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


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

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

There's no sense in being precise when you don't even know what you're 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Uniform (Im)Prudent Investor Act- Waaaaaaaaaaaaaaaaaay Out of Date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

8/2: Starting up

A separate World Bank report is even more sobering. Last year it ranked countries according to their levels of support for the corporate world. This placed America in seventh place in terms of overall ease of doing business. But the US was ranked 46th — yes, 46th — in terms of how easy it is to start a company. This is worse than Estonia, Malaysia, Georgia and even France.

One important reason for this dismal position is that in America entrepreneurs need, on average, to navigate six different legal and regulatory hurdles to start a company. In New Zealand and Canada, which top the league, there is just one procedure. The complexity faced by Americans means that it takes them on average about six days to create a start-up; in many other countries the process is much faster and cheaper.


Some Academic Views of Financial “RISK” Tolerance

8/2:Really REALLY HOT

2014 was the hottest year ever but it may fall with days/months like this. Disagree or not about our impact on Global warming, humans are going to have to reinvent where and how to live in the next 50 years. It is not going to be pretty.  .'

8/2: Not going well

The economy of the years between 2011 and 2014 was even more mediocre than previously recognized, according to the Bureau of Economic Analysis.
Instead of an average growth rate of 2.3 percent over those years, the economy grew at a rate of only 2 percent,

State and local governments spent less than the bureau realized throughout the interval, as did the federal government last year. When government spends less, its public employees, contractors and suppliers are all stretched. They have less to live on, and less money to spend in the rest of the economy.

When consumers spend less, so does government. When government spends less, so do consumers, which just makes things worse. Government should spend more, borrowing money if necessary, to break that cycle, the argument goes. Over the previous four years, though, government wasn't really spending.(??????????????????)
EFM- The government poured billions into the economy= which, it appears, is  not the same as government spending. I have to rethink the above paragraph.



Compound Annual Growth Rate (Annualized Return)

8/2: Leveraged Loan Funds: Debunking the Myths

Good insight



8/2: Financial planning advice

In one study that SENDHIL MULLAINATHAN conducted with the economists Markus Noth at Hamburg University and Antoinette Schoar at M.I.T., we tried to quantify the quality of advice on the market. We did this by sending mystery shoppers to financial advisers. Our shoppers received very bad advice, by any measure. They were told to put their money into highly nondiversified portfolios that were also expensive. That’s the worst of both worlds: high risk and low returns. Perhaps most shocking was when our shoppers started with portfolios that were well diversified and inexpensive. Even in those cases, they were told to switch to options that were clearly worse.

8/2: Real indexed annuity   Apples and Oranges

So why do these have problems? Look at the date they started the contract- 1998. They don't write these contracts anymore. Entirely different with a lot of hoops to jump through. Each one has to be very carefully reviewed for new terms and higher fees.

7/30: Only in America




 By jacking up minimum wage, Seattle has provided a valuable lesson in liberal economics.

The plan has now backfired.    Nora Gibson is the executive director of Full Life Care told

KIRO 7 she saw a sudden reaction from workers when Seattle’s phased minimum-wage

ordinance took effect in April, bringing minimum wage to $11 an hour. She said anecdotally,

some people feared they would lose their subsidized housing so they have asked that their

work hours be reduced to remain eligible for all government subsidies.    It doesn’t stop at

$11/hour. The law puts it up to $15 starting January 1, 2017, they will have to reduce their

work hours even more to remain eligible for handouts. Good thing the minimum wage wasn’t

raised even higher, most would not work at all, they prefer to be spoon fed and remain on

the government plantation.    Remember free market capitalism? Under that system,

the harder and smarter you worked, the higher your standard of living. But that was found

to result in income inequality, so now we have a system where wealth is bestowed by

 bureaucrats, and working harder doesn’t always make sense.

7/30: Ben Hunt caution

Monetary policy divergence manifests itself first in currencies, because currencies aren’t an asset class at all, but a political construction that represents and symbolizes monetary policy. Then the divergence manifests itself in those asset classes, like commodities, that have no internal dynamics or cash flows and are thus only slightly removed in their construction and meaning from however they’re priced in this currency or that. From there the divergence spreads like a cancer (or like a cure for cancer, depending on your perspective) into commodity-sensitive real-world companies and national economies. Eventually – and this is the Big Point – the divergence spreads into everything, everywhere. Some things will go up, and some things will go down. But the days of ALL financial assets inflating in lock-step … the days of everything, everywhere going up together … that’s over.

For a lot of active investment managers, this is great news. For a lot of politicians and central bankers – particularly the weaker ones, either in resources or in willpower (yes, I’m looking at you, Alexis Tsipras) – this is terrible news. For investors? Well, it’s a mixed bag. Certainly it’s a more difficult bag, where so many of the learned behaviors of the past five years that worked so well in an environment of monetary policy coordination will fail miserably in an environment of monetary policy competition.


Monte Carlo Simulation and Portfolio Management:

A Monte Carlo simulation allows an analyst to determine the size of the portfolio required at retirement to support the desired retirement lifestyle and other desired gifts and bequests. She factors in a distribution of reinvestment rates, inflation rates, asset class returns, tax rates and even possible life spans. The result is a distribution of portfolio sizes with the probabilities of supporting the client's desired spending needs.

7/29: Alternative Fund launches continue at record clip, despite pullback in flows. gven as flows have moderated, fund companies continue to launch funds at a record clip. Many of these new funds were launched in the multialternative, long-short equity, and non-traditional-bond categories, each of which saw more than 30 new fund creations. The contrast of increasing fund launches against softening flows suggests that currently supply may be outstripping demand. As companies look to stake a claim in this niche space, assets may not come as easily as expected. Fund companies should also consider carefully the rationale and potential market for new alternative funds. But looking ahead, advisors and institutions expressed continued enthusiasm in the survey for alternative strategies including multistrategy, long-short equity, long-short debt, and managed futures, suggesting that demand may strengthen in the future.

