2/8:

Date:	2010-01-22
By:	Nelson, Richard Consoli, Davide
URL:	http://d.repec.org/n?u=RePEc:pra:mprapa:20197&r=cbe
Evolutionary economics badly needs a behavioral theory of household consumption behavior, but to date only limited progress has been made on that front. Partly because Schumpeter's own writings were focused there, and partly because this has been the focus of most of the more recent empirical work on technological change, modern evolutionary economists have focused on the "supply side". However, because a significant portion of the innovation going on in capitalist countries has been in the form of new consumer goods and services, it should be obvious that dealing coherently with the Schumpeterian agenda requires a theory which treats in a realistic way how consumers respond to new goods and services. The purpose of this essay is to map out a broad alternative to the neoclassical theory of consumer behavior.

1. Sense of Control Affects Investment Behavior

   Date:	2010-01-20
   By:	Li King King (Strategic Interaction Group, Max Planck Institute of Economics, Jena)
   URL:	http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2010-004&r=cbe
   Preference for control affects investment behavior. Participants of laboratory experiments invest different amount of money in a risky asset when face with two different methods of control which have identical payoff structure and probability distribution, but provide different sense of control. Preference for controlling and not controlling are both observed. Participants increase their investment when their preferred method of control is used. Participants who prefer to control more reduce their investment more strongly when face with less control. Preference for control has larger effect on investment behavior when participants are induced to have a comparative mindset rather than non-comparative mindset.
   Keywords:	Preference for control, sense of control, risk attitudes, illusion of control, source preference, portfolio choice, behavioral finance, comparative mindset, non-comparative mindset
   JEL:	B49

2. Impacts of Personality on Herding in Financial Decision-Making

   Date:	2010-01-22
   By:	Baddeley, M. Burke, C. Schultz, W. Tobler, T.
   URL:	http://d.repec.org/n?u=RePEc:cam:camdae:1006&r=cbe
   Experimental analyses have identified significant tendencies for individuals to follow herd decisions, a finding which has been explained using Bayesian principles of statistical inference. This paper outlines the results from a herding task designed to extend these analyses. Empirically, we estimate logistic functions using panel fixed effect estimation techniques to quantify the impact of herd decisions on individuals‘ decisions about whether or not to buy a financial asset. We confirm that there are statistically significant propensities to herd and that social information about others‘ decisions has an impact on individuals‘ decisions. We extend these findings by identifying associations between herding propensities and individual characteristics such as gender, age and specific personality traits including impulsivity and venturesomeness.
   Keywords:	herding, social influence, financial decision making, personality

2/8:

2/8: WSJ- Jason Zweig notes-

Consider Philip Eberlin, 56 years old, who runs a woodwork-restoration business in Chicago Heights, Ill. Trading hot stocks a decade ago, Mr. Eberlin got burned on picks like Krispy Kreme and Tyco. In 2007 he got back into stocks, only to take another hit.

"Having been burned twice in 10 years," says Mr. Eberlin, he now has about 80% of his family's assets "protected from the market" in certificates of deposit and fixed annuities. "I don't have trust in Wall Street to help the small investor in any way, shape or form."

EFM- somebody kidding me. Maybe not- the industry has never addressed diversification. I may be hard on Eberlin for buying single issue securities but that is what the bulk of the industry suggests.


But Zweig also says, "I believe the old truths remain valid: Buying and holding a diversified stock portfolio still makes sense."  ."  But then I believe he also has stated that one must accept 50% losses every so often during their lifetime. Not a chance. the average 401k investor cannot handle that emotionally nor financially.
,
Also, Paradoxically, as fewer people cling to their faith in traditional stock investing, the future rewards from it are likely to grow greater." Possibly but as Bernstein noted. the future is unknown. 
"Likely" is not acceptable. 

2/8: The unemployment rate fell from 10.0 to 9.7 percent in January and nonfarm payroll employment was essentially unchanged (-20,000). Employment fell in construction and in transportation and warehousing, while temporary help services and retail trade added jobs.

It is actually MUCH higher than this with the people no longer looking, immigrants etc. Probably closer to 17%..

2/8: The Nursing Home Abuse Center is an informational website committed to providing comprehensive information on nursing home abuse and neglect for the elderly and their loved ones

2/8: From my June 1995 newsletter.

ILLITERACY: (Marcia Kaplan, SF Chronicle) "Each year over 700,000 graduate from high school unable to read their high school diploma. The US. Department of Education says that 20% of American adults are functionally illiterate. Functional illiterates can read words but they cannot comprehend their meanings, synthesize information or make decision based on what they read. And marginally illiterate people feel most comfortable receiving information in a visual format, relying more on television than print for information.

At the same time that American's skills are declining, entertainment, computer and telecommunications companies are creating new, technologically advanced methods to amuse and educate us. (However) in the excitement about the information superhighway, businesses are ignoring a troubling fact- a substantial number of Americans are not intellectually capable of using their technologies.

.....Any business that sells a products or services that require a user's ability to exercise cognitive skills will face a shrinking market.

No other industrialized country treats literacy with such contempt as the United States."

It has gotten worse over the past 15 years. 

2/8: They have to change allocation:  Many employees of U.S. institutions of higher learning are feeling nervous about their retirement finances.
1. ING U.S. Retirement Services, Windsor, Conn., a unit of ING Groep N.V., Amsterdam, has published figures supporting that conclusion in a summary of results from a Web survey of 301 individuals employed by colleges, universities, technical schools and other post-secondary schools who participate in defined contribution plans.
About 62% said they are less certain today about living comfortably in retirement than they were before the financial market decline in 2008, but 63% said they do not expect to delay their retirement in light of the financial downturn.
Although 64% said they had calculated their retirement income needs at some point in life, 30% admitted that they have not done so within the past year, ING says.
In other survey findings:
- 40% of the participants said they have never changed their retirement plan investment mix.
- 28% said they have not changed their asset allocations in the past year.
- 55% of the participants ages 55 and over have sought retirement advice from a financial professional.
- 26% of the participants who have not sought a professional’s financial advice said they would now consider doing so.

2/8: <endnote>Many employees of U.S. institutions of higher learning are feeling nervous about their retirement finances. <P>ING U.S. Retirement Services, Windsor, Conn., a unit of ING Groep N.V., Amsterdam, has published figures supporting that conclusion in a summary of results from a Web survey of 301 individuals employed by colleges, universities, technical schools and other post-secondary schools who participate in defined contribution plans.</P> <P>About 62% said they are less certain today about living comfortably in retirement than they were before the financial market decline in 2008, but 63% said they do not expect to delay their retirement in light of the financial downturn.</P> <P>Although 64% said they had calculated their retirement income needs at some point in life, 30% admitted that they have not done so within the past year, ING says.</P> <P>In other survey findings:</P> <P>- 40% of the participants said they have never changed their retirement plan investment mix.</P> <P>- 28% said they have not changed their asset allocations in the past year. </P> <DIV id=bodyAd> <SCRIPT type=text/javascript src="http://oascentral.nationalunderwriter.com/RealMedia/ads/adstream_jx.ads/www.nulh.com/distribution/News/2010/2/Pages/ING-Downturn-Weakens-Educators-Retirement-Security.aspx/112010251317@!"></SCRIPT> <NOSCRIPT> - 55% of the participants ages 55 and over have sought retirement advice from a financial professional. - 26% of the participants who have not sought a professional’s financial advice said they would now consider doing so.

2/8: Waddle this: In 2001 and 2002, Waddell & Reed Inc., Overland Park, Kan., shifted customers with $616 million in 6,742 variable annuities from one carrier to Nationwide variable annuities, officials say.
1. The exchanges resulted in 4,937 of the customers paying a total of $9.6 million in surrender charges, and some of the customers ended up with lower death benefits, according to officials at the Minnesota Department of Commerce
Although Waddell & Reed sold the annuities, “regulators from the five states assert that Nationwide Life and Nationwide Life and Annuity did not take the required steps to ensure that Waddell's supervision and control were adequate,”

Nationwide will reimburse affected consumers for surrender charges they may have incurred as a result of the exchanges covered by the settlement, give consumers the option of rescinding some riders purchased in connection with the exchanges, and increase the death benefits for consumers who shifted into annuities with lower death benefits than their original annuities offered,

This type of stuff will never stop under current laws and regulations. Sure some of this stuff got reversed but many others in smaller companies are out of luck. 

2/8: For wealthy global families seeking new passports, Canada is the world’s best kept secret. Although top marginal tax rates are a bit higher than the U.S., there are significant planning opportunities for wealthy immigrants. In some cases, wealthy families can legally acquire and, generation after generation, maintain Canadian citizenship without any substantial tax exposure. A summary of Canada’s advantages:

CULTURE AND LIFESTYLE

Canadians (at least English-speaking ones) and Americans share a common language and popular culture. Nonetheless there are important differences.

While generally having enormous respect for the stunning economic, cultural, social, technological and even military achievements of our American brothers, Canadians are a bit smug about having declined to participate in many of the seriously odd chapters in U.S. history (eg. slavery, Civil War, prohibition, McCarthyism, the Vietnam war, S&L insolvencies, the Iraq War, sub-prime mortgage lending, massive taxpayer funded bailouts of well-connected financial institutions). Canadians are cautious and conservative. The upshot is that Canada now has the strongest economy and likely best prospects of all OECD countries. It has the best banking system in the world. It is in a strong fiscal position. It is geographically isolated from the world’s trouble spots. And it is a resource and energy superpower (the leading exporter of oil, natural gas, uranium and hydroelectric power to the USA) in a world that is running out of energy and resources.

As for lifestyle, three of Canada’s cities (Vancouver, Toronto and Montreal) are among the most cosmopolitan urban centers anywhere. Vancouver is often rated (see, for example, the Economist Intelligence Unit) as the number one city in the world in terms of lifestyle.

CONCLUSION

In conclusion, wealthy global families are increasingly aware of their need for a carefully crafted citizenship and residency strategy to protect family assets and enhance mobility in what may be a troubled future. In this context Canadian citizenship should be given serious consideration.

2/7: Oy!  

“Thinking about your household’s financial condition, do you expect it to be better or worse in the next 6 months?”

.One in five U.S. adults (21%) expect their household’s financial condition to be better in the next six months while half (49%) expect it will remain the same. Three in ten (30%) believe their financial condition will be worse in the next six months. This is similar to how people felt in December when 19% believe their household’s financial condition would be better in six months, 48% believed it would be the same and one-third (33%) believed it would be worse.

These are some of the results of The Harris Poll of 2,576 adults surveyed online between January 18 and 25, 2010 by Harris Interactive.

Looking to economic growth, 14% of Americans believe the economy has started growing already while 12% believe it will begin growing in the next six months. Two in five U.S. adults (22%) believe the economy will begin growing between six and 12 months from now and two in five (39%) do not think it will begin growing for another year or longer.

Many Americans saw their incomes shrink over the past year. In fact, two in five (39%) say their household income now is lower than it was in 2008 before the downturn in the economy and one-quarter (26%) say it is lower now than it was just three months ago. Only 18% say their income is higher now than in 2008 and 10% say it is higher now than three months ago.

There have also been claims that people are saving more now that there is this economic uncertainty and concern over jobs. However, two in five Americans (40%) say they are saving less now than they were in 2008 before the downturn in the economy while 36% say they are saving less than just three months ago. Less than one in five (18%) of U.S. adults are saving more than in 2008 while 14% say they are saving more than three months ago.

2/7: annuity like: Now there's a simple annuity-like product that seniors are excited about. It's easy for them to understand and easy for you to sell. It offers a combination of outstanding benefits in convincing fashion:

• A true, simple-issue whole life product for advisors who
  don't want the hassle of underwriting
• Passes benefits TAX-FREE (unlike annuities) to
  beneficiaries (perfect for their grandchildren!)
• Offers instant liquidity and competitive cash value growth
• Unbeatable living benefits — clients can use the death
  benefit for LTC, HHC, assisted living and terminal illness needs (allay their fears!)
• Offers a competitive 15% commission

2/7: VPIKE: Go to site and type in any address and a picture of the house at that address will appear.  Use arrows to get 360 degree viewing.  Zoom also available

2/4: Finance and Investment
U, V or W: What Kind of Recovery Can We Expect, and When?
Delegates to the just-ended World Economic Forum in Davos, Switzerland, found plenty of positive economic signs -- but not enough to keep them from wringing their hands. The consensus at the five-day gathering called for strong growth in emerging markets like China, India and Brazil, and poor growth in Japan and much of Europe, with the United States somewhere in between. The Forum's official statement called the global recovery "fragile."

2/4: Human Resources
(Article with Video)
One Ambivalent Economy + Many Cautious Employers = One Difficult Job Market
More than seven million jobs have been lost during this recession, and so far, few have come back. When jobs do return, say experts, many will be temporary, contract or short-term. Risk-averse employers seeking cost savings and flexibility will outsource whatever they can to smaller firms or independent contractors before hiring full-time employees. That means job seekers will have to be more flexible, willing to take short-term assignments or relocate to places where jobs are plentiful.

2/3: $3.8 trillion budget?????????

Use any rationalization you want, this will derail the  U.S. economy for decades.

Glad I will be dead by then.

2/3:A typology of risk management failures Rene Stultz-
How can risk management go wrong? The way we describe the role of risk management suggests important ways in which risk management can go wrong. We started by saying that the first step in risk management is to measure risk. Let’s assume, for now, that the right risk measure is used given the situation of the firm. This measure could be VaR or could be some other measure. Two types of mistakes can be made in measuring risk: Known risks can be mismeasured and some risks can be ignored, either because they are unknown or viewed as not material. Once risks are measured, they have to be communicated to the firm’s leadership. A failure in communicating risk to management is a risk management failure as well. After management decides what kind of risks to take, risk management has to make sure that the firm takes these risks. In other words, risk managers must then manage the firm’s risk, a task that may involve identifying appropriate risk mitigating actions, hedging some risks, and rejecting some proposed trades or projects. Lastly, a firm’s risk managers may fail to use appropriate risk metrics.
With this perspective, there are six types of risk management failures:
1) Mismeasurement of known risks.
2) Failure to take risks into account.
3) Failure in communicating the risks to top management.
4) Failure in monitoring risks.
5) Failure in managing risks.
6) Failure to use appropriate risk metrics.

2/3: Correlations Rene Stulttz: When an institution has many positions or projects, the risk of the institution depends on how
the risks of the different positions or projects are related. If the correlation between the positions
or projects is high, it is more likely that all the firm’s activities perform poorly at the same time,
which leads to a higher probability of a large loss. These correlations can be difficult to assess
and they change over time, at times abruptly. A partner of LTCM described the problem they
faced in August and September as being one where correlations that they thought were extremely
small suddenly became large. With this perspective, correlations would have been misestimated.
It is well-known in finance that correlations increase in periods of crisis. Failure to assess
correlations correctly would lead to the wrong assessment of the risk of a portfolio or of a firm.
The problem of mismeasurement of correlations is more subtle, however, if correlations are
10
random and sometimes turn out to be unexpectedly large ex post. In this case, risk managers
could not be expected to know what correlations will be, but their assessment of the risk of a
portfolio or of the firm would depend on their estimates of the distribution of the correlations. In
this case, it would be possible for realized correlations to be different from their expected value
and yet there would be no risk management failure.

2/3: Caterpillar Fourth Quarter Profit Plunged 65%
The world’s largest maker of construction and mining equipment, Caterpillar Inc. (CAT), reported fourth-quarter earnings that plunged 65%. In addition to the disappointing results, the company offered up a cautious outlook for the remainder of 2010.

2/2: Guaranty Funds and Guarantee Associations  
What happens when an insurance company is declared insolvent? The mechanism which protects policyholders is called the "State Guaranty Fund" or Guarantee Association system. All fifty states and the District of Columbia operate guaranty funds which may pay the claim of a financially-impaired company that operates in their state.

2/2:

Date:	2010-01
By:	Akira IIDA (Policy Research Institute)
URL:	http://d.repec.org/n?u=RePEc:eab:develo:1689&r=cbe
In any policy making exercise, whether it is about matters of economic, social or political problems, both domestic and international, such as diplomatic relations or national defense, there are various cognitive issues that affect the design and implementation of the policy. Without correct cognition of the actuality and history regarding the problems in question, or without correct cognition of the problems that might arise in the process of the policy implementation, the policy making exercise is bound to fail. Yet, in the history of economics, sociology or the study of the diplomacy or of national defense, philosophical inquiry about “cognitive issues in policy making� has been very poor. More specifically, on one hand, epistemologists have hesitated to go into this kind of inquiry, since policy making always embraces questions of values or other subjective judgments, and hence, objectivity is not assured. On the other hand, the attention of the economist, sociologist, or analysts on diplomacy and national defense has focused on the analysis of relationships among the economic, social, diplomatic or defense factors, while neglecting the cognitive issues in policy making itself. Policy makers should have far better knowledge in this area, but they have paid scarce attention to it, despite their policy failures, caused by their failures to recognize the factors that really mattered in the case in question

2/2:  Interesting- particuilarly that compusory attendance may not do any good.  However, it may be the only way to avoid fiduciary reponsibility.

Date:	2010-01
By:	Angela A. Hung Joanne Yoong
URL:	http://d.repec.org/n?u=RePEc:ran:wpaper:714-1&r=cbe
When do individuals actually improve their financial behavior in response to advice? Using survey data from current defined-contribution plan holders in the RAND American Life Panel (a probability sample of US households), the authors find little evidence of improved DC plan behaviors due to advice, although they cannot rule out problems of reverse causality and selection. To complement the analysis of survey data, they design and implement a hypothetical choice experiment in which ALP respondents are asked to perform a portfolio allocation task, with or without advice. Their results show that unsolicited advice has no effect on investment behavior, in terms of behavioral outcomes. However, individuals who actively solicit advice ultimately improve performance, in spite of negative selection on financial ability. One interesting implication for policymakers is that expanding access to advice can have positive effects (particularly for the less financially literate); however, more extensive compulsory programs of financial counseling may be ultimately ineffective.

2/1: ETFs: ETF assets and trading volume are highly concentrated in just a handful of funds. The 10 largest ETFs account for almost 40% of total ETF assets, while the 10 funds with the largest dollar trading volume accounted for roughly 60% of the total volume for all ETFs in December

2/1: Equities: U.S. stocks make up only 42% of the value of all the planet's equity markets. Yet the average American investor keeps 72% of stock assets here in the U.S., a preference for local companies that's known as "home bias."

Roughly 95% of the $25 billion that U.S. investors pumped into international funds in 2009 went into funds that specialize in emerging markets like Brazil, Russia, India and China, according to Morningstar. By year-end, U.S. investors had just under $300 billion riding directly on the developing world, and perhaps another $110 billion indirectly, through other funds that have some assets in emerging markets.

Add it all up and the average fund investor's stock portfolio sits roughly 68% in the U.S., 6% in emerging markets and 26% in all the rest of the planet combined. Yet companies based in advanced, as opposed to emerging, foreign economies make up 45% of the world's stock-market value. Americans are top-heavy at home, spread thin in countries like Australia, Britain, France and Japan, and diving headlong into emerging markets.

The argument for going global used to be based on low correlations, or the tendency for foreign stocks to thrive when U.S. stocks dive (and vice versa). In the 1980s and 1990s, foreign shares were generally less than 50% correlated, zigging whenever the U.S. zagged. But in 2008, stocks fell in lock step both at home and abroad, while in 2009 they rose almost in unison around the world. The correlation between foreign and U.S. stocks has risen above 90%.

But correlations have converged between U.S. stocks and just about everything, including commodities and hedge funds. There are other, better reasons to invest world-wide.

The weights within MSCI's All Country World index approximate how all the world's investors already have placed their bets: 42% in the U.S., 45% in developed foreign markets, 13% in emerging m. arkets.

efm- fine, but just be careful if we go into a another bad patch since, if all the correlations are the same, everything will tank.

 2/1 Yep-

Bull Market Is Showing Its Age

With stocks down 6% from that Jan. 19 high, analysts and investors are concerned the market could be in for a period of ragged, possibly disappointing, stock behavior.

1/31: Joke: The House bill  would require all brokers providing advice to abide by fiduciary standards but would give the Securities and Exchange Commission the discretion to write regulations defining those standards. Advisers have argued that an SEC revision of fiduciary standards could result in rules closer to those under which brokers work, which require only that products be suitable to the investor.

they are both jokes- a broker cannot provide the fiduciary element since they have never been tuaght the fundamentals of investing. And the SEC doesn't know them and won't include them anyway.
Bascially the public gets screwed.
 
1/31: Past performance- Very few funds manage to consistently repeat top-half or top-quartile
performance. Over the five years ending September 2009, only 4.27%
large-cap funds, 3.98% mid-cap funds, and 9.13% small-cap funds
maintained a top-half ranking over the five consecutive 12-month periods.
No large- or mid-cap funds, and only one small-cap fund maintained a topquartile
ranking over the same period.

Our research suggests that screening for top-quartile funds may be
inappropriate. A healthy plurality of future top-quartile funds comes from the
prior period’s second, third and even fourth quartiles. Screening out bottom
quartile funds may be appropriate, however, since they have a very high
probability of being merged or liquidated.

1/27:  Oy!

S&P Lowers Outlook on Japan to 'Negative'

Standard & Poor's threatened to cut Japan's government debt rating by a notch, saying the government isn't fixing the nation's bloated finances as fast as expected.

1/27:

The Scales Can Lie: Hidden Fat

Can you be normal weight and fat at the same time? A Mayo Clinic report suggests that fat in your body can get you and your heart into trouble even if the scale tells you you're healthy.

1/27:  

Date:	2009-11
By:	Antonio Mele
URL:	http://d.repec.org/n?u=RePEc:fmg:fmgdps:dp642&r=fmk
Does capital markets uncertainty affect the business cycle? We find that financial volatility predicts 30% of post-war economic activity in the United States, and that during the Great Moderation, aggregate stock market volatility explains, alone, up to 55% of real growth. In out-of-sample tests, we find that stock volatility helps predict turning points over and above traditional financial variables such as credit or term spreads, and other leading indicators. Combining stock volatility and the term spread leads to a proxy for (i) aggregate risk, (ii) risk-premiums and (iii) monetary policy, which is found to track, and anticipate, the business cycle. At the heart of our analysis is a notion of volatility based on a slowly changing measure of return variability. This volatility is designed to capture long-run uncertainty in capital markets, and is particularly successful at explaining trends in the economic activity at horizons of six months and one year.

1/26: Disability insurance: The percentage of companies that paid all or part of the cost of workers' private long-term disability insurance fell to 48% last year, from 59% in 2002

Many employers are "taking a step back in terms of what they pay and putting the onus on employees" to purchase richer benefits if they choose

disability claims are pouring in to the Social Security Administration, and that's resulting in bigger backlogs. The agency expects claims to jump to 3.3 million in the current fiscal year, ending Sept. 30, from 2.6 million two years earlier. That's led to a greater number of cases pending—about 794,000 this month, up from about 557,000 in late 2008

Social Security is only available to those with a condition that is either expected to leave them unable to work for at least a year, or is terminal. For those who do qualify—around 36% on average on the first application, though more win benefits after appealing—the payout averages just 40% of their predisability income. For high earners, the share will be smaller.

Tom Klett, a consultant with Towers Watson & Co., says qualified applicants should count on waiting three to five months or longer to get Social Security disability benefits. And with the number of applicants growing

If you are buying an individual long-term disability policy, the initial premiums will be set based on factors including your age, health status and occupation, according to insurer Unum Group. You may have the option of a level premium, which won't change over the life of the policy, or premiums that could rise at a fixed rate. If you're joining your employer's group disability policy, the premiums will be adjusted based on the claims history of the entire group.

A growing number of employers offer basic disability coverage and let workers buy more. But you'll have to figure out how rich a benefit you need. Long-term disability insurance will generally pay a percentage of your predisability income—60% is common—and it may not include extras such as bonuses. Also, be aware that most private disability policies require you to apply for Social Security benefits, and then subtract the government payout from what the insurer pays, a move called an "offset."

1/26: From 2006-

A Morningstar journalist had this to state about fiduciary duty and standard deviation- (2006) "In the following examples, basic rules of arithmetic show how reducing volatility (or risk) can reduce loss. (We will also see how reducing volatility risk can enhance gain. By the way, I equate "volatility" with "risk," which I define as standard deviation in this article. While using standard deviation as a measure of risk is not ideal (e.g., it encompasses both bad "uncompensated" risk and good compensated" risk), nonetheless it can help illustrate a basic concept: the reduction of a portfolio's volatility reduces loss and can also enhance gain." 

EFM- the problem is that it is WRONG. It is true that the longer you hold onto a portfolio, the lower the overall annual standard deviation/volatility. But the problem is the risk of loss goes UP.  

When I contacted the author, he simply said it was better to teach something wrong than not to teach it at all.

From a paragraph in my upcoming Ebook, No Nonsense Finance II

"Theory is great. But it does not have to apply to real life. Nonetheless,  the responsibility of advisers is to know the implications of risk. If nothing else, they have to know the risk of loss. They have to convey it to clients in understandable terms  along with what they will do regarding the scenarios where risk raises its ugly head. If what they are doing- and will only do-  it is just the simplistic annual rebalancing based on software correlations that may be years old, it is illogical to pay a fee for such advice."
The client has  just paid money for an  invalid advice. Whenever the standard deviation is used and indicates a lower element of risk and nothing else , there has been a breach by the adviser and firm.  

1/26: The standard gaussian bell shaped curve.

One standard deviation is occurrences 68% of the time

Two deviations is 95%

Three is 99%

Problem is, real life does not work like this- but if standard deviation is taught at all, this is what it 'is'.

1/26: Buffet on standard deviation- 

many people talk about “sigmas” (the standard deviations of price changes) and equate volatility with risk. He asked why a rational person would substitute the opinions of the public (as reflected in volatility caused by mass decisions) for one’s own measurement of the inherent risk of a company.

Buffett: The measurement of volatility: it’s nice, it’s mathematical, and wrong. Volatility is not risk. Those who have written about risk don’t know how to measure risk. Past volatility does not measure risk. When farm prices crashed, [farm price] volatility went up, but a farm priced at $600 per acre that was formerly $2,000 per acre isn’t riskier because it’s more volatile. [Measures like] beta let people who teach finance use the math they’ve learned. That’s nonsense. Risk comes from not knowing what you’re doing. Dexter Shoes was a terrible mistake—I was wrong about the business, but not because shoe prices were volatile. If you understand the business you own, you’re not taking risk. Volatility is useful for people who want a career in teaching. I cannot recall a case where we lost a lot of money due to volatility. The whole concept of volatility as a measure of risk has developed in my lifetime and isn’t any use to us.

1/25: Arbitrations: New arbitrations filed with Finra surged in 2009 to 7,137 cases, up from 4,982 cases in 2008, according to statistics recently released by Finra. That's a 43% gain

The most common complaint on the list involved — surprisingly — breach of fiduciary duty, racking up 4,206 arbitration claims last year. Though registered representatives are bound to ensure only that products they sell are suitable, clients' attorneys have used the common-law definition of fiduciary duty when filing claims.

Misrepresentation and negligence claims were second and third on the list, cited in 3,408 and 3,405 cases, respectively.

Cases involving mutual funds and common stock were the most numerous, with the former being the subject of 1,556 claims last year, up from 1,069. Common stock claims rose from 773 to 1,367 in the space of a year.

Interestingly, variable annuities experienced a threefold spike in arbitration claims, rising to 123 cases filed with Finra. Only 47 were filed in 2008

EFM- but a lot of these cases will  never see the light of day since most attorneys will suggest settlement. Not necessarily bad but also not necessarily good for the plaintiff since the attorneys are not necessarily well versed in how to try the cases on what SHOULD have been done. Remember, next to no attorneys know the fundamentals of investing and nary a one can use a financial calculator.

Pundits will say that is not necessary. After all, an attorney does not have to have a medical degree to file against a doctor. True. But there is a huge body of work based on medicine that provides a direction. There is hardly anything in the real world that addresses the practical application of products since none of the fundamentals have been taught to effectively anyone. Even where some insight is offered, I still point to practical application. A stock with a good beta is a fine example. The point is, so what? You need up to 350 of these stocks for proper diversification. And an attorney knows what diversification is by the numbers, don't they?
No they don't.
Nor does the NASAA, FINRA, SEC, State Departments of Insurance or Corporations. 

1/25:

Date:	2009-12
By:	Jan Kregel
URL:	http://d.repec.org/n?u=RePEc:lev:levypn:09-11&r=rmg
Past experience suggests that multifunctional banking is the leading source of financial crisis, while large bank size contributes to contagion and systemic risk. This indicates that resolving large banks will not solve the problems associated with multifunctional banking--a conclusion reached after every financial crisis, and one that should apply to the present crisis as well. Senior Scholar Jan Kregel observes that it is important to recognize that past solutions may not be appropriate for present conditions. The approach to the current financial crisis has been to resolve small- and medium-size banks through the FDIC, while banks considered "too big to fail" are given direct and indirect government support. Many of these large government-supported banks have been allowed to absorb smaller banks through FDIC resolution, creating even larger banks. As these institutions repay their direct government support, the problem of "too big to fail" is simply aggravated. Thus, the current thrust of government regulatory reform--increased capital and liquidity requirements, and further legislation--is unlikely to lessen the systemic risks these institutions pose.

1/25:

Date:	2009-12
By:	Zhiguang (Gerald) Wang (Deparment of Economics, South Dakota State University)
URL:	http://d.repec.org/n?u=RePEc:sda:ibrief:2009513&r=rmg
Classical capital asset pricing theory tells us that riskaverse investors would require higher returns to compensate for higher risk on an investment. One type of risk is price (return) risk, which reflects uncertainty in the price level and is measured by the volatility (standard deviation) of asset returns. Volatility itself is also known to be random and hence is perceived as another type of risk. Investors can bear price risk in exchange for a higher return. But are investors willing to pay a premium to enjoy lower volatility? In this essay, I try to answer this question by (1) introducing two different measures of volatility, (2) summarizing findings about volatility risk and its premiums in financial equity markets and (3) presenting preliminary research on volatility risk premiums in the markets for corn, wheat and soybeans, which are relevant to the South Dakota economy

1/25:

Date:	2010-01
By:	Hiroaki Hata Hideo Nagai Shuenn-Jyi Sheu
URL:	http://d.repec.org/n?u=RePEc:arx:papers:1001.2131&r=rmg
We consider a long-term optimal investment problem where an investor tries to minimize the probability of falling below a target growth rate. From a mathematical viewpoint, this is a large deviation control problem. This problem will be shown to relate to a risk-sensitive stochastic control problem for a sufficiently large time horizon. Indeed, in our theorem we state a duality in the relation between the above two problems. Furthermore, under a multidimensional linear Gaussian model we obtain explicit solutions for the primal problem.

1/24: Stranger-Owned Life Insurance (SOLI"): Killing the Goose That Lays Golden Eggs!"

1/24:  

Discharge “Discharge of Indebtedness” Taxes By Tim Berry, JD Email Editor

Dear Valued Reader, I live in ground zero of the real estate crisis: Arizona. We’ve seen prices drop to pre-bubble prices, and it looks like they are going to drop some more. Why is the market descending past what one would think would be support levels? I think a large part is going to be a liquidity crunch. The people with the guts to invest in real estate as investments have been obliterated, and it is going to be some time before they are able to get back onto their financial feet. Not only are the investors hit with the actual losses on their real estate investments, but also a large number of them are going to be hit with large tax bills in the years to come due to something called the Discharge of Indebtedness. Discharge of indebtedness (DOI) is a fancy way for saying that the IRS believes that if you are relieved of an obligation to pay debt, your net worth has increased; and the IRS wants to be able to tax that increase in net worth. While there are some neat loopholes available, they are mainly for DOI on a personal residence, or if you are a real estate, “professional”. (If you have a full time job other than real estate, you probably aren’t a real estate professional.) One simple way to avoid the DOI taxes is simply to go bankrupt. Under the tax code it specifically says that if the DOI is incurred after a bankruptcy is filed no DOI taxes apply. Keep in mind that you need to go bankrupt before the foreclosure or short sale. If you wait to go B.K. until after the short sale or foreclosure, chances are the tax debt is going to survive bankruptcy, which is going to be a massive hindrance to your ability to get back on with your life. I can’t tell you the number of people I’ve met who think that going B.K. is going to relieve them of this burden. It’s a real heartbreaker to tell people they filed B.K. for nothing, and the $200K tax bill is going to haunt them for years to come. A couple of recent court cases highlighted some other interesting ways to manage the DOI tax liability. In the first case, the court took pains to highlight that the amount of the debt must be “definite and liquidated”. In this case, a taxpayer was disputing the amount of debt they had with Citifinancial and Chase. Evidently Citifinancial got tired of arguing about it and just issued the taxpayer with a 1099-C. The IRS received the 1099-C and was nice enough to assess taxes on the taxpayer for the relieved debt; pretty much standard stuff. However, the taxpayer was not standard material. To their credit (sorry, couldn’t resist) they kept on fighting. In Tax Court they argued the 1099-Cs issued were incorrect. The court pointed out that the tax code provides that, “In any court proceeding if a taxpayer asserts a reasonable dispute with respect to any item of income reported on an information return, and has fully cooperated, the Commissioner shall have the burden of producing reasonable and probative information concerning the deficiency in addition to the information return.” In short, the burden of proof was on the IRS to prove the 1099s were correct. Apparently the IRS didn’t provide any information other than the 1099s, and so the court reduced the amount of DOI to the amount the taxpayers agreed was valid debt. Moral to the story? If you are facing a large tax bill for DOI on a foreclosure or short sale, dispute the hell out of the debt: Argue fraud, truth in lending violations, RESPA violations, argue the world just isn’t fair, but argue and dispute the hell out of the debt before the short sale or foreclosure. This way you might have a chance when it comes tax time to show the debt was not bona fide or “definite and liquidated”. The other DOI case was all about timing. In 2000 the taxpayer went through foreclosure with the bank getting $35K less on the foreclosure sale than the balance on the loan. Time dragged on, and it wasn’t until 2007 that the bank issued the taxpayer a 2006 1099-C for the $35K. The taxpayer ignored the 1099-C and didn’t report the $35K as income on their 2006 return. Thus the Tax Court case. The taxpayer took the position that the debt was really discharged in an earlier year, not 2006. Once again the court determined the 1099-C wasn’t dispositive of the issue, rather, the burden of proof was upon the IRS to say otherwise. As the court so eloquently put it, the IRS, “did not present one scintilla of other evidence . . ." Bang! The gavel came down on the side of the taxpayer saying the DOI was not income for 2006. Moral of this story? If the creditor waits a couple of years to hit you with the 1099-C, you probably have a good defense. Overall moral of this article? Kinda the same thing I wrote about last year. Do not accept. There are tools available to you if you are willing to fight. Yeah, the above are long shots and may not work for everyone, but if you don’t try them, what are your results going to be? Then, if by some miracle they do work for you, how much money could you save? How much emotional trauma? Asset protection is not taking one simple step to achieve planning nirvana; instead it is a process to identify and fully utilize all the tools available to you.

1/24: RE: Mellody Hobson’s Three Lessons of the Crash: Save. Don’t Wait. Don’t Panic

I do not dismiss the element of continuing contributions, but I have a difficult with an industry that has refused to teach participants what risk actually means. The idea that one is going to lose 50% or so of their capital every so often from age 30 forward is a breach of duty by the industry not to instruct them of the odds of success of what they are saving. And how to save it from devastation. No rational person will ever feel comfortable with an investment that loses that much money when it may be needed the most.

Every employee portfolio has a risk of loss that needs to be formally explained to each employee. I do not know of any instruction that covers that- further it requires a personal financial calculator- and that is not demanded of advisers.  
Being scared is also being uninformed of the consequences. That is NOT how one invests nor does much of anything else.  

In short, it IS fighting the plan you have since it is incomplete and needs to be changed to add real life applications. Looking at a flat rate of return from historical projections starting from the 'ice age' is not planning. While not gambling per se, false and old data it is a poor way to design one's financial future. As Peter Bernstein noted, “the future is unknown” but it is current work on economics and correlations that needs to be evaluated for potential success.
 
You are rarely going to fid the instruction needed in the industry to truly help the employee. Brokers have never been taught the fundamentals of investing and the designations of CFPs, ChFCs, CPA PFS et al  are lacking in a presentation on true risk.  I do not believe that anyone at the Investment Company Institute can do a risk of loss. Hence the bulk of commentary from the industry is flaccid marketing


Errold Moody
PhD MSFP MBA LLB BSCE
Life and Disability Insurance Analyst

1/22: CFP voluntary relinquishment. I have my two year annual renewal for the designation - which I have not promoted publicly  in 10 years (got in 1984) . I just  took the mandatory 2 hour ethics course where I state that I will adhere to ethical and fiduciary standards. After passing, I took a long hard look at the fiasco. Why should I pay money to an organizations that allows illegal activity form the get go. .

Here is part of the reason- recognize the date
May 6, 1996


Mr. Alex Nocon
Investigator
California Department of Insurance
45 Fremont St. 24th Floor
San Francisco, CA 94105



Dear Mr. Nocon,


I sincerely appreciated your call and the opportunity to objectively define some of the issues. I do wish to elaborate on one part that I did not address in our conversation (though left a subsequent message). It is in regards to being reasonably sure that not only are the individuals in question no longer able to  act illegally, but that the rest of the practitioners in California are also forced to adhere to the law starting immediately.

I recognize, both as an arbitrator and as a realist- and I appreciate your candor here- that when people are faced with an investigation of clear illegal activity, they may distort the truth, outright lie or "lose" files and documents. As such, it may be that you are unable to locate the documents needed to confirm the violations that  they have repeatedly indicated to me over the years that they perform. Nonetheless, it is  imperative that the Department clearly inform such people that, regardless of the outcome,  continued marketing, advertising and offering of comprehensive fee only services that cover the areas of risk management, retirement planning and estate planning, (among others) without the proper licensing as an Insurance Analyst is tacit admission of a continued violation of the law and that the Department will therefore pursue additional actions accordingly. (It is not necessary to dictate actually what the Department could do, but that continued violations would not be tolerated. It is mandatory that this be done, particularly in the case if files and evidence have been destroyed. Otherwise, they and the other practitioners will continue to violate the law.) My point here is the  continued membership under the NAPFA banner wherein the requirements of membership absolutely mandate such planners MUST offer fee only planning in estate planning, retirement planning and risk management, etc. No one can legitimately state that these areas do not involve insurance or that they would simply exclude such insurance review. Therefore, the mere offering of advice for a fee demands the adherence to the Code and at least stops further violations. For those not involved with NAPFA, marketing oneself as a comprehensive financial planner implies the same requirements of law- licensing either as an agent or as an Insurance Analyst.

As stated, I have no personal animosity towards any of these individuals- though their continuing violations of the law coupled with an arrogant attitude regarding their "inherent" expertise- is testing that resolve.  The problem solely arises from their obvious lack of insurance knowledge that I noted at least 6 years ago, their vocal disdain for anything to do with the insurance industry and their refusal to adhere to the law  (though the past CFP president  indicates that he was oblivious to the law)- while at the same time extolling their high ethical standards. The essence is that the consumer, through the repeated advertising and statements of said individuals and their numerous  compatriots, erroneously  believe they are getting some of the best and most independent advice possible. Not even close. Their conduct violates every tenet of the law and ethics and must be stopped. Recognize that I am not saying that all licensed agents would provide exacting knowledge either, but at least the consumer had a legally  qualified and reasonably trained individual for such effort. That is a big difference.

I hope that you will be successful since, if you are, so will the California consumer. And it will change the focus and direction of financial planning nationally. It will show that states can actually force legal compliance, mandate  continuing education standards and protect consumers from fraudulent activity.

If I can be of any further assistance in clarifying any points in my submission or in any previous discussion with the individuals, just give me a call.


Very Truly,

Errold F. Moody Jr.


CC:
Dale Wisemen
Patricia Staggs
Bill Palmer
Chuck Quackenbush

And this  in 2007 for which no reply was received

June 5, 2007


Mr. Steve Poizner
California Insurance Commissioner
300 Capitol Mall, Ste 1700
Sacramento, CA 95814


RE: Life and Disability Insurance Analysts


Dear Mr. Poizner,

Over the last 15+ years, I have been directly involved with the various financial planning agents and organizations regarding  the continuing violation of California State Insurance Code Chapter 8, Part 2, Division 1
1. A Life and Disability Insurance Analyst is a person who, for a fee or compensation of any kind, paid by or derived from any person or source other than an insurer, advises, purports to advise, or offers to advise any person insured under, named as beneficiary of, or having any interest in, a life or disability insurance contract, in any manner concerning that contract or his or her rights in respect thereto.
As of this year, I am still the only CFP that has ever taken and passed the Analyst exam. I am the only fully licensed and legal financial planner in the state who can charge a fee for comprehensive advice- which always includes insurance review . (Pursuant to review of a few years ago, none of the other Analysts do financial planning or are licensed to do so.) This is not meant as a statement of my abilities but the fact that none of the other planners- as well as none of the planning organizations- have ever bothered to adhere to the law.  While these comments do not expressly relate to commissionable agents, recognize that effectively all are offering (supposed) financial plans for a fee wherein insurance review and advice is part of such plan. They are therefore charging an (illegal) fee plus a commission. Yet under my license, I am precluded from doing so.
I have provided a couple of background letters. You will note in my letter to Patricia Staggs , November 1995, that the National Association Personal Financial Advisers (fee only)  had directly stated that they had an formal release from compliance to the law directly from the DOI. When that failed, they tried the exemption as RIAs. They knew the law did not apply since I had previously  received the letter of ‘clarification’ from   Patricia Staggs, Chief, Compliance Bureau, Assistant General Counsel dated July 1995- almost 12 years ago. But not a planner has paid attention then nor now. Subsequently I worked with the then DOI attorney Fred Butler regarding the problem and that culminated with a meeting with the various planning entities (including CPAs practicing planning) on July 30, 1997.  The letter from Jeffrey Kenny, Assistant Ombudsman and Legislative Liaison, February 1998, was presented to the CFP Board, Financial Planning Association,  et al. It appeared that the DOI would pursue the issue but then came the legal debacle with Chuck Quackenbush and nothing happened after that. And that cessation pretty much stopped any compliance by any of the associations or agents whatsoever- then and now.
That said, I requested confirmation of the DOI’s stance to same from John Garamendi and received validation about two years ago. I need to corroborate your position as well.
But one major thing has changed. The Financial Planning Association recently won the case against the Merrill Lynch Rule whereby all ‘Financial’ Advisers have to act in a fiduciary capacity to their clients. The CFP Board of Standards has now also actively promoted the fiduciary level of its representatives (about 8,000 in California),  “making it explicit that the nearly 55,000 planners it oversees must put clients’ interests first, act as fiduciary and disclose the scope of their engagement and their compensation when engaging in planning activities.”  (Once again I note that the predominant current focus in financial planning is on a fee basis, not a commission, so the issues I have raised since 1991 carry even more significance.)
And “Ethical service is something that people expect and deserve when they hire a CFP professional, so at the CFP Board we take this very seriously. We wanted to make sure that in the financial planning relationship that clients have an utmost good faith standard, that we have a clear fiduciary standard and that the disclosure rule is not misleading … all the components to having the best relationship with the client.”
I spoke with a ethics professor by asking if one is a ‘fiduciary’ in acting as an investment adviser while acting illegally as an insurance analyst, can one still be a fiduciary? Obviously not. But it is the position taken by financial planners throughout the state. (There are about 35 states with similar licensing laws- the illegal activity is the same).  
The issue is, has the California Department of Insurance changed its mind in regards to the law or the violations thereof? Is the law intact and do the rules still apply for licensing? I was told years ago (privately) by the Chief of Compliance that the state would not enforce this statute and that I might as well drop my Analyst license and act illegally as well. But that would make me no better than the fraud that is currently perpetrated on the public. I could not do that and have continue to pay fees- though for little reason. 
I have presented just a few letters on this issue (my file is enormous) merely to indicate the essence of the problem that has lasted for over a decade. The positioning by the various planning entities is a ridiculous charade on fiduciary standards that will only continue to harm consumers on the most difficult area in planning.
However, if the DOI has shifted its position on the law, its application and the necessity for public good, I need to know before I contact these entities once again.

I would appreciate a reply at your earliest convenience.

Very Truly,

Errold F. Moody Jr.

1/24: Couple lost an arbitration. Here was part of the broker ADV- Option I: Annual management fee of 4% of the total account value for individuals with no more than $750,000 under management or net worth of no more than $1,500,000. Sales commissions are charged to the account by the broker as transactions occur.

If you pay 4%, you probably are pretty stupid to begin with.  Yes, I know it is not nice. But they lost $2,2 million. Which is worse?,

1/24:Medicare

Programs that Can Help You Pay Your Medical Expenses
http://www.medicare.gov/Publications/Pubs/pdf/11445.pdf
Centers for Medicare & Medicaid Services

How the Medicare Beneficiary Ombudsman Works for You
http://www.medicare.gov/Publications/Pubs/pdf/11173.pdf
Centers for Medicare & Medicaid Services

1/24: End of Life Issues

Video Eases End-of-Life Care Discussions
http://www.cancer.gov/clinicaltrials/results/end-of-life-video0110
National Cancer Institute

1/24: Taking Care of You: Support for Caregivers  Nemours Foundation

1/22: Steepener” interest rate-linked bond  These may be interesting but I have a lot of research to do.

1/22: Just for info window.document.ULForm.NumOfProds.value ='25'

	Insurance Company Name Product Name	A.M. Best Rating	Guaranteed Premium Type	Std NT Premium	Next Avail Class Premium	Other
	Aviva Life & Annuity Advantage Builder II Indexed UL    Standard Non-Tobacco    Calculated Age: 55	A (3)	Age 121 (No Lapse)	$6,570*	N/A*	Quick View
	Aviva Life & Annuity Guaranteed UL Solution    Standard Non-Tobacco    Calculated Age: 55	A (3)	Age 121 (No Lapse)	$6,636*	N/A*	Quick View
	Nationwide Life & Ann YourLife No-Lapse Guarantee UL (Age 100)    Non Smoker    Calculated Age: 55	A+ (2)	Age 100 (Target)	$6,942*	N/A*	Quick View
	North American Custom Guarantee Gen 5    Standard Non-Tobacco    Calculated Age: 55	A+ (2)	Age 100 (No Lapse)	$7,163*	N/A*	Quick View
	Penn Mutual Guaranteed Protection UL - Flex Premium Adj. Life    Standard Non-Tobacco    Calculated Age: 55	A- (4)	Age 121 (No Lapse)	$7,188	N/A	Quick View
	Nationwide Life & Ann YourLife No-Lapse Guarantee UL (Lifetime)    Non Smoker    Calculated Age: 55	A+ (2)	Age 120 (No Lapse)	$7,191*	N/A*	Quick View
	West Coast Life LifeTime Platinum III 8/09    Standard NT    Calculated Age: 55	A+ (2)	Age 121 (No Lapse)	$7,288	N/A	Quick View
	GLIC GenGuard UL NEW!    Standard Non-Nicotine    Calculated Age: 55	A (3)	Age 105 (No Lapse)	$7,321	N/A	Quick View
	GLAIC GenGuard UL NEW!    Standard Non-Nicotine    Calculated Age: 55	A (3)	Age 105 (No Lapse)	$7,321	N/A	Quick View
	MetLife Investors Guarantee Advantage UL 8/09    Standard Nonsmoker    Calculated Age: 55	A+ (2)	Lifetime (No Lapse)	$7,506*	N/A*	Quick View
	Sun Life Sun Universal Protector [LP6 2009]    Nonsmoker    Calculated Age: 55	A+ (2)	Age 121 (No Lapse)	$7,549*	N/A*	Quick View
	Transamerica TransACE 2007    Standard Nonsmoker    Calculated Age: 55	A (3)	Age 111 (No Lapse)	$7,555*	N/A*	Quick View
	AXA Equitable Athena UL    Standard Non-Tobacco    Calculated Age: 55	A+ (2)	30 Years (No Lapse)	$7,665*	N/A*	Quick View
	North American Custom TermGUL    Standard NT    Calculated Age: 55	A+ (2)	Age 120 (No Lapse)	$7,705*	N/A*	Quick View
	Lincoln National LifeGuarantee UL    Std NT    Calculated Age: 55	A+ (2)	Age 121 (No Lapse)	$7,731	N/A	Quick View
	Principal Life Universal Life Protector III 2007    Standard NT    Calculated Age: 55	A+ (2)	Lifetime (No Lapse)	$7,780*	N/A*	Quick View
	United of Omaha GUL Complete    Standard Non Tobacco    Calculated Age: 55	A+ (2)	Age 120 (No Lapse)	$7,796	N/A	Quick View
	Lincoln Benefit Life Legacy Secure UL    Standard Nonsmoker    Calculated Age: 55	A+ (2)	Lifetime (No Lapse)	$7,884*	N/A*	Quick View
	Banner Life Umbrella UL 120    Standard Non-Tobacco    Calculated Age: 55	A+ (2)	Age 120 (No Lapse)	$8,100	N/A	Quick View
	American National LTG UL    Std Non-Nic User    Calculated Age: 55	A (3)	Age 100 (No Lapse)	$8,105*	N/A*	Quick View
	John Hancock Protection UL-G 7/09    Non-Smoker    Calculated Age: 55	A+ (2)	Lifetime (No Lapse)	$8,141*	N/A*	Quick View
	North American Guarantee Builder IUL (GPT)    Standard Non-Tobacco    Calculated Age: 55	A+ (2)	Age 120 (No Lapse)	$8,150	N/A	Quick View
	Security Life of Denver ING GDBUL II (9/09)    Standard No Tobacco    Calculated Age: 55	A (3)	Lifetime (No Lapse)	$8,388*	N/A*	Quick View
	PRUCO Life Ins Co UL Protector (Lifetime Guarantee) 10/09    Non-Smoker    Calculated Age: 55	A+ (2)	Age 121 (No Lapse)	$9,090*	N/A*	Quick View
	American General ContinUL Extend Plus    Standard NT    Calculated Age: 55	A (3)	Age 121 (No Lapse)	$9,522*

1/22:

51% of Affluent Retirees Rue Focusing on Numerical Goal Given the opportunity to approach their retirement savings again, 51% of affluent Americans who have retired said they would have preferred to have focused on life goals rather than a retirement number, Merrill Lynch found in a survey. However, the remaining 49% still believe in zeroing in on the numbers

1/22:

World Bank sees risk of recovery losing steam

The World Bank warns that while it believes the global economy will grow 2.7 per cent this year and that the risk of a double-dip recession is receding, the effects of the crisis will linger

1/22:

China grows 10.7% in fourth quarter

China’s economy grew 10.7 per cent in the fourth quarter from the same period a year earlier but the strong growth was accompanied by higher inflation, raising fears that Beijing may introduce stronger measures to avoid economic overheating

1/22:  FINRA joke-

In today’s environment, compliance professionals, securities attorneys and other industry professionals are called upon to lead their firm’s process of revisiting, developing and implementing practices to protect investors. 

For 2010, the FINRA Annual Conference has been expanded to three days to cover core areas—including anti-money laundering, examination findings and focus, risk management, supervision and suitability

EFM- Protect investors??????????? Unless one knows the fundamentals of investing- certainly standard deviation, correlation and risk of loss- it is a farce on their part to put out anything.

`1/22: Performance Maximization of Actively Managed Funds � Paolo Guasoni, Gur Huberman, and Zhenyu Wang (no. 427, January 2010)
JEL codes: G11, G12, G13, G14
Ratios that indicate the statistical significance of a fund’s alpha typically appraise its performance. A growing literature suggests that even in the absence of any ability to predict returns, holding options positions on the benchmark assets or trading frequently can significantly enhance performance ratios. This paper derives the performance-maximizing strategy--a variant of buy-write--and the least upper bound on such performance enhancement, thereby showing that if common equity indexes are used as benchmarks, the potential performance enhancement from trading frequently is usually negligible. The enhancement from holding options can be substantial if the implied volatilities of the options are higher than the volatilities of the benchmark returns.


1/21: From Bill Jahnke 2003- You attack the conventional wisdom applied by many of the nation’s leading financial planners. Why? The conventional wisdom has resulted in bad practices. Among them would be static asset allocation––the setting of asset allocation policy and sticking with it regardless of what’s going on in the world––and the overstatement of return expectations, which results in under-funding financial plans. In a world that is dynamic, static asset allocation doesn’t make sense. It’s not the way things were done for a long time. It was an idea that took root in the latter part of the 80s. Before that, the idea of sticking with investment solution through thick and thin was not part of the received wisdom. But there was a recognition that being an active asset allocator is a tough job. Then came development of performance measurement and statistics of how the stock market had done going back to 1926, and the realization that stocks had handily outperformed bonds over that period. Consultants selling databases suggested that you can take the historic numbers and put them into optimizers and use the result to make investment decisions. I believe that it is important to know how the market behaved in the past, but if you assume you can extrapolate historical returns, there is a problem. Expected returns on stocks deviate significantly from historical returns and the output of portfolio optimization programs is only as good as the input.

1:21:

HOW DO CMS STEEPENERS WORK?

A constant maturity swap (CMS) is similar to an interest rate swap - an over-the-counter derivative that allows counterparties to swap cashflows determined by floating and fixed interest rates as specified in the contracts. However, with a CMS, the floating-rate portion is reset periodically according to a specified market rate, such as the two-year or the 10-year swap rate.

A CMS steepener, meanwhile, pays coupons based on the difference between two different swap rates - the spread. The coupons of such a structure depend on the slope of the yield curve. So the steeper the yield curve, the greater the coupon.

Since the start of 2006, both dollar and euro yield curves have flattened dramatically and have thus led to a fast-shrinking CMS spread. This has caused the classic steepener to underperform, and investors that had positions in CMS spread instruments took big mark-to-market losses due to a significantly lower coupon.

1/21/ More from Jahnke: You say that advisors have totally misapplied the Nobel-prize-winning ideas of Harry Markowitz and Modern Portfolio Theory. So let’s focus on the hijacking of MPT for a minute. Markowitz’s name has been co-opted. Markowitz is recognized as the father of Modern Portfolio Theory. In his 1952 paper, Portfolio Selection, he cites three significant influences. One was John Burr Williams, who argued that investors should figure out what companies will earn, what they will pay in dividends and then discount dividends back to a present value. If you figure in the current price of a company’s shares, you can calculate the expected return. Markowitz said that was all fine and good, but asked, “What should we do about the risk of the stock not fulfilling your return expectations?” He figured out the mathematics of how to trade off the expected return from security selection with uncertainty, to find the sweet spot. And then he elaborated on this in his 1959 book, Portfolio Selection. I believe Markowitz would say his ideas and MPT have been co-opted. I have had several brief conversations with him about my ideas on matching investment solutions with financial planning objectives, and he recognizes that single period mean-variance optimization is not up to the task. Markowitz does not believe you can use historical returns as inputs in portfolio optimization. He thinks the assumptions underpinning the capital asset pricing model are strange. The idea that applying MPT requires that you believe in market efficiency came about because of the work by Bill Sharpe, Eugene Fama, and others. These two things got connected at the hip. But Markowitz does not believe that markets are efficient and that the process of generating returns is stable. MPT got co-opted by zealots of the efficient market school.

1/21: US Government Agency Step-Up Coupon. You can get a 7% rate till 2025. Not a bad return if you can deal with a 15 year maturity. 

1/21: Disaster Preparedness for Elder Loved Ones
1. By Dana Carr
It’s no secret that a large percentage of deaths in Katrina-ravaged New Orleans were our sick and our elderly. Even institutions built to safeguard our elderly loved ones were ill-equipped to handle a disaster of this magnitude.

In his September 19, 2005 report, New York Times reporter David Rohde exposes Katrina’s impact on nursing homes and hospitals. About 60% of nursing homes failed to evacuate successfully before the storm hit. Many nursing home operators feared their frailest residents would die on the buses leaving town. So far, more than 150 of the deaths in New Orleans were patients in hospitals and nursing homes.

This report should be a wake-up call to all families with elderly loved ones. What would happen in the event of a major earthquake? Or even in other areas of the US where unanticipated disasters such as tornados, floods or fires could occur. The damage could be even more extensive due to the element of surprise.

No one likes to plan for the worst. However, objectively considering the possibility of a disaster and developing a contingency plan is exactly what’s needed to offset the tremendous impact such an event could have on our elderly loved ones and on us. Even if your loved one resides in an assisted-living facility, there is no guarantee the employees would elevate your loved one’s interest ahead of their own family’s safety. Indeed, you may be called upon to transport and care for your loved one until the situation stabilizes.

Are you prepared to care for your loved one? Do you have a week’s supply of their daily medications? How will you transport your loved one?

Here is a brief checklist of tasks that should be completed now. Completion of these tasks will help prepare you to effectively and efficiently handle any emergency.
Provide the facility with in-state and out-of-state emergency contact information.
Find out if the facility has a website where they will post information in case of a major emergency.

Keep a current copy of your loved one’s medical requirements with you. Arrange with the doctors, pharmacy and/or facility to have at least a seven day supply of each of their medications.

Prepare a bag that you can carry with you to the facility if the roads are out. It should contain a portion of each of the following items.

Stock disposable rubber gloves, antibacterial gels, adult diapers, wipes, skin creams and a supply of plastic bags to dispose of any waste. Elders with special medical needs require special hygiene products.
You should have a change of clothes for your elder family member. Many elders in facilities always wear a nightgown or very light clothing. If you need to bring them home, they will need shoes, socks, sweaters, jackets, etc.

For dementia or Alzheimer’s patients, make sure your loved one always wears their medic alert bracelet. It contains the appropriate contact and medical information. You may also want to consider putting an emergency pack in their room with all of the pertinent information about their care in writingg
Meet with other family members and discuss the following questions.
Which family member is closest to the facility should transportation become necessary?

Who is responsible for moving the loved one? Also, establish a backup person..
If the loved one can’t be moved, who can stay in the facility with them?
The bottom line is that we are the primary caregivers to our loved ones during an emergency, not the facilities they live in. It’s in our loved one’s best interest to take responsibility for their care in the event of a disaster rather than for one hospital administrator to care for all of the patients in their charge

1/21:

Tax Credit Helps Pay for Higher Education Expenses 

The American Recovery and Reinvestment Act was passed in early 2009 and created the American Opportunity Credit. This educational tax credit – which expanded the existing Hope credit – helps parents and students pay for college and college-related expenses.

Here are the top nine things the Internal Revenue Service wants you to know about this valuable credit and how you can benefit from it when you file your 2009 taxes.

1. The credit can be claimed for tuition and certain fees paid for higher education in 2009 and 2010.
2. The American Opportunity Credit can be claimed for expenses paid for any of the first four years of post-secondary education.
3. The credit is worth up to $2,500 and is based on a percentage of the cost of qualified tuition and related expenses paid during the taxable year for each eligible student. This is a $700 increase from the Hope Credit.
4. The term "qualified tuition and related expenses" has been expanded to include expenditures for required course materials. For this purpose, the term "course materials" means books, supplies and equipment required for a course of study.
5. Taxpayers will receive a tax credit based on 100 percent of the first $2,000 of tuition, fees and course materials paid during the taxable year, plus 25 percent of the next $2,000 of tuition, fees and course materials paid during the taxable year.
6. Forty percent of the credit is refundable, so even those who owe no tax can get up to $1,000 of the credit for each eligible student as cash back.
7. To be eligible for the full credit, your modified adjusted gross income must be $80,000 or less -- $160,000 or less for joint filers.
8. The credit begins to decrease for individuals with incomes above $80,000 or $160,000 for joint filers and is not available for individuals who make more than $90,000 or $180,000 for joint filers.
9. The credit is claimed using Form 8863, Education Credits, (American Opportunity, Hope, and Lifetime Learning Credits), and is attached to Form 1040 or 1040A.

1/20: Getting rich-

Seven out of 10 say it is harder to get rich in America today than it used to be, according to the most recent Bankrate.com survey 

Compare that response to a similar poll taken in 1999, during the era of the dot-com bubble: Only 38 percent of Americans said it was harder to get rich than it used to be. Just more than a quarter, 26 percent, said it was easier. Today, 9 percent say it's easier.

1/20:  Possibilities of 401k disclosure 

According to the House committee's Web site, the 401(k) Fair Disclosure and Pension Security Act (H.R. 2989), would:

- Require 401(k) plans to disclose fees on workers' quarterly statements as a dollar figure taken from participants' accounts. Fine

- Require service providers and plan administrators to disclose fees in four categories: administrative, investment management, transaction, and other fees. Fine

- Help workers understand their investment options by providing information on risk, return, and investment objectives. Not a chance. There is no training in the industry for risk or much of anything else.  

- Require plan administrators to offer at least one low-cost index fund in order to receive protection against liability for participants' investment losses. Wrong. The S&P 500 lost 55%. The requirement is insipid. 

- Require service providers to disclose financial relationships so companies that sponsor 401(k) plans can make sure there are no conflicts of interest. Fine

- Ensure that investment advice is based on workers' needs--not the financial interest of those providing the advice. Cannot be done without a budget and an individual analysis.  

- Provide adjustments to pension funding rules to ensure plans can weather economic crises without providers being forced to cut jobs or freeze plans. No idea what that means.  

1/19: Pets- Forty-two states and the District of Columbia now have laws that specifically authorize the creation of trusts for the care of pets. That's up from 16 states in 2003, with Connecticut, Maryland and Vermont enacting their pet trust laws just last year.

1/19: Stock ownership:  50 or so years ago about 92 percent of stocks were owned by individuals and only 8 percent were in the hands of institutions.  Today it’s almost the reverse, with more than three-quarters of stocks owned by mutual funds and pension funds and less than a quarter in the hands of individuals.  


1/19: 

Creditors put Dubai World debt up for sale

Bank creditors to Dubai World that are owed billions of dollars are trying to reduce their exposure to the debt-laden conglomerate by offering their loans for sale ahead of an expected restructuring of the company’s $22bn of debt http://link.ft.com/r/NA70KK/722MF3/8ZDJB/ZB0ZOD/C77EB/RF/h

Chinese hunt for bargains in Dubai

Chinese investors known for picking up distressed assets at knockdown prices are turning their attention to Dubai in the hunt for property bargains in the wake of its financial crisis

1/19: Fools: A nationwide survey last year found that investors expect the U.S. stock market to return an annual average of 13.7% over the next 10 years.


1/19:  

Date:	2009-12-10
By:	Günster, N.K. Kole, H.J.W.G. Jacobsen, B. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
URL:	http://d.repec.org/n?u=RePEc:dgr:eureri:1765017525&r=fmk
We empirically analyze rational investors' optimal response to asset price bubbles. We define bubbles as a sudden acceleration of price growth beyond the growth in fundamental value given by an asset pricing model. Our new bubble detection method requires only a limited time-series of historical returns. We apply our method to US industries and find strong statistical and economic support for the riding bubbles hypothesis: when an investor detects a bubble, her optimal portfolio weight increases significantly. A dynamic riding bubble strategy that uses only real-time information earns abnormal annual returns of 3% to 8%.

1/19:

Date:	2009-12
By:	Miguel A. Fuentes Austin Gerig Javier Vicente
URL:	http://d.repec.org/n?u=RePEc:arx:papers:0912.5448&r=fmk
Many studies assume stock prices follow a random process known as geometric Brownian motion. Although approximately correct, this model fails to explain the frequent occurrence of extreme price movements, such as stock market crashes. Using a large collection of data from three different stock markets, we present evidence that a modification to the random model -- adding a slow, but significant, fluctuation to the standard deviation of the process -- accurately explains the probability of different-sized price changes, including the relative high frequency of extreme movements. Furthermore, we show that this process is similar across stocks so that their price fluctuations can be characterized by a single curve. Because the behavior of price fluctuations is rooted in the characteristics of volatility, we expect our results to bring increased interest to stochastic volatility models, and especially to those that can produce the properties of volatility reported here.

1/19:  “Fee-only.” A certificant may describe his or her practice as “fee-only” if, and only if, all of the certificant’s compensation from all of his or her client work comes exclusively from the clients in the form of fixed, flat, hourly, percentage or performance-based fees.

This is from the CFP mandatory ethics course. However, the  failure of the definition is that fee ONLY reflects what the adviser will do, not the fact that if teh client is referred to a standard life agent, a commission will be charged. Secondly, the laws determine if a planner can charge a fee. 99.99% of fee only advisers are RIA eitehr through the SEC or state.

But about 32+ states have requirements for fee advice on insurance. And maybe 0.5% are licensed.

So there really is only a fee only investment advisor. There are NO fee only planners in these states.   

1/18: Three quarters??? Goldman set aside $16.7 billion for compensation in the first nine months of 2009, and in good years, the firm dedicates about three-quarters of its compensation budget to year-end bonuses

1/18:  From the WSJ: 

The third step to an all-weather portfolio: Hire good professionals -- cheaply. How? By investing some money in smart, flexible mutual funds where the managers can pick their bets and avoid risks.

I tend to sort these into three broad types. Asset-allocation funds give a manager freedom to move money between different asset classes like stocks and bonds in response to perceived risks. (Ho Ho Ho Ho Ho Ho ho Ho Ho Ho ho)

Examples include the BlackRock Global Allocation and the Leuthold Asset Allocation funds.

Long-short funds let managers bet on shares falling as well as rising. Examples: Hussman Strategic Growth and Federated Market Opportunity funds. (gernerally they suck)

1/18: Oy!: A nationwide survey last year found that investors expect the U.S. stock market to return an annual average of 13.7% over the next 10 years

1/18:  Stiglitz 
1/15: 401 k info

1/15:

1. Financial Bubbles, Real Estate bubbles, Derivative Bubbles, and the Financial and Economic Crisis

   Date:	2009-05-02
   By:	D. Sornette R. Woodard
   URL:	http://d.repec.org/n?u=RePEc:stz:wpaper:ccss-09-00003&r=fmk
   The financial crisis of 2008, which started with an initially well-defined epicenter focused on mortgage backed securities (MBS), has been cascading into a global economic recession, whose increasing severity and uncertain duration has led and is continuing to lead to massive losses and damage for billions of people. Heavy central bank interventions and government spending programs have been launched worldwide and especially in the USA and Europe, with the hope to unfreeze credit and boltster consumption. Here, we present evidence and articulate a general framework that allows one to diagnose the fundamental cause of the unfolding financial and economic crisis: the accumulation of several bubbles and their interplay and mutual reinforcement has led to an illusion of a ``perpetual money machine'' allowing financial institutions to extract wealth from an unsustainable artificial process. Taking stock of this diagnostic, we conclude that many of the interventions to address the so-called liquidity crisis and to encourage more consumption are ill-advised and even dangerous, given that precautionary reserves were not accumulated in the ``good times'' but that huge liabilities were. The most ``interesting'' present times constitute unique opportunities but also great challenges, for which we offer a few recommendations.
   Keywords:	Financial crisis, bubbles, real estate bubble, derivatives, super-exponential
   JEL:	O16

2. TIPS, Inflation Expectations and the Financial Crisis

   Date:	2009
   By:	Thorsten Lehnert (Luxembourg School of Finance, University of Luxembourg) Aleksandar Andonov (Limburg Institute of Financial Economics, Maastricht University) Florian Bardong (Fixed Income Research, Barclays Global Investors, London)
   URL:	http://d.repec.org/n?u=RePEc:crf:wpaper:09-09&r=fmk
   Previous research indicates that the US market for inflation-linked bonds is not efficient and that market inefficiencies can be exploited by informed traders who include survey estimations or inflation model forecasts in trades on break-even inflation. Results from this extended research over a time-period in which the TIPS market matured and increased in depth, while the volatility of real yields and inflation increased, confirm that TIPS market inefficiency was not temporary but persisted over the entire time period between 1997 and 2009. Using estimations generated by the Survey of Professional Forecasters or forecasts based on the Kothari and Shanken (2004) inflation model to construct a break-even trading strategy leads to excess returns over a static buy-and-hold strategy. These excess returns remain substantial even after accounting for trading costs. Furthermore, TIPS returns still include a substantial liquidity premium, which increased during the financial crisis.

Date:	2009-12
By:	Jiri Novak (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic) Dalibor Petr (Palacky University, Olomouc)
URL:	http://d.repec.org/n?u=RePEc:fau:wpaper:wp2009_29&r=fmk
Measuring risk in the stock market context is one of the key challenges of modern finance. Despite of the substantial significance of the topic to investors and market regulators, there is a controversy over what risk factors should be used to price the assets or to determine the cost of capital. We empirically investigate the ability of several commonly proposed risk factors to predict Swedish stock returns. We consider the sensitivity of an asset returns to the variation in market returns, the market value of equity, the ratio of market value of equity to book value of equity and the short-term historical stock returns. We conclude that none of these factors is clearly significant for explaining stock returns at the Stockholm Stock Exchange, which casts doubt on their use as universal risk factors in various corporate governance contexts. It seems that the previously documented relationship is contingent on the data sample used and on the time period.

1/14: The Roller Coaster of Caregiving
1. By Jane Cassily Knapp, RN, LCSWC
The decisions to become a caregiver are usually made in crisis situations. We rarely have time to consider the ramifications of these decisions nor do we really fully understand that there are any ramifications. What could be so difficult about caring for someone we love?

In the ideal situation a family meeting should be called to get an understanding from all involved as to what the primary caregiver’s role will be. What are each family member’s expectations and understanding of caregiving? What is the family’s plan for support to the caregiver? Scheduled assistance and relief to the caregiver should be routinely incorporated into the weekly schedule from the onset.

The caregiving role is a pivotal one: You become the center person, the “expert” in the care of someone. Everyone else in the family is required to go through you to find out what is now needed for this person. Your new position forever changes your role with each family member.

It’s a little like working with the same group of people on your job for 20 years and suddenly being promoted to the boss. People who were your comrades and trusted support system are now critical of you and your actions. They don’t want your job but they’re jealous that you have it. They may also feel that through your new caregiving role you now hold control over their actions to some extent.
Avoid pit falls……….. Dispel misunderstandings/ myths regarding your desire to be the caregiver. Others not available or not wanting the responsibility to caregive may misunderstand your motives. Often this is rooted in their guilt over not taking on this role themselves. They begin to question………”what is your hidden agenda for caregiving?”

You must want the estate or checking account, etc. If this is allowed to brew you may find yourself in the midst of serious family conflict.

You think everyone should be so grateful to you for the incredibly generous gift you are providing the family and suddenly you become very hurt by these knives of jealousy and misperceptions.

Usually caregivers are by nature giving people. This additional responsibility seems natural to them. These persons occasionally suffer from co-dependency. This means that they have had a history of setting poor boundaries and healthy limits to protect themselves from being victimized or exhausted.

Others, not attuned to this, often misunderstand. They may have healthier boundaries and would never allow themselves to do more than they feel they can do. Therefore, they assume that the caregiver is not going to work harder than they can tolerate. If an exhausted caregiver continues to try to provide everything needed without asking for help, those around them assume that they are fine. If they weren’t fine they would stop and ask for help. The caregiver may become angry and feel abused and victimized. They feel that others should know that they need help but if you don’t ask, no one will know. The people around you may not be unwilling or uncaring; they just aren’t mind readers. No one enjoys being related to a martyr.

When a dependent family member first moves into your home for care giving there is often a “honeymoon” period.

Everyone is polite, friendly and appreciative. This new change in the family dynamics can temporarily make even old persistent family problems seem like they have been resolved or forgotten. Everyone puts his or her best foot forward.

However, as many of you are aware, this is often short lived. The “new” family member may offer “suggestions” about how your family should do things; especially concerning how you should raise your children. There is no longer just you and your husband watching TV in the evening. His mother is sitting in between. Your children compete for attention by fighting with each other while you’re changing grandpa’s diapers. They may let you know how they feel about the new member in their home by acting out at school; grades may drop. All these wonderful things add to your exhaustion and frustration. Your mother-in-law may re-arrange your furniture or your kitchen closets. And just to make life more interesting, you are up every 3-4 hours to take your new family member to the bathroom only to get there and have them say, “I guess it was just a false call.”

There are many positive gifts to be had by participating in caregiving. You have the unique opportunity to get to know the dependent person in a very intimate and wonderful way. You can experience tremendous satisfaction from caregiving. You become the model for family members and others who take on the caregiving experience.

You provide the gift of allowing the dependent person to live in a home environment and to be taken care of by someone who loves them and who will honestly work to maintain their privacy, security, and personhood.
Family caregivers have history with the dependent person. They knew them before their many losses. They knew and respected the personhood of their past. Therefore they don’t only see them as who they appear in the present. This provides a connection and intimacy that is very comforting.

Family caregivers also provide a sense of comfort and relief to the other family members of the dependent person by the fact that they now have the peace of mind that their dependent loved one is being cared for by someone who really cares for them.

We have mentioned:
Anger
Ambivalence
Exhaustion
Frustration
Guilt
As difficult feelings common to the family members of a dependent person and the caregiving role.

Now let’s look at

Scorekeeping—Who did what, when? Who did more? Whose turn is it? Who never takes a turn? Who is the most exhausted? There is no equality in caregiving as in parenting. Be careful not to fall into this pit. It will only add to further family discord.

Advise Givers—Sometimes those family members who, for various reasons, are not the primary caregivers attempt to make themselves feel less guilty or more involved than they actually are by stopping by weekly or monthly to loudly advise the caregiver regarding all the things you aren’t doing adequately for “Mom” or all the ways in which you need to improve your caregiving.

Don’t allow yourself to be hurt by these people. Just let them vent. They are only trying to take care of themselves. It’s not really about you or the quality of your caregiving. You may choose to respond by saying, “I know it must be very hard for you to not be able to be here as often as you would like to be and not to be able to do the things for Mom that you wish you could.”

Overcoming Losses

One thing that is often overlooked by the caregiver and other family members is the impact of the losses for both the caregiver and the dependent family member. A wife may miss the husband she has known and loved for many years. She experiences the loss of the friend with whom she has shared interests and confidences. Who was her companion for parties, grocery shopping, going to church or just taking a walk or watching TV together. Not only have you lost your friend but now you may have to take on the roles that this person used to hold within the relationship

like financial responsibilities and household jobs.

You may feel guilty, angry, and sad for feeling like “this isn’t the person I married.”

The dependent loved one experiences many losses as well. Their lifestyle, their independence, their jobs (at home and/ or at work), their health, friendships with co-workers or others are now cut off. Others now see them as invalids but they may feel like screaming “I’m in here and I’m a person!” It’s very hard to tolerate a constant state of dependence.

On whom do we find it easiest to take out our frustrations? The person we love, of course. When we are totally dependent on that person, we often take out our anger and frustrations. This can make for very difficult times.

Ambivalence—We may find ourselves saying “I want to do this…I don’t want to do this…..I wish this was over…” Does that mean I don’t love this person? “Sometimes I daydream about their funeral. Sometimes I wish they had died while they were independent and not survived to be in this state. What’s wrong with me….sometimes I wish they were dead.” Does that mean I’m terrible? You are not terrible for thinking these thoughts. You are not wishing the person you love is gone; you are wishing this state of constant caregiving and decreased quality of life for your loved one are gone. You are wishing your exhaustion and frustration are gone. That is why you need to improve your self caregiving. Your dependent loved one is counting on you to be there for them but you can’t do this if you don’t take care of yourself.

What you can do to assist in caregiving and to care for yourself.
Allow others to help you.
Be assertive of your needs.
Set healthy boundaries.
Use respite services.
Participate in support groups and church activities.
Exercise.
Take time out for yourself and your family; take vacations.
Make sure you have planned caregiver relief routinely into your weekly schedule. (i.e. Every Tues. from 2-5 my sister Mary comes in to care for Joe. Or my friend from the church comes in every Wed. 1-3.) Don’t wait until you are exhausted to ask for relief!
Maintain your own health. Keep routinely scheduled doctor appointments, counseling appointments; get adequate sleep and nutrition.
Use a “baby” monitor so that you have peace of mind while working in the yard or doing anything out of ears’ length of your loved one.
Use a monitor if applicable so that you can safely leave your loved one for short periods.
Invite friends in.
Create a private space for you and your family within your home for socialization away from the dependent person.
Allow yourself to vent your frustrations.
Don’t beat yourself up with guilt.
Compliment yourself for the tremendous caregiving job you are doing


1/14: Fitness at 50+: Five Barriers You Can Beat

While exercise is often touted as a fountain of youth, it often gets harder to  do as you get older.

Physical medicine and rehabilitation (PM&R) physicians, also called physiatrists, are doctors who restore and maintain function lost due to injury, illness and age-related conditions such as osteoporosis, arthritis, joint replacements or stroke. They often prescribe exercise to prevent and treat many of these conditions, working with their older patients to help them get the right kind of exercise so that they can remain active and independent. PM&R physicians offer these tips to help seniors overcome five common fitness obstacles:

OBSTACLE: Declining Strength

What you can do: use your endurance. It’s true we lose muscle mass as we age, and older people have been told that weight training will help prevent this loss of strength and keep them young. However, many seniors find they can’t lift the heavy weight experts say is necessary to actually build muscle. A recent study has shown that while muscle strength diminishes with age, muscle endurance does not. You may benefit from working muscles longer - doing more repetitions - with lighter weights. Exercises that emphasize endurance, such as swimming, walking or biking, may be more enjoyable and beneficial for you than those that require great strength.

OBSTACLE: Arthritis or Other Conditions That Make Moving Difficult

What you can do: you can, and should, still exercise. Ask your doctor, or physical therapist, about how to use a cane, rollator (rolling walker) or other assistive device. These can be especially helpful if you’re recovering from a joint replacement, or a serious illness such as stroke or cancer. Another condition that becomes more common as we age is neuropathy, which is nerve damage in the feet and extremities that makes it difficult to maintain balance and walk steadily. For all of these conditions, assistive devices can keep you active while helping you prevent a fall and further injury.

OBSTACLE: Exercise and Activity After Surgery
What you can do: follow your doctor’s orders, but the best, general rule is to get moving as soon as possible. The type of surgery you had and the type of exercise you plan to do will influence when you should start exercising after an operation. But a recent study found that people who began physical rehabilitation two days after heart surgery recovered faster than those who delayed. PM&R physicians say keeping active becomes more important as the body ages and loses its ability to recover. The longer you delay returning to activity, the more difficult it will be to regain fitness.

OBSTACLE: A History of Inactivity

What you can do: get started on the path to fitness by using everyday activities as exercise. Recent studies have shown that “functional exercises,” those that mimic actual daily activities such as walking up stairs and getting in and out of chairs, are most effective for you. Climbing a flight of stairs several times or repeatedly rising from and returning to a seated position is an effective way to build leg strength. As you become stronger and more fit, increase the challenge by holding some sort of weight on your shoulders, like soup cans. PM&R physicians say that even mundane household chores such as transferring wet laundry from the washer to the dryer, one piece at a time, can be used to increase strength and flexibility in your abdominal, low back and hip muscles. Once you’ve established a routine of exercise, functional fitness exercises can also be used to maintain your health.

OBSTACLE: Chronic Pain and Inflammation

What you can do: choose low impact activities to keep moving and minimize pain. Experts say that certain types of exercise can reduce joint stiffness, pain and inflammation associated with arthritis conditions that affect more than 40 million Americans. A PM&R physician can advise you on the exercise best suited for your arthritis, but activities such as walking, swimming and water-based exercise are generally effective and well tolerated. PM&R physicians also advise arthritic patients to take breaks from long periods of sitting so that joints don’t become stiff and painful.

If you face chronic pain or other medical conditions, consult a PM&R physician who can help you overcome obstacles and develop a realistic and effective fitness program. PM&R physicians are experts at diagnosing pain and restoring function, treating the whole patient, not just symptoms. Many recommend a simple tool to help aid accurate diagnosis, development of tailored and effective treatment and evaluation of progress: keep a log of daily activity, pain and questions that you bring with you to appointments with PM&R physicians or other doctors.



1/13: Interesting: The drop in real-estate values accompanying the credit crunch is enabling conservationists to snap up and preserve land that had been marked for development. Nonprofit groups and state and local governments have purchased thousands of acres of land, from New Jersey marshland to wooded Idaho foothills, as the real-estate bust has led property owners to slash prices.

1/13:  Wrong: Trustmakers talking about rebuilding your portfolio: "If you lost money in a stock, you should ferret out the cause. Did earnings come in below estimates? Are sales in a slump due to consumer spending? Is their market share increasing? Are profit margins growing or shrinking. All of these factors affect corporate earnings. A study of the company's financials will keep you out of harm's way. Lastly, look for signs of institutional block buying or selling. All you have to do is see the foot prints of the major players 

Buying stocks breaches any rational teachings. Did earnings come in below estimates? Whose estimates. Based on what, by whom? Profit shares increasing? By whose estimates?  And on an on.
People who buy stocks to make a portfolio are simply not that bright

They also note, "In addition to the above factors, evaluate your ability to manage risk"..  There are about 2 consumers  in the US who know their actual risk of loss
 
1/13: IRS Fact Sheet -- 2009 Tax Credits and Deductions
 
In FS 2010- 4, the IRS has released a fact sheet that explains 2009 tax law changes. These deductions and credits may assist taxpayers in reducing their payments on 2009 taxes. The fact sheet focuses on deductions for college tuition, energy credits, vehicle deductions and increased limits for the standard deduction, personal exemption and alternative minimum tax exemptions.
 
    1. American Opportunity Credit - The American Opportunity Credit provides for a 100% deduction for the first $2,000 of tuition and a 25% deduction for the next $2,000. For expenditure for tuition and qualified books, the total deduction can be $2,500. Persons with a modified adjusted gross income (MAGI) of $80,000 single or $160,000 married qualify. The credit applies to the first four years of college and is 40% refundable. Even individuals who do not pay tax may obtain a partial refund.
 
    2. Energy Credits - There are two main energy credits. The non-business or homeowners credit is 30% of expenditures up to $5,000. The $1,500 credit may be used for improved heating and air conditioning systems, biomass stoves, and some types of energy efficient windows, doors and installation. The second residential credit is 30% with no cap on solar systems, wind turbines and geothermal heat pumps. The manufacturer must certify that the installed energy equipment qualifies for this credit.
 
    3. New Vehicle Deduction - The state and local sales tax paid on a new car, light truck, motor home or motorcycle with a value up to $49,500 may be deducted. The vehicle must have been purchased between February 16, 2009 and December 31, 2009. Individuals qualify with incomes of $125,000 (single) or $250,000 (married).
 
    4. Standard Deduction - The 2009 standard deduction for married couples is $11,400. Single persons qualify for $5,700 and a head of household may receive $8,350 as the standard deduction. With the higher standard deduction rates, the majority of taxpayers no longer itemize. 
 
    5. Alternative Minimum Tax - The AMT exemptions were increased for 2009 to $70,950 (married), $46,700 (single) and $35,475 (married filing separately).
 
    6. Personal Exemptions - The personal exemption will be $3,650. This exemption is available for the taxpayer and for eligible dependents.
 


1/13:  Pensions

Only about half of private sector workers had any sort of employer-sponsored retirement plan in a given year between 1979 and 2008, according to a new Center for Retirement Research at Boston College analysis.

Many workers also move in and out of retirement plan coverage throughout their career as they change jobs, which leads to smaller retirement payouts than if they consistently participated. Plus, about a third of primarily low-income households are not covered by any sort of retirement plan throughout their entire working life. These people will be entirely dependent on Social Security in retirement.

The percentage of employers offering some form of retirement benefits has remained relatively stable for the past 25 years. But as private sector employers eliminated mandatory pensions and began offering only voluntary retirement accounts, fewer low- and middle-income workers used their retirement benefits. Workers in the top third of the income scale had nearly constant participation throughout the shift, but participation for the middle third declined from 94 percent in 1979 to 86 percent in 2008.

Among low-paid workers, participation in any sort of retirement plan fell even more sharply from 85 to 69 percent over the same time period.

1/12: Dying couch potatoes: each hour of TV-viewing was associated with an 11 percent increased risk of death from any cause, and an 18 percent increased risk of death from cardiovascular disease. These findings held true even after the researchers took into account other factors that could raise the risk of dying, such as age, gender, waist circumference and exercise habits

The researchers suggest this link between TV-time and early death could be partly due to the fact that sitting in front of the tube may take away from time a person might otherwise spend moving about, engaging in light activity, which has been shown to reduce the risk of developing certain biological indicators of cardiovascular disease. The new results agree with those of another recent study, which showed that adults who watch less TV also burn more calories.

The results also showed that those who watched TV for four hours a day or more had a 46 percent increased risk of death from any cause and an 80 percent increased risk of death from cardiovascular disease, compared with those who watched TV less than two hours a day. This connection was found to be independent of other risk factors for death and cardiovascular disease, including smoking, high cholesterol, poor diet, high blood pressure and a large waistline

In Australia and the United Kingdom, the average person watches about three hours of TV a day, the study's authors say, while in the United States, the average daily viewing time is around 5 hours,

And skinny people are not off the hook when it comes to the risks of sedentary behavior. "Even if someone has a healthy body weight, sitting for long periods of time still has an unhealthy influence on their blood sugar and blood fats,"

1/12: Risk Aversion, Over-Con…dence and Private Information as determinants of Majority Thresholds
Giuseppe ATTANASIy Luca CORAZZINIz
Nikolaos GEORGANTZISx Francesco PASSARELLI{
September 2009
Abstract
We study, both theoretically and experimentally, the relation between pre-
ferred majority thresholds and behavioral traits such as the degree of risk
aversion and the subjective con…dence on others’ preferences over the alter-
native to vote. The main theoretical …ndings are supported by experimental
data. The majority threshold chosen by a subject is positively and signi…cantly
correlated with her degree of risk aversion while it is negatively and signi…-
cantly associated to her con…dence on others’votes. Moreover, in a treatment
in which each subject can privately observe the distribution of preferences over
a sub-group of participants, we …nd that the quality of information crowds-out
subject’s con…dence.

 

Mr. Graham proposed that the price of every stock consists of two elements. One, "investment value," measures the worth of all the cash a company will generate now and in the future. The other, the "speculative element," is driven by sentiment and emotion: hope and greed and thrill-seeking in bull markets, fear and regret and revulsion in bear markets.

The market is quite efficient at processing the information that determines investment value. But predicting the shifting emotions of tens of millions of people is no easy task. So the speculative element in pricing is prone to huge and rapid swings that can swamp investment value.

*  "The market may be crazy, but that doesn't make you a psychiatrist."

Prof. Meir Statman 

Jason Zweig concludes, The market may be inefficient, but it remains close to invincible.

Probably true but do you note that everyone says the same thing- the MARKET. The point is that the market supposedly determines what you are to do/invest in. Why is the market the only place to be? OK But ONLY if you keep risk at the forefront. If risk is too HIGH, simply exclude the market altogether. Of course pundits say that that is market timing- trying to get in at the bottom and out at the top.

No, I am simply avoiding risk altogether whether it be real estate, the market, gold and a bunch of other stuff that is out of favor. Does out of favor mean zero or negative returns? Not necessarily at that point. With an inverted yield curve, the market, for example  tends to go up for awhile while the FED comes in and tries to stop a debacle. Out of favor can also  mean value stock or contrarian investing. Sure they can work. But sometimes a stock that is not priced high is simply because the company sucks. 

Here is one of my major comment on market efficiency that nobody seems to address. Graham notes that the price of stock contains the value and the other part is speculation. Frankly I think there is yet other elements. Incompetence and lack  knowledge. Even if all info was there, and negating speculation for a moment, why is the assumption that everyone has the same capability to dissect the info into objective numbers. If a janitor does the numbers, is the analysis as good as mine? Is mine as good as Peter Bernsteins? How about two CFAs? Shouln't they come up with the same value given the same input? Theyu do not. Why? It is an interpretation of tens if not hundreds of pieces of data that must be processed.

Investment value  measures the worth of all the cash a company will generate now and in the future. But the measurement in the FUTURE is unknown. Hence it requires analysis by humans of tons of data with completely different end analysis, irrespective of any speculation.

{Per Mandlebrot:  for each stock, you must laboriously calculate its covariance with, or how it fluctuates against, every other stock. For a thirty stock portfolio, about the minimum needed to make the numbers work well, that means 495 different calculations of mean variance and covariance. For the entire NY Stock Exchange, 3.9 million calculations. And because prices change, the exercise needs constant repetition.

And everyone of those entries may be different by different advisors. 

1/11: When: A $10,000 investment 15 years ago would be worth about $36,173 today. But anyone who jumped in with $10,000 around the peak of the market in October 2007 would have just $5,734

1. 1/11: Other costs for managed funds:  transaction and trading costs. These are more likely to be higher for an actively managed fund, which typically does more trading than an index fund. They average about 1.4% or 1.6% on top of the published expense ratio which may reach 2%

 1/11: Many of you may not be loading up the front page. I can get it on my Apple phone but not on the computer. It is being fixed in that the whole site is going through a makeover for the videos.

1/10: Monetary Cycles, Financial Cycles, and the Business Cycle,� Tobias Adrian, Arturo Estrella, and Hyun Song Shin (no. 421, January 2010)
JEL codes: E52, E50, E44, G18
One of the most robust stylized facts in macroeconomics is the forecasting power of the term spread for future real activity. The economic rationale for this forecasting power usually appeals to expectations of future interest rates, which affect the slope of the term structure. In this paper, the authors propose a possible causal mechanism for the forecasting power of the term spread, deriving from the balance sheet management of financial intermediaries. When monetary tightening is associated with a flattening of the term spread, it reduces net interest margin, which in turn makes lending less profitable, leading to a contraction in the supply of credit. Adrian, Estrella, and Shin provide empirical support for this hypothesis, thereby linking monetary cycles, financial cycles, and the business cycle.
http://www.newyorkfed.org/research/staff_reports/sr421.html

1/10 About 5% of boomers are on ellicit drugs. They never gave them up as they got older.   Getting close to 50% obese.

1/10: U.S. Economic Indicators, updated every Wednesday



1/7:

Eight Facts About Filing Status 

Everyone who files a federal tax return must determine which filing status applies to them. It’s important you choose your correct filing status as it determines your standard deduction, the amount of tax you owe and ultimately, any refund owed to you.

Here are eight facts about the five filing status options the IRS wants you to know in order to choose the correct filing status for your situation.

1. Your marital status on the last day of the year determines your marital status for the entire year.
2. If more than one filing status applies to you, choose the one that gives you the lowest tax obligation.
3. Single filing status generally applies to anyone who is unmarried, divorced or legally separated according to state law.
4. A married couple may file a joint return together. The couple’s filing status would be Married Filing Jointly.
5. If your spouse died during the year and you did not remarry during 2009, you may still file a joint return with that spouse for the year of death, provided the joint return election is not revoked by a personal representative for the deceased spouse.
6. A married couple may elect to file their returns separately. Each person’s filing status would generally be Married Filing Separately.
7. Head of Household generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status.
8. You may be able to choose Qualifying Widow(er) with Dependent Child as your filing status if your spouse died during 2007 or 2008, you have a dependent child and you meet certain other conditions.

1/7:

The economy is so bad that . . . .  1.  I got a pre-declined credit card in the mail. 2.  I ordered a burger at McDonald's and the kid behind the counter asked, "Can you afford fries with that?" 3.  CEO's are now playing miniature golf. 4.  If the bank returns your check marked  "Insufficient Funds," you call them and ask if they meant you or them. 5.  Hot Wheels and Matchbox stocks are trading higher than GM. 6.  McDonald's is selling the 1/4 ouncer. 7.  Parents in Beverly Hills fired their nannies and learned their children's names.

8.  A truckload of Americans was caught sneaking into Mexico .

9.  Dick Cheney took his stockbroker hunting.

10.  Motel Six won't leave the light on anymore.

11. The Mafia is laying off judges.

12. Exxon-Mobil laid off 25 Congressmen.
 
13. Congress says they are looking into this Bernard Madoff scandal. Oh, Great!!  The guy who made $50 Billion disappear is being investigated by the people who made $1.5 Trillion disappear!

And,finally...
 
14. I was so depressed last night thinking about the economy, wars, jobs, my savings, Social Security, retirement funds, etc., I called the Suicide Lifeline. I got a call center in Pakistan, and when I told them I was suicidal, they got all excited, and asked if I could drive a truck.

1/7: Which one is it???
What's Hot
(Podcast)
Jeremy Siegel on 2010: Good for Stocks, Bad for Bonds -- and Why Interest Rates Will Go Up
U.S. stocks boomed in the last nine months of 2009, but remained well below earlier highs. Indeed, many people referred to the first 10 years of the 21st century as "the lost decade," because stocks returned virtually nothing while investors had been conditioned to expect 10% a year. Meanwhile, bonds and commodities experienced a stunning run. Have the rules of investing changed? What's ahead for 2010? Knowledge@Wharton talked with Wharton finance professor Jeremy Siegel, who sees some hazards, especially for bonds, but expects a good year for stocks.

or

Finance and Investment
(Podcast with Transcript)
Global Interdependence: Are the U.S and Other Markets 'Sowing the Seeds' for the Next Crisis?
Despite renewed GDP growth and other positive signs, the U.S. isn't out of the woods, says Wharton finance professor Franklin Allen. In fact, the country could be heading into a "double dip" scenario that tips it back into a recession. That depends on how a number of factors play out in the coming months -- or even years -- not only in the U.S., but also around the world. Global interest rate policies, property markets and public deficits will all demand attention, Allen notes in a recent interview with Knowledge@Wharton.

1/6: The fallacy of theory: These are comments from the Journal of Financial Planning, "Second, assume that markets have produced Black Swan returns—an event that has a 1 percent chance of occurring,
according to the same Monte Carlo simulation—hence, Robert’s wealth of 950,000  has declined to $342,400 while Sandra’s wealth of 330,000  has declined to $197,700. 

So Moshe Milvesky comments is how much is left blah, blah and developing another index to determine what retirement success they might have. It's called a sordex index. “The SORDEX Ratio is a value between zero (very good)
and infinity (very bad) that summarizes the vulnerability of a number to statistical outliers, defined within the same simulation.
A SORDEX Ratio greater than 1 should raise alarm bells, while anything above 2 should set-off ear piercing sirens. Moreover, this technique can be extended to inflation and longevity Black Swans as well.”

What the @&)U()*&(**+!! .  There is no way 'Robert' could lose over 607,000 and not do anything. Admittedly a  Black Swan can happen all at once- 9/11 for example- but even given that, it should have been  avoided in any case because the inverted curve had already indicated a period during which equities would have been limited anyway. .(The current mess is NOT  a black swan. The recession was knonw simply not the severity)  Assumimg a reduction of value over time, why in god's name would one simply sit around and lose 64% and do nothing??? It is so far from real life as to be laughable.If the intent by all academics is to put out another statistic to show that there is A risk in investing,is, why bother? Consumers need to know what is THE risk of their portfolio and what the adviser will do to protect assets. Or will they do anything at all?? If not, you got the wrong adviser.

1/6: Chubby women: After adjusting for other variables, the 10-year weight gain for an average 140-pound woman was 20 pounds if she had a baby and a partner, 15 if she had a partner but no baby, and only 11 pounds if she was childless with no partner

1/6:

New Year Primer:  What's Your 2010 Fiduciary Risk Management Plan?

January 2010 Edition By Ken Golsan

As many begin the New Year with the formation of hopeful aspirations (or necessary modifications!), one such goal within the RIA practice could be to review one's current strategy for fiduciary risk-transfer, or broader yet, one's total Fiduciary Risk-Management Program.   The subject of risk-management can be categorized into four main strategy fields - let's call them "The 4 Pillars of Risk-Management".  These "pillars" constitute the support for your risk-management plan.  They are: (#1) Risk Avoidance, (#2) Risk Retention, (#3) Risk Control, and (#4) Risk Transfer.  Every good RM plan will possess components from each field; some avoidable, some intentional.   Obviously, the presence of fiduciary risk to the RIA professional is manifest by law (1940 Act the primary framework).  So, while it would be great to simply apply the aforementioned (#1) and move on to more enjoyable activities, understandably youthful avoidance does not mean risk abated.  Further, we may innocently believe the establishment of a corporation or similar entity, applying (#3), shields and therefore completes either/and (#1) and (#4) by removing one's personal liability imposed by fiduciary law - unfortunately, that would be a risk management plan missing an important "capstone"; entity protection is a common misconception.  Thus, let us maturely move onward and upward as we briefly review our 2010 risk-management program and determine true and proper strategies.  We know... no fun... yet imperative, unless you take pleasure in "rolling the dice".  Last time we checked, most investment advisors avoid gambling.   Briefly, let's examine the "4 Pillars" with some simple examples:   #1 - Avoidance:  how about the strategy of client selection (or de-selection)?... new clients interview you, but what is your process for interviewing them?... how are they suited to your investment philosophy?... what might you hear in the interview process that causes concern?... then, what about existing clients?... are there any names that arise more than twice-a-week during the lunch hour?... could it be time for a little client de-selection?!... think of your most difficult client... do they regularly disregard or counter your recommendations?... do they complain about other professionals or boast of disagreements, subsequent terminations or lawsuits aimed at past various professional counsel?... are they overly afraid of investment losses?... abusive to your clerical administration staff?... notice any unethical or immoral personality traits or activities?... some of your clients might be better served elsewhere.   #2 - Retention:  consider an appropriate level of insurance deductible (retention)... deductibles are always per claim... understand that, historically, suitability claims can come in "bunches"... a "leader" brings a complaint and "followers" show up to the party later, based on the leader's encouraging progress... so, if such a "wave" hit (historically tagged to market meltdowns), what would be an acceptable aggregated dollar level that you could financially support?... leading into Transfer, how does your contract of insurance (E&O) speak to "interrelated wrongful acts"?... might the deductible for "related acts" apply only once? ... or individually to each claimant?   #3 - Control:  how about a word on documentation?... document, document, document... a defensible file will contain (1) a documentation of your client's life circumstances, tolerance for risk, investment objectives and style, leading to a plan and/or broad (but brief) investment policy statement, (2) file notes on client interactions, which need not be extensive, but should capture the essence of the interactions, (3) at least an annual summary (quarterly is considered "best practice") of activity or discussion signed by the client acknowledging their understanding, and (4) complete documentation of any changes in objectives, advice given, and those not heeded.  Then, a second key example is in the area of "execution errors"... match every order against its return confirmation and promptly resolve discrepancies.                   #4 - Transfer:  the primary risk-management, specifically risk-transfer, tool applied by RIA professionals falls within this category - the insurance mechanism.... yet, buyer beware!... comprehend that ISO (the Insurance Services Office), the insurance industry "body" with insurance company members, writes and issues "commodity" standard forms of insurance for most types of insurances (such as General Liability insuring a manufacturer, distributor, restaurant or retailer)... those standard forms of insurance are adopted by all insurance company members... not so with RIA professional liability!... ISO has decided to ignore this specialty form of coverage and allow each independent insurance underwriter to uniquely issue their own manuscripted contracts... are there differences among the carriers?... how many colors in the painter's palette?!  Finally, think of your insurance as not only a key risk-management tool, but as a business asset.  Paid for and, if properly written, your "army" for defense and/or financial indemnification.

1/6: Retirement at the Tipping Point revealed four key illuminating and provocative findings, including:

#1: Resetting the Retirement Clock * Seven-Year Money Setback - Nearly 60% of Americans have lost money in mutual funds, 401(k) plans, or the stock market. Respondents think it will take an average of seven years for their investments to recover. * Number One Fear: Uncovered Medical Costs are the Retirement Wildcard - The single biggest worry among those 55+ is that they will be unable to afford uncovered medical expenses (46%). This is now a greater concern than either lack of personal savings (18%) or uncertain entitlements (11%). * Retirement Postponed - For the first time in U.S. history, we may witness a significant increase in the retirement age as respondents say on average they will now need to postpone retirement by 4.2 years - which will also adjust the "work-to-retirement ratio."

#2: Needed: Financial Rehab * Lessons Learned - Only 4% of respondents strongly agree that Americans behave in a financially responsible fashion. 81% said that to "live within your means" was the most important financial advice parents could pass on to their children - jumping up from 69% a year ago. "Begin saving at an early age" came in second (65%). * A Call for Financial Fitness at Every Age - An overwhelming 95% of respondents agree that financial management should be a standard part of high school curricula. Although 35 states mandate sex education, only three - Utah, Tennessee and Missouri - have, to date, made personal finance courses a requirement. * Seeking Financial Peace of Mind - A majority of all survey participants (56%) agree that the best thing about having money is "feeling secure." In recent months, we have seen Americans go "back to basics" as evidenced by an increase in the savings rate, now over 4%, twice the savings rate over the past decade, and household credit card debt has dropped almost 10% from the prior year.

#3: Am I My Brother's Keeper? * What We Value Most - The majority of respondents (58%) said that loving family and relationships are at the heart of what we hold most dear today - twice as important as being wealthy (33%) and twenty times more important than wielding power and influence (3%). * Brother Can You Spare a Dime (or $50,000, or a bedroom)? With growing uncertainty about both government benefits and work security, millions of men and women are turning back to their families for financial assistance. * The Sandwich Generation has Turned Into Multigenerational "Rubik" Families - Four out of ten respondents now worry they will have to financially support their parents or in-laws. This growing interdependence extends to siblings, with nearly a quarter of Millennials worrying they will need to provide care and support for siblings as well.

#4: Retirement Finds a New Purpose. Out of the Ashes, New Possibilities - A new and, in some ways, more optimistic vision for retirement is emerging. 60% of Americans now say they view retirement to be "a new, exciting chapter in life" contrasted with 52% last year. And, 70% want to include working in retirement as a way to contribute, remain stimulated and pay the bills. * Sage Elders Needed - Three-quarters of all respondents think our country would benefit in important ways if retirees were more involved in contributing their valuable skills and experience to our communities, with the most enthusiastic response coming from retirees themselves (83%). * The Emergence of Philanthropreneuring - As I've written about in my book, With Purpose: Going from Success to Significance in Work and Life, with growing interest in civic engagement, the majority (57%) of respondents would prefer a volunteer activity that makes use of their full range of work and life skills and experience - rather than basic service and support tasks.

According to Age Wave's Senior VP of Research, David Baxter, "While we discovered both disturbing and encouraging signs about retirement from each generation, there are indications that of all cohorts, it's the Millennials that are coming out of this financial storm a wiser, more cautious, and more responsible generation. They were the most likely to have learned valuable lessons about financial responsibility and had the biggest jump over the past year in their concern about living within their means (63% to 81%)."


1/6:  Woof

"Pets Trusts: Fido with a Fortune?" 

1/5: INVESTING IN RISKY ASSETS
2008 was a devastating year for buy and hold investors. The classic barometer of stocks,
the S&P 500 Index, declined 36.77%. The normal benefits of diversification disappeared
as many non-correlated asset classes experienced large declines simultaneously.
Commodities, REITs, and foreign stock indices all suffered losses over 35%.
While many global asset classes in the twentieth century produced spectacular gains in
wealth for individuals who bought and held those assets for generation-long holding
periods,1 most common asset classes experienced regular and painful drawdowns.2 All of
the G-7 countries experienced at least one period where stocks lost 75% of their value.
The unfortunate mathematics of a 75% decline require an investor to realize a 300% gain
just to get back to even – the equivalent of compounding at 10% for 15 years..


1/5:

Risk Management for Non-Quants^SM
 January 27 – 28, 2010, New York City         14 CPE Credits

See Full Agenda             Register             Instructor

“An Education in Risk Management Can Offer a Leg Up,” according to the New York Times of Aug 19, 2009. “Among the hot areas now are positions related to minimizing risk, as firms try to mitigate the chances of another financial crisis. Risk in general is a relatively new focus, and the openings range from business, credit and operational risk to product and technology risk.”  Today nearly everyone in the financial services industry has risk management listed in their job description.  Yet, when trying to grasp the concepts, many people are intimidated by the mathematics in most texts and risk courses. 

Bernard S. Donefer, a Wall Street veteran and now professor at NYU Stern and Distinguished Lecturer at Baruch CUNY graduate business schools, has created a unique 2 day seminar covering the essential topics of risk management, requiring only basic high school math skills.  If you need to read and understand risk reports, interact with risk managers or just want to broaden your expertise in a critical skill, this is the seminar.  It is not aimed at financial engineers looking for hedging and trading strategies, but for those managers responsible for monitoring, measuring and controlling risks.  It is a pragmatic course for practitioners who must deal with or are regulators, board members or senior management  This course has been given at the SEC and Federal Reserve Bank in Washington DC, as well as to major financial firms in New York, Chicago, Boston, Los