older people do not receive training in safer sexual activities. Because older people don’t see themselves on posters or billboards advertising AIDS prevention, they may think they are immune to the illness, Taylor of SAGE said. Society itself has a blind spot when it comes to thinking about older people contracting HIV. “We don’t tend to think of older adults as sexual people and don’t tend to think of them as using recreational drugs,” she said.

The reality is that because people are living longer, they are engaging in sex until a later age. Viagra and other sexual enhancement drugs may contribute to increased rates of sexual activity. Also, physicians may not diagnose HIV infection in older people, or inquire about their sexual habits or drug use, or talk to them about risky behaviors. Moreover, doctors may overlook early symptoms of HIV as normal signs of aging.


Aging with HIV

The aging process tends to complicate the effects of HIV. While older adults tend to adhere to drug regimens better than younger people, the side effects can be more severe, researcher Gebo said. Renal failure is more likely to happen in the elderly. Metabolism of the drugs is affected by worsening kidney and liver function with aging, she added.
Complications from a variety of drugs also appear to be a major problem. Medicines for age-related conditions, such as heart disease, depression, osteoporosis and diabetes, may interfere with strong ARVs, which are used to treat HIV.

Dementia is another problem that older people with HIV or AIDS are facing. While older people tend to develop cognitive problems, ARVs may worsen them. Moreover, many other health problems older people face, such as osteoporosis, may progress faster in people with HIV.

Other “hidden” illnesses, such as depression and loneliness, are common in older adults with HIV. Because of the stigma attached to HIV and AIDS, they may feel they can’t tell their families and friends about their illness. (“What will the people in church think?”) Some may stop seeing their grandchildren. While there are advocacy groups for older adults, this cohort may shy away from joining support groups. Depression, while a problem in younger people, can lead to other health problems and have more detrimental effects in older adults.


Financial Stress
Financial problems among this population also cannot be overlooked, according to Gebo. Under Medicare Part D, the government program that pays for Medicare prescription drugs, there is a coverage limit at which the government will stop paying for drugs annually. That threshold is $2,250. When Medicare recipients reach this level in drug costs, they are responsible for the total cost of their formulary expenses—until they reach $5,100 in total spending. Many older adults with HIV must seek other sources of funding, such as the Ryan White CARE Act, that provide assistance to cover this gap.

Also, many older adults with the virus are in lower socio-economic groups. Staying “in shape” is not as easy for them because they may not have the means to join a gym, Gebo said. Exercising is important in helping reduce the risk of diabetes and cardiovascular disease, both of which are more common in older people.

Caregiving could present another financial burden as many older adults may need to rely on paid caregivers, such as home health aides.


Problems to Solve

Many answers still elude scientists regarding this population with HIV. Still a mystery is the precise cause of certain diseases, such as Alzheimer’s, in older adults with HIV. Is it the medication? The aging process? Or the disease itself, which can cause dementia in younger adults? Neurological problems can be caused by vitamin deficiencies, opportunistic infections or ARVs. Also, how much HIV is worsening co-morbidities, such as heart disease and diabetes, remains unclear.

Gebo is working on fine-tuning drug regimens for elderly people living with AIDS to reduce the pill burden and offer the best combination of therapies.

Another quandary doctors face with this population is what to treat first. For example, is it more important to treat the HIV or the tuberculosis? Those are just some of the new questions that scientists are grappling with as the population with the disease continues to age.

There no doubt is still a lot to figure out regarding this population. Exacerbating the problem for researchers is that drug companies have not included older people in clinical trials of new drugs. Clearly, that has to change. The population of people with HIV is not getting any younger.

6/28: If you own a pet and want to leave them something, this might help. My name is Fluffy in case you are interested. 

"Max's Taxes: A Tax-Based Analysis of Pet Trusts" 

 6/28: Wharton- 

Can you really measure risk accurately?

Professor Dick Herring: I think the last year shows that we can't, that there are lots of things we can't quantify very successfully and that we became overconfident in the things we could quantify. We've made great strides in risk analysis, risk measurement, and aggregating risk. But we've tended to focus most of those efforts on things that are relatively easy to manage. And even some of those relations broke down. We simply didn't have enough data. Our techniques were not good enough. We weren't using enough forward information and, unfortunately, this crisis has blame that can be shared across the entire spectrum of participants, from regulators to participants in securitizations and even to risk managers themselves.

EFM- When you read Mandelbrot and Taleb, they talk about extreme and sudden risks: 9/11 for example. You cannot measure or determine that risk with any certainty. As regards all the quantitative analyzes, Herring is quite right- they were not that good.
But once again, I point to the 100% indicator of extremely high risk; the inverted yield curve. It's about 12 months to a recession.  I did not have to even use a formula for that. Now, it certainly won't tell you how bad things are going to be, how long it will last and so forth. But to dismiss this risk is moronic. Yet I have not read but a couple sentences after all these months about the curve- and none from the quants. They got stuck in computer land and have to find a formula to get out. But it was already too late.

John Drzik: I'm just going to add that there wasn't enough attention on the unknown risks rule versus the known in that part of the problem. For people who are risk analysts or practitioners who were in the academic community who tracked risk there tends to be a focus on risk modeling where there's data, rather than risk modeling where there's risk. You can build much more sophisticated models where there's lots of data to work with. That doesn't mean you're focusing on the biggest problems that the firms face, because that's where you have thin data sets and often have to make judgment calls. People with an analytical bent are often uncomfortable going into that sphere. But that's really where a lot of the real big risks that firms face are.

6/28: And does this sound familiar about my long time comments on correlation?? 

Diebold: I think there are two key issues, or at least two, both of which are very difficult and related. The first is understanding correlations across banks, financial institutions ...

Herring: And understanding how they vary over time.

Diebold: That's number two. And they certainly are different in crises just as volatility is different in crises. And, of course, the way that they're different is often in very adverse ways. Correlations rise just when you don't want them to rise and you lose, for example, portfolio diversification benefits just when you need them the most.

Herring: The dirty little secret of diversification is that it disappears when you need it most. The only thing that rises in falling markets is correlations.

EFM- doesn't anyone think that won't happen in a recession?? 

* You cannot beat the market, says the standard market doctrine. Granted. But you can sidestep its worst punches. 

Benoit Mandelbrot

6/28: Looking forward- Herring: Another thing I'd like to highlight that follows on John's comment is that there's been a failure in most risk technology to look at forward-looking indicators. They're out there. We saw, long before it happened, that Bear and Lehman and lots of other firms were going to fail because of the credit default swap spreads widening up. But if you looked at the backward statistics that you had to estimate from, you weren't picking that up. Virtually every firm that failed over the last year had much more than the minimum required regulatory capital, which simply means the regulators aren't measuring capital very well.

EFM- well, the inverted yield curve is forward looking (Yes I am taking some liberty because a recession doesn't mandate that everything fails. But it is a severe stress test for inadequate risk measures which was almost all the rest)
 
6/25: "Trillions have evaporated from those accounts that have become the prime source of retirement funds for a majority of American workers, affecting their psyche and their future. If you are still young enough, there's time to rebuild and recover, but if you are in your 50s, 60s or beyond the consequences can be dire, and its drawing attention to the shortcomings of a retirement system that has jeopardized the financial security of tens of millions of people."
- Ira Rosen, CBS News

6/25 Broker Fiduciary Plan Favors Investors, Roper Says (Update3) By Alexis Leondis and Elizabeth Hester  
Read this first. It talks about the 'new' fiduciary requirements.

Here is my first reply-

6/25:World Losing Millionaires

The number of millionaires in the world plunged 14.9% last year as the markets faced extreme losses and volatility,

I was not one of them- primarily because I wasn't one to begin with.

6/25: Arbitrations:

Obama also asked the SEC to consider forcing brokerages to stop requiring customers to file complaints with industry arbitration panels, rather than courts.

Investor advocates have expressed concern that panelists who previously worked in the securities industry may favor firms, said Howard Mayers, a Manhattan lawyer who teaches a legal clinic on arbitrations at New York Law School. Letting investors file lawsuits would probably boost firms’ legal defense costs and may give claimants greater access to internal company documents or the ability to question additional witnesses, he said.

The Securities Industry and Financial Markets Association says no changes are needed, according to Travis Larson, a spokesman for the Washington-based lobbying group. The arbitration system “provides equal protection to all investors in a manner that is fair, and both faster and less expensive than courts,”

EFM: Panelists in arbitrations DO favor the firms. If you are knowledgeable and contradict the industry too often, an arbitrator will be persona non grata (like I was. It is called a preemptory challenge). What is left is not necessarily fair at all. Juries would be much more independent.

6/25: Employers' (Lack of) Response to the Retirement Income Challenge"

The brief's key findings from a 2006 survey are:

• Employers expect many of their older workers will need to work longer, but are lukewarm about keeping them.

• Employers are failing to confront a potential disorderly retirement process.

• Firms more inclined to help workers plan for retirement or work longer tend to be large, fast-growing, and worried about "brain drain."

• Firms that expect many older workers to stay on show no special interest in such retirement initiatives. 

• In short, employers appear to view retirement initiatives only as part of hiring and retention, not as a way to ease retirement transitions.

As reported in previous Issue in Briefs, the survey found that employers expect: 1) half these employees will lack the resources needed to retire at the organization’s traditional retirement age; 2) one out of four will respond by wanting to stay on the job at least two years past that traditional retirement age; but 3) the employers are lukewarm about creating opportunities for even half of these employees to work longer.  Note that the survey was conducted well before the financial crisis; the retirement preparedness of workers has deteriorated since the survey – making potential employer responses all the more important...
It's just business- neither their employees’ retirement security nor the prospect of a disorderly retirement process currently influences employer retirement policies.

624: Oops in England: One in 10 borrowers with an excellent credit record are trapped in negative equity, owing more on their mortgage than the value of their homes, says a report that forecasts a peak-to-trough fall in house prices of up to 35 per cent.

6/24: Asset Protection

John Dietz, CWPP™, CAPP™- Senior Advisor

Dear Valued Reader, There isn’t a day that goes by without someone calling me about a strategy whereby the client asks us to move all their assets into an entity without an owner. Sure, that’s a cumbersome sentence, but it’s an even more cumbersome thought: “move all your hard earned assets into an entity without an owner.” For some reason, even bright people get attracted to this idea, but there is one small problem; it’s BO or Beneficial Owner. This BO acronym is bantered about in the financial industry when banks, law firms, trust companies, and government agencies want to know “who is the real owner” of a company, trust, or any financial transaction. Another way of putting it, the BO cuts through the BS. Sure, the Beneficial Owner of any Asset Protection structure can be obscured purposely to gain maximum security and privacy. The concept is fairly straight forward. Take any asset you own and re-title it in the name of a trust or company, and via privacy you are essentially shielding it from future creditors. Even though you have a new title, you still maintain a degree, directly or indirectly, as the beneficial owner. Ask yourself this question: Do I have money in stocks, bonds, mutual funds, hedge funds or whatever, in my family name? If you were served papers for a lawsuit tomorrow, and heaven forbid, lose that lawsuit, it is as simple as entering your name in a database to get a list of all of your assets. The challenge to a solid Asset Protection Plan is deciding the proper timing and titling of assets. Changing title to an asset can be confusing; the right choices depend on the facts and circumstances of your situation. To further add to the confusion, changing title does not necessarily mean you are asset protected. Beneficial Owner And Beyond In some parts of the world, there are still jurisdictions that offer bearer shares for companies and structures. As most readers of this newsletter already know, bearer shares are just like the money in your wallet. Whoever has possession of that money is the owner and therefore the benefactor of the notes they are holding. Most places, and I dare say Nevada, have outlawed bearer shares for a multitude of reasons. I am sure you can think of a few. Legally obscuring beneficial ownership can be prudent Asset Protection Planning and should be looked at the same way you would view trade secrets, proprietary formulas, secret sauces and the formula for Coke. You can gain a competitive advantage from using these types of Asset Protection Strategies. In this vein, beneficial ownership is a very important topic and needs thoughful consideration. "Clients call daily asking for privacy and security in their financial affairs. The question becomes how much is too much? Is there such a thing as too much protection?" Undoubtedly there is balance between lunatic fringe planning and real world planning. Going offshore, for example, fits certain clients but not others. Insurance can be part of a solution and so can a trust. There is balance that must be attained between planning and realistic client goals. Take your garden-variety foundation. The structure I am referring to is the private interest foundation. You may know it as the highly marketed Panamanian Foundation. This structure can be set up in any number of ways, a host of options, and, in theory, can be set up to completely remove the beneficial owner. Nevertheless, theory must meet reality. Is there reality to a structure that has no beneficial owner? Why was it established in the first place? Is there any economic reality to such an entity? Creating stealth by building fortified walls around your assets is a must in our litigious society. However, to what degree and to what end? The question again is, how far do you go? Without disrespecting one entity for another, and giving the fact that they all have their place; let’s focus on removing the beneficial owner. Ask yourself these questions. - If I set up a structure that clearly makes someone else the beneficial owner will my assets remain mine? - Will I trust someone or some firm with my hard-earned money? - If I gave up ownership of my assets to a structure in which I have no interest in; have I created a gift that gives rise to a gift tax? Asset Protection Planning can get so opaque as to the ultimate goal, you may even start to think that since you may not be the beneficial owner anymore, you probably do not owe any tax. Maybe you invoke the 16th Amendment. Yikes, and double Yikes--need I say more! (The 16th Amendment allows Congress to levy an income tax without apportioning it among the states or basing it on census basis). We have many real horror stories of clients in this scenario. To quote Lieutenant General Frederick Browning speaking to Field Marshal Montgomery (World War II battle of Arnhem), “But Sir, I think we might be going a bridge too far.” If Service Providers were to be honest they would share stories of how clients lost money long before Bernie Madoff showed up on the scene. The past is riddled with schemes and scams, from tax protestors to dishonest people stealing money straight out of the till. A carefully crafted Asset Protection Plan encompasses privacy, tax considerations, inheritance planning, government agency considerations, and most importantly never puts your money in harm’s way. Any plan that goes beyond these parameters starts looking like “a bridge too far” and an exercise in gluttony.

