Master Financial Education
Daily Commentary 2015
E. F. Moody Jr.


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

Steven Winks

Secretary of State John Kerry - In America,  "you have a right to be (as) stupid (as) you want to be."
(But too many Americans are abusing the privilege)

Why did our systems fail and why will they continue to do so?  From Paul Volcker

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

You must not believe everything you think

Stephan Thomas Vitas

You are entitled to your own opinion. You are not entitled to your own facts.

Kevin Kind

Words  are chosen in order to influence us as manipulable objects, not to inform us as autonomous subjects.

Stephen Colbert

language intentionally designed to influence rather than inform is now ubiquitous in the business of sports and politics and markets
 Why? Because it works.

Ben Hunt

Be careful who you call your friends. I'd rather have four quarters than one hundred pennies.
 Al Capone

Investing is not easy. Anyone thinking that it is, is stupid

Charlie Munger

There is no sense in being precise when you do not know what you are talking about

        John von Neumann

There are decades where nothing happens; and there are weeks where decades happen.


Great spirits have always encountered violent opposition from mediocre minds 

Albert Einstein


Uniform (Im)Prudent Investor Act- Waaaaaaaaaaaaaaaaaay Out of Date

World Clock by

 I now have contracted with one of the major professional (non industry) associations in the U.S. to provide videos on a host of financial issues to their members

10/4: Is there an appropriate time to decline surgical procedures

This is a tricky area for the elderly, particularly for those with dementia.

Is the procedure going to allow the person another good X years?

Or will it lead to more pain and suffering just to extend life? 

10/4: And this as well.

How do I handle bathroom accidents?

10/4: Soda

Didn't think this would ever happen- wonder if a hedge fund shorted the stock

10/4: Bad omen for interest rate rise

The dollar fell while Treasury prices and gold jumped as a soft US employment report prompted participants to push back their expectations for when the Federal Reserve might raise interest rates.

Interest rate futures moved to price in a 29 per cent chance of the US central bank raising rates for the first time in a decade in December, down from 43 per cent on Thursday, according to Bloomberg calculations. The chances of a move this month tumbled to just 8 per cent.

“A uniformly dreadful September US labour report effectively buries any hopes for an October rate hike from the Fed,” said Rob Carnell, chief international economist at ING.

“But it raises doubts too about the probability of a December hike, unless the Fed changes the basis upon which it decides policy rates.”

10/4 traffic deaths

10/4: The rise of ETFs

10/4: A Balancing Act: Simple Steps to Help Seniors See the Need for Home Modifications

A police officer called the station on his radio. 
"I have an interesting case here. An old lady shot her husband for stepping on the floor she just mopped." 
"Have you arrested the woman?" 
"Not yet. The floor's still wet."

10/4: OCD in Elderly for Caregivers
By Cheryl Ellis, Staff Writer


Obsessive-compulsive disorder (OCD) is defined in part by the Merck Manual as “anxiety provoking thoughts and urges.”  While the publication (a staple in the medical field for years) notes that symptoms are not often prominent in the elderly, caregivers may disagree.

Early stage Alzheimer’s patients may obsess about minor issues, such as the garbage being taken out.  In some cases, it may become a “chicken or the egg” question as to which came first, the OCD or Alzheimer’s.

Since part of OCD involves performing repetitive tasks that balance the anxiety (using hand sanitizer repeatedly to avoid germs), it may not be immediately visible that there is an obsessive component to the elder’s thought process.   Grandma may spend twenty minutes wiping out the bathroom sink after she has gone to the bathroom.  Part of her extended cleaning out of the sink may be due to poor vision, or remembering something from a past not known by current family. 

Elder folks who can identify “habits” begin to disassemble the cycle of worry that accompanies OCD.  Dorothy, who is well into her seventies and a former nurse, mentions that she has several “habits” that have cropped up since her husband passed away.  “I’ll just go right to the refrigerator in the middle of the night, not turning on the light.  That’s a HABIT.”  She’s noted others, such as waking up several times in the middle of the night.  During family visits, she wakes hardly at all, and concludes she’s conditioned herself to associating being alone with needing to wake up. 

A bright woman who applied much rational thought and association in her nursing career, she is still able to do so today.  Dorothy emphasizes that recognizing a habit is one thing.  “Doing something about it, well that’s another!”

It’s evident that the key to her dealing with these habits is making a connection; but more importantly, she has removed the anxiety component.  Acceptance of these behaviors and the knowledge that she will break them when she chooses give her a sense of autonomy.

Caregivers can work toward helping their older family members retain a sense of self-control by remaining calm when “habit” strikes.  When Grandma spends 20 minutes cleaning the sink, she can be asked “What makes you do such a good job?”  This will open the door for her to make her own connection as to why.  The caregiver may learn about the past (“My grandfather was in the military and we had to make sure it was clean and sparkling”).  Or they may learn about a contemporary occurrence (“I heard my son say the place is a mess. I don’t want him to think I’m a burden”).

In either case, an artful question combined with a compliment may draw out information.  It also allows caregivers to begin the process of reassurance which can decrease anxiety.

OCD is designated as an anxiety disorder, and any type of stress reduction technique that is agreeable to the person and caregiver can help tremendously.  Aromatherapy, guided meditation, relaxing music and changes in diet (like reducing caffeine) are alternative methods of stress reduction that may have some impact.

Howard Hughes, famous eccentric billionaire, suffered from OCD.  Those who have seen the movie “The Aviator” or who remember accounts from decades before have an idea of how bizarre this individual became.  While most people live undocumented lives, we can look at the experiences of individuals in public power to relate to.

The Anxiety Disorders Association of America ( has a great deal of information to educate the layperson on anxiety in OCD, as well as other types of anxiety.  Caregivers may find themselves developing a generalized anxiety disorder in response to the OCD disorder for those they are caring for.

Remember that when elders switch locations (moving in with a child, or to assisted living), they are going “out of the box” and stress factors increase.  This increase in stress may turn Mom’s “habit” of cleaning when she is a little nervous into a full blown obsession over time.  Work on the root cause, always.

Compulsive hoarding or collecting may have developed from not having enough basic supplies during younger years.  The cliché “salad days” may literally have meant that there were only vegetables from the garden to eat.  A parent who always made sure there was plenty of food in the house may now not only have 65 cans of green beans (bought at scratch and dent warehouses), but stacks of newspaper coupons that are beyond the expiration date.

Instead of cleaning house in one fell swoop, try getting the elder to focus on the abundant stores they have, and how they can help others who are less fortunate.  Some caregivers may have tremendous stress when it comes to dealing with the situation.  At that point, calling in the “cavalry” of friends and associates who offer vague help is in order.

“I need you to help by going through Dad’s canned goods to find out which ones are expired or near expiration.  Can you go with us to donate them to the local shelter?”

Any problems with compulsive hoarding require help.  The Obsessive Compulsive Foundation has a website ( designed to guide caregivers.  Support groups and other information can be found there.  From that point, work on recruiting friends and family to help you with this issue.  In the case of animal hoarding, the local Humane Society may be of help.  Never, ever give any pet (hoarded or just a small excess) to anyone you do not know, or to any shelter that you do not know. 

Even caregivers can have some obsessive compulsive traits develop with the day-to-day caregiving of an OCD elder.  Look through information to see where you may have borderline events, too.  By working

10/1: Munger and Buffett maintain that the way to reduce risk is to think broadly.

In order to think about investing, you must think about thinking. Warren and Charlie purposely clear their calendars for extended periods so that they can just sit and think. Without exception, all the [great] investors are broad thinkers. And they read constantly because to do what investing really requires, you need to know a lot about a lot.

Munger’s “Lattice of Mental Models”

Right. There are at least 10 fundamental models [across] all disciplines, including history, physics, philosophy, sociology, psychology, that are super-powerful; for example, return to the mean, compounding, evolution – all of which you should be thinking about at the same time. That way, you’ll produce the lollapalooza called wisdom.

In the short term, the market is not wise. When you treat Mr. Market as wise, you’re in big trouble. Some days he’s going to give you a bargain; other days, he’ll offer you something that’s overpriced. In the short term, the market is a popularity contest, and that creates mispricing.  Extreme libertarians think the market is perfect, that it can never be wrong. Rubbish!