Interestingly, a higher percentage of institutions stated that alternatives were “somewhat less important” or “much less important” than traditional investments, as compared with the previous year. Advisors appeared to hold similar convictions as last year. gOnce again, diversification/low correlation remains the top driver for investing in alternatives. The poor bond market outlook was also a top reason to invest in alternatives, as both advisors and institutions look to seek cover from rising interest rates and low yields. gCompared with last year, investors more often cited “higher correlation to the stock market than anticipated ” as a top reason to hesitate investing in alternatives. Respondents also cited “difficulty to perform due diligence” as a top impediment. Alternative asset managers should emphasize true differentiation of their strategies as well as improved transparency. gHigh fees remained the top impediment to investing for both advisors and institutions, with half or more of each group citing fees as a top reason to hesitate.

7/29: No that is not a chart of 2008. It is China's stock market right now.  It's a mess and WILL impact us. By how much is uncertain since it still has bad news coming.

7/28: Delirium vs Dementia

(If you work with the elderly or even know someone old, read this)

What health problem is extremely common, has serious implications for a senior’s health and wellbeing, and can often – but not always – be prevented?

It’s delirium. In my opinion, this is one of the most important senior health problems for caregivers to know about, since families can be integral to preventing and detecting this condition.

In this article, I’ll explain just what delirium is and how it compares to dementia. Then, I’ll share 10 things you should know and what you can do.

What is Delirium – Symptoms and Causes

Delirium is a state of worse-than-usual mental confusion, brought on by some type of unusual stress on the body or mind. It’s sometimes referred to as an “acute confusional state,” because it develops fairly quickly (e.g., over hours to days), whereas mental confusion due to Alzheimer’s or another dementia usually develops over a long time.

The key symptom of delirium is that the person develops difficulty focusing or paying attention. Delirium also often causes a variety of other cognitive symptoms, such as memory problems, language problems, disorientation, or even vivid hallucinations. In most cases, the symptoms “fluctuate,” with the person appearing better at certain times and worse at other times, especially later in the day.

Delirium is usually triggered by a medical illness, or by the stress of hospitalization, especially if the hospitalization includes surgery and anesthesia.

It’s much more common than many people realize: about 30% of seniors experience delirium at some point during a hospitalization.

That post-operative confusion that seniors often experience? That’s delirium.

The way your elderly mother with dementia gets twice as confused when she has a urinary tract infection? That’s delirium too.

Or the common phenomenon of “ICU psychosis?” That too is delirium.

Delirium vs. Dementia

People often confuse delirium and dementia, because both conditions cause confusion and appear superficially similar. Furthermore, people with dementia are actually quite prone to develop delirium. That’s because delirium is basically a reflection of the brain going haywire when it gets overloaded by the stress of illness or toxins, and brains with dementia get overloaded more easily.

In fact, the more vulnerable a person’s brain is, the less it takes to tip them into delirium. So a younger person generally has to be very very sick to become delirious. But a frail older person with Alzheimer’s might become delirious just from being stressed and sleep-deprived while in the hospital.

Why Delirium is Such an Important Problem

There are three major reasons why delirium is an important problem for us all to prevent, detect, and manage.

First, delirium is a sign of illness or stress on the body and mind. So if a person becomes delirious, it’s important to identify the underlying problems – such as an infection or untreated pain – and correct them, so that the person can heal and improve.

The second reason delirium is important is that a confused person is at higher risk for falls and injuries during the period of delirium.

The third reason is that delirium often causes serious consequences related to health and well-being. In the short-term, delirium increases the length of hospital stays, and has been linked to a higher chance of dying during hospitalization. In the longer-term, delirium has been linked to worse health outcomes, such as declines in independence, and even acceleration of cognitive decline.

Now let’s cover 10 more important facts you should know about delirium.

10 Things to Know About Delirium, and What You Can Do

1. Delirium is extremely common in seniors.

Almost a third of seniors experience delirium at some point during a hospitalization, with delirium being even more common in the intensive care unit, where it’s been found to affect 70% of patients. Delirium is also common in rehabilitation units, with one study finding that 16% of patients were experiencing delirium.

Delirium is less common in the outpatient setting (e.g. home, assisted-living, or primary care office). But it still can occur when a senior gets sick or is affected by medications, especially if the person has a dementia such as Alzheimer’s.

What to do: Learn about delirium, so that you can help your parent reduce the risk, get help quickly if needed, and better understand what to expect if your parent does develop delirium. You should be especially prepared to spot delirium if your parent or loved one is hospitalized, or has a dementia diagnosis. Don’t assume this is a rare problem that probably won’t affect your family.

2. Delirium can make a person quieter.

Although people often think of delirium as a state of agitation or restlessness, many older delirious people get quieter instead. This is called hypoactive delirium. It’s still linked with difficulty focusing the attention, fluctuating symptoms, and worse than usual thinking. It’s also linked with poor outcomes. But it is of course harder for people to notice, since there’s little “raving” or restlessness to catch people’s attention.

What to do: Be alert to those signs of difficulty focusing and worse-than-usual confusion, even if your parent seems quiet and isn’t agitated. Tell the hospital staff if you think your parent may be having hypoactive delirium. In the hospital, it’s normal for seniors to be tired. It’s not normal for them to have a lot more difficulty than usual making sense of what you say to them.

3. Delirium is often missed by hospital staff.

Despite the fact that delirium is extremely common, it is often missed in seniors, with some reports estimating being missed 70% of the time. That’s because busy hospital staff will have trouble realizing that an older person’s confusion is new or worse-than-usual. This is especially true for people who either look quite old – in which case hospital staff may assume the senior has Alzheimer’s – or have a diagnosis of dementia in their chart.