6/24:  

"College Savings Plans: Not Just for Education" 

6/24:

"Review of Federal Income Taxation of Estates and Beneficiaries" 

6/23: Simple statistics- I fish at some farm ponds on a cattle ranch in Sacramento. In over 15 years, I have been absolutely amazed that there is NO consistency in what the pond will look like each year. One year it has a lot of bloom, another TONS of weeds so you are sure the next year will be impossible to fish, then it ends up with no high weeds, then...................

This is just a pond. Same place, same water- there should be some consistency from year to year. There isn't and never has been.

My point? Here we have all the economist and statisticians state that subsequent years HAVE to follow a regression of returns based on a 10 or 20 or 30 year or whatever history. Maybe there is some correlation. I cannot argue otherwise. But I look to this simple pond unaffected by direct development and nothing is the same from year to year. Why should something far more exotic follow a predetermined path. Why???  Charlie Munger may have said it best- " It seems like the higher mathematics with more false precision should help you, but it doesn’t. They teach that in business schools because, well, they’ve got to do something.”


6/23: What a joke- Sen. Jim Bunning, Republican from Kentucky, collects an approximately $20,000 annual salary from his namesake foundation, more than the charity’s yearly grants payout.  The Jim Bunning Foundation charges baseball-memorabilia companies for appearances by the senator, a Hall of Fame pitcher. Under Congressional ethics rules, Mr. Bunning is not allowed to charge for autographs himself, but the restriction does not apply to the charity.  The foundation has paid Senator Bunning, its only employee, $155,000 since 2001, according to financial disclosure forms. Internal Revenue Service documents and Senate filings show it donated $16,350 in 2008 and has never given more than $19,575 in a year.

6/23: Oy!:  

The World bank earlier this month said it expected a deeper global recession, forecasting a 2.9 percent contraction in gross domestic product for this year, rather than 1.7 percent, as it projected as recently as March.

More detailed forecasts released Monday showed that much of this pain will be in high-income areas like the euro zone, the United States and Japan. The bank said that it expected economies in high-income nations to contract a total of 4.2 percent this year.

It expects the U.S. economy to shrink 3 percent and the euro zone 4.5 percent, rather than the 2.4 percent and 2.7 percent it forecast in March. For Japan, the World Bank now projects contraction of as much as 6.8 percent this year — significantly higher than the 5.3 percent it forecast three months ago.

6/23:

Date:	2009-06-09
By:	Anna Christina d'Addio José Seisdedos Edward R. Whitehouse
URL:	http://d.repec.org/n?u=RePEc:oec:elsaab:70-en&r=rmg
This paper explores how uncertainty over investment returns affects pension systems. This issue is becoming more important because of the dramatic spread of defined-contribution pension provision around the world. It has also been highlighted by the recent financial crisis: the OECD estimates that pension funds lost 23% of their value in 2008, worth a heady USD 5.4 trillion. The scale of investment risk is measured in this paper using historical data on returns on equities and bonds in major OECD economies over the past quarter century. The results show a median real return of 7.3% a year on a portfolio equally weighted between equities and bonds (averaging across the countries studied). It might be expected that, over a very long period, the degree of uncertainty in investment returns is small. After all, a few bad years in the market are likely to be offset by boom years. Nevertheless, the degree of uncertainty, even with the relatively long investment horizons of pensions, is found to be large. In 10% of cases, an annual return of less than 5.5% would be expected, while in 10% of cases, this should exceed 9.0%. Compounded over the time horizon for pension savings of 40 years or more, such differences in rates of return amount to enormous sums of money. However, there is a series of reasons why returns achieved by individuals on their pension funds are less than the market return (as measured by conventional indices). These factors include administrative charges, agency and governance effects and demographic change, depressing investment returns below the high levels recorded over the past two decades. As a result, a more conservative assumption for future investment returns than the record over the past quarter century is appropriate. Settling on a median of 5.0% annual real return net of charges implies that 80% of the time, the investment return on pension savings should be between 3.2% and 6.7% a year

6/23: I have no idea what they are talking about but konck yourself out

Date:	2009-06
By:	Raymond BRUMMELHUIS Jules Sadefo-Kamdem
URL:	http://d.repec.org/n?u=RePEc:lam:wpaper:09-06&r=rmg
This paper is concerned with the e±cient analytical computation of Value-at-Risk (VaR) for portfolios of assets depending quadratically on a large number of joint risk factors that follows a multivariate Generalized Laplace Distribution. Our approach is designed to supplement the usual Monte-Carlo techniques, by providing an asymptotic formula for the quadratic portfolio's cumulative distribution function, together with explicit error-estimates. The application of these methods is demonstrated using some financial applications examples.

6/23:

Date:	2009
By:	Borghans Lex Golsteyn Bart Heckman James Meijers Huub (ROA rm)
URL:	http://d.repec.org/n?u=RePEc:dgr:umaror:2009006&r=cbe
This paper demonstrates gender differences in risk aversion and ambiguityaversion. It also contributes to a growing literature relating economic preferenceparameters to psychological measures by asking whether variations in preferenceparameters among persons, and in particular across genders, can be accounted forby differences in personality traits and traits of cognition. Women are more riskaverse than men. Over an initial range, women require no further compensationfor the introduction of ambiguity but men do. At greater levels of ambiguity,women have the same marginal distaste for increased ambiguity as men.Psychological variables account for some of the interpersonal variation in riskaversion. They explain none of the differences in ambiguity.

6/23: "Physical Activity: Economic and Policy Factors" 
6/22:  Inflation?? Alan S. Blinder is a professor of economics and public affairs at Princeton and former vice chairman of the Federal Reserve The central bank is holding the Fed funds rate at nearly zero and has created a mountain of bank reserves to fight the financial crisis. Yes, these moves are unusual, but these are unusual times. Concluding that the Fed is leading us into inflation assumes a degree of incompetence that I simply don’t buy.

EFM- I am never so certain of anything and that includes the inverted yield curve. But you have to pay attention to the above I have been definitely leaning to TIPS in the near term. Not to say they may not be correct but perhaps I have to take another look. and then another.

6/22: Maybe he has the guts but it me be superficial rhetoric:  Obama-“As we continue to recover from an historic economic crisis,” he said, “it is clear to everyone that one of its major causes was a breakdown in oversight that led to widespread abuses in the financial system.

“An epidemic of irresponsibility took hold from Wall Street to Washington to Main Street. And the consequences have been disastrous. Millions of Americans have seen their life savings erode. Families have been devastated by job losses. Business large and small have closed their doors.”

EFM- If you do not teach the fundamentals of investing, it will mean nothing. 

6/22: Risk- (NY Times) There’s even a new study that contends holding stocks over long periods of time may be riskier than previously thought. Robert F. Stambaugh, a finance professor at the Wharton School at the University of Pennsylvania and a co-author of the report, said most investment research only accounted for the risk of short-term market swings around the stock market’s average gain over time. It doesn’t factor in the fact, he said, that the average itself is subject to change.

EFM- yea, the rules might/will change. But underlying it all is the inverted yield curve. I have never been able to see how any economy can exist with long term rates lower than short term. The curve has ALWAYS indicated a  recession. Duriong such periods of stress, all bets are off. Maybe it will all come back to normal. But why???? Because some 10, 20, or 30 year old statistics say so? And after one of the most unique changes in history- the persoanl computer and the Internet. Nothing is the same anymore. 

6/21: LATER "ON." A Watson Wyatt survey found that a third (34%) of workers have increased their planned retirement age in the last 12 months.  44% of those age 50 and over plan to delay their retirement, compared with only 25% of those under 40. Although the average planned retirement age for all employees is 65 years old, half of respondents age 50 or older plan to retire at age 66 or later

6/21 Never heard of these- automated “dark pools” are  off-exchange trading venues that do not display quotes to the public. Investors can anonymously trade large blocks of shares on dark pools,

6.21: SEC Shapiro-  

Ms Schapiro said the agency would also focus on standards of conduct that apply to broker-dealers and investment advisers who provide financial services to retail investors.

EFM- Conduct?? Well if they do not have to know the fundamentals of investing in engaging the consumer, isn't that a problem that must be dealt with first. I have tried for over 15 years and with no success whatsoever. 

6/21:Volatility under Bounded Rationality

Date:	2009-03
By:	Nhat Le (Nhat Le, Ph.D, lecturer at Faculty of Economics, Vietnam National University, HCM city, Vietnam)
URL:	http://d.repec.org/n?u=RePEc:dpc:wpaper:1109&r=cbe
The ARCH model shares with the related literature on risk and return one common thing: the rational-expectation paradigm. In particularly, market prices should reflect investors' rational forecasts, based on the best available information. When new information arrives, the market's expectations change. Therefore, prices fluctuate. Thus, price volatility is due to information arrivals and hence, volatility can be forecast, based on the up-to-date information. However, when the available information is too complex, the rational expectation may no longer hold. Bounded rationality should be added into our frame work to study risk and return, so that, we can gain a better understanding of market volatility.

Sounds reasonable but here is the difficulty. Who determines what info is simple and what is complex? Think about that. It';s not going to be a computer- it has to be a human. Therefore much goes back to square one. 

6/21: Arbitration Cases Filed

 

Year Cases 1994 5,586 1995 6,058 1996 5,631 1997 5,997 1998 4,938 1999 5,608 2000 5,558 2001 6,915

Year Cases 2002 7,704 2003 8,945 2004 8,201 2005 6,074 2006 4,614 2007 3,238 2008 4,982 Through May 2009 3,163

Arbitration Cases Served by Controversy Involved

 

Type of Controversy* 2005 2006 2007 2008 May - 2009 Margin Calls 78 103 45 64 50 Churning 315 257 133 212 115 Unauthorized Trading 395 242 174 248 178 Failure to Supervise 1,828 1,425 830 1,029 937 Negligence 2,225 1,619 891 1,602 1,276 Omission of Facts 1,123 588 275 1,201 957 Breach of Contract 1,987 1,397 953 1,658 1,085 Breach of Fiduciary Duty 3,514 2,621 1,616 2,836 1,718 Unsuitability 1,926 1,347 695 1,181 985 Misrepresentation 1,826 1,187 739 2,005 1,385 Online Trading 7 8 1 3 0 *Each case can be coded to contain up to four controversy types. Therefore the columns in this table cannot be totaled to determine the number of cases served in a year.

6/21: Hard to figure who may be worse=

Mafia blamed for $134bn fake Treasury bills

Italian and US secret services concluded that $134bn in US Treasury bills found in a false-bottom suitcase were the handiwork of the Italian Mafia http://link.ft.com/r/8P1R88/C8UUF/FKJ1V/ATBWN/C63N7/FW/h

Stanford surrenders to US authorities

Sir Allen Stanford has surrendered to US authorities in Virginia after a warrant was issued for his arrest and will face criminal charges tied to an alleged fraud,

6/21: Predicting Stock Returns in a Cross-Section : Do Individual Firm chatacteristics Matter ?

Date:	2009-05
By:	Kateryna Shapovalova (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I) Alexander Subbotin (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
URL:	http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00390647_v1&r=rmg
It is a common wisdom that individual stocks' returns are difficult to predict, though in many situations it is important to have such estimates at our disposal. In particular, they are needed to determine the cost of capital. Market equilibrium models posit that expected returns are proportional to the sensitivities to systematic risk factors. Fama and French (1993) three-factor model explains the stock returns premium as a sum of three components due to different risk factors : the traditional CAPM market beta, and the betas to the returns on two portfolios, "Small Minus Big" (the differential in the stock returns for small and big companies) and "High Minus Low" (the differential in the stock returns for the companies with high and low book-to-price ratio). The authors argue that this model is sufficient to capture the impact on returns of companies' accounting fundamentals, such as earnings-to-price, cash flow-to-price, past sales growth, long term and short-term past earnings. Using a panel of stock returns and accounting data from 1979 to 2008 for the companies listed on NYSE, we show that this is not the case, at least at individual stocks' level. According to our findings, fundamental characteristics of companies' performance are of higher importance to predict future expected returns than sensitivities to the Fama and French risk factors. We explain this finding within the rational pricing paradigm : contemporaneous accounting fundamentals may be better proxies for the future sensitivity to risk factors, than the historical covariance estimates.