Warren Buffet

"An unexpected rise in inflation also tends to reduce the real purchasing power of labor income for a time because nominal wages and salaries are generally slow to adjust to movements in the overall level of prices. Survey data suggest that this effect is probably the number one reason why people dislike inflation so much. In the longer run, however, real wages — that is, wages adjusted for inflation — appear to be largely independent of the average rate of inflation and instead are primarily determined by productivity, global competition, and other nonmonetary factors. In support of this view, figure 3 shows that nominal wage growth tends to broadly track price inflation over long periods of time."

"As I noted earlier, after weighing the costs associated with various rates of inflation, the FOMC decided that 2 percent inflation is an appropriate operational definition of its longer-run price objective. In the wake of the 2008 financial crisis, however, achieving both this objective and full employment (the other leg of the Federal Reserve's dual mandate) has been difficult, as shown in figure 4. Initially, the unemployment rate (the solid black line) soared and inflation (the dashed red line) fell sharply. Moreover, after the recession officially ended in 2009, the subsequent recovery was significantly slowed by a variety of persistent headwinds, including households with underwater mortgages and high debt burdens, reduced access to credit for many potential borrowers, constrained spending by state and local governments, and weakened foreign growth prospects. In an effort to return employment and inflation to levels consistent with the Federal Reserve's dual mandate, the FOMC took a variety of unprecedented actions to help lower longer-term interest rates, including reducing the federal funds rate (the dotted black line) to near zero, communicating to the public that short-term interest rates would likely stay exceptionally low for some time, and buying large quantities of longer-term Treasury debt and agency-issued mortgage-backed securities."10/1: Future Adviser

The main web application, which launched last week, is completely free to consumers and works much like other wealth management tools.

Link every account tied to your wallet and let the site untangle the mess–from figuring out exactly how much you're paying in brokerage fees to honing in on which of your funds aren't doing that hot



10/1: Another fraud?

There have been several studies indicating that most of the articles/theories in medical publications were wrong. A more recent review of financial heuristics and theoretcial claims were wrong. And now

a painstaking yearslong effort to reproduce 100 studies published in three leading psychology journals has found that more than half of the findings did not hold up when retested. 
The vetted studies were considered part of the core knowledge by which scientists understand the dynamics of personality, relationships, learning and memory.

The new analysis, called the Reproducibility Project, found no evidence of fraud or that any original study was definitively false. Rather, it concluded that the evidence for most published findings was not nearly as strong as originally claimed.

Dr. John Ioannidis, a director of Stanford University’s Meta-Research Innovation Center, who once estimated that about half of published results across medicine were inflated or wrong, noted the proportion in psychology was even larger than he had thought. He said the problem could be even worse in other fields, including cell biology, economics, neuroscience, clinical medicine, and animal research

The new analysis focused on studies published in three of psychology’s top journals: Psychological Science, the Journal of Personality and Social Psychology, and the Journal of Experimental Psychology: Learning, Memory, and Cognition.

EFM- Given that open fraud was not the issue but ineptness does not change the final summary. Misleading examples and assumptions unquestionably screw the public.


  1. The ABCs of financial education : experimental evidence on attitudes, behavior, and cognitive biases




Carpena,Fenella ; Cole,Shawn A. ; Shapiro,Jeremy ; Zia,Bilal Husnain

This paper uses a large scale field experiment in India to study attitudinal, behavioral, and cognitive constraints that stymie the link between financial education and financial outcomes. The study complements financial education with (i) participant classroom motivation with pay for performance on a knowledge test, (ii) intensity of treatment with personalized financial counseling, and (iii) behavioral nudges with financial goal setting. The analysis finds no impact of pay for performance but significant effects of both counseling and goal setting on real financial outcomes. These results identify important complements to financial education that can bridge the gap between financial knowledge and financial behavior change.


Access to Finance,Curriculum&Instruction,Financial Literacy,Effective Schools and Teachers,Access&Equity in Basic Education


9/30: Just another element of fraud

Fraudulent ambulance rides: Medicare paid more than $50 million, IG says

By Amy Goldstein

Medicare paid more than $50 million in potentially improper bills for ambulance rides for older and disabled Americans, investigators say.  Read full article »

9/30: Mutual funds

9/30: Life insurance coverage

9/30 This is why you do not make big plays with individual stocks

Qatar’s sovereign wealth fund has had a quarter to forget — suffering as much as $12bn of losses on Volkswagen, Glencore and Agricultural Bank of China, three of the biggest equity investments of its roughly $250bn fund.

9/30" Memory-

Researchers in the US have developed an implant to help a disabled brain encode memories, giving new hope to Alzheimer’s sufferers and wounded soldiers who cannot remember the recent past.

The key to the research is a computer algorithm that mimics the electrical signalling used by the brain to translate short-term into permanent memories.

This makes it possible to bypass a damaged or diseased region, even though there is no way of “reading” a memory — decoding its content or meaning from its electrical signal.


News to me
Some Funds in Your 401(k) Aren't Really Mutual Funds After All
"[Collective investment trusts] look and act a lot like mutual funds, but generally have lower fees and disclose less about their inner workings to 401(k) participants.... [S]uch investments currently account for $2.4 trillion, or 16%, of the $15 trillion in 401(k)-style and pension plans, up from $1.3 trillion (and 12.7% of the total) in 2009 ... The trusts are accounts available only to retirement plans. They are sponsored by banks and trust companies and are primarily overseen by banking regulators, rather than subject to mutual-fund rules enforced by the [SEC]."


Saudi Arabia withdraws overseas funds The country has withdrawn tens of billions of dollars from global asset managers as the oil-rich kingdom seeks to cut its widening deficit and reduce exposure to volatile equities markets amid the sustained slump in oil prices. The Saudi Arabian Monetary Agency’s foreign reserves have slumped by nearly $73bn since oil prices started to decline last year.

EFM- But they won the brass ring for causing the shut down of a lot of fracking in the U.S. since they are not financially justified with the low prices. The Saudi's make less as well but their costs are a lot less.

9/28: Purchasing managers index

Low but far from recession- at least for right now

9/28: Liquidity in mutual funds

funds will be required to classify assets into one of six liquidity buckets, depending on how long it would take to convert the asset to cash, ranging from two to three business days up to more than 30 calendar days.

Funds will also have to establish a minimum amount of assets that can be converted into cash within three days without materially affecting the assets price. The public will have 90 days to comment on the proposed rule.

Mutual funds and other open-end funds hold more than $15tn of assets, said Mary Jo White, SEC chair. “Among these strategies are ones that rely on securities that tend to be less liquid, such as high-yield bond funds, emerging market equity and debt funds, and funds with alternative strategies


Aging and Sex Through the Eyes of a Psychologist

9/28: This is really disturbing

Thousands Enter Syria to Join ISIS Despite Global Efforts

Nearly 30,000 foreign recruits have now poured into Syria to join the civil war, stark evidence that an international effort to enforce antiterrorism laws is not diminishing the militants’ ranks.

This, by itself, could push the middle east to join hands with Assad to stop ISIS.
Saudi Arabia will have to step up many fold

9/28: Dave Ramsey- read the article first


Good commentary overall and allow me to take it further...........

An investment adviser, per se, does not have the competency to judge allocations. Why? Because brokers and registered investment advisers have never been taught the fundamentals of investing- standard deviation, diversification, asset allocation, correlation and on and on. That is simply due to the fact that the items are not tested on the licensing exam (and I have taught most of them). Pundits always point to the extra criteria of a "competent" adviser. Okey dokey, who or what is that? Most would suggest a CFP. Yes it is better but the effort is akin to ONE semester on money. It is NOT one semester on investments, one semester on insurance et al. But nary anyone makes reference to that (I have taught most of the CFP classes in the past). So who to use- tough call and it would take too long to address.