What to do: You must be prepared to speak up if you notice that your parent isn’t in his or her usual state of mind. Hypoactive delirium is especially easy for hospital staff to miss. Hospitals are trying to improve delirium prevention and detection, but we all benefit when families help out. Remember, no hospital person knows your parent the way that you do.

4. Delirium can be the only outward sign of a potentially life threatening problem.

Although delirium can be brought on or worsened by “little things” such as sleep-deprivation or untreated constipation, it can also be the sign of a very serious medical problem. For instance, older adults have been known to become delirious in response to urinary tract infections, pneumonias, and heart attacks. In general, it tends to be older seniors with dementia who are most likely to show delirium as the only outward symptom of a very serious medical illness.

What to do: Again, if you notice new or worse-than-usual mental functioning, you must bring it up and get your parent medically evaluated without delay. For seniors who are at home or in assistedliving, you should call the primary care doctor’s office, so that a nurse or doctor can help you determine whether you need an urgent care visit versus an emergency room evaluation.

5. Delirium often has multiple underlying causes.

In seniors with delirium, we often end up identifying several problems that collectively might be overwhelming an older person’s mental resilience. Along with serious medical illnesses, common contributors/causes for delirium include medication side-effects (especially medications that are sedating or affect brain function), anesthesia, blood electrolyte imbalances, sleep-deprivation, lack of hearing aids and glasses, and uncontrolled pain or constipation. Substance abuse or withdrawl can also provoke delirium.

What to do: To prevent delirium, learn about common contributors and try to avoid them or manage them proactively. For instance, if you have a choice regarding where to hospitalize your parent, some hospitals have “acute care for elders” units that try to minimize sleep-deprivation and other hospital-related stressors. If your parent does develop delirium, realize that there is often not a single “smoking gun” when it comes to delirium. A good delirium evaluation will attempt to identify and correct as many factors as possible.

6. Delirium is diagnosed by clinical evaluation.

To diagnose delirium, a doctor first has to notice – or be alerted to – the fact that a senior may not be in his or her usual state of mind. Experts recommend that doctors then use the Confusion Assessment Method (CAM), which describes four features that doctors must assess. Delirium can be diagnosed if a senior’s symptoms include “acute onset and fluctuating course,” “difficulty paying attention,” and then either “disorganized thinking” or “altered level of consciousness.”

Delirium can’t be diagnosed by lab tests or scans. However, if a senior is diagnosed with delirium, doctors generally should order tests and review medications, in order to identify factors that have caused or worsened the delirium.

What to do: Again, the most important thing for you to do is to get help for your loved one if you notice worse-than-usual confusion or difficulty focusing. Although families have historically not had a major role in delirium diagnosis, delirium experts have developed a family version of the CAM (FAM-CAM), which is designed for non-clinicians and has been shown to help detect delirium.

7. Delirium is treated by identifying and reversing triggers, and providing supportive care.

Delirium treatment requires a care team to take a three-pronged approach. First, they must identify and reverse the illness or problems provoking the delirium. Second, they have to manage any agitation or restless behavior, which can be tricky since a fair number of sedating medications can worsen delirium. Furthermore, the once-popular practice of physically restraining agitated seniors has been shown to sometimes worsen delirium, and should be avoided if possible. And third, they’ll need to provide general supportive care to help the brain and body recover.

What to do: The reassuring presence of family is often key to providing a supportive environment that promotes delirium recovery. You can also help by making sure your loved one has glasses and hearing aids, and by alerting the doctors if you notice pain or constipation.Ask the clinical team how you can assist, if restlessness or agitation is an issue. Bear in mind that physical restraints should be avoided, as there are generally safer ways to manage agitation in delirium.

8. It can take seniors a long time to fully recover from delirium.

Most people are noticeably better within a few days once the delirium triggers have been addressed. But it can take weeks, or evenmonths, for some seniors to fully recover.

For instance, a study of senior heart surgery patients found that delirium occurred in 46% of the seniors. After 6 months, 40% of seniors who’d had delirium still hadn’t recovered to their pre-hospital cognitive abilities.

What to do: If your parent or someone you love is diagnosed with delirium, don’t be surprised if it takes quite a while for him or her to fully recover. It’s good to be prepared to offer extra help during this period of time. You can facilitate recovery by creating a restful recuperation environment that minimizes mental stress and promotes physical well-being.

9. Delirium has been associated with accelerated cognitive decline and with developing dementia.

This is unfortunate, but true, especially in people who already have Alzheimer’s or a similar dementia.A 2009 study found that in such seniors, delirium during hospitalization is linked to a much faster cognitive decline in the following year. A 2012 study reached similar conclusions, estimating that cognition declined about twice as quickly after delirium in the hospital.

In seniors who don’t have dementia, studies have found that delirium increases the risk of later developing dementia.

What to do: Experts aren’t sure what can be done to counter this unfortunate consequence of delirium, other than to try to optimize brain well-being in general. (For this, I suggest avoiding risky medications, getting enough exercise and sleep, being socially and intellectually active, and avoiding future delirium if possible.) The main thing to know is that delirium has serious consequences, so it’s often worth it for a family to be careful about surgery in an older person, and it’s good to learn about delirium prevention (see below).

10. Delirium is preventable, although not all cases can be prevented.

Experts estimate that delirium is preventable in about 40% of cases. Preventive strategies are meant to reduce stress and strain on an older person, and also try to minimize delirium triggers, such as uncontrolled pain or risky medications.

In the hospital setting, programs such as the Hospital Elder Life Program (HELP) for Prevention of Delirium have been shown to work. The HELP website has a section for family caregivers, which includes tips on how to prevent delirium. For instance, families can help reorient a relative in the hospital, ensure that glasses and hearing aids are available, and provide a reassuring presence to counter the stress of the hospital setting.

Less is known about preventing delirium in the home setting. However, since taking anticholinergic medications (such as sedating antihistamines) has been linked with hospitalizations for confusion, you can probably prevent delirium by learning to spot risky medications your parent might be taking.

What to do: To prevent hospital delirium, carefully weigh the risks and benefits before proceeding with elective surgery. If your parent must be hospitalized, choose a facility using the HELP program or with an Acute Care for Elders unit if possible. Be sure to read HELP’s tips for families on preventing hospital delirium.

Remember, delirium is common and can be the only outward sign of a serious medical problem.

7/27: Index fees may be over the top
In 2004, Ali Hortacsu and Chad Syverson, economists at the University of Chicago, found that index funds had as much variability in fees as their more labor-intensive actively managed counterparts. And these fees are nothing to be scoffed at — paying 1 percent more every single year in fees can compound over a lifetime to noticeably lower returns.

Pierluigi Balduzzi and Jonathan Reuter found and reported in a recent paper, some target date funds may already be taking an expansive view of what it means to invest in equities: They seem to produce a wide range of returns and risks across the year.

EFM- Anyone know the real reason why target date funds might be the bane of retirees for up to two decades????


The so-called “Warren Buffett indicator,” which compares the value of the stock market with the size of U.S. gross domestic product, suggests stocks are overvalued by nearly 100%. (It is known as the Buffett indicator because the fabled investor has sometimes offered it as a rough rule of thumb about the market.) But there are issues with this indicator, as the bank acknowledges. These days, big U.S. companies such as Apple AAPL, -0.53%  and Exxon Mobil XOM, -1.48%  are so global that it makes little sense to compare them solely with the U.S. economy.

There’s a popular industry on Wall Street these days that consists of mocking any measure that suggests the stock market is expensive. Every time share prices rise, after all, the skeptics look even more foolish. But markets can be overvalued for many years before they correct.

Niner One part one    Niner one part two

Don Ellis was one of the finest trumpeters and arrangers for big band that ever lived. He was 40 years ahead of his time when he died in the late 70s. He is still 40 years ahead today. 


7/26: Chemo and quality of life
I have a friend dying of cancer now and chemo and radiation did help initially. But then he and his wife said enough and they will let his life run its course.

Despite the intuitive sense that any treatment is better than none, there is not much evidence that chemotherapy is the right choice —and it may very well be the wrong one. Prigerson’s analysis showed that these patients experience a drop in their quality of life if they get chemo, and that they are therefore worse off than if they hadn’t opted for the treatment. On measures of things like whether they could continue to walk on their own and take care of themselves and keep up with their daily activities, those on chemotherapy reported marked declines compared to patients who opted not to receive more chemo.

A Better Way to Die

Treating the end of life in every case as a medical emergency, rather than as a moment to seek comfort and dignity, runs contrary to most people’s wishes. In one survey, 70 percent of Californians said they would prefer to die at home; just one in three do. In another, more than 80 percent of patients with chronic disease said they wanted to avoid hospitalization or intensive care when they died.

Two-thirds of Americans say patients should sometimes be allowed to die. More than half said they would want their doctors to let them die if they had a disease with no hope of improvement that left them totally dependent on others for care; just one-third said they had put those wishes in writing.

EFM- my issues ho further. And that involves Alzheimers. Billions are spent allowing those who have no concept not only to their families but even to the concept of living as well. In the latter stages, it reflects no dignity at all. Many elderly will soon opt for assisted suciide by 2030 and the bulk of citizens by 2050.

3 simple rules will explain 99% of human behavior 1: Most people don’t think. 2: Some people are jerks. 3: Everyone is selling something.

— Barry Ritholtz

Are Stocks Overvalued? A Survey of Equity Valuation Models

Detailed analysis and charts.
EFM- I still have a problem with relying on any one analysis because all bets are off with a fabricated economy due to the FED. 

Are you smarter than a financial adviser? Test yourself (Series 65 license)

Like doctors, lawyers or engineers for insight, financial advisers are looked upon to help guide you through the chaos of personal finance.

I settled on the Series 65 Uniform Investment Advisor Law Exam, which allows one to become an Investment Advisor Representative, a common financial adviser designation, and one of the highest designations achievable independently.

My personal take away studying this section — if you’ve taken a basic economics class in college, know basic statistics and frequently read about the economy on news & media you’ve got most of it covered.

 North American Securities Administrators Association (NASAA). which runs the certification, the Series 65 exam lasts 3 hours, contains 130 relevant test questions and requires a 72%, or 94 correct, result to pass.

1. If a bond with a face value of $1,000 is bought for $920, you say the bond traded at:

a) A premium

b) Maturity

c) Par

d) A discount

2. The total return of an investment includes each of the following elements except:

a) Interest

b) Dividends

c) Appreciation or depreciation

d) Beta

3. Which of the following statements about investment risk are correct?

a) Standard deviation is a measure of total risk

b) Market risk is also known as unsystematic risk

c) Unsystematic risk can be greatly reduced through diversification

d) Beta is a measure of systematic, non-diversifiable risk

e) a, c and d

f) b, c, and d

g) a and b only

h) a, b, and d

4. What level of investment income generated by an REIT must be distributed to shareholders?

a) 90%

b) 75%

c) 95%

d) 100%

5. Which of the following best describes American Depository Receipts (ADRs)?

a) Trade U.S. securities in foreign markets

b) Trade foreign securities in U.S. markets

c) An option to purchase a stated number of shares of a common stock at a stated price

d) Fixed income security portfolio managed by a corporate trustee

6. Which of the following are key advantages of annuity ownership?

a) Earnings are distributed tax-free

b) Tax deferral and compounding

c) Guaranteed income for life

d) Short-term investments

e) b and d only

f) a and c only

g) b and c only

h) b, c, and d

7. Each of the following investment types is permitted within an IRA except:

a) U.S. gold coins

b) Government securities

c) Collectibles

d) Annuities

8. You have helped Rusty develop an asset allocation model for his portfolio. Over time, his ratio of equities to fixed income has deviated from the original agreed investment policy statement. The process of shifting assets from one asset class to another in order to maintain the original asset allocation is called?

a) Rebalancing

b) Passive management

c) Collective shifting

d) Indexing

9. Allen (a single father) comes to you for investment advice; he is looking to purchase a house for him and his son in the next 2 to 3 years. He has saved $20,000 in a savings account (this is his only savings), but he wants to receive a decent return. Which of the following are true?

a) Allen should have adequate insurance coverage prior to his investment program

b) You must be concerned with capital preservation when investing his savings

c) Allen should postpone his purchase for another 5 years, so you can invest him in stocks

d) You should buy speculative stocks to get him a higher rate of return

e) a and d only

f) a and b only

g) b and c only

h) c and d only

10. Investment advisors may base their compensation on which of the following arrangements?

a) A fee based on percentage of capital appreciation in an account

b) A flat hourly fee

c) An annual retainer

d) A wrap fee that combines asset management charges and transactional fees into a single annual fee

e) a and d

f) c and d

g) b, c and d

h) b and c

11. Which of the following would be excluded from registration under the Investment Advisors Act of 1940?

a) An adviser maintains a listing in the telephone directory as an investment adviser

b) Adviser has less than five clients in each state with $40 million assets under management

c) Adviser has all clients in one state and does not give advice on securities listed on a national exchange

d) All of the above


1) D. 2) D. 3) E. 4) A. 5) B. 6) G. 7) C. 8) A. 9) F. 10) G. 11) C.

As global economies flourish and contract, the American business world changes constantly.  Companies merge and downsize creating pitfalls in corporate reorganization that human resource departments often miss or may not even be aware exist.  One such unfamiliar peril is that of disability insurance for employees terminated following a downsizing or acquisition.

Severance agreements are usually considered and presented to employees whose positions are deemed redundant in restructured or shrinking companies.  Severred employees are frequently offered packages of continued salaries and benefits for specific time periods usually from six to 24 months in length. 

Employment regulations of many U.S. states require that provided severance benefits mirror those of current employees.  The problem is that disability insurance carriers in this country only offer group or individual insurance policies to actively-employed persons.  As a result, most American employers needlessly end up temporarily self-insuring recently terminated employees.  This substantial liability created by employee severance is completely unnecessary, but the solution is “severance disability insurance” which is designed to allay the expenses typically involved in the disablement of a former employee.

Petersen International offers the Severance Agreement Disability Insurance plan which is a unique product and service for the business world.  Underwriters provide a road map for human resource managers and business owners, helping arrange the necessary and promised benefits to financially protect both terminated employees and their diligent employers.  The plan relieves corporations from potentially costly financial liabilities should severed employees become disabled while under the protective umbrellas of legally binding severance contracts.
The product itself offers long-term disability benefits that copy the group and/or individual benefits sponsored by the former employer.  Policy terms are available to match the exact terms of the severance agreement.


SIFMA Weighs in – Again – on Fiduciary Proposal

SIFMA outlined its concerns to the DOL in eight comment letters in hopes it will be able to give testimony at the department’s August hearing. Among the organization’s concerns: the prohibited transaction exemptions in the proposed rule will limit access to financial guidance, reduce choice and ultimately raise the cost of saving for retirement. Using data from actual trading patterns of investors with individual retirement accounts, SIFMA contends that investors are already making competent, informed choices about where to park their retirement assets.

Read more >

7/22 Only in America

Twenty-two percent of American children were living in poverty in 2013 compared with 18 percent in 2008,, with poverty rates nearly double among African-Americans and American Indians and problems most severe in South and Southwest.

More children were raised in single-parent homes in 2013 than in 2008, and fewer lived with parents with secure employment.

Foundation President Patrick McCarthy said that particularly troubling is an increase in the share of kids living in poor communities, regardless of their own families' economic standing. The report says 1 in 7 children live in those areas, marked by poor schools and a lack of a safe place to play.


Student Loan Calculator


Find a surgeon's complication rate with the ProPublica database

This is a new service so you can find out about your surgeons ratings

Just plane funny

7/21: Interesting

  1. Gender Interaction in Teams: Experimental Evidence on Performance and Punishment Behavior




Jung , Seeun (ESSEC Business School and THEMA) ; Vranceanu, Radu (ESSEC Business School and THEMA)

This paper reports results from a real-eort experiment in which men and women are paired to form a two-member team and asked to execute a real-effort task. Each participant receives an equal share of the team's output. Workers who perform better than their partner can punish him/her by imposing a fi ne. We manipulate the teams' gender composition (man-man, man-woman, and woman-woman) to analyze whether an individual's performance and sanctioning behavior depends on his/her gender and the gender interaction within the team. The data show that, on average, men perform slightly better than women. A man's performance will deteriorate when paired with a woman, while a woman's performance will improve when paired with a woman. When underperforming, women are sanctioned more often and more heavily than men; if sanctioned, men tend to improve their performance, while women's performance does not change.


Gender studies; Real-effort task; Team production; Performance; Punishment; Discrimination


C91 J16 M52




10 Conditions That Land Seniors in the ER

Strokes, heart attacks, falls — these are the conditions we usually think of as landing older adults in the emergency room. But, seniors visit the ER for a lot of other reasons that may be just as critical, such as adverse drug effects, infections and COPD.

Caregivers should be aware of the symptoms that are most likely to lead to a serious diagnosis in seniors. If you have seniors under your care, this is a list of 10 conditions that you’ll want to pay attention to:

1. Injuries and Accidents

Injuries, falls, traffic accidents, even exhaustion — these are the types of acute issues that most often land seniors in the emergency room, according to the CDC.

2. Heart Disease

Some of the most common symptoms reported by seniors in emergency room visits are chest pain and shortness of breath, both potential indicators of heart disease, which is still the leading cause of death in the U.S., as reported by the CDC and Discovery Health.

3. Chest Pain

As mentioned above, chest pain can be a symptom of heart disease; it can also be caused by other problems such as heart attacks, injuries, blood clots, respiratory infections, or even gastrointestinal issues, according to the CDC and WebMD.

4. Adverse Effects and Complications of Medical Treatment

Adverse drug reactions are a shockingly common cause of emergency room visits in the elderly, including unexpected side effects, interactions with other drugs, or inappropriate self-medication, as reported by the CDC and NIH.

5. Abdominal Pain

Digestive disease, food poisoning and infection can all cause abdominal pain or nausea; so can kidney stones, which may result from malnutrition, dehydration or other medical conditions, according to the CDC and Discovery Health.

6. Chronic Obstructive Pulmonary Disease

According to the CDC, COPD covers a number of conditions including bronchitis, emphysema, and chronic airway obstruction. Fatigue, coughing, and shortness of breath are some possible symptoms, as reported by the CDC and WebMD.

7. Pneumonia

Pneumonia is one of the most common upper respiratory infections to land seniors in the ER. Signs may be milder in older adults, and can include shortness of breath, coughing, and confusion or delirium, according to the CDC and WebMD.

8. Urinary Tract Infection

This is yet another reason why seniors should make sure they’re getting enough fluids—31% of seniors arechronically dehydrated, and one of the best ways to prevent UTIs is to drink plenty of water, as reported by the CDC.

9. Stroke

Stroke is the third leading cause of death in the U.S. It has a distinct pattern of symptoms, which means a vigilant caregiver can often prevent long-term damage if the patient is treated quickly enough, according to the CDC.

10. Spinal Disorders

Back pain is another symptom that commonly brings seniors to the ER, whether the pain is due to an injury to the back or neck, a vertebral disc disorder, or an inflammatory condition such as arthritis, as reported by the CDC


7/19: Doctors, heal thyself (financially that is)

A recent blog post by one doctor perhaps characterizes best why many doctors get failing grades in finance. “Why are some of the smartest, hardest-working and most responsible members of our society unable to create real wealth?” the doctor asked. “The answer is two words: financial illiteracy. Doctors spend so much time in school memorizing facts, but receive little education in basic financial skills that can provide a real and lasting positive impact on their professional and personal lives.”

7/19: Roubini

the existence of a "liquidity time bomb" that he fears will eventually "trigger a bust and a collapse."

The New York University economist joins a growing number of observers who are worried about the issue. Liquidity is the lifeblood of financial markets. It measures how easy it is for investors to quickly sell stocks and bonds. When investors get fearful but can't sell their stocks, it causes even more panic.

Are more flash crashes coming? Roubini pointed to several scary episodes to back up his case that investors should be worried about "severe market illiquidity."
Investors around the world were spooked by the May 2010 flash crash, which sent the Dow Industrials plummeting nearly 1,000 points in about half an hour before recovering.
And then there was the "taper tantrum" in the spring of 2013 when bond yields skyrocketed for a few days after ex-Fed chief Ben Bernanke suggested ending quantitative easing.
Just last fall, bonds had a "flash crash" of their own, mysteriously plummeting in dramatic fashion on one day before rebounding. One New York Fed official even said reduced liquidity may have played a role in the incident.

So what's causing these liquidity troubles? Roubini pointed to three major factors:
1) Herding behavior: Lightning fast trading makes up an increasingly large amount of activity in the stock market. This has led to "herding behavior" and crowded trades (think: bullish on the U.S. dollar) that can create chaos when surprises occur and everyone heads for the exits at the same time.
2) Bonds are not stocks: It's important to remember that fixed-income assets don't trade in super liquid stock markets. They mostly change hands in illiquid, over-the-counter markets. Despite that, as Roubini points out, investors can cash out overnight. That creates the potential for fire sales like those that hit the mortgage bond market in 2007 and 2008.

7/19: You can't go back again

What would you do if you had a chance to go back in time and ask one question to someone who knew your younger self? Culturally, economically, and politically, much had changed since I sat in those second grade desks. I asked Miss Wilson this simple question: What’s the biggest difference between her current students and the students of my era?

In a word (actually two) she immediately shot back: “Sesame Street.”

“So it’s made them smarter and better prepared when they went to school?” I surmised.

“No,” she said glumly, “It’s made them harder to teach. They’re attention span is about 30 seconds.”

EFM- When I was redoing some videos last year, a very experienced friend said that I "held" a page for the viewer too long and the visuals had to go faster (or at least add more visuals to the commentary). To put it in real life, movies/TV  almost always hold one single frame for no more than 10 seconds. I tried several films- and he was right.

"How did this play out in terms of financial literacy? Remember “The Stock Market Challenge” or any other similar massive open (increasingly online) course-related investment game. It began with the noble idea to instill stock market principles in the hearts and minds of our country’s youth. Unfortunately, as endorsed through the authority of the public school system, “The Stock Market Challenge” only reinforced the same short-term thinking financial professionals have been trying to wean their clients away from for years."

EFM- The stock market Challenge/Game is real crap. It basically has students buying and selling stocks and funds as fast as they can to beat the other teams. It is nothing more than instilling large amounts of risk. Sure they may learn something but it's better to send them to Las Vegas and try their luck there.


Fiduciary Advice Proposal Signals a Fundamental Shift in DOL's Regulatory Method (PDF)
"The DOL's fiduciary proposal represents a fundamental shift in the Department's approach to regulating the retirement services industry... [T]he Department has chosen to reformulate the definition of fiduciary to encompass numerous types of sales activities that are clearly non-fiduciary in nature under current law.... The 'principles-based' approach utilized in [the best-interests contract] exemption may be a model for how the DOL sees the 'next generation' of class exemptions... And finally, the proposal represents a dramatic shift by the Department toward the regulation of the IRA rollover marketplace."
(Groom Law Group) 

EFM- there has been nothing by any entity addressing the competency of advisors. A series 7 or 65 is ludicrous.


  1. Optimal Equity Glidepaths in Retirement




Christopher J. Rook

Dynamic retirement glidepaths evolve over time based on some measure such as the retiree's funded status or current market valuations. Conversely, static glidepaths are fixed at a starting point and selected under the assumption that they will not change. In practice, new static glidepaths may be derived periodically making them more flexible. The optimal static retirement glidepath would be the one that performs better than all others with respect to some metric. When systematic withdrawals are made from a retirement portfolio, glidepaths are often assessed via the probability of ruin (or success). Our goal here is to derive the optimal static glidepath with respect to this metric. It is a result new to the literature and the shape will be of special interest to retirees, financial advisors, retirement researchers, and target-date fund providers.


7/19: Literacy/Game

 An FDIC report found that 28% of adult Americans are either unbanked or underbanked, and a separate survey found that 40% of adults would give themselves a grade of “C” or lower on their knowledge of finances.

7/19: How much $100 is really worth in each state


  1. Us and Them: Experimental evidence on what creates efficiency in choices made by married couples.




Lopez Maria Claudia (Department of Community Sustainability, Michigan State University, MI USA) ; Munro Alistair (GRIPS) ; Tarazona-Gomez Marcela (Oxford Policy Management, United Kingdom)

A recurring and puzzling pattern with experiments on intra-household behaviour is the common failure of couples to attain the cooperative solution. Using married couples from a low income area of Bogota, Colombia we conduct an experiment that raises the salience of the family vis-à-vis outsiders. In this experiment husbands and wives play a repeated voluntary contribution game. At the same time each participant plays an identical game with one stranger in the same session. When investments to the common pools are made from separate and non-fungible budgets, most subjects contribute more to the household pool than the stranger pool, but rarely contribute everything to the household even after repetition and opportunities for learning. Efficiency is not obtained. However, when subjects make contributions to the two games from a single budget many individuals converge rapidly on a strategy of investing everything in the household pool and contributing little to the pool with a stranger. Overall the amount invested in some pool rises. Our results are in line with games played with individuals in which in-group cooperation is higher when membership of the group is more salient. They suggest that strengthening family identity may raise intrahousehold cooperation, but at the expense of cooperation of interhousehold cooperation.


7/19: Frontier market indexes this year

Kuwait 25.87%
Argentina 13.38%
Nigeria 13.36%
Pakistan 11.08%
Kenya 6.22%
Oman 5.61%
Morocco 5.15%
Romania 4.3%
Vietnam 3.56%
Bangladesh 3.2%
Kazakhstan 2.93%
Sri Lanka 2.41%
Mauritius 1.34%
Jordan 1.14%
Other 0.52%

7/19: Great  chart by Steve Oshins

Non-Grantor Trust State Income Tax Chart

7/19: Robert Shiller on Valuation

Annual Returns in Local
U.S. Europe Emerging
2012 16% 16% 17% 16%
2013 33% 22% 4% 26%
2014 13% 5% 6% 10%
First Half 2015 1% 8% 6% 5%
Source: MSCI, January 1 to June 30 2015, including dividends
Earlier this year, a chart (replicated below) circulated showing the average stock on the New York Stock exchange selling for the highest multiple ever, above levels before the tech bubble and the global financial crisis.

Traditional market indices are weighted by a stock’s market value, so price movements by Apple at a market value of $750 billion have three and a half times the impact of Coca-Cola at $200 billion and 35 times the value of Marriott Hotels, whose market value is roughly $20 billion. In the chart above, every stock is given the same weight, so that movements by Marriott count the same as Apple. What this chart reflects is that among the factors driving the rise in stock prices, smaller and more speculative stocks have generally outperformed, as access to cheap money has allowed some stocks to do well that otherwise might struggle

7/19: Workplace the Right Place for Financial Education

employers already provide information about employee benefits, have key information about employees’ lives, and are generally trusted to provide sound financial information and advice. They suggested information provided by employers should go beyond the current emphasis on retirement and other benefits to include education about budgeting, money management, building emergency savings and understanding the financial impact of health care.

7/19" Ben Hunt
where we could all use some help is with an investment strategy for the Real World in-between paradise and doomsday. What we all need is a good perspective or vantage point for differentiating between this potential shock and that potential shock, for evaluating what signals to press and what signals to fade. It’s not a matter of predicting shocks, but rather a matter of reacting to incipient shocks smartly and strategically, of knowing, in the immortal words of Kenny Rogers, when to hold ‘em and when to fold ‘em.

 always start by makingthe distinction between decisions under risk and decisions under uncertainty. In a decision under risk, you know the possible outcomes of a decision and you have a rough sense of the probabilities to associate with those outcomes. In a decision under uncertainty, you either don’t know the possible outcomes or it’s impossible to assign meaningful probability distributions to those outcomes. What’s at stake in the distinction between the two? All of modern portfolio theory and all of mainstream macroeconomic theory and all of econometric modeling – ALL of it – is based on the assumption that everyone in the world is making decisions under risk. Violate that assumption – an assumption that is as deeply buried and indecipherably written within the edifice of academic economics today as the assumption that “a nationwide decline in home prices is impossible” was deeply buried and indecipherably written within the edifice of $10 trillion worth of residential mortgage-backed securities in 2008 – and your portfolio risk analysis suddenly has a hole big enough to drive a truck through. Game theory provides a perspective and a toolkit to distinguish between decisions under risk and decisions under uncertainty. It can’t work miracles by predicting the outcome of something that’s inherently unpredictable, but it can identify the situations that are unpredictable and suggest coping mechanisms for dealing with them. And that’s a lot. It can also highlight the situations where you have made a category error, where you have a misplaced confidence in your existing risk management toolkit or perspective. And that’s a lot, too.

EFM- when you have a 10% to 15% loss in equities. you still do not know the ultimate risk of lo$$. But the probability of such a loss similar to 2000 and 2008 should be indelibly etched into your brain... While there is uncertainty how bad it might be, a similar loss would be financially and EMOTIONALLY devastating. So you do risk off with DCAD.

Such scenarios are identified in the videos coming up. Been delayed again with computers.....................

7/19: A half-century ago Milton Friedman famously argued that the test of a theory is the accuracy of its predictions, not the realism of its assumptions, and that principle still holds.6

7/19: The True cost of health care by Belk MD


Financial Literacy: The Role of the Workplace


7/19:Medicare to Cover End-of-Life Counseling

Counseling would be entirely voluntary for patients.

Some doctors already have such conversations. But an opening to roughly 55 million Medicare beneficiaries could make that far more common.

EFM- And I was a fan or Kervorkian. If I get Alzheimers, I am otta here.

7/19: Stock volatility
If stock prices fall in the event of a disaster — and that is an important risk that investors take into account — that can explain why in normal times we have such high returns on stock prices, which has long been a puzzle. It can also explain why stock prices are so volatile, because this risk is hard to calculate, and as investor’s perceptions of it move around, that can move around stock prices.

Stock market volatility has been a puzzle for a long time. What surprised me is that when we put this international data from disasters into a model, we found it really could explain the magnitudes of stock market volatility that we see. Part of it is investors’ risk aversion. When you have even a small probability of a 50% decline or even a 20% decline, it really influences investors’ behavior.

Unfortunately, I think some people have a wishful thinking view of the stock market — that if you just hold on long enough, you’re guaranteed to get some of the high rates of return that we’ve measured over the post-[World War II] period, these rates of return being 12%. Well, that may not be true. Now, this is not a suggestion that investors shouldn’t hold stocks. I hold stocks and I think for investors who have positive net worths, stocks are an important part of the portfolio, but in evaluating the risk, they could go down and they might not come back up. (EFM)- Peter Bernstein noted many years ago that teh length of time for a stock recoup would be much longer in the future than previously utilized- up to 20 years or more. Also that while minor losses (10%?)  have a negative behavioral twice that of a gain, the factor goes up rapidly to 10 times (at least) when losses are 50%. And it is not just the financial loss, it is the emotional impact on family, self esteem, employment and so on.

7/19: Misbehavior by Thaler, coments by Seigel-

":today’s investors are unlikely to appreciate the extent to which academics in the 1970s, when Thaler began his quest, shut out all attempts to show how or why markets might be inefficient. As Thaler notes, most papers that challenged efficient markets were rejected outright by prestigious journals, and the few that were accepted were accompanied by “abject apologies [from the authors] for the results.”9 It was as though the authors had announced to their preachers that they had ceased to believe in God.

It is right for the proponents of a good theory to defend it from flaky, flat-Earth attackers. But, in the case of efficient versus inefficient markets, there were good arguments on both sides. The academic community should be embarrassed by the long delay between Fama’s groundbreaking 1964 study showing that markets are likely to be efficient and the wide acceptance of market efficiencies in the 1990s; it was one of the worst examples of groupthink ever.10


DOL Fiduciary Proposals May Squeeze Complex Financial Products
"Proposed regulations from the [DOL] aimed at reducing conflicts of interest between corporations providing investment/retirement products and selling agents could drive significant revamps of business practices for many registered investment advisors (RIA) and the financial advisors of broker dealers ... As proposed, the new standards would greatly expand the universe of individuals and corporations covered under [ERISA].... The proposed rules raise the risk of regulatory enforcement and or trial bar litigation ... Limitations on commission structures could have a disproportionate impact on the sale or fee structures of investment and retirement products sold in the middle market[.]"
(Fitch Ratings) 


  1. What moves international stock and bond markets?




MGino Cenedese (Bank of England) ; Enrico Mallucci (London School of Economics (LSE))

We study the relation between international mutual fund ows and the different return components of aggregate equity and bond markets. First, we decompose international equity and bond market returns into changes in expectations of future real cash payments, interest rates, exchange rates, and discount rates. News about future cash flows, rather than discount rates, is the main driver of international stock returns. This evidence is in contrast with the typical results reported only for the US. Inflation news instead is the main driver of international bond returns. Next, we turn to the interaction between these return components and international portfolio flows. We find evidence consistent with price pressure, short-term trend chasing, and short-run overreaction in the equity market. We also find that international bond flows to emerging markets are more sensitive to interest rate shocks than equity flows.


International Capital Flows, Return Decomposition, International Equity Markets, International Bond Markets, Mutual Funds


F31 G15



DOUBLE FOOD CRISIS: OBESITY AND HUNGER - The world is entering an era of global food insecurity which is already leading to the "double burden" of both obesity and malnutrition occurring side by side within countries and even within the same families, a leading food expert has warned. "It will become increasingly common to see obese parents in some developing countries raising underweight and stunted children because high-calorie food is cheaper and more readily available than the nutritious food needed for healthy growth," says the London School of Hygiene and Tropical Medicine.