6/19:

Overview: Caution and risk aversion hover over equities

The market looked increasingly uncertain on Wednesday as bearish signals from the US highlighted growing nervousness about the economic outlook

6/19: Budgeting. A  survey by Wells Fargo & Company indicates that 95% of parents say they're confident their children will attain their financial goals, but only 5% of the young adults surveyed said they had such confidence about their personal finance goals. Parents and young adults also have very different views on budgeting - 95% of youth said a budget is not effective for them, while 92% of parents indicated budgets are effective.

6.19: Ponzi- Ravaged by the same fiscal turbulence pounding the nation's legitimate businesses, Ponzi operations have been collapsing at a record clip, the Washington Post reports. The FBI has almost 500 open Ponzi investigations nationwide - up from about 300 in 2006, bureau officials said, according to the Post. Law enforcement officials with other agencies have noticed similar trends, and authorities said they expect to turn up many more cases in coming months.

6/19:  

Frustrated by Losses, Americans Re-Assess Advisors

Ninety percent of American investors are frustrated by financial losses and 25 percent are considering changing financial services firms or advisors,

EFM- /well, they should not have lost all that money if they had an advisor. The problem is that they universally found such advisor via their church or some simplistic referral that meant nothing. /they accepted designations instead of degrees. they let someone have a discretionary account. And it goes on.

Unfortunately, it was also a game of numbers. The advisors were all focused on outdated statistics that showed  that the market could never go down that badly. And that a buy and hold was the only way to invest. That's primarily because they did not have to think at all. Just market to friends relatives or whoever and charge 1% or more with one annual rebalancing.

6/18:  VOCATIONAL SCHOOL DATABASE: RWM provides a database of Private Postsecondary Vocational Schools in all 50 states. It is organized first by State, then by Training Occupation.

Included are private schools that offer certificates, diplomas, associate (junior college) degrees, and bachelor (college) degrees in various Business, Trade and Technical disciplines.

6/18: NAPFA fraud- If you know the industry, you are aware that a past president of NAPFA has been indicted for kickbacks on client accounts. Then we have a more publicized screwing of a New York Times journalist and his NAPFA advisor. And another NAPFA member in Ohio is indicted. Obviously those are just the ones that have been caught recently.

Of course the NAPFA home office reasserts its members' statement to the highest fiduciary standards, blah, blah, blah. NAPFA is a joke and always has been. As I have repeated, "it is a lot easier to talk about your ethics than to stand up for them". NAPFA has always been a fraudulent, unethical and even 'illegal' entity since it has never had legal members in most states and certainly the most populous- California. But they get all the press because of the rhetoric on ethics and fiduciary standards by the press which is generally very incompetent. Or stupid. Or they just don't care.

Actually not much different from the rhetoric from the CFP Board of Standards.

As stated, out of 8000 CFPs in California, all NAPFA members, all the thousands upon thousands of FPA members there is only one in the state who is fully licensed and legal to offer comprehensive fee planning. That is not a misprint- there is just one. And all the planning organizations including the CPA Society were told to comply with the law and all have refused. They can get away with is since the states do not have the money to follow through. But why is that at all necessary when you are dealing with the highest integrity to begin with??????????

The continuing 'lapse' of public servants and the obvious dearth of journalistic capability and  integrity is part and parcel of the reason we have taken such a financial bloodbath from 2000 forward. It will not cease as long as ethics is just a word by the various planning organizations that just like to lie and deceive under the banner of "fiduciary".

Caveat Emptor

6/18:  On a seasonally adjusted basis, the CPI-U rose 0.1 percent in May after being unchanged in April.  The index for all items less food and energy increased 0.1 percent in May after increasing 0.3 percent in April.

Yes, but you add in gas prices right now and one trip of 100 miles will kill whatever else you may be buying by a long shot.

6/18: DRIVER’S "ED?" What sends drivers into a rage? Talking on a cell phone was the behavior that irked motorists the most (84%), while driving too fast (58%), tailgating (53%), eating (48%) and texting (37%) behind the wheel were also reported to cause stress and incite road rage. Detroit and San Francisco had the most text-happy drivers,

6/17: MEDICAL COSTS AND PERSONAL BANKRUPTCY - Harvard researchers say 62% of all personal bankruptcies in the U.S. in 2007 were caused by health problems — and 78% of those filers had insurance. 

6/17: REVERSE MORTGAGES HOT - Inside Mortgage Finance reports that in March and April, the number of reverse mortgages backed by the government jumped nearly 20% from the same period last year. By contrast, the number of new home-equity loans, which similarly allow homeowners to tap the equity in their homes, fell around 70% in the first quarter from the prior-year period. The maximum home value that seniors can borrow against was raised to $625,500 from $417,000 in February.  John Dugan, who heads the Office of the Comptroller of the Currency, says that regulators are "crafting guidelines to ensure that robust consumer protections are in place for reverse mortgages."  The concern is not with the majority of reverse mortgages that are insured by the FHA and pose limited credit risk.  Instead, the so-called proprietary products offered by banks hold the potential to become the "next subprime mortgage product to experience rapid growth while taking advantage of a vulnerable segment of the population." 

6/17: WOMEN WORRY MORE ABOUT MONEY – According to Financial Finesse, women worry more about money management and are more likely to ask for help with money problems than their male counterparts. However, 53% of women say they have a handle on their cash flow and spend less than they make each month, while 71% of men claim to do so.  (Emphasis on "claim").  Also 36% of women and 61% of men say they pay off their credit cards in full on a regular basis. 

6/16: U.S. retirement assets were down 22% at the end of 2008, compared with yearend 2007

6/16: Since Iran elected the same ol same ol, Israel may now decided to blow up Iran's nuclear plants. Won't happen for probably a few months.

6/16: Give it up (WSJ)  A rebound in the global economy will not undo the lasting impact of last year’s massive drop in charities’ wealth.  “This is a long-term problem and we need to address it with a long-term outlook.”
        Investment managers are also taking another look at the endowment model for asset allocation made famous by Yale and Harvard in the boom years, many of which have dropped more than 30%.  "If you're managing a portfolio, it's time to take a step back and think about risk differently, think about your portfolio differently,".  To protect against often-hidden illiquidity and credit risks, the impact will be seen in portfolio managers moving from private equities to public equities, selling arbitrage hedge funds in favor of fixed income and making allocations to emerging markets more cautiously in order to create a more liquid portfolio.

EFM- I looked at Yale's allocation in the past. I know of the long term trend of timber but I could never figure out how to use it for anyone above age 50. These are L O N G term investments and totally illiquid. If you have too much stuff like this and the market goes south, there is pretty much nothing you can do.  

6/16: If you have followed Barry Kaye, you will like this. Otherwise, skip it: It was the largest donation in Florida Atlantic University history, heralded in a flutter of press releases and repeated in promotions for well-heeled benefactor Barry Kaye's insurance business.  The $16 million pledge announced in 2007 by the booming self-made mogul and author of the book "You Buy, You Die, It Pays," led grateful university officials to rename their business school the Barry Kaye College of Business. With state matches, Kaye's pledge would equal $32 million.  Previous Kaye donations engraved Kaye's, and his wife's name, on the Carole and Barry Kaye Performing Arts Auditorium, the Carole and Barry Kaye Great Hall in FAU's alumni center, and the Barry Kaye School of Finance Insurance and Economics.  
        But there is question now as to whether Kaye will be able to fulfill his pledges to FAU and keep his name on the college in perpetuity - an increasingly common dilemma nationwide as the economy slides.  Reports about trouble with the donations began circulating among professors following an April faculty meeting where the business dean was asked about the status of Kaye's gift.  "The response we got was there have been substantial economic problems involving Barry Kaye and we didn't get a payment that we thought we would get," said Brenda Richey, chairman of the business faculty assembly.  Despite that, the status of the pledge has remained shrouded by the school - a sharp departure from the huge publicity given to Kaye's contributions.  FAU officials will not answer questions about Kaye or his donations, which were made at a time when Kaye was promoting his 2006 book and holding symposiums at FAU touting life settlements. Life settlements were a specialty of Kaye's insurance business, which acted as broker on the deals.
        The practice involves private investors buying the life insurance policies of senior citizens for cash, taking over the premium payments, and hoping for a big return with a quick death of the seller.  The life settlement industry, however, has recently fizzled, taken down by the market collapse, an increase in life expectancy insurance tables, and heightened scrutiny from regulators.  In April, Florida Deputy Insurance Commissioner Mary Beth Senkewicz testified before the U.S. Senate Special Committee on Aging on the office's attempts to expand oversight of the industry, which she said has "consistently attempted to circumvent statutes."  "This was a booming business," said Susan Voss, vice president of the National Association of Insurance Commissioners, about life settlements. "Then all of a sudden they couldn't turn them around. The markets dried up."
        State records show that Kaye's Boca Raton-based Wealth Creation Foundation closed in September. The foundation was used to buy insurance policies on senior citizens, sell the policies to investors, and give part of the proceeds to charity.  The for-profit company was a multi-million dollar contributor to the Carole and Barry Kaye Foundation, which, in turn, made donations to the FAU Foundation.  Members of the executive committee of FAU's Foundation spent their January meeting discussing whether to release an unnamed donor from a large pledge in exchange for a smaller amount. The foundation wouldn't say whether the donor was Kaye.  There are clues, however, that Kaye has left Florida behind.  His 12,000-square-foot home in Boca Raton's St. Andrew's Country Club, has been on and off the market since 2007, but was most recently re-listed in June 2008 for $16.7 million.  His Flagler Drive condominium overlooking the Intracoastal in West Palm Beach is also up for sale. Asking price - $6.7 million.

6/16: Applicable Federal Rate of 2.8% for June -- Rev. Rul. 2009-16; 2009-22 IRB 1 (18 May 2009) The IRS has announced the Applicable Federal Rate (AFR) for June of 2009. The AFR under Sec. 7520 for the month of June will be 2.8%. The rates for May of 2.4% or April of 2.6% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2009, pooled income funds in existence less than three tax years must use a 4.8% deemed rate of return.6/16: SMART STUFF. A Universityof Floridastudy finds people with intelligence earn more in their lifetime than those who are self-confident or attractive. The researchers found that, after brains, self-confidence ranked second in importance, followed by beauty.

6/16:

Pakistan calls for help to defeat Taliban

Islamabad says the Taliban could spread beyond its borders to neighbouring India and as far as the Persian Gulf unless it receives international aid to help battle militancy on its soil http://link.ft.com/r/0QSDPP/VEOXW/167D3/Z9WU8/9BWS2/82/h

If it spread to India, you would have a massive war- perhaps spreading into Pakistan. Then what?

 
6/15: US DEBT CLOCK  Watch the amounts go up and up. And up and up. And up and up


6/15: Coming due: Barclays Capital has analyzed financial company debt among United States institutions coming due over the next decade. During the rest of the year, for example, roughly $172 billion in debt will mature; in 2010, an additional $245 billion comes due. That amounts to about $25 billion a month in debt rolling into a market with a shortage of buyers willing to invest in it.

6/14: Jim cramer????: Carnegie Mellon University in Pittsburgh, Pennsylvania, shows that we prefer advice from a confident source, even to the point that we are willing to forgive a poor track record. It argues that in competitive situations, this can drive those offering advice to increasingly exaggerate how sure they are
The findings add weight to the idea that if offering expert opinion is your stock-in-trade, it pays to appear confident

There are times, however, when this link breaks down. With complex but politicised subjects such as global warming, for example, scientific experts who stress uncertainties lose out to activists or lobbyists with a more emphatic message.

So if honest advice risks being ignored, what is a responsible scientific adviser to do? "It's an excellent question, and I'm not sure that I have a great answer,"

6/14 Notice how nothing has changed in the last 9 years (It's called sarcasm)

:  


there is good news where the spreads have dropped. I am still waiting for the other shoe to drop and will not commit to anything till late August. I think there are far  more foreclosures on upper end housing. That is my interpretation of risk- not returns. They do not always dovetail in movements. However, oil prices are killing me in any analysis. Prices are already over $3.00 out here and a continuing increase over the summer months and consumer confidence will have to take a dive.  They are going to be scared out of their wits. No job and gas over $3 gallon. It should not approach $4 since OPEC would kill any economy. 

6/14: I wish they'd lose 9 billion on me: Fed Loses $9 Billion On AIG: Report
WASHINGTON—The Federal Reserve Board suffered paper losses of almost $9 billion, or 19% , in the first quarter of 2009 on risky securities it took over from American International Group Inc. last year

6/14: The Pink Prescription: Facing Tomorrow's Challenges Calls for Right-brain Thinking
In a world where jobs can be sent overseas, tasks can be automated and the feverish pace of technology can render even last year's innovation obsolete, students will have to learn how to think differently than their parents in order to survive and prosper, says Daniel H. Pink, author of three bestselling books about the changing work environment. He spoke at the recent Wharton Evolution of Learning Symposium.
http://knowledge.wharton.upenn.edu/article/2255.cfm

6/14: So You Think Owning a Home Will Make You Happy? Don't Be Too Sure
Owning a home has long been viewed as the cornerstone of the American Dream, the foundation for a happy family life and long-term financial security. Now, a new research paper challenges that conventional wisdom. Wharton's Grace Wong Bucchianeri, a professor of real estate, says her research shows that while homeowners experience significant joy, they also face more aggravation, spend less time with friends, and are even heavier than renters living in comparable homes.
http://knowledge.wharton.upenn.edu/article/2257.cfm

6/14:  Warning: Big Financial Firms May Be Riskier Than They Appear
Large financial institutions have failed with much higher frequency than is generally perceived, says Andrew Kuritzkes, a partner at Oliver Wyman and head of the management consulting firm's public policy practice in North America. In this interview with Knowledge@Wharton, Kuritzkes suggests some new guidelines that would greatly improve the financial system's ability to absorb the inevitable, if individually unpredictable, shocks of big failures.
http://knowledge.wharton.upenn.edu/article/2259.cfm

*  "It is outrageous that the man running the City of Hope Cancer Research Hospital -- Dr. Michael Friedman -- has been paid $590,000 to sit on the corporate board of one of the largest cigarette retailers. I've written a bill to stop this from ever happening again."

--Senator Dean Florez, May 9, 2009

(That is funny. Stupid, but funny)

Stocks have rebounded on Wall Street during the past two months. The pace of job losses seems to be slowing down. Even quarterly reports from banks suggest that the banking sector is slowly struggling back to its feet. Do these signs portend the first indicators of an economic recovery? Not yet, according to experts at Wharton and elsewhere, who insist that despite some of the hopeful data, the recovery will be weaker and take longer to gain momentum than past slowdowns.
http://knowledge.wharton.upenn.edu/article/2261.cfm

6/14: Helping Family Members to Deal with a Fall Risk
1. by Steven Allred, MS,PT, and Jennifer Ellis, MS,PT
“I’ve fallen and I can’t get up!” How many times have we heard comics deliver that line from a now-famous 1980s TV commercial?
The truth is that a dangerous fall is no laughing matter. It’s a real worry — for those who suffer from balance dysfunction and for the family caregiver.
Just the fear of a parent, spouse or other loved one falling is enough to give a caregiver chills. And the statistics bear that out. The National Institutes of Health says that falls are the leading cause of fatal and non-fatal injuries in people 65 and older. And The New England Journal of Medicine reports that if you’re elderly and are injured by a fall, there’s a good chance you’ll end up in a skilled nursing facility, such as a nursing home.
Hip fractures alone are a serious problem. The American Academy of Orthopaedic Surgeons has estimated that 90 percent of the 352,000 hip fractures recorded in the U.S. each year are the result of a fall. Only a quarter of hip fracture patients make a full recovery. About 40 percent will require nursing home care, half will need a cane or walker and another quarter over age 50 will die within a year of the injury. In fact, the rate of hip fractures begins to increase at age 50 and doubles every five to six years. Women over 50 suffer such fractures at two to three times the rate of men.
Fortunately, there are a series of steps that the caregiver and patient can take to reduce the risk of dangerous falls and increase the safety of maneuvering at home. If balance dysfunction appears to be an issue, both should visit the family doctor for a discussion of the symptoms and possible treatments.
A typical solution will be for the doctor to refer patients to a fall prevention program. Today, there are both traditional and advanced programs available on an outpatient basis and at home. Home therapy programs can offer some distinct advantages over treatment at an institution:
Patients who have balance problems or who have already fallen may not be able to travel to a rehab facility, and it may be inconvenient or impossible for the caregiver to provide transportation.
Home treatment allows the patient to progress in a familiar environment, while institutional therapy can sometimes require a patient to learn movements all over again when he or she gets back to the house.
Home therapy allows a patient to remain among family and friends.
Home programs typically involve individual one-on-one therapy focused on a speedy recovery, while institutional rehab may treat patients in a group setting.
Those patients who still have an active career find it easier to work at home and keep in touch with the office while they’re recovering.
Traditional home fall prevention methods have typically involved “gait training,” which is essentially teaching someone to walk. The patient also gets general strengthening exercises and instruction on how to use an assistive device, such as a cane or walker. The challenge with these basic programs is that they sometimes leave the patient coping with certain limitations when they could actually achieve a higher level of mobility through more advanced treatments.
To guide patients toward the most successful recovery, newer, more advanced therapy programs have emerged to deal proactively with the root causes of balance problems. The causes might involve vision, inner ear or other balance-related issues. Sensation and coordination problems could be factors. There might be pain or numbness in the feet. A patient’s lack of strength or flexibility could be the cause. Or a person’s living area and environment could reveal hazards which increase the likelihood of falls.
These newer programs examine the potential causes through a detailed evaluation. Working with the physician, specially trained therapists then develop and launch treatment plans that are customized for each patient. The success rate is high. Sponsoring home health organizations have begun to document patient outcomes demonstrating the ability of such programs to relieve pain, increase sensation and reduce the risk of dangerous falls.
As part of any fall prevention program, a therapist can make recommendations to the patient and caregiver about improving safety in a home environment. The caregiver can follow through on these and other possible recommendations:
Keep floors clear and reduce clutter.
Ensure that floors are clean and not waxed.
Use non-skid throw rugs.
Install handrails or grab bars in stairways or bathrooms.
Make sure the home is well lit.
Use a sturdy step stool or ladder to reach high places.
Excellent do-it-yourself fall prevention information can often be found on Web sites of state or local health departments, and through local or regional fall prevention coalitions.
Balance programs can help to change the lives of patients and allow them to live more independently at home. A Florida woman resumed her walking regimen and said that her life was worth living again. An 87-year-old pharmacist was able to return to work. Even a 100-year-old Hurricane Katrina survivor was made mobile enough to return to relatives in New Orleans. These new balance therapies can also help to reduce stress for caregivers and help them sleep at night, knowing that an older relative is safe from fall injuries that could send them to the hospital – or worse.
The message is clear: there’s no reason for patients or their caregivers to suffer from a fear of falling when solutions are just a phone call away.


614: Structured settlements and in force annuities offering 8%.   Very interesting.

611: Never let them out??? of the 272,111 persons released from prison in 1994, an estimated 67.5% were rearrested for a felony or serious misdemeanor within three years, 46.9% were reconvicted and 25.4% resentenced to prison for a new crime.


6/10: Economic Recovery: Are Happy Days Here Again?
Stocks have rebounded on Wall Street during the past two months. The pace of job losses seems to be slowing down. Even quarterly reports from banks suggest that the banking sector is slowly struggling back to its feet. Do these signs portend the first indicators of an economic recovery? Not yet, according to experts at Wharton and elsewhere, who insist that despite some of the hopeful data, the recovery will be weaker and take longer to gain momentum than past slowdowns.
http://knowledge.wharton.upenn.edu/article/2261.cfm


6/10: So You Think Owning a Home Will Make You Happy? Don't Be Too Sure
Owning a home has long been viewed as the cornerstone of the American Dream, the foundation for a happy family life and long-term financial security. Now, a new research paper challenges that conventional wisdom. Wharton's Grace Wong Bucchianeri, a professor of real estate, says her research shows that while homeowners experience significant joy, they also face more aggravation, spend less time with friends, and are even heavier than renters living in comparable homes.
http://knowledge.wharton.upenn.edu/article/2257.cfm


6/10:

Date:	2009
By:	Jayanth R Varma
URL:	http://d.repec.org/n?u=RePEc:ess:wpaper:id:1981&r=fmk
During the global financial turmoil of 2007 and 2008, no major derivative clearing house in the world encountered distress while many banks were pushed to the brink and beyond. An important reason for this is that derivative exchanges have avoided using value at risk, normal distributions and linear correlations. This is an important lesson. The global financial crisis has also taught us that in risk management, robustness is more important than sophistication and that it is dangerous to use models that are over calibrated to short time series of market prices. The paper applies these lessons to the important exchange traded derivatives in India and recommends major changes to the currentmargining systems to improve their robustness. It also discusses directions in which global best practices in exchange risk management could be improved to take advantage of recent advances in computing power and finance theory. The paper argues that risk management should evolve towards explicit models based on coherent risk measures (like expected shortfall), fat tailed distributions and non linear dependence structures (copulas).[

6/9:  Not necessariluy unexpected: The recession has not prompted many people to change their behavior and start saving more for retirement, according to a new survey by Charles Schwab.

The quarterly survey found that many Americans are neither financially nor emotionally ready for retirement, even as they approach their retirement years. Almost four in 10 Americans (39 percent) are not currently saving for retirement and, despite market losses, six in 10 Americans (62 percent) have not adjusted their thinking about what age they will retire – nearly unchanged from Schwab’s first quarterly retirement pulse survey in September 2008, months before the recession was officially declared.

Survey respondents estimate they will need just over $1.2 million to comfortably retire, yet those currently saving for retirement have put away an average of $194,000. Despite this awareness, 41 percent of Americans feel positively about their retirement preparedness and another 22 percent feel indifferent.


6/9: Home prices:  Robert Shiller,said home prices may “continue to fall, or stagnate” in 2010 and 2011. The S&P/Case Shiller index of 20 major cities showed median home prices were down 32 percent in March from their peak in July 2006.

Shiller noted that U.S. home prices didn’t begin moving up, “even incrementally,” until six years after the end of the prior housing boom in 1990-91. Home prices in Japan fell every year for 15 years after the 1991 bursting of Japan’s real estate bubble

6/8: You can always get insurance

Do you need a quote for your special risk client such as Cancer, Diabetes, or Heart Attack? Click on the impairment below – e-mail or fax the information to 831-476-1008

You will have a competitive quote in 48 hours or less – Client signature not required.

 

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Colitis | Chron's disease | Coronary artery disease | Depression | Diabetes
 | Epilepsy | Heart attack | Systemic Lupus | Anxiety Disorders
Heart murmur | Hepatitis |  Atrial Fibrilation|  | Kidney Transplant
Leukemia | Mental Disorders | Mental-NervousDisorder  | Morals
Multiple Sclerosis | Paralysis | Parkinson's disease | Bundle Branch Block
Sleep Apnea  | Stroke  | COPD Pulmonary Disease | Cushing Syndrome
Glomerulonephritis | Hemochromatosis | Mitral Valve prolapse
Pancreatitis | Polycystic Kidney Disease | Scuba Diving  | Sky Diving
Racing  |  Hypertension | Liver Functions  | Foreign Nationals

He made that point in 2005 in a semimonthly newsletter that he published for many years. Five days before his death, he republished the article in the same newsletter, Economics and Portfolio Strategy, adding a prologue in which he said, “With hindsight, most readers today would find our position in 2005 to have been a prescription for tragedy.”

Peter Bernstein died Friday

6/7: The CBOE Volatility Index^® (VIX^®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. Since its introduction in 1993, VIX has been considered by many to be the world's premier barometer of investor sentiment and market volatility.


6/7:

Obama cracks the code to reach Islam

While President Barack Obama addressed masterfully the conflicting pressures the US faces in the region, he will find translating them into coherent policies far more challenging, if not impossible. http://link.ft.com/r/LVA6WW/G07GS/5VWQL/VY1E5/EOOGQ/LE/h

6/7: Convexity
Unfortunately, duration, used as a measure of interest rate sensitivity has limitations. The statistic calculates a linear relationship between price and yield changes in bonds. In reality, the relationship between the changes in price and yield is convex. In Figure 1, the curved line represents the change in prices given a change in yields. The straight line, tangent to the curve, represents the estimated change in price via the duration statistic. The shaded area shows the difference between the duration estimate and the actual price movement. As indicated, the larger the change in interest rates, the larger the error in estimating the price change of the bond.

 

6/7: Multiple Sclerosis: Getting and Managing
Health Care Needs
1. By Grace Curry
If you are caregiving to a friend or relative with Multiple Sclerosis, you already know how difficult it can be to manage that care. Services once covered by health care insurance no longer are available. Managed care and increased benefit cutbacks in both private and federal health care agencies have made getting quality care difficult. It is not just the person with Multiple Sclerosis who is affected by this. Many others dealing with various diseases and disabilities have found trying to obtain adequate care, a very frustrating concern. As caregivers, we see the responsibility to ensure quality care is provided to our loved one falling more and more of on our shoulders.

We are learning through trial and error that what you see is not always what you get in relation to satisfying health care needs. We have also been “managing” the care of our family member, or significant other, for a long time. We are experts. We have learned it behooves us to be proactive in the health care planning, implementation and delivery of that care. It is not always easy to know just where to begin or how to know if what we are doing is the right thing to do.

In order to begin, it is beneficial to learn all you can about the disease and how it’s progression can affect your loved one’s ability to function independently. This information can be found anywhere. It is best to start with the primary health care provider who is following the person with MS. They can help you with a prognosis for the future and perhaps recommend resources available in your community to assist you. Other resources include the Internet, public library, care consultant specialist and magazines such as Today’s Caregiver Magazine that target caregivers and their specific needs.

Next you need to become aware of the specific needs of the person you care for. These needs should encompass every aspect of daily living and not just those specific to the disease.

Here are some of the problem areas caregivers need to consider when planning care. In doing this it is helpful to consider each area listed and keep a record of the personal needs of your loved one. This will help you to track of the progress in rehabilitation or help to show what problems need to be addressed.

General Health

It is a good idea to make sure that they have a physical exam every year. This should include routine screening exams for cancer. For women this would include mammograms, and pap smears and in men prostrate and rectal exam. Dealing with problems that MS can bring will be easier if general well being is maintained. Evaluation of neuromuscular and musculoskeletal function should also be a part of the yearly exam.

At this time it is also a good idea to have a checklist that you can show the doctor that documents the different levels of functioning and how they have improved or declined since the last check up.
Neuromuscular checklist includes: complaints of pain and spasticity.

Musculoskeletal function should include monitoring impairment in range of motion to all extremities, including the joints.

Psychological functioning also needs to be monitored. This is an area that is often avoided because many people get embarrassed talking about it. Yet, problems with emotional issues are not uncommon in people with MS, and periodic evaluations by a psychologist can help to prevent serious complications from developing.

More Specific Areas to Monitor

While it is good to have yearly checkups, or as frequent as your doctor feels is necessary, there are some areas that need to be monitored routinely to help ensure proper management of your loved one with MS and their care. Let’s take a brief look at some of these areas here. You will find a more comprehensive checklist accompanying this article that you can copy and use to help monitor all these areas. Keep copies of the list to use as comparison and to show your health care provider on routine checkups.

Activities of Daily living:

How much assistance is required for your family member to eat, dress, cook, clean, perform personal hygiene and any other necessary functions? In many cases an occupational therapist can help with these areas and it is advisable to get a consultation for an initial evaluation and periodic updates.

Mobility:

What limitations does the person with MS have? Can they get around the house and the community without difficulty? Is driving a car an issue at this time? Again in many instances a consult to a physical therapist will help in this evaluation initially and provide recommendations for any adaptive equipment determined to be helpful in their situation. Braces, canes, mobility devices such as scooters or wheel chairs can go a long way towards maintaining independent functioning. The more the person with MS can do for themselves, the easier your role of caregiver will be.

Bowel and Bladder Function:

Problems in these areas are common in people with MS. Monitor any changes in bowel and bladder function. Also you need to consider if your loved one is able to attend to their own bowel and bladder functioning. Physical limitations can cause problems in completing bowel or bladder routines, and perhaps something as simple as a button or a zipper is the cause of the problem and this can be remedied by using elastic waistbands or velcro closures. Constipation and frequent bladder infections can be very frustrating and so setting up a program to maintain regularity can often improve the level of functioning by helping to keep your loved one continent and regular.
Skin Integrity:

Has a loss of sensation occurred? This can lead to problems because we change or shift positions based on our comfort level. We sense pressure to the sitting area and move. If the person with MS has lost sensation there is no warning of discomfort to change position. This can lead to skin break down. Spending long periods in a wheelchair or long periods of immobility will cause problems. It is advisable to make the physical therapist aware of any difficulties and request recommendations for proper cushions or other pressure reducing appliances to help reduce the chance of impaired skin integrity.

When you made your list, and noted your initial assessments, you will soon see where problems areas currently exist, or may become a problem in the future. Next you will need to determine which items on your list are of greatest importance. Prioritize the list. In many cases you will not be able to take care of everything on the list initially. Realistically there is just not enough time for your health care provider to address each separate issue at one time. However letting the doctor know you are monitoring all these areas will go a long way to showing him or her that you are being proactive in the health care planning of those in your care.

It is possible that your health care provider may not take you seriously or may dismiss some of your concerns as minor, or seem unwilling to listen to you. They may feel overwhelmed by all your concerns, and feel at a loss to help you. Personally, I have found that in some cases the health care provider is not exactly responsive to my needs because some physicians still feel they are the ones to make the assessments and get defensive when I would question recommendations or request specific options. Not all doctors continue to have this outlook. It is important to realize that you and your loved one do not need to maintain the services of any health care professional if they are not providing what you need. Remember health care providers should be doing just that. Providing for health care. Anything less gives you the right to select another provider. This is one of the more unpleasant responsibilities of a caregiver, knowing when it is time to look for a new health care provider.

If you find you are having a problem communicating with a provider, or are seeking the help of an outside agency such as a consumer advocate agency or customer service organization, be sure to make all your requests in writing and keep copies of everything. Hopefully you will not have to go through this, however it is better to be prepared just in case you need the information at some later date. Frequently the heart of the problem lies more with the managed care system or insurance company than it does with the doctor. Many of the doctors I speak with tell me how frustrated they get when they are prevented from follow through due to some restriction placed on them. Keeping positive lines of communication open with your health care provider may prevent some of these problems. In the end it falls to the caregivers to continue to be an advocate to those in their care. Demonstrate your resolve to get the best quality care for your loved one through patience and facts. You will not make it a perfect world, but you will be better equipped to deal with the challenges that need to be faced for years to come.


6/7:

FDIC stalls sale of toxic loans

Details of the Treasury's toxic asset plan are in doubt after the Federal Deposit Insurance Corporation said it was suspending a test run of the legacy loans programme

6/4:  

Revenue Ruling 2009-13

In Situation 1 of Revenue Ruling 2009-13, the individual surrenders a policy with a cash value of $78,000 in which prior premiums totaled $64,000. In this circumstance, he or she will recognize income equal to the difference of the cash value and the investment in the contract. Investment in the contract will be the total amount of premiums paid. Therefore, the individual will recognize income of $14,000. This income will be taxed at the ordinary income tax rates.

In Situation 2, the individual sells the policy to a third party, in a life settlement transaction, for $80,000. In this case, the income is measured by comparing the sale proceeds to basis in the contract. Basis must be reduced by “that portion of the premium paid for the contract that was expended for the provision of insurance before the sale.” Therefore, total premiums of $64,000 are reduced by the cost of insurance, which in this example is $10,000.

The individual will recognize income of $26,000, which is equal to the difference of the sale proceeds and basis. This income is characterized as ordinary income to the extent the cash value exceeds total premiums ($14,000). The balance ($12,000) will be treated as a capital gain.

Situation 3 involves the sale of a level-term policy in a life-settlement transaction for $20,000. The individual paid monthly premiums totaling $45,000 prior to the sale. Basis is determined in the same fashion as Situation 2. In the case of term insurance in this example, “absent other proof, the cost of the insurance … is presumed to equal the monthly premium under the contract, or $500.” Therefore, basis equals zero or a modest amount equal to the prepaid premium. In Situation 3, basis was deemed to be $250, representing the prepaid premium for the half of the month that had not expired.

The difference between the sale price and basis is a capital gain. Therefore, the individual would report a capital gain of $19,750. Since the policy was held more than 12 months, the gain is long term.

Revenue Ruling 2009-14

Ruling 2009-14 addresses the income-tax consequences to the purchaser of a term life insurance policy upon later maturity of the contract or sale. If the purchaser collects the death benefit from the policy (i.e., the policy matures), ordinary income is recognized to the extent the death benefit exceeds basis. Basis will include the purchase price of the policy as well as subsequent premium payments.

Normally death benefits are not taxable; however, the purchaser of a policy in a life-settlement transaction generally will be deemed to be a party of a “transfer for value.” Thus, the proceeds, less basis, will be taxable. If the purchaser sold the policy prior to maturity, the sale price in excess of basis would be treated as a capital gain (Situation 2 of Ruling 2009-14).

6/3 The first graph shows the S&P 500 since 1990.

The dashed line is the closing price June 1

The S&P 500 is up almost 40% from the bottom (267 points), and still off almost 40% from the peak (622 points below the max).

That equates to a 1.25% annualized return over 19 years Not including dividends) .

:  

6/3:






6/3: ECONOMY SINKS AGAIN - The economy sank at a 5.7% pace as the brute force of the recession carried over into the start of the year. However, many analysts believe activity isn't shrinking nearly as much now as the downturn flashes signs of letting up. It marked the second straight quarter where the economy took a huge tumble. At the end of last year, the economy shrank at a staggering 6.3% pace, the most in a quarter-century.

6/3: MORTGAGE DELINQUENCIES UP - Mortgage delinquencies and foreclosures increased to record levels not seen since 1972 and home-loan rates jumped as the government's effort to fix the housing slump lost momentum. The administration's efforts to keep homeowners current on mortgages by allowing them to refinance or sell to buyers enticed by affordable terms is apparently being undermined by job losses. "If people don't have a paycheck, they can't support a mortgage. The longer the recession lasts the more people run through their savings reserves. One in every eight Americans is now late on a payment or already in foreclosure.

6/3: HOME SALES - New home sales fell 34% since April 2008.  However existing home sales rose 2.9% as foreclosure auctions enticed bargain hunters. The median price slumped 15% from a year earlier, the second-biggest drop on record, and distressed properties accounted for 45% of all sales. "We clearly haven't hit the top yet in terms of delinquencies or the bottom of the housing market."

6/3: BLAME GAME...MBAs? – Many are pointing toward MBAs and the business schools from which they graduated as major culprits in the current financial crisis and it is easy to see why. Many of the players in high finance are graduates of the likes of NYU Stern School of Business and Harvard Business School and other Ivy League business schools. These young executives learned in the 1970s that a fortune could be made by boosting shareholder returns in the short-term and became exceedingly rich doing so.  Unfortunately, these actions would ultimately destroy their companies and deal a body blow to the world economy. Whether, and to what extent, the nation's business schools laid the groundwork for the economic crisis is a serious topic for educators to ponder.

6/3: 2009 HSA LIMITS - Unless changed by possible health care legislation, the deductible contributions to health savings accounts will increase to $6,150 for family coverage in 2010 (up from $5,950 in 2009) and to $3,050 for individual coverage (up from $3,000 in 2009).  The 2010 minimum high-deductible health plan deductible amount increases to $2,400 for families and $1,200 for individuals, up from $2,300 and $1,150 in 2009.  Finally, the cap on out-of-pocket costs in 2010 increases to $11,900 for families and $5,950 for individuals, up from $11,600 and $5,800 this year

6/3: EARLY SOCIAL SECURITY - The Social Security Administration had been expecting a 15% increase in applications this year due to aging baby boomers.  Instead, they're seeing a 25% increase and speculation is that the increase has been caused by the recession.  Laid-off workers may be signing up for Social Security beginning at age 62 as an immediate source of income.  Unfortunately, while the income is immediate, the reduction in their benefits will last a lifetime.

6/2:

Oil prices hit seven-month highs

Crude oil and gold prices soared on Monday as the weakness of the US dollar, which hit a five-month low against the euro, and signs that the worst of the economic crisis, particularly in Asia, is behind, prompted investors to buy commodities

6/2: Disability: According to the U.S. Census Bureau, over 54 million Americans, or 19 percent of the population are considered disabled.

6/2: Giving:  the U.S. Bureau of Labor Statistics' latest survey of consumer expenditure found that the poorest fifth of America's households contributed an average of 4.3 percent of their incomes to charities in 2007. The richest fifth gave at less than half that rate, 2.1 percent.

One-third of San Francisco-area nonprofit groups are worried they may have to shut down in the next year, and 34 percent say they have no more than two months’ worth of operating funds in reserve, according to a survey by the regional United Way.  Nearly two-thirds of the 391 respondents to the organization’s 2009 Nonprofit Pulse Survey said demand for their services was increasing. Twenty-three percent have had to reduce services, while 26 percent said they have collaborated in the past six months with another charity.

6/2:

Split Decision on FLP Discounts

In Estate of Valeria M. Miller v. Commissioner; T.C. Memo. 2009-119; No. 5207-07 (27 May 2009), the Tax Court determined that FLP discounts would be permitted for initial contributions, but would be denied for deathbed additions.

Decedent Valeria Miller was married to her husband Mr. Miller in 1938. They had four children -- Virgil G., Gordon, Donald and Marcia. Mr. Miller was an architect who retired in 1974 at age 60. He spent the next 26 years managing his portfolio using a personally-developed method of charting stocks.

When he passed away in 2000, the securities were worth nearly $7 million. Mr. Miller created a QTIP for decedent Valeria Miller and the balance of his securities were transferred to her revocable trust.

In 1994, decedent Valeria Miller created an irrevocable life insurance trust. It was funded with annual exclusion gifts through Crummey powers, and purchased policies that paid approximately $2.75 million to her children when she passed away. In 2001, Mrs. Miller created the Miller Family Limited Partnership (MFLP). She was age 86 and in good health at the time. The partnership was signed on March 6, 2002 and funded in May 2002 with approximately 77% of her estate. Of the 1,000 units that were issued, she gave 20 units to each of the four children and retained 920 units.

Son Virgil G. Miller managed the stock portfolio using the charting method taught by his father. He devoted approximately 40 hours per week to that management effort.

In May 2003, Mrs. Miller was recovering from a broken hip and had congestive heart failure. Just prior to her death on May 28, 2003, most of the securities in her brokerage accounts were transferred to MFLP.

The estate filed Form 706 and the IRS issued a deficiency of $1,019,399. There were two issues to determine. First, the estate claimed that the QTIP trust was not needed by Mrs. Miller and therefore was not taxable in her estate. Second, the estate claimed 35% discounts for lack of marketability on the MFLP contributions in May of 2002 and May of 2003.

The IRS opposed both claims and noted that the QTIP qualified for a marital deduction in Mr. Miller's estate. Therefore, it is taxable in the estate of Mrs. Miller. Furthermore, the Service claimed that the MFLP discounts were not valid under Sec. 2036.

The Tax Court reviewed facts and law and determined that the QTIP was taxable in the estate of Mrs. Miller. The determining factor was the asset "availability," not the need of Mrs. Miller. Because QTIP assets were available, they are taxable in her estate.

Second, the Court determined that the 2002 transfers to MFLP were a valid exercise of the right to continue the 26 year investment strategy of Mr. Miller. This was an active (as opposed to the inactive management strategies that had not been upheld in other cases) management process with 40 hours per week expended by Virgil G. Miller. In addition, Mrs. Miller retained over $1 million in securities outside the MFLP, an amount sufficient to provide for her other needs. Therefore, the 35% discount was permitted.

However, the Court determined that the deathbed MFLP additions were simply a tax avoidance device with "no significant nontax purpose." Therefore, the discounts were not permitted on the deathbed transfers.

6/2:

Investors sceptical on stock market rebound

The majority of the world's leading investors do not believe the recent strong performance of stocks and other risky assets is sustainable, according to a report http://link.ft.com/r/NA70KK/6UFO3/2OMYP/G6CGV/ZJW0U/UP/h

6/2:

Date:	2009
By:	Jayanth R Varma
URL:	http://d.repec.org/n?u=RePEc:ess:wpaper:id:1981&r=rmg
During the global financial turmoil of 2007 and 2008, no major derivative clearing house in the world encountered distress while many banks were pushed to the brink and beyond. An important reason for this is that derivative exchanges have avoided using value at risk, normal distributions and linear correlations. This is an important lesson. The global financial crisis has also taught us that in risk management, robustness is more important than sophistication and that it is dangerous to use models that are over calibrated to short time series of market prices. The paper applies these lessons to the important exchange traded derivatives in India and recommends major changes to the currentmargining systems to improve their robustness. It also discusses directions in which global best practices in exchange risk management could be improved to take advantage of recent advances in computing power and finance theory. The paper argues that risk management should evolve towards explicit models based on coherent risk measures (like expected shortfall), fat tailed distributions and non linear dependence structures

6/1:

Date:	2009
By:	Renneboog, L.D.R. Spaenjers, C. (Tilburg University, Center for Economic Research)
URL:	http://d.repec.org/n?u=RePEc:dgr:kubcen:200934&r=cbe
Although the relationship between religion and economic development on the macro-level has been investigated, it is less clear how religious background influences economic attitudes and financial decision-making on the level of the individual or household, the micro-level. We use panel data from the extensive DNB Household Survey, covering the period from 1995 to 2008, to investigate whether – and through which channel – religious denomination affects household finance in the Netherlands. We find evidence that, in general, religious households care more about saving, are more risk-averse, consider themselves more trusting, have a more external locus of control, and have a stronger bequest motive. Furthermore, Catholics and Protestants have longer planning horizons, and Protestants and Evangelicals seem to have a greater sense of individual financial responsibility. Most of these factors matter for household financial decision-making, albeit to differing degrees. Using our religion variables as instruments for economic attitudes (and controlling for demographic and background risk characteristics), we demonstrate that the above-mentioned differences in economic beliefs and preferences explain the higher propensity to save by religious households in general and the lower investments in risky assets by Catholic households.

6/1: Volatility index:  (Times)

Last week, the VIX, as the index is commonly called, fell below 30 for the first time since September, about the time that the collapse of Lehman Brothers set off a wave of panic in the financial markets.

The VIX reached 50 earlier this year and hit 80 last fall.

History shows that rallies that emerge from the depths of bear markets are almost always followed by a “retesting” of those market lows.

Sometimes, the retests can be mild. For example, after the recovery rally that took place at the end of the 1982 bear market, the S.& P. 500-stock index fell about 4 percent.

But retests can also be frightening. After stocks rallied in October 2002, the S.& P. 500 suffered another scare that pushed stock prices lower by 15 percent.

“If we’re going to go through a retest that could be as severe as a correction — a 10 percent to 20 percent decline — I would tend to think that panic will return,”

6/1:  Vehicle Miles driven in March

The first graph shows the annual change in the rolling 12 month average of U.S. vehicles miles driven. Note: the rolling 12 month average is used to remove noise and seasonality.

By this measure, vehicle miles driven are off 3.3% Year-over-year (YoY); the decline in miles driven was worse than during the early '70s and 1979-1980 oil crisis. However miles driven - compared to the same month of 2008 - has only been off about 1% for the last couple months.

6/1:

6/1: Unemployment Claims

This graph shows weekly claims and continued claims since 1971.

Continued claims are now at 6.79 million - an all time record. This is 5.1% of covered employment.

Note: continued claims peaked at 5.4% of covered employment in 1982 and 7.0% in 1975. So this isn't a record as a percent of covered employment.


6/1: This graph shows Capacity Utilization. This series is at another record low (the series starts in 1967).

The Federal Reserve reported that "Industrial production decreased 0.5 percent in April after having fallen 1.7 percent in March. Production in manufacturing declined 0.3 percent in April and was 16.0 percent below its recent peak in December 2007. The decreases in manufacturing in April remained broadly based across industries."


 

6/1: Although containers tell us nothing about value, container traffic does give us an idea of the volume of goods being exported and imported.

Inbound traffic was 21.5% below April 2008.

Outbound traffic was 18.3% below April 2008.

There has been some slight recovery in exports the last two months (the year-over-year comparison was off 30% from December through February). But this is the 2nd worst YoY comparison for imports - only February was worse, and that might have been related to the Chinese New Year. So imports from Asia appear especially weak.
 

6:1 This graph shows shows New Home Sales vs. recessions for the last 45 years. New Home sales have fallen off a cliff.

 

5/31: The new economy: Bill Gross 

In a world of more regulation, private-sector deleveraging and less consumption, "it's hard for [Pimco] to imagine" the Dow Jones Industrial Average  climbing back to 14,000 or home prices returning to 2006 levels.

"Growth will be stunted,"  "It will be a different type of world and we have to get used to that."

The U.S. economy will grow at between 1% and 2% a year rather than 2% to 3% a year for the next three to five years at least. "That will make a significant difference for corporate profit growth,"

Moreover, unemployment will hover around 7% to 8% rather than the recently typical 4% to 5%, he added, and the higher rate would be around "for a long time to come."

5/31:  

Interest Rates Remain the Same for the Third Quarter of 2009

WASHINGTON — The Internal Revenue Service today announced that interest rates for the calendar quarter beginning July 1, 2009, will remain the same. The rates will be:

• four (4) percent for overpayments [three (3) percent in the case of a corporation];
• four (4) percent for underpayments;
• six (6) percent for large corporate underpayments; and
• one and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000.

5/31: Total mortgage delinquencies rose slightly in April to 8.1%, according to a monthly report published by Lender Processing Services (LPS: 28.35 -0.35%). The figure represents a 2.8% increase from March and is up 43% from the same time last year.


April redefault (recidivism) rates among modified mortgages. Modifications involving a reduction in the unpaid principal balance experience a 25% lower recidivism rate six months after modification.
Seven states — Delaware, Maine, New Mexico, North Carolina, North Dakota, New York and Washington — experienced an increase in foreclosure starts. Foreclosure starts in New York, which represents 4.5% of all loans in the US, increased by 12.5%. Nationwide, foreclosure starts have increased by 35% in the last 12 months,

5/31: Paying the uninsured:  Health insurance premiums for an average family are $1,000 a year higher because of costs of health care for the uninsured,  
And private coverage for the average individual costs an extra $370 a year because of the cost-shifting, which happens when someone without medical insurance gets care at an emergency room or elsewhere and then doesn't pay.

in 2008, uninsured people received $116 billion in health care from hospitals, doctors and other providers. The uninsured paid 37 percent of that amount out of their own pockets, and government programs and charities covered another 26 percent.

That left about $43 billion unpaid, and that sum made its way into premiums charged by private insurance companies to businesses and individuals

5/31:  Piss on this:
A contractor for the IRS has been charged with repeatedly urinating in a freight elevator in the IRS’s office building in Detroit, causing an unpleasant aroma. (Ya think??)

“Hicks denied having any medical conditions that would cause him to commit such an offense,”  “He stated that he did it because he felt he could get away with it.”
(Admit it, you would like to do it to to the IRS) 

5/31:   

1. Corporate bond yields to decrease and spreads to tighten. Corporate bond spreads as compared with government bonds are the highest since 1932, according to Moody's. In other words, when you see these crazy yields on bonds, it is because prices are low and because demand isn't there to snap them up. When yields are this high, it is more difficult for companies to survive, because they can't beat their cost of capital to become profitable at those levels. However, as investors move into the market, they will create demand and drive up prices while driving down yields. This in turn will allow companies to borrow money at cheaper prices and enable them to grow their earnings and profits.

2. Municipal bond yields to decrease and spreads to tighten. Municipal markets have essentially collapsed during the past year, with the Lehman Brothers bankruptcy sending the market into a tailspin. Many managers find the municipal bond market to be attractively valued, as the traditional yield relationship has been turned on its head. Typically, municipal yields are 80%-95% of Treasury bonds, and now some municipals bonds are yielding 150% of Treasuries. This relationship needs to normalize, as it will indicate investors' ability to tolerate some risk. To illustrate this point, I show my clients a chart that tracks the spreads for the past 10 years and demonstrates the reversal in yields.

 

5/28: Usually a steep yield curve precedes a period of decent growth, but several analysts suggest the current ten year sell-off is due to concerns about increased Treasury issuance to finance the deficit. Whatever the reason, this is a challenge for the Fed to keep mortgage rates low.

 

Note January 2006 and 2006 and certainly the tiems previous. When you have inverted yield curves you invariably have recessions. You certainly have huge increases in investment risk. Want to stay with a buy and hold? Fine, but you better live for a long time before you might see your value return. And if you are retired, you may be dead by then.  



5/28: FDIC:

At the end of the first quarter there were 305 'problem institutions' with a total of $220.0 billion in assets, up from 252 institutions and $159.4 billion in assets at the end of 2008. At the end of the quarter, the Deposit insurance fund was at just $13.0 billion, or 0.27% of insured deposits, a decline of 24.7% in the quarter alone.

The first graph (from http://www.calculatedriskblog.com/) shows the steep drop in the coverage ratio. Just a year ago, the fund was equal to 1.01% of covered deposits. The current level is its lowest since the first quarter of 1993, when we were digging out from the S&L fiasco.

To bring the fund up to a more normal 1.2% of insured assets would require $44.8 billion, not counting the losses that the fund has incurred so far in the second quarter, or any subsequent losses. That would be a pretty hefty tax for the banks to pay. Still, fairness demands that it be paid by the banks, not by the general taxpayer.

During the quarter, 21 banks with $9.5 billion of assets failed, at an estimated cost to the fund of $2.2 billion. In the 12 months to 3/31/09 there have been 44 failures with $381.4 billion in assets at a total cost to the fund of $20.1 billion.

:

5/27: Geithner says AIG Bailout 'Complicated'
Treasury secretary, testifying before the Senate, said bailing out the troubled insurance giant "proved much more complicated, much more risk than people thought"...

EFM- but what's the problem?? they already knew that AIG was illustrating products showing a 17.53% return annually for the next 25 years................. .

5/27: Retirement concerns- 

more than half of adults in the US, France, Italy and Spain saying they are more concerned about this than they were one year earlier.

The most worried are in the US where 59 per cent of those surveyed said they were more concerned about income security in old age.

In the US, pensions are more likely to be the result of investments in shares but plunging stock markets have left a huge hole in retirement accounts.

The survey also found a uniformly high percentage of those seeking greater security for their income in retirement, with those in the UK, US, France, Italy, Spain and Germany saying they prefer using part of their pension fund to buy a secure income rather than gamble on higher investment returns later on.

the percentage of those U.S. employed beyond 65 has increased from 12.5 per cent in 2000 to 15.5 per cent in 2007

In Italy, however, which also appears to favour extended working, the rate of older workers is almost unchanged since the start of the decade at 3.2 per cent.

5/27: “The Persistent Effects of a False News Shock,” 
In September 2008, a six-year-old article about the 2002 bankruptcy of United Airlines’ parent company resurfaced on the Internet and was mistakenly believed to be reporting a new bankruptcy filing by the company. This episode caused the parent company’s stock price to drop by as much as 76 percent in just a few minutes, before NASDAQ halted trading. After the “news” had been identified as false, the stock price rebounded, but still ended the day 11.2 percent below the previous close. The authors  use this natural experiment and a simple asset-pricing model to study the aftermath of this false news shock. Carvalho, Klagge, and Moench find that, after three trading sessions, the company’s stock was still trading below the two-standard-deviation confidence band implied by the model and that it returned to within one standard deviation only during the sixth trading session. On the seventh day after the episode, the stock was trading at exactly the level predicted by the asset-pricing model. The authors also document that the false news shock had a persistent effect on the stock prices of other major airline companies.

5/26: I want one of these women: High-income women are the main drivers of philanthropy in their households, according to research released today by the Fidelity Charitable Gift Fund, a charitable-donor-advised-fund program established by Fidelity Investments.  Charitable giving is often a joint decision, but when there is a prime decision maker identified, it is more likely to be a woman.  A full 92% of men said that their spouse is the primary influence regarding giving, compared with 84% of women who said the same.   The study involved a random sample of 1,003 adults who donated at least $1,000 in 2007. 

5/26: No wrongdoing and no money anyway: As part of a sweeping nationwide crackdown on "fake charities," the Federal Trade Commission and state officials took actions that forced dozens of groups to shut down or stop making false appeals in the name of police, firefighters and veterans.  Among the groups singled out by the FTC as sham nonprofit organizations were three fundraising groups from Santa Ana. The government said the groups raised $19 million from 2005 to 2008 but turned over only 5% of the money to legitimate charities.  Most of the money raised by the Santa Ana groups instead went to telemarketers contracted to make solicitation calls and into the pockets of company executives and staff members, the agency said, and for outings, such as trips to Hawaii and Las Vegas.  
        The groups -- the American Veterans Relief Foundation, the Coalition of Police and Sheriffs and the Disabled Firefighters Fund, all located at the same address -- agreed to a settlement in which they did not acknowledge wrongdoing. They were fined $19 million, but the FTC waived the penalty because of inability to pay.

5/26: The non profits are caught as well:  Buffeted earlier this year by the outcry over its plans to raise money by closing its art museum and selling the collection, Brandeis University said this week that it would suspend payments to the retirement accounts of faculty and staff members starting in July.  While universities across the country have taken a wide range of actions to confront their financial problems, including layoffs and the suspension of capital projects, freezing contributions to retirement accounts is rare. Financially troubled corporations have been taking such action, but faculty and staff members at colleges and universities have traditionally enjoyed stable, and generous, benefits — and expect no less. “There is this perception that the nonprofit world is maybe a gentler, kinder world than corporate,” said Roland King, vice president for public affairs at the National Association of Independent Colleges and Universities. “So some people seem to perceive this as a breach of faith, especially since many people go into nonprofit work at less salary, because the benefits are so good. But we are absolutely at a point in this economy where these sort of things have to be on the table.”  

5/26:  Expensive health care: Between 1999 and 2008, the typical family paid a premium increase of 117%. During the same decade, health care costs for employers increased by 119%

With the substantial increase in costs, the Medicare Hospital Insurance (HI) Trust Fund is now projected to be exhausted in 2017. By 2018, the share of the economy devoted to health care could reach 20%.

5/26: Health Care Tax Subsidies

Through various deductions and credits, the federal government subsidize health care, reduces taxes on capital gains, pays for part of the cost of IRAs and other retirement plans and assists homeowners through mortgage interest deductions. Of these major federal tax subsidies, health care in 2008 costs total $194.2 billion. It was the largest of the federal tax subsidies.

The federal health care tax subsidies are as follows:

Federal Health Care Subsidies	$ Billions
Employer-Sponsored Health Care	$132.7
Medicare Tax-Free Payments	40.6
Income Tax Deduction Over 7.5% of AGI	10.7
Self-Employed Health Care Deduction	5.2
Other Health Care Benefits	5.0
Total Health Care Tax Subsidies	$194.2

The potential tax increases to pay for healthcare reform may include the following:

1. Employer Health Care Exclusion -- The exclusion could be capped or phased-out for higher-income employees. For higher-income persons, part of their medical premium will be taxable, even though paid by the employer.

2. Income Tax Deduction -- The 7.5% floor could be raised to a substantially higher level and reduce the value of the deduction.

3. HSAs and FSAs -- The health savings account (HSA) or flexible spending arrangement (FSA) could have reduced contribution limits. FSA fund distributions could be limited to qualified itemized medical deductions.

4. Medicare -- All state and local employees may be required to participate.

5. Alcohol Tax - An increased and uniform national tax may apply to alcohol.

6. Soft Drink Tax -- A new tax may be levied on sugar-enhanced beverages.

7. Top Brackets Increase -- The current top 35% and 33% brackets may rise to 39.6 % and 36%.

8. Itemized Deduction Limits -- Higher income individuals may have a 3% floor on deductions and would also lose their personal exemptions.

9. Capital Gains Tax Increase -- The 15% capital gains tax rate may be increased to 20%.

10. Estate Tax -- Retained with $3.5 million exemption and 45% rate.

11. Estate Tax Discounts -- Valuation discounts reduced or eliminated.

12. Grantor Retained Annuity Trusts -- GRATs limited to ten years or longer.

5/26:

Date:	2009-05-10
By:	Almenberg, Johan (Dept. of Economic Statistics, Stockholm School of Economics) Karapetyan, Artashes (Empirical Institute of Economics and SFI, University of Zürich)
URL:	http://d.repec.org/n?u=RePEc:hhs:hastef:0718&r=cbe
We use a survey to identify a consumer bias with regard to different sources of debt-financing. Less salient debt may generate psychological benefits. This should be weighed against the possible economic costs of a sub-optimal capital structure, but low levels of financial literacy make it unlikely that all households perceive the full economic costs. As a result there is a bias in favour of less salient debt. In a market with limited scope for arbitrage this consumer bias is likely to generate inefficiencies. We examine such a market in both theory and practice. The predictions of our model are given strong support by market data.

5/26: I stampeded a herd of cattle. I fish on a cattle ranch in Sacramento. Came upon  about 40 cattle in a field when I was walking to a pond. And they just took off in full gallop. Not a day I am soon  to forget. 

525: Economic Advice -

The first question to ask yourself when you listen to one of these supremely confident forecasts is how does the forecaster get paid? Some conflicts of interest are pretty clear. A car salesman is not likely to volunteer all the recalls and known defects for the model you're asking about. But you know that when you step into the showroom, and you take appropriate steps to balance the pleasant patter with your own research from independent sources.

For some reason, consumers who will dicker for the last $50 off the price of a new car don’t think twice about following the advice of a stranger on TV — or worse, turning over their life savings to a “financial adviser” based on nothing more than a magazine ad or referral from a friend. Investors turned their hard-earned retirement savings over to money managers who, on average, don’t even keep up with the return of stock market indices. Home buyers signed dozens of pages of imponderable mortgage documents based on little more than a real estate agent or mortgage broker’s soothing reassurance that home prices “never go down.”

5/24: 401k: Charles Schwab has released  data showing that a significant number of 401(k) assets held by workers who leave their jobs have been left behind in former employers' plans.  43% of assets held by 401(k) participants who left their jobs in the first quarter of 2008 had not been moved a year later. Of those that did take a distribution, 75% were rolled over into IRAs, 14% were cashed out, 7% were rolled into a new employer's plan, and 4% were taken in other forms of distributions

5/24: How the mighty have fallen:

Past NAPFA President Charged In Kickback Scheme

A former president of the National Association of Personal Financial Advisors has been charged with taking kickbacks from unregistered investment pools in which his Wisconsin advisory firm placed $102 million in client assets. James Putman, founder, majority owner and CEO of Wealth Management LLC in Appleton, Wisc, and Simone Fevola, the firm's former president, a minority owner and chief investment officer, each accepted $1.24 million in undisclosed payments derived from investments made by the unregistered investment pools, according to a civil complaint filed by the Securities and Exchange Commission. Putman could not be reached for comment on the charges by press time. of the National Association of Personal Financial Advisors (NAPFA) in 1996-1997 and is cofounder and first president of the Northeast Wisconsin Chapter of the International Association for Financial Planning, now the Financial Planning Association. He adds that the firm has been named among the “100 Great Financial Planners” by Mutual Funds magazine, one of the “250 Best Financial Advisers” by Worth magazine, and one of the “150 Best Financial Advisers for Doctors” by Medical Economics magazine

Do you notice what is really going on? The comments about being a financial planner are immediately usurped by how much money he has in control. Betcha- like most NAPFA members and CFPs- the financial planning is nothing more than a marketing gimmick to see how much assets they can gather under management. A CFP is NOT viable as a money manager. They do not have the background. Period

5/24: Unemployment: The number of people who are continuing to receive jobless benefits rose to nearly 6.7 million from about 6.6 million, according to the Labor Department. That's the highest total on records dating to 1967, and the 16th straight weekly record. New jobless claims fell to a seasonally adjusted 631,000 last week, down from a revised figure of 643,000 the week before.

Unemployment may not peak until about a year from now. .5/24: How the mighty have fallen

5/24:

Dollar hits five-month low

The dollar dropped to a five-month low against a basket of currencies as fears over the US debt position grew in the wake of a downgrade to the outlook for the UK

Feeling better about the economy yet???

5/24: Eating Habits: Suggestions When Feeding  Your Elderly Loved Ones . by Ryan Mackey
Alleviate any diversions when eating, and be basic with your meals:
Use only utensils that are needed.

Have cups with lids to avoid a mess if spilled.

If possible, use bowls instead of plates.

Provide food that can easily be eaten. Serve food that is already cut, cooled, and easily recognizable to the person.
Caring for those with swallowing or chewing problems:
Use simple spoken commands to help them realize when to swallow and when to chew.

Do not serve food that breaks apart easily or foods that tend to be messy..
Serve food in small amounts, and make sure food is cut up so they can chew and swallow without much effort.

Allow them a moment to swallow and then prepare for their next bite.

Check to see that food is not too hot for them, and have it moistened if possible..
Caring for those who eat too much or too little:
Allow for healthy snacks throughout the day to offset eating at just mealtime.

Ensure the person receives enough exercise to justify their food intake.

Serve foods that the person likes best to keep up their appetite.

Think about your style of cooking. Does it supply the proper nutrition and is easy to digest

5/24: Historical Interest rate data (Federal Reserve) 



5/20: Don't get sick: Milliman, Inc. announced that average total medical spending for its "typical American family of four" reached $16,771, an increase of $1,162. While cost trends are decelerating for the third-straight year, the total dollar increase is the highest since 2006 - 7.4%, Milliman said. The Milliman Medical Index (MMI) tracks the changes in average yearly health care costs when the family of four is covered by an employer sponsored preferred provider organization (PPO). Of the total medical cost for Milliman's family of four, the employer pays about 59%, while the employee pays 24% in payroll deductions and 17% in out-of-pocket costs

5/20: S&P Earnings
“While the stock market is up sharply since early March, the economy as well as corporate earnings continue to suffer. Today’s chart helps provide some perspective as to the magnitude of the current economic decline. Today’s chart illustrates that 12-month, as-reported S&P 500 earnings have declined over 90% over the past 20 months (with over 90% of S&P 500 companies having reported for Q1 2009), making this by far the largest decline on record (the data goes back to 1936). In fact, real earnings have dropped to a record low and if current estimates hold, Q3 2009 will see the first 12-month period during which S&P 500 earnings are negative.”

5/20: US oil prices regain $60 a barrel level
May 19 2009 11:09
US crude oil prices regained the $60 a barrel level while base metals, agricultural and soft commodities all made gains on hopes for a more rapid recovery in the global economy

5/20: German investor confidence at 3-year high
May 19 2009 11:06
German analyst and investor morale rose to its highest level in nearly three years in May, reinforcing expectations that the worst of the slump is over for Europe's largest economy

I will probably wait till August to see if the "other shoe will drop". 

5/19: Real Estate Glossary and Examples  

The examples are good.


5/18: CPI: On a seasonally adjusted basis, the CPI-U was unchanged in April after falling 0.1 percent in March.  The index for all items less food and energy increased 0.3 percent in April after increasing 0.2 percent in March.
I am not sure I believe that. A lot of the food products I buy may not cost any more, but I get less. 16 ounces is now down to 12. Soda at Wal Mart went from 58 cents to 78 cents in 1.5 years.  

5/18:

1. Herd Behavior in Financial Markets: An Experiment with Financial Market Professionals

   Date:	2008-02
   By:	Antonio Guarino (University College London) Marco Cipriani (George Washington University)
   URL:	http://d.repec.org/n?u=RePEc:wef:wpaper:0047&r=cbe
   We study herd behavior in a laboratory fnancial market with financial market professionals. An important novelty of the experi- mental design is the use of a strategy-like method. This allows us to detect herd behavior directly by observing subjects?decisions for all realizations of their private signal. In the paper, we compare two treatments - one in which the price adjusts to the order ?ow in such a way that herding should never occur, and one in which the presence of event uncertainty makes herding possible. In the first treatment, traders herd seldom, in accordance with both the theory and previous experimental evidence on student subjects. A proportion of traders, however, engage in contrarianism, something not accounted for by the theory. In the second treatment, on the one hand, the proportion of herding decisions increases, but not as much as the theory would suggest; on the other hand, contrarianism disappears altogether. In both treatments, in contrast with what theory predicts, subjects sometimes prefer to abstain from trading, which affects the process of price discovery negatively.

2. Mass Psychology in Action: Identification of Social Interaction Effects in the German Stock Market

   Date:	2009-04
   By:	Thomas Lux
   URL:	http://d.repec.org/n?u=RePEc:kie:kieliw:1514&r=cbe
   We use weekly survey data on short-term and medium-term sentiment of German investors to estimate the parameters of a stochastic model of opinion dynamics. The bivariate nature of our data set also allows us to explore the interaction between the two hypothesized opinion formation processes, while consideration of the simultaneous weekly changes of the stock index DAX enables us to study the influence of sentiment on returns within a behavioral model of boundedly rational traders. Technically, we extend the maximum likelihood framework for parameter estimation in agent-based models introduced by Lux (2009a) by generalizing it to bivariate and trivariate settings. As it turns out, short-term sentiment is governed by strong social interaction with abrupt changes of direction while medium-term sentiment is a slowly moving process with more moderate social interaction. The trivariate model can potentially predict stock returns out-of-sample on the base of medium-run sentiment at least if an apparently spurious influence from short-run sentiment is discarded
   Keywords:	Opinion formation, social interaction, investor sentiment

5/17:

U.S. MORBIDITY AND MORTALITY UPDATE
Notifiable Diseases and Reported Deaths

check out all the deaths and impress your neighbors, kids, mother in law.

5/17: News Release

Shapiro did all she could before becoming head of the SEC to avoid any fiduciary duty for brokers or firms. Actually, she did about everything she could to stop any broker from knowing anything.  I know because I tried for years to get basic investments courses to be required for brokers. Repeated ad finitum, no broker has ever been taught the fundamentals of investing (alpha, beta, diversification, standard deviation, correlation and more). There is nothing on risk. Just in case you missed that, there is nothing on risk. No wonder the messes of 2000 and 2008 occurred. Most all advisers are borderline incompetent and the overseers were asleep at the wheel. 

Shapiro also stated that FINRA was a procedural  entity, not a substantiative one and not even arbitrators could be taught anything.  NASD/FINRA said in the 90's that the brokerage firms would never allow proper instruction since it would slow sales (true). So much for protecting consumers. 

Ketchum is the current chairman and chief executive of the Financial Industry Regulatory Authority Inc. and is calling for bringing investment advisers under a self-regulatory organization in order to leverage the ability of the Securities and Exchange Commission to supervise advisory firms. He is now calling for all advisers to adhere to a fiduciary standard.

So, who or what is a fiduciary? In the shortest form, “A fiduciary owes an obligation to carry out the responsibilities with the utmost degree of "good faith, honesty, integrity, loyalty and undivided service of the beneficiaries interest."

Isn’t that wonderful? Don’t you feel all warm and fuzzy? Is your cat purring? Unfortunately it is all a bad joke.

Admittedly, the definition of fiduciary does contain some valid issues but it misses the most critical. Knowledge. Your mother can provide all the elements listed above but you would be dumber than a rock to have her do brain surgery on your daughter. Even your turtle. Doesn’t it seem like the height of hypocrisy to demand the highest duty to consumers when the agents have little comprehension of the fundamentals of investing. Want simple proof? No broker has ever been taught how to use a financial calculator. Over 600,000 ‘fiduciaries’ and none can do a present or future value.  

Heed this-  Never , NEVER, NEVER GIVE MONEY TO ANYONE UNLESS THEY HAVE AND CAN EFFECTIVELY UTILIZE AN HP 12C CALCULATOR OR SIMILAR
If you or your adviser does not have and cannot use a financial calculator, then he/she does not understand money. You are committing financial/economic suicide when you entrust money to someone who doesn't know how it works.

Pundits will say that personal capability is not necessary. They have a computer and financial software to do the work. As the church lady used to say, “well, isn’t that special”. In a recent case against UBS and a CFP, this is what they ‘computed’.  The investors could get a $377,000 after tax return on an asset base of $2,140,000 each year for the next 25 years. This represents returns far above Madoff!!! All completely ‘acceptable’ simply because it came out of a computer and ‘that it must be right’. Just plain terrible but nobody checked any of the numbers. 

Want more absurdity about duty? AIG was picking up billions in bailout funds while at the same time- with complete acceptance by the SEC, FINRA and all 50 states-  it was legally illustrating to consumers through backtesting that it was possible to get 17.53% return each year for at least the next 50 years. Another Madoff and nobody has blinked an eye.

Ketchum notes that Finra would need to add investment advisory expertise to its staff to oversee the advisory industry. Well, they can also add the Silver Surfer for all I care since, as stated over and over, advisers/brokers et al are not taught risk. And they are going to sit around with a bunch of attorneys discussing what? Golf scores? Whatever it is, it is not going to be how to make the industry better (knowledgeable) through education since they don’t have anyone that could teach it anyway. Shapiro had made it  very, very clear that FINRA would not make any attempt to educate and  Ketchum is going to be no better.

There has been billions of dollars lost through the complete ineptness, stupidity and gross incompetence of the securities regulators. The SEC is a lost cause under Shapiro. Yes, you will see more ‘investigations’ but what can you expect in the end when the regulators cannot do basic financial calculations.

Ketchum wants to introduce a fiduciary duty to advisers where 95%+ have never been taught the fundamentals of investing. Most cannot spell fiudcari. 

We’re screwed.

5/17:  "The Financial Crisis and the Systemic Failure of Academic Economists

The economics profession appears to have been unaware of the long build-up to the current worldwide financial crisis and to have significantly underestimated its dimensions once it started to unfold," they write. "In our view, this lack of understanding is due to a misallocation of research efforts in economics. We trace the deeper roots of this failure to the profession's insistence on constructing models that, by design, disregard the key elements driving outcomes in real world markets."

The paper, generally referred to as the Dahlem report, condemns a growing reliance over the past three decades on mathematical models that improperly assume markets and economies are inherently stable, and which disregard influences like differences in the way various economic players make decisions, revise their forecasting methods and are influenced by social factors. Standard analysis also failed, in part, because of the widespread use of new financial products that were poorly understood, and because economists did not firmly grasp the workings of the increasingly interconnected global financial system, the authors say.

One result of this, argues Winter, who is not one of the authors but agrees with much of what they say, is to build into models an assumption that all market participants -- bankers, lenders, borrowers and consumers -- behave rationally at all times, as if they were economists making the most financially favorable choices. Clearly, he says, rational behavior is not that dependable, or else people would not do self-destructive things like taking out mortgages they could not afford, a key factor in the financial crisis. Nor would completely rational executives at financial firms invest in securities backed by those risky mortgages, which they did.

By relying so heavily on the view of humans as rational, the paper's authors argue, economists ignore evidence of irrational behavior that is well documented in other disciplines like psychology and sociology. Even if an individual does act rationally, economists are wrong to assume that large groups of people will react to given conditions as an individual would, because they often do not. "Economic modeling has to be compatible with insights from other branches of science on human behavior," they write. "It is highly problematic to insist on a specific view of humans in economic settings that is irreconcilable with evidence."

The authors say economists badly underestimated the risks of new types of derivatives, which are financial instruments whose value fluctuates, often to extremes, according to the changing values of underlying securities. Traditional derivatives such as stock options and commodities futures are well understood. But exotic derivatives devised in recent years, including securities built upon pools of mortgages, turned out to be poorly understood, the authors say. Credit default swaps, a form of derivative used to insure against a borrower's failure to repay a loan, played a key role in the collapse of American International Group.

5/14: ING Grope NV, the Dutch bank and insurer, reported $1.08 billion  net loss for the first quarter, blaming falling asset prices, the weak performance of insurance contracts, and charges for restructuring its business.

How about they were simply stupid.

5/13: Cannot be fiduciaries: The law of ERISA has always provided that qualified retirement plans such as 401(k) plans should ideally be run by professional fiduciaries, not by plan sponsor executives with little (or no) experience (much less time or interest) in such matters. Many sections of ERISA that grant fiduciary delegating authority, in fact, attest to this, as does case law.
1. Plan sponsors that choose to delegate their responsibilities and liabilities to a professional named fiduciary can, in effect, get out of the retirement plan business and be free to concentrate fully on their business so they can stay in business during these troubled times instead of worrying about fiduciary risks they are neither prepared nor trained to manage. Sponsors never need worry about somehow "losing control" of their plan, since ERISA requires them to always retain the residual fiduciary responsibility to ensure that those to whom they have delegated authority are--and remain--prudent delegatees. In short, plan sponsors always have the power to "pull the plug" on such delegatees.

EFM: The point is that you can't be a fiduciary if you do not have a background in risk. Brokers don't. CFPs don't. And so on. A sponsor can supposedly be removed from any liability by using almost any adv iser classified as an RIA. Which, for all intents and purposes, means nothing. 

5/13: SS and Medicare-
 The financial health of Social Security and Medicare, the government's two biggest benefit programs, worsened in the past year because of the severe recession.
Trustees of the two programs said today that Social Security will start paying out more in benefits than it collects in taxes in 2016, one year sooner than projected last year, and the giant trust fund will be depleted by 2037, four years sooner.
5/13: Click here to see a U.S. map of unemployment (now over 8% and up over 3% this last year)

5/13: Correlation tracker

5/12: In-house fraud cases surge
May 10 2009 23:30
Fraud committed against companies by their own employees has surged this year, new data suggest, providing fresh evidence that the recession is fuelling a rise in crime

5/12: Public sector workers start to feel the pain
May 11 2009 00:24
The jobs market will continue to shrink over the next three months, according to a survey of more than 500 employers that suggests the public sector is starting to suffer

5/12: Insurance: 1. Surrender of an Insurance Contract. Taxpayer acquires a permanent insurance contract and pays $64,000 in premiums over eight years. At that point, taxpayer surrenders the policy to insurer for $78,000 in cash. Because the taxpayer has a $64,000 investment in the contract and received $78,000, under Sec. 72(e)(5)(A), the $14,000 excess is taxable as ordinary income.

2. Sale of Policy to Third Party. With the same taxpayer who had the permanent contract, he or she sells it to a third party for $80,000. Under Sec. 1001(d), the basis of $64,000 is reduced by $10,000 of insurance value and the taxpayer has gain of $26,000. The same $14,000 increase in cash value on the insurance is ordinary income and the balance of $12,000 is long-term capital gain.

3. Sale of Term Policy. Taxpayer purchased a 15 year term policy and made payments of $45,000 over eight years. The insurance cost during that time is $44,750. Taxpayer sells to third party for $20,000. The basis is reduced by cost of insurance from $45,000 to $250. Taxpayer has a long-term capital gain of $19,750 because the gain is not a "substitute for ordinary income."

Under Rev. Rul. 2009-14, there are three tax scenarios for buyers. One is a buyer of a term policy, the second is the buyer who resells the policy and the third is a foreign corporation purchaser.

1. Buyer of a 15 Year Term Policy. The purchaser is a U.S. investor who buys a policy for $20,000 and makes premium payments of $9,000. The insured passes away 18 months later and the insurance company pays $100,000 to buyer. The buyer recognizes $100,000 of income less $29,000 of basis. Because the funds are received under an insurance contract, the death benefit of $71,000 is ordinary income.

2. Buyer Who Resells Policy. In the second situation, the purchaser buys the term policy for $20,000, pays $9,000 in premiums and sells the policy for $30,000. Because this is a "contract solely with the view to profit," there is no reduction in basis for the insurance value. Purchaser holds a capital asset and reports $1,000 of long-term capital gain.

3. Foreign Corporation Buyer. The scenario is similar to the first buyer scenario with a purchase of a 15 year term policy for $20,000 and premium payments of $9,000. Eighteen months later the insured passes away and the insurance company makes payment of $100,000 to the foreign corporation. Under Sec. 861(a), the $71,000 payment in excess of basis is taxable to the foreign corporation as income from United States source.

5/12: Giving: While most foundations plan to decrease their giving in 2009, many are responding to the recession by providing grants to help poor families and others hit hard by the tough economic times, according to a new survey.  The Council on Foundations surveyed 430 foundations in March and found that 62 percent expect to reduce their grant making this year. Almost half of the respondents said they will decrease their giving budgets by more than 10 percent.  
        In response to the economic downturn, most foundations — 92 percent — are focusing on assisting low-income people, the unemployed, and others. Of that group, 31 percent said they are increasing support for so-called basic needs — fighting hunger, providing emergency shelter, paying utility bills, and creating jobs — and 6 percent said they have started to support such causes for the first time.   The council also said that 60 percent of foundations reported that they are trimming their operating budgets for 2009. For example, 45 percent aren’t providing salary increases to their staff members this year, 27 percent have frozen hiring, 16 percent have eliminated unfilled job positions, and 6 percent laid off employees.


5/12: 

5/12: Has risk subsided??: Merrill's economist David Rosenberg

Risk is much higher now than it was 18 weeks ago.  The nine-week S&P 500 surge from 666 at the March lows to 920 as of yesterday has all but retraced the prior nine-week decline from the 2009 peak of 945 on January 6 to the lows on March 9. We believe it is appropriate to put the last nine weeks in the perspective of the previous nine weeks. To the casual observer, it really looks like nothing at all has happened this year, with the market relatively unchanged. But something very big has happened because the risk in the market, in our view, is much higher than it was the last time we were close to current market prices back in early January, for the simple reason that we believe professional investors have covered their shorts, lifted their hedges and lowered their cash positions in favor of being long the market. 

Employment, output, income, sales still in a downtrend. Considering what transpired from an economic standpoint, the decline in the first nine weeks of the year was rather appropriate in the midst of the worst three-quarter performance the economy has turned in roughly 70 years. The rally of the past nine weeks appears to be rooted in green shoots. While it may be the case that the pace of economic decline is no longer as negative as it was at the peak of the post-Lehman credit contraction, the reality is that employment, output, organic personal income and retail sales are still in a fundamental downtrend. 

Need to see an improvement in the first derivative. We have evidence that the consumer, after a first-quarter up-tick that was front- loaded into January, is relapsing in the current quarter despite the tax relief (didn’t we see this movie last year?). Not until improvement in the second derivative morphs