Investing is not easy. Those who think it is are stupid
Charlie Munger

Then we go to what is conservative, moderate, aggressive, speculative. Are those defined in any licensing? No? And if the industry has its way, it will stay that way since lawyers will give it the ol' "he said, she said" argument. However I submit that a conservative must be willing to accept a 10% to 15% loss at any given time since that simply represents a normal correction. Anyone unwilling to accept that is not an investor. Moderate might be 20% to 35%. Aggressive (which includes a pure 5&p 500) is around 35% to 55%. (Do losses of 44% in 2000 and 57% (top to bottom) in 2008 ring a bell??). (It is possible- and absolutely necessary- to do a Risk of Loss for every allocation- but that would take too long here. It also requires a financial calculator. Do you think that brokers or registered advisers are taught how to use one in licensing? Go ahead, take a guess. Pundits note that licensees have computers. That's a cop out. Further, planning requires far more and different calculations that are NOT in software.

Ramsey's comment, “When you’re looking ahead five years or more, you have a pretty good safety mechanism to be in good growth stock type mutual funds,” since “the vast majority [of the five-year periods], upward of 80–90 percent, make money.” He says that you could lose money “but it wouldn’t be substantial, very minimal” and that “even if the market were down, you could wait six months and ride it back up,” is one of the dumbest, wrong, and statistically inept comments (did I miss something?) anyone could make. We are in a global economic arena which is both fabricated (due to quantitative easing), and volatile. In a 5 year period it is absolutely necessary to consider the S&P 500 to take a dive of 50% (note it is true that the probability of such a loss goes down but there is an increase in the amount that can be lost). To suggest the losses would be minimal is 'criminal' (or at least idiotic). Secondly to suggest that in 6 months you could start recouping losses is also ludicrous (Also remember that a 50% loss requires a 100% gain on what is left. Good luck with that. Returns from 2000 to 2013 were ZERO, NADA, NOTHING. ). Peter Bernstein noted that one "never should invest where the consequences are greater than the probabilities". Middle America CANNOT accept such losses again and they sure would be tempting fate.

Lastly, you are correct in using an allocation of laddered bonds. A little tricky but if you have a definite maturity, the risks can be very small. And the $700,00 would allow nice diversification. Or a 3%, annuity over 5 years might even be easier.

9/28: Kahneman- this review of his recent book is excellent. (Thinking Fast and Slow)

Anybody interested  in cognitive dissonance has to read this


Two Brains Running

In 2002, Daniel Kahneman won the Nobel in economic science. What made this unusual is that Kahneman is a psychologist. Specifically, he is one-half of a pair of psychologists who, beginning in the early 1970s, set out to dismantle an entity long dear to economic theorists: that arch-rational decision maker known as Homo economicus. The other half of the dismantling duo, Amos Tversky, died in 1996 at the age of 59. Had Tversky lived, he would certainly have shared the Nobel with Kahneman, his longtime collaborator and dear friend.

Human irrationality is Kahneman’s great theme. There are essentially three phases to his career. In the first, he and Tversky did a series of ingenious experiments that revealed twenty or so “cognitive biases” — unconscious errors of reasoning that distort our judgment of the world. Typical of these is the “anchoring effect”: our tendency to be influenced by irrelevant numbers that we happen to be exposed to. (In one experiment, for instance, experienced German judges were inclined to give a shoplifter a longer sentence if they had just rolled a pair of dice loaded to give a high number.) In the second phase, Kahneman and Tversky showed that people making decisions under uncertain conditions do not behave in the way that economic models have traditionally assumed; they do not “maximize utility.” The two then developed an alternative account of decision making, one more faithful to human psychology, which they called “prospect theory.” (It was for this achievement that Kahneman was awarded the Nobel.) In the third phase of his career, mainly after the death of Tversky, Kahneman has delved into “hedonic psychology”: the science of happiness, its nature and its causes. His findings in this area have proved disquieting — and not just because one of the key experiments involved a deliberately prolonged colonoscopy.

“Thinking, Fast and Slow” spans all three of these phases. It is an astonishingly rich book: lucid, profound, full of intellectual surprises and self-help value. It is consistently entertaining and frequently touching, especially when Kahneman is recounting his collaboration with Tversky. (“The pleasure we found in working together made us exceptionally patient; it is much easier to strive for perfection when you are never bored.”) So impressive is its vision of flawed human reason that the New York Times columnist David Brooks recently declared that Kahneman and Tversky’s work “will be remembered hundreds of years from now,” and that it is “a crucial pivot point in the way we see ourselves.” They are, Brooks said, “like the Lewis and Clark of the mind.”

Now, this worries me a bit. A leitmotif of this book is overconfidence. All of us, and especially experts, are prone to an exaggerated sense of how well we understand the world — so Kahneman reminds us. Surely, he himself is alert to the perils of overconfidence. Despite all the cognitive biases, fallacies and illusions that he and Tversky (along with other researchers) purport to have discovered in the last few decades, he fights shy of the bold claim that humans are fundamentally irrational.

Or does he? “Most of us are healthy most of the time, and most of our judgments and actions are appropriate most of the time,” Kahneman writes in his introduction. Yet, just a few pages later, he observes that the work he did with Tversky “challenged” the idea, orthodox among social scientists in the 1970s, that “people are generally rational.” The two psychologists discovered “systematic errors in the thinking of normal people”: errors arising not from the corrupting effects of emotion, but built into our evolved cognitive machinery. Although Kahneman draws only modest policy implications (e.g., contracts should be stated in clearer language), others — perhaps overconfidently? — go much further. Brooks, for example, has argued that Kahneman and Tversky’s work illustrates “the limits of social policy”; in particular, the folly of government action to fight joblessness and turn the economy around.

Such sweeping conclusions, even if they are not endorsed by the author, make me frown. And frowning — as one learns on Page 152 of this book — activates the skeptic within us: what Kahneman calls “System 2.” Just putting on a frown, experiments show, works to reduce overconfidence; it causes us to be more analytical, more vigilant in our thinking; to question stories that we would otherwise unreflectively accept as true because they are facile and coherent. And that is why I frowningly gave this extraordinarily interesting book the most skeptical reading I could.

System 2, in Kahneman’s scheme, is our slow, deliberate, analytical and consciously effortful mode of reasoning about the world. System 1, by contrast, is our fast, automatic, intuitive and largely unconscious mode. It is System 1 that detects hostility in a voice and effortlessly completes the phrase “bread and. . . . ” It is System 2 that swings into action when we have to fill out a tax form or park a car in a narrow space. (As Kahneman and others have found, there is an easy way to tell how engaged a person’s System 2 is during a task: just look into his or her eyes and note how dilated the pupils are.)

More generally, System 1 uses association and metaphor to produce a quick and dirty draft of reality, which System 2 draws on to arrive at explicit beliefs and reasoned choices. System 1 proposes, System 2 disposes. So System 2 would seem to be the boss, right? In principle, yes. But System 2, in addition to being more deliberate and rational, is also lazy. And it tires easily. (The vogue term for this is “ego depletion.”) Too often, instead of slowing things down and analyzing them, System 2 is content to accept the easy but unreliable story about the world that System 1 feeds to it. “Although System 2 believes itself to be where the action is,” Kahneman writes, “the automatic System 1 is the hero of this book.” System 2 is especially quiescent, it seems, when your mood is a happy one.

At this point, the skeptical reader might wonder how seriously to take all this talk of System 1 and System 2. Are they actually a pair of little agents in our head, each with its distinctive personality? Not really, says Kahneman. Rather, they are “useful fictions” — useful because they help explain the quirks of the human mind.

To see how, consider what Kahneman calls the “best-known and most controversial” of the experiments he and Tversky did together: “the Linda problem.” Participants in the experiment were told about an imaginary young woman named Linda, who is single, outspoken and very bright, and who, as a student, was deeply concerned with issues of discrimination and social justice. The participants were then asked which was more probable: (1) Linda is a bank teller. Or (2) Linda is a bank teller and is active in the feminist movement. The overwhelming response was that (2) was more probable; in other words, that given the background information furnished, “feminist bank teller” was more likely than “bank teller.” This is, of course, a blatant violation of the laws of probability. (Every feminist bank teller is a bank teller; adding a detail can only lower the probability.) Yet even among students in Stanford’s Graduate School of Business, who had extensive training in probability, 85 percent flunked the Linda problem. One student, informed that she had committed an elementary logical blunder, responded, “I thought you just asked for my opinion.”

What has gone wrong here? An easy question (how coherent is the narrative?) is substituted for a more difficult one (how probable is it?). And this, according to Kahneman, is the source of many of the biases that infect our thinking. System 1 jumps to an intuitive conclusion based on a “heuristic” — an easy but imperfect way of answering hard questions — and System 2 lazily endorses this heuristic answer without bothering to scrutinize whether it is logical.

Kahneman describes dozens of such experimentally demonstrated breakdowns in rationality — “base-rate neglect,” “availability cascade,” “the illusion of validity” and so on. The cumulative effect is to make the reader despair for human reason.

Are we really so hopeless? Think again of the Linda problem. Even the great evolutionary biologist Stephen Jay Gould was troubled by it. As an expert in probability he knew the right answer, yet he wrote that “a little homunculus in my head continues to jump up and down, shouting at me — ‘But she can’t just be a bank teller; read the description.’ ” It was Gould’s System 1, Kahneman assures us, that kept shouting the wrong answer at him. But perhaps something more subtle is going on. Our everyday conversation takes place against a rich background of unstated expectations — what linguists call “implicatures.” Such implicatures can seep into psychological experiments. Given the expectations that facilitate our conversation, it may have been quite reasonable for the participants in the experiment to take “Linda is a bank clerk” to imply that she was not in addition a feminist. If so, their answers weren’t really fallacious.

This might seem a minor point. But it applies to several of the biases that Kahneman and Tversky, along with other investigators, purport to have discovered in formal experiments. In more natural settings — when we are detecting cheaters rather than solving logic puzzles; when we are reasoning about things rather than symbols; when we are assessing raw numbers rather than percentages — people are far less likely to make the same errors. So, at least, much subsequent research suggests. Maybe we are not so irrational after all.

Some cognitive biases, of course, are flagrantly exhibited even in the most natural of settings. Take what Kahneman calls the “planning fallacy”: our tendency to overestimate benefits and underestimate costs, and hence foolishly to take on risky projects. In 2002, Americans remodeling their kitchens, for example, expected the job to cost $18,658 on average, but they ended up paying $38,769.

The planning fallacy is “only one of the manifestations of a pervasive optimistic bias,” Kahneman writes, which “may well be the most significant of the cognitive biases.” Now, in one sense, a bias toward optimism is obviously bad, since it generates false beliefs — like the belief that we are in control, and not the playthings of luck. But without this “illusion of control,” would we even be able to get out of bed in the morning? Optimists are more psychologically resilient, have stronger immune systems, and live longer on average than their more reality-based counterparts. Moreover, as Kahneman notes, exaggerated optimism serves to protect both individuals and organizations from the paralyzing effects of another bias, “loss aversion”: our tendency to fear losses more than we value gains. It was exaggerated optimism that John Maynard Keynes had in mind when he talked of the “animal spirits” that drive capitalism.

Even if we could rid ourselves of the biases and illusions identified in this book — and Kahneman, citing his own lack of progress in overcoming them, doubts that we can — it is by no means clear that this would make our lives go better. And that raises a fundamental question: What is the point of rationality? We are, after all, Darwinian survivors. Our everyday reasoning abilities have evolved to cope efficiently with a complex and dynamic environment. They are thus likely to be adaptive in this environment, even if they can be tripped up in the psychologist’s somewhat artificial experiments. Where do the norms of rationality come from, if they are not an idealization of the way humans actually reason in their ordinary lives? As a species, we can no more be pervasively biased in our judgments than we can be pervasively ungrammatical in our use of language — or so critics of research like Kahneman and Tversky’s contend.

Kahneman never grapples philosophically with the nature of rationality. He does, however, supply a fascinating account of what might be taken to be its goal: happiness. What does it mean to be happy? When Kahneman first took up this question, in the mid 1990s, most happiness research relied on asking people how satisfied they were with their life on the whole. But such retrospective assessments depend on memory, which is notoriously unreliable. What if, instead, a person’s actual experience of pleasure or pain could be sampled from moment to moment, and then summed up over time? Kahneman calls this “experienced” well-being, as opposed to the “remembered” well-being that researchers had relied upon. And he found that these two measures of happiness diverge in surprising ways. What makes the “experiencing self” happy is not the same as what makes the “remembering self” happy. In particular, the remembering self does not care about duration — how long a pleasant or unpleasant experience lasts. Rather, it retrospectively rates an experience by the peak level of pain or pleasure in the course of the experience, and by the way the experience ends.

These two quirks of remembered happiness — “duration neglect” and the “peak-end rule” — were strikingly illustrated in one of Kahneman’s more harrowing experiments. Two groups of patients were to undergo painful colonoscopies. The patients in Group A got the normal procedure. So did the patients in Group B, except — without their being told — a few extra minutes of mild discomfort were added after the end of the examination. Which group suffered more? Well, Group B endured all the pain that Group A did, and then some. But since the prolonging of Group B’s colonoscopies meant that the procedure ended less painfully, the patients in this group retrospectively minded it less. (In an earlier research paper though not in this book, Kahneman suggested that the extra discomfort Group B was subjected to in the experiment might be ethically justified if it increased their willingness to come back for a follow-up!)

As with colonoscopies, so too with life. It is the remembering self that calls the shots, not the experiencing self. Kahneman cites research showing, for example, that a college student’s decision whether or not to repeat a spring-break vacation is determined by the peak-end rule applied to the previous vacation, not by how fun (or miserable) it actually was moment by moment. The remembering self exercises a sort of “tyranny” over the voiceless experiencing self. “Odd as it may seem,” Kahneman writes, “I am my remembering self, and the experiencing self, who does my living, is like a stranger to me.”

Kahneman’s conclusion, radical as it sounds, may not go far enough. There may be no experiencing self at all. Brain-scanning experiments by Rafael Malach and his colleagues at the Weizmann Institute in Israel, for instance, have shown that when subjects are absorbed in an experience, like watching the “The Good, the Bad, and the Ugly,” the parts of the brain associated with self-consciousness are not merely quiet, they’re actually shut down (“inhibited”) by the rest of the brain. The self seems simply to disappear. Then who exactly is enjoying the film? And why should such egoless pleasures enter into the decision calculus of the remembering self?

Clearly, much remains to be done in hedonic psychology. But Kahneman’s conceptual innovations have laid the foundation for many of the empirical findings he reports in this book: that while French mothers spend less time with their children than American mothers, they enjoy it more; that headaches are hedonically harder on the poor; that women who live alone seem to enjoy the same level of well-being as women who live with a mate; and that a household income of about $75,000 in high-cost areas of the country is sufficient to maximize happiness. Policy makers interested in lowering the misery index of society will find much to ponder here.

By the time I got to the end of “Thinking, Fast and Slow,” my skeptical frown had long since given way to a grin of intellectual satisfaction. Appraising the book by the peak-end rule, I overconfidently urge everyone to buy and read it. But for those who are merely interested in Kahneman’s takeaway on the Malcolm Gladwell question it is this: If you’ve had 10,000 hours of training in a predictable, rapid-feedback environment — chess, firefighting, anesthesiology — then blink. In all other cases, think

9/27: W

This immigration crisis in Europe is a big deal, and it’s a bigger deal for Germany than for any other European country. Germany is directly in the firing line, both geographically and in terms of how many of the migrants want to settle there. Nearly 40% of migrants choose Germany as their preferred final destination, while the only other nation that is chosen by more than 10% of migrants is Hungary, at 18%.

EFM Europe was in bad shape before the immigration. The extra turmoil and huge costs may keep The entire region in an extended recession. And while Yellen has to raise rates, it certainly can have devastating global effects.

9/27: China devaluation  (Wharton)

This move — one of the reasons it may have had so much impact is that people realize that [the Chinese] are serious about globalizing, and becoming part of the global financial system. The IMF has been asking them to move towards a freer float and many people have been asking the same thing. This was a sign that they were going to do that and suggests that over the next year or two, or few years, they are going to really change the way they interact with the global economy.There are worries about how that is quite going to play out that helps trigger so much of the turmoil that we saw.

It is a very different situation than it was in the mid- to late 1990s, and I don’t know how things are going to go from here going forward. A lot depends on what happens with interest rates in the U.S., and not just in terms of whether it [a rate increase by the Fed] is now, or three months from now, or six months from now, or whenever they start raising rates, but it is about how far is that process going to go, how much money is going to float back from emerging economies in to the U.S. And if the Europeans eventually get through with their quantitative easing, how much will go back to Europe.


What does a 5.1 per cent unemployment rate mean when the labour force participation rate is near a 40-year low?


9/27: Yes, it was the actual money loss but the psychological impact was even worse

When asked about the crash, more than two-thirds (67 percent) of Gen X and baby boomer respondents said they still feel the impact in how they live, work, save, and spend.

But a subset of respondents is still suffering the effects of the 2008 crash in a far more drastic way.

These “post-crash skeptics,” as the study terms them, “appear … to suffer from a significant psychological impact on their financial attitudes and behaviors, including lost confidence in financial institutions and a switch to more conservative investments.”
The percentage of “skeptics” who said the crash still haunts them today is huge: a whopping 93 percent. The group is made up of GenXers and boomers “who experienced six or more major effects of the crash.”

These folks are so wounded by what happened to them that 93 percent believe the traditional definition of retirement is now a “romantic fantasy of the past.” Among the overall population of respondents, just 84 percent—a high number in itself—said so
A full 83 percent of post-crash skeptics said the crash made them more cautious in their financial strategy, which could adversely impact their ability to effectively save for retirement.

Seventy-seven percent of skeptics have lost faith in financial institutions, compared to 38 percent of the overall respondent population. In addition, 67 percent of skeptics now say they regard the market as risky (compared with 32 percent of respondents overall), and 43 percent fled to more conservative investments or products, compared with 22 percent overall.

Half the skeptics said they’d incurred more debt after the crash, compared with 23 percent of respondents overall, while 41 percent said that they or a partner had lost a job.

That’s nearly three times the rate among overall respondents (15 percent).

And 41 percent of skeptics stopped saving for retirement since the crash; that’s more than three times that of Gen Xers and boomers as a group.

And half (52 percent) don’t believe they’ll have the lifestyle they want in retirement, compared with 39 percent of respondents overall.

9/27: Lousy

It’s no secret that many Americans are lousy writers. Just ask any college professor or employer, including those at prestigious institutions. With the advent of e-mail, writing ability has become more important than ever, and writing deficiencies have become increasingly apparent.

Surely one reason so many Americans lack writing skills is that, for decades, most U.S. schools haven’t taught them. In 2011, a nationwide test found that only 24 percent of students in eighth and 12th grades were proficient in writing, and just 3 percent were advanced.

EFM- if you cannot write well. you usually don't think that well either. 
Frankly, I have found few good thinkers- certainly as it addresses anything financial.

9/27: Yellen on Inflation

"I expect that inflation will return to 2% over the next few years as the temporary factors that are currently weighing on inflation wane, provided that economic growth continues to be strong enough to complete the return to maximum employment and long-run inflation expectations remain well anchored,"

Economists' understanding of the dynamics of inflation is far from perfect."

9/27: Perception

researchers told one group of white male Stanford students with high math ability that they were taking a difficult eighteen-question test on which “Asians tend to do better than whites.” A control group of white male students was told nothing. The results were stark. The white men who were told that Asians do better on the test performed three questions worse than the students who were told nothing at all, the difference between an A and a B grade

100 facts people need to know about annuities

very good overview


Deciphering Duration

When interest rates fluctuate, bond prices also shift. Rising rates push bond prices lower, while falling rates push bond prices higher. Duration, expressed as a number of years, measures a bond’s interest rate sensitivity: The higher the duration, the higher the interest rate risk. This means that if interest rates rise the price of a high duration bond will fall more than the price of a low duration bond.

Short, Medium and Long Duration

In fixed income, investors use the term “short” to denote a low duration, and “long” to denote a high duration. The duration of a bond is related to its maturity, with longer maturity bonds generally having higher durations. To be fair, longer maturity bonds don’t always have longer durations, but this is the case more often than not. Let’s take a look at some definitions for different duration ranges.


When we say “short duration”, we are generally referring to bonds that mature within three years. Short duration bond strategies tend to have lower yields than long duration bond strategies, but when interest rates rise, short duration strategies will experience a smaller price drop.


This refers to bond funds with average maturities of 3 to 10 years. Usually, yield is higher with these types of bond strategies than with short duration, while interest rate risk is lower than long duration.


This generally encompasses bond strategies with an average maturity of more than 10 years. This strategy usually offers the highest interest rates, which can be optimal in a falling rate environment. But when rates rise, long duration bond strategies can experience sharp price declines.

9/27: Oy!

School district replacing traditional game of ‘tag’ because it involves touching

9/27 Oy again

A battered woman will stay in prison for failing to protect her kids from her abuser. He was released 9 years ago.

9/27: Info only- but interesting

Introducing ProShares S&P 500 Ex-Sector ETFs, the first ETFs that allow you to buy the S&P 500® and leave behind the sector you don't want. You can use these ETFs to:

Reduce or eliminate exposure to a sector you believe may underperform

Avoid a sector you might already have enough exposure to through work or other holdings

Each ETF seeks to track the performance of the following indexes, before fees and expenses:


ProShares ETF



S&P 500 Ex-Energy ETF


S&P 500 Ex-Energy Index

S&P 500 Ex-Financials ETF


S&P 500 Ex-Financials Index

S&P 500 Ex-Health Care ETF


S&P 500 Ex-Health Care Index

S&P 500 bo


S&P 500 Ex-Information Technology & Telecommunication Services Index

This effectively says that the FED can increase interest rates. But the dollar will rise further and exports will go down. The problem is what will happen with the rest of the world? Syria and Russia might be a big hiccup. What is going to be the actual GDP for China- 7% or 3%?? And I have given up on Japan and South America cannot get its act together with all the corruption.

US growth revised higher to 3.9% from 3.7%


US gross domestic product expanded at a faster pace in the second quarter of the year than previously forecast, according to the third and final government estimate of how the economy performed.

The economy grow at a 3.9 per cent annualised pace, up from an earlier estimate of 3.7 per cent.

Economists had forecast a reading of 3.7 per cent. The final reading is up from a paltry 0.6 per cent annualised expansion in the first quarter

9/27: Retirement survey

The 2015 “Life + Money Survey” from, released this month, showed that Americans think more about money on a daily basis than about anything else, including their health and fitness or their love lives.

One in five Americans fears living paycheck-to-paycheck for the rest of their life, with almost as many people worried about being in debt forever. Never being able to retire was a common worry for more than one in seven survey respondents

EFM- just why should they feel comfortable? The losses of 2000 and 2008, in large part, have to be put at adviser's feet. You cannot lay out a plan where clients lose over 50% of their money. For 13 years up to 2013, they got a zero return. Admittedly returns after that were nice but 2015 is also about zero with anxiety as to what can happen in a fabricated economy.

9/27: Robo advisers

Why Silicon Valley Believes Robo Advisors can Save Investors from Themselves

September 25, 2015
By Steven Maimes

Wealthfront is part of an emerging group of startups asking people to put the fate of their money in the hands of computers. Along with other Silicon Valley-backed startups such as Betterment and Personal Capital, Wealthfront says its software can manage money better and at a lower cost than emotional, irrational humans.

EFM- possibly but the issue is this- what happens when the economy and market tanks? What do the computers currently say about bonds, target date funds?????

9/27: Health DEDUCTIBLES- the second paragraph is key to human behavior

Alfac reports that while most employees continue to evaluate plans based upon premiums, more are starting to dig a bit deeper to see if they should in fact be paying  more attention to (and spending  less on) the deductible side of the equation.

The 2015 Aflac Open Enrollment survey reveals several unsurprising outcomes: that employees hate having to choose a plan, that they’d rather be doing almost anything else than going through the annual enrollment drill, and that they tend to look first at what the monthly premium will cost them when they make the decision.

But the survey also found that more than half—52 percent—“at least somewhat agree” that they later regretted choosing a high deductible plan. And even more—59 percent—said they “at least somewhat agree” that the HDHP hurt themselves and/or their family financially.

Further, 39 percent said they recognized that their health coverage would provide sufficient security in the event of a serious accident or illness.

9/27: Oh, the horror

The percentage of “skeptics” who said the crash still haunts them today is huge: a whopping 93 percent.

EFM- I knew it was still remembered but I did not expect a number that high.

9/27: Watching TV
the number of people using TV in the coveted 18-to-49 demographic was down 8% against the same time last year, and for the first two nights this week usage is off 10%.

Ad Age also noted that among millennial consumers (18-to-24-year-olds), viewing is down 20% against last year, with 24% fewer men in this age group watching TV. The number of 18-to-34-year-old men watching TV is down 18% compared to the same period last year.

9/27: This is why one does not buy individual stocks


Volkswagen's stock drops 29.4% in 2 days following emissions controversy

Volkswagen AG saw its stock price drop 16.5% on Monday and a further 15.4% on Tuesday following admissions it cheated on emissions tests, creating large losses for several institutional investors directly holding the company's stock.

It is called business risk or unsystematic risk. It is effectively impossible to maintain a diversified portfolio because you need up to 350 stocks to avoid getting clobbered by one stock-certainly no one would have ever imagined  VW dropping this much due to absolute fraud.

9/27. FINRA market risks
What Are Common Market Risks?

Depending on the nature of the investment, relevant market risks may involve international as well as domestic factors. Key market risks to be aware of include:

  • Interest Rate Risk relates to the risk of reduction in the value of a security due to changes in interest rates. Interest rate changes directly affect bonds—as interest rates rise, the price of a previously issued bond falls; conversely, when interest rates fall, bond prices increase. The rationale is that a bond is a promise of a future stream of payments; an investor will offer less for a bond that pays-out at a rate lower than the rates offered in the current market. The opposite also is true. An investor will pay a premium for a bond that pays interest at a rate higher than those offered in the current market.

    For instance, a 10-year, $1,000 bond issued last year at a 4% interest rate is less valuable today, when the interest rate has gone up to 6%. Conversely, the same bond would be more valuable today if interest rates had gone down to 2%.

  • Inflation Risk is the risk that general increases in prices of goods and services will reduce the value of money, and likely negatively impact the value of investments.

    For instance, let's say the price of a loaf of bread increases from $1 to $2. In the past, $2 would buy two loaves, but now $2 can buy only one loaf, resulting in a decline in purchasing power of money.

    Inflation reduces the purchasing power of money and therefore has a negative impact on investments by reducing their value. This risk is also referred to as Purchasing Power Risk. Inflation and Interest Rate risks are closely related as interest rates generally go up with inflation. To keep pace with inflation and compensate for loss of purchasing power, lenders will demand increased interest rates.

    However, you should note that inflation can be cyclical. During periods of low inflation, new bonds will likely offer lower interest rates. During such times, investors looking only at coupon rates may be attracted to investing in low-grade junk bonds carrying coupon rates similar to the ones that were offered by ordinary bonds during inflation period. Investors should be aware that such low-grade bonds, while they may to a certain extent compensate for the low inflation, bear much higher risks.

  • Currency Risk comes into play if money needs to be converted to a different currency to purchase or sell an investment. In such instances, any change in the exchange rate between that currency and U.S. dollars can increase or reduce your investment return. This risk usually only impacts you if you invest in stocks or bonds issued by companies based outside the United States or funds that invest in international securities.

    For example, assume the current exchange rate of US dollar to British pound is $1=£0.53. Let's say we invest $1,000 in a UK stock. This will be converted to the local currency equal to £530 ($1,000 x £0.53 = £530). Six months later, the dollar strengthens and the exchange rate changes to $1=£0.65. Assuming that the value of the investment does not change, converting the original investment of £530 into dollars will fetch us only $815 (£530/£0.65 = $815). Consequently, while the value of the stock remains unchanged, a change in the exchange rate has devalued the original investment of $1,000 to $815. On the other hand, if the dollar were to weaken, the value of the investment would go up. So if the exchange rate changes to $1 = £0.43, the original investment of $1,000 would increase to $1,233 (£530/£0.43 = $1,233).

  • Liquidity Risk relates to the risk of not being able to buy or sell investments quickly for a price that tracks the true underlying value of the asset. Sometimes you may not be able to sell the investment at all—there may be no buyers for it, resulting in the possibility of your investment being worth little to nothing until there is a buyer for it in the market. The risk is usually higher in over-the-counter markets and small-capitalization stocks. Foreign investments pose varying liquidity risks as well. The size of foreign markets, the number of companies listed and hours of trading may be much different from those in the U.S. Additionally, certain countries may have restrictions on investments purchased by foreign nationals or repatriating them. Thus, you may: (1) have to purchase securities at a premium; (2) have difficulty selling your securities; (3) have to sell them at a discount; or (4) not be able to bring your money back home.
  • Sociopolitical Risk involves the impact on the market in response to political and social events such as a terrorist attack, war, pandemic, or elections. Such events, whether actual or anticipated, affect investor attitudes toward the market in general, resulting in system-wide fluctuations in stock prices. Furthermore, some events can lead to wide-scale disruptions of financial markets, further exposing investments to risks.
  • Country Risk is similar to the Sociopolitical Risk described above, but tied to the foreign country in which investment is made. It could involve, for example, an overhaul of the country's government, a change in its policies (e.g., economic, health, retirement), social unrest, or war. Any of these factors can strongly affect investments made in that country. For example, a country may nationalize an industry or a company may find itself in the middle of a nationwide labor strike.
  • Legal Remedies Risk is the risk that if you have a problem with your investment, you may not have adequate legal means to resolve it. When investing in an international market, you often have to rely on the legal measures available in that country to resolve problems. These measures may be different from the ones you may be used to in the US. Further, seeking redress can prove to be expensive and time-consuming if you are required to hire counsel in another country and travel internationally.
- See more at:
927: A friend of mine had his back crushed in an industrial accident and he is in constant pain no matter the drugs he has to take

Tips for Pain Management

By Peter Ganther

Almost all seniors today face some degree of pain and soreness. But up to 35% of all seniors face chronic pain resulting in depression and can greatly affect their daily life. Often this chronic pain goes undiagnosed or overlooked, and only after life is negatively altered is it caught and treated. Some of the obvious chronic pain symptoms include limping, moaning, spending more time in bed, and reduction in activity. Often it is left up to the caregiver’s discretion surrounding the severity of the pain, because the loved one usually refuses help and does not want to visit a doctor. Once the pain is realized, the next step is finding the right doctor who can locate the pain and find a probable cause. 

As a caregiver, understanding the aspects of pain management can greatly help your loved one return to better health and daily living. The most common recommendations made by doctors in the treatment of pain include:

Medication- Doctors usually are not eager to prescribe pain relievers that may be abused or simply looked at to numb the pain. Commonly prescribed medications include analgesics and narcotics, but both have potentially adverse effects associated with them.

Cortisone Treatments- This can be done through creams or injections into the affected muscles, but it usually only dulls the pain and should not be used for any extended period.

Regular Exercise- Routines that involve weights and stretching can correct one’s pain and body movement, as well as enhancing your loved one’s well-being in the process. 

Other Health Alternatives- Treatments such as acupuncture, yoga, and meditation may correct some pain, but these approaches are not for everyone, and do not work on all pain sufferers.

Advice to Caregivers- Doctors are always reminding caregivers to remain positive and supportive to ensure that they can cope and deal with the daily pain and struggle their loved one faces.

Dietary Changes- Doctors also urge your loved ones to cut back on any high fat, cholesterol rich foods that may dampen their ability to respond to treatment.

9/27 Retirement

Thirty million Americans used money from their retirement savings to account for an emergency in the past year. In addition, 21 million Americans aren’t saving for retirement at all.

Bucking the perception that lower-balance accounts are more likely to see early withdrawals, Millennials were the least likely to tap into their retirement accounts, with only 8% of this demographic group having done so in the past year. Helping to explain the trend, 40% of Millennials say their financial situation has improved in the past year, and only 11% say they are doing worse right now than they were 12 months ago.

However, for those in the 50 to 64 age group, 26% say their financial situation has deteriorated in the past year, and 18% have drawn down funds from their retirement account for an emergency


Just a reminder

Jails have become warehouses for those struggling with mental illness as well as drug addiction. Serious mental illness now affects about one in six men and almost one-third of women in jails, rates four to six times higher than in the general population. For people with serious mental illnesses, stigma often keeps them from seeking treatment, which is how they wind up in the criminal justice system. There are currently 10 times more mentally ill people in jails and prisons than in state mental health institutions; the vast majority of these people are in jail for non-serious offenses.

9/27 What do folks see as the single biggest problem with the federal government? Asked to pick one item from this list of nine answers, this is how it broke down:
  • Corrupt (23 percent)
  • Inefficient (18%)
  • Out of touch (17%)
  • Wasteful (14%)
  • Too big (9%)
  • Doesn’t reflect my views (7%)
  • Not transparent (6%)
  • Unresponsive (4%)
  • Not inclusive (2%)9/24:
EFM-There are four reasons for the inability of government to work

Liars and Frauds
Grossly incompetent
Conveniently stupid\
Simply unethical

  1. Daily Market News Sentiment and Stock Prices




David E. Allen (School of Accounting, Finance and Economics Edith Cowan University, Australia.) ; Michael McAleer (Econometric Institute, Erasmus School of Economics, Erasmus University Rotterdam and Tinbergen Institute, The Netherlands, Department of Quantitative Economics, Complutense University of Madrid, and Institute of Economic Research, Kyoto University.) ; Abhay K. Singh (School of Accounting, Finance and Economics, Edith Cowan University, Australia)< /td>

In recent years there has been a tremendous growth in the influx of news related to traded assets in international financial markets. This financial news is now available via print media but also through real-time online sources such as internet news and social media sources. The increase in the availability of financial news and investor’s ease of access to it has a potentially significant impact on market price formation as these news items are swiftly transformed into investors sentiment which in turn drives prices. Various commercial agencies have started developing their own financial news data sets which are used by investors and traders to support their algorithmic trading strategies. Thomson Reuters News Analytics (TRNA)1 is one such data set. In this study we use the TRNA data set to construct a series of daily sentiment scores for Dow Jones Industrial Average (DJIA) stock index component companies. We use these daily DJIA market sentiment scores to stu dy the influence of financial news sentiment scores on the stock prices of these companies using a multi-factor model. We use an augmented Fama French Three Factor Model to evaluate the additional effects of financial news sentiment on stock prices in the context of this model. Our results suggest that even when market factors are taken into account, sentiment scores have a significant effect on Dow Jones constituent company returns and that lagged daily sentiment scores are often significant, suggesting that information compounded in these scores is not immediately reflected in security prices and related return series.


Sentiment Analysis; Financial News; Factor Models; Asset Pricing.


G12 G14 C31


9/24: The FED

“Recent global economic and financial developments may restrain [US] economic activity somewhat and are likely to put further downward pressure on inflation in the near term… The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced but is monitoring developments abroad.”

“The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.”

9/24 End of the rice age
As Japan’s population ages, appetites are shrinking, with the country now eating about 20 per cent less rice than it did two decades ago.

9/23 How Has Shift to Defined Contribution Plans Affected Saving?
"Many believe that people are saving less for retirement due to the shift from defined benefit (DB) to defined contribution (DC) plans. The analysis uses National Income and Product Accounts data, with adjustments, to compare DB benefit accruals with DC contributions from 1984-2012. The results show that the percentage of total salaries going to retirement saving has declined slightly during this period. But if returns on asset accumulations are included, the annual change in pension wealth is relatively steady, so the shift to DC plans has not led to less total saving. What has changed is that individuals, rather than plan sponsors, now bear all of the risk."

EFM- Unfortunately nary a one knows how to deal with that risk. Every EE should be shown how to figure out just how big that risk is.  It is called the risk of Loss.

9/23A necessary issue to address.

The Inconvenience of Incontinence
by Kristine Dwyer, Staff Writer

Just mention the word “incontinence” or “bladder leakage” and watch people react. Most people are reluctant to speak about it and many are afraid to even discuss it with their doctor. Surprisingly, aging alone is not the only cause of bladder leakage or incontinence, as it is commonly known. Actually, it can occur in many age groups and affects men, women and, yes, even caregivers. Incontinence can be an inconvenient and unsettling condition for those who experience it on a regular basis. Many believe their only option is wearing absorbent undergarments when, in fact, there are now a wide variety of treatment options available today.

According to JAMA (Journal of the American Medical Association), incontinence is defined as the involuntary loss of urine severe enough to cause adverse social or hygienic consequences. Statistics show that more than 13 million Americans of all ages are currently affected by incontinence at an estimated cost of over 16 billion dollars per year. More of this money is spent on absorbent pads and undergarments than on treatments. Twice as many women than men are affected by this problem during their lifetime. Of all the issues and challenges that family caregivers face, few are as troubling as incontinence. Changing pads, clothing and bedding day and night can produce tremendous fatigue and frustration for both the caregiver and care receiver. In fact, caregivers report that one of the major factors leading to placing a loved one in the nursing home is unmanageable incontinence.

Urinary control problems are complex and involve three areas of the brain plus the spinal cord, bladder and many muscles in the body. It can range from occasional leakage to a complete loss of bladder control; a temporary condition for some, a long-term challenge for others. Incontinence can be divided into several categories: Stress, urge, mixed, overflow, neurologic and reflex/unconscious. Stress and urge incontinence are the most common types. Stress incontinence is the involuntary loss of urine with physical exertion such as sneezing, coughing or laughing. Urge incontinence occurs with a strong, sudden need to urinate. The bladder contracts prematurely and can be triggered by hearing running water or by an anxious moment such as standing at a locked door while trying to locate the key.

We now know that there are many other contributing factors that can lead to incontinence. Examples are: poor body mechanics during lifting, urinary tract infections, obesity, side effects from medication (such as diuretics, sedatives and alcohol, pain relievers, antihistamines, and cold medicines), nerve/muscle damage, physical and emotional stress, medical conditions such as diabetes, Parkinson’s disease, Alzheimer’s disease, multiple sclerosis, loss of muscle control from prostate surgery or a hysterectomy, repeated catheterizations and prolonged states of immobility (especially among patients who are bedridden or have extended hospitalizations).

One of the most important roles of a caregiver is to take the lead in addressing the problem and advocate not only for their loved one but also for themselves. Since incontinence is not an inevitable part of aging, the inability to control urination should always be brought to the attention of the physician.  Caregivers can help in ensuring their loved one is able to communicate with the doctor and partake in a joint treatment plan that benefits both parties.  Urinary-control problems must be assessed in the context of a complete medical history and physical exam from a physician. This thorough medical evaluation can identify the type of incontinence that one faces. A urologist or gynecologist may also be consulted for diagnoses and treatment options. A variety of treatment choices are now available to manage bladder health; however, choosing the right treatment plan is the key for both the caregiver and the care receiver.

The following effective approaches have been identified:

  • Medications (however, not all bladder leakage issues require medication to correct)

  • Exercises (such as Kegel’s) to strengthen the pelvic muscles around the bladder

  • Relaxation/breathing techniques

  • Lifestyle changes

  • Physical therapy including biofeedback and muscle stimulation

  • Behavior changes such as keeping a bladder diary and monitoring diet and fluid intake.

  • Medical interventions (surgery, implants and catheterization)

Robert has been caring for his wife for four years following a series of chronic health events. In the past year, his wife’s incontinence has become of increasing concern to both of them. Robert knows the problem is affecting more areas of their lives including their social life and sleep patterns. He is also concerned about skin infections and his ability to properly bathe his wife. Robert has become weary and is finding it progressively more difficult to manage his wife’s care. He consulted a physician and together they were referred to a physical therapist for an evaluation.

Across the country, physical therapists, as well as occupational therapists and registered nurses, are now becoming specifically trained in exercise therapy and continence re-training programs. Once a cause for incontinence is determined, an individual program is devised. Patients meet with therapists, learn how their bladder works and what steps to take to retrain and manage their bladder health. The program lasts from four to twelve weeks. By using exercises supported by biofeedback methods (a therapy that uses measuring devices or sensors to help you learn to identify and control the bladder muscles), physical therapists and the like are now able to help patients of all ages.

Re-training and strengthening pelvic floor muscles can help patients improve their bladder control. Lifestyle changes such as relaxation, decreased caffeine consumption, monitored diet and fluid intake, knowledge of proper lifting techniques and daily exercise can also positively impact bladder health. Therapists report that even the smallest changes or adjustments in one’s daily life can be very beneficial in treating incontinence. In addition, catching the problem early and seeking a physical therapy consultation are important steps toward treatment or management of incontinence issues.

Physical therapists report that the most difficult issues to conquer with patients are embarrassment, social isolation and the loss of independence that can result from bladder control problems. Patients often feel depressed and withdraw from social connections and opportunities. They fear losing bladder control and avoid spending time away from home. Hygienic considerations such as body odor and skin irritations, as well as having easy access to a bathroom, also impact one’s comfort level outside of the home environment. It is also worth noting that the person with incontinence may lose their ability to smell the odor of urine. This is a sensitive point for caregivers to realize as they are providing care and encouraging good personal hygiene.

Caregiving suggestions for oneself and the care receiver include:

  • Monitor fluid intake; focus on adequate water intake vs. juices, carbonated drinks, caffeine and alcohol. Cut back on fluids in the evening hours.

  • Exercise together and promote daily weight bearing (standing) to maintain pelvic control muscles.

  • Use personal care absorbent products, bed and furniture pads and plastic sheets.

  • Make sure an adequate supply of pads/sheets is available to avoid additional strain and reduce laundering.

  • Wear loose or pull-on clothing for easier wear and removal.

  • Pack a car bag with absorbent underwear/pads, hand wipes, extra clothing, and disposable bags.

  • Increase bathroom accessibility with a bedside commode and have a plan for bathroom visits while away from home.

  • Void urine every two hours and try to maintain this routine throughout the day.

  • Keep skin clean and dry to avoid skin breakdowns and irritations.

  • Maintain privacy and dignity during caregiving. Show patience and offer support when accidents do occur.

  • Consider hiring help at home to ease the stress of daily caregiving and to focus on your own needs for rest and renewal.

Physicians and other health care professionals are great resources for information about incontinent care. Disease-specific support groups are also excellent places to obtain useful information and receive mutual understanding. Thanks to the Internet, there are now opportunities for education and research as well as numerous resources available to caregivers at the touch of a button. Experts can answer questions and caregivers can find support in online chat rooms.

Web sites to consider are:

Caregiver Support at
National Kidney Foundation at
National Association for Continence at

Yes, incontinence is inconvenient, yet support and treatments are readily available.  Today, more than ever, society openly recognizes this personal challenge and even the media addresses the issue of “human plumbing” problems. It is a fact of life and does not have to lead to feelings of shame and embarrassment. Managing bladder health issues is possible and staying at home no longer has to be the solution.

9/23: Info only THREE percent annuity

A strong multi-year guaranteed annuity has recently been announced from an "A" rated carrier. This launch is timed perfectly for CD renewal season, and this rate is just the right conversation starter.

  • 3% for 7 Years Guaranteed
  • Issue Age to 85
  • Full Death Benefit
  • Penalty Free Withdrawals
  • Low Initial Deposit

9/23: Earnings

There is inequality between workers and owners, and inequality between workers themselves. It is this last one that is the biggest culprit when it comes to why a growing economy has not meant growing incomes for so many people. The combination of tax cuts for the top, new technologies that have helped high-earners more than anyone else, and globalization moving manufacturing jobs overseas has made growth much more lopsided the past 30 years. A rising tide, in other words, might lift all boats, but not many people can afford a boat anymore.

This is part of the reason the Fed's job is so perilous. Any retrenching in this fabricated economy could make a bad problem much worse.

9/22: Not a good idea to have fat friends

having a close friend who becomes obese raises your own risk by 57 percent.'
Look at Arkansas= a 100% increase in just 20 years

 “Arkansas’s adult obesity rate is currently 35.9 percent, up from 21.9 percent in 2000 and from 17.0 percent in 1995.”

9/22: Saudi Arabia is coming out ahead in the"oil
" war

Energy projects in question A report published today says $1.5tn of potential investment globally — including in North America’s shale-producing heartlands — is “out of the money” at current oil prices close to $50 a barrel and unlikely to go ahead.

  1. Impact of Artificial Intelligence on Economic Theory




Tshilidzi Marwala

Artificial intelligence has impacted many aspects of human life. This paper studies the impact of artificial intelligence on economic theory. In particular we study the impact of artificial intelligence on the theory of bounded rationality, efficient market hypothesis and prospect theory.



The Dangers of More Seniors Living Alone

According to AARP, nearly 90% of people over age 65 want to stay at home for as long as possible. Living at home and staying in a familiar community may offer benefits to seniors’ emotional well-being — but research indicates that a staggering number of seniors who should be receiving assisted living care are still living at home — in many cases, alone.

To some of us, the answer may seem obvious: make the move to an assisted living community where social activity, health monitoring and medication management is all included. However, moving to senior living can be a difficult decision, particularly if your loved one is not keen on moving. For more information, read our guide to assisted living vs. in-home care.

The Administration on Aging reports that about 29%, or 11.3 million older adults lived alone in 2010. At the same time, it’s estimated that over 12% of seniors 65 and older — more than 5 million — need assistance with long-term care to perform activities of daily life.

Those seniors who are low-income or live in poverty are even more likely to live at home rather than in a facility, even if they require more care. The numbers for individuals with Alzheimer’s or dementia are, quite frankly, startling: of the 60-70% of seniors with dementia living in the community, 25% live alone, reports the Alzheimer’s Association.

Andrew Steptoe, a professor of psychology at University College London, says he was surprised by the results of the social isolation study:

“Both social isolation and loneliness appeared initially to be associated with a greater risk of dying,” he says. “But it was really the isolation which was more important.”

When Living Alone is Unsafe

If we want our loved ones to remain safe and healthy, it’s important to make sure their environment is appropriate to their physical needs—particularly if they’re showing early signs of cognitive impairment.

If you notice that your loved one needs help with daily activities such as eating, bathing and dressing, they may have decreased cognitive functioning associated with early or middle stage dementia. Even in their own home, the combination of poor eyesight and minor safety hazards can put seniors at risk for falls, broken hips and even death.

Keeping track of physical symptoms, mental health, and senior nutrition is of critical importance. Warning signs that living alone is no longer safe for an older adult include:

  • Medication management issues
  • Poor eyesight
  • Social isolation
  • Forgetting appointments
  • Unable to keep up with daily chores and housekeeping
  • Poor nutrition or malnutrition
  • Home safety hazards such as poor lighting and loose carpeting
  • Unable to pay bills on time

9/21: nearly 4 in 10 (37 percent) of Americans are without life insurance to protect their families.


  1. Clever enough to tell the truth




Bradley J. Ruffle, Yossef Tobol (Wilfrid Laurier University)

We conduct a field experiment on 427 Israeli soldiers who each rolled a six-sided die in private and reported the outcome. For every point reported, the soldier received an additional half-hour early release from the army base on Thursday afternoon. We find that the higher a soldier’s military entrance score, the more honest he is on average. We replicate this finding on a sample of 156 civilians paid in cash for their die reports. Furthermore, the civilian experiments reveal that two measures of cognitive ability predict honesty, whereas self-report honesty questions and a consistency check among them are of no value. We provide a rationale for the relationship between cognitive ability and honesty and discuss the generalizability of this result.


honesty, cognitive ability, soldiers, high non-monetary stakes, regression discontinuity design


C93 M51



9/21: Brazil

South America’s biggest economy fell into recession in August and is expected to shrink by 2 to 3 percent this year. Inflation is pushing 10 percent, its highest since 2003, unemployment has climbed to over 8 percent, and the Brazilian real has lost about a third of its value against the dollar this year.
EFM- South America is a mess and has been for a long time. It is too risky (a lot of graft)

9/21: Examining the Results: Lower-Cost Active Management
"[T]he performance gap between the cheapest and average-priced funds is just as wide with passive funds as it is with active funds. The lowest-cost passive funds bolt back into the lead. As those tend to be the largest and most popular of passive funds, that is a significant victory for passive funds -- even against the attractively priced active funds."

1000-Participant Plans Pay Twice the Fees of the Largest Plans
"For very large plans -- those with more than 100,000 participants -- the average expense ratio among funds was just 0.27 percent. But for very small plans with fewer than 100 participants, the average expense ratio for the funds offered was more than three times as high at 0.87 percent. Even funds in slightly larger plans, with 100 to 1,000 participants, had an average expense ratio of 0.70 percent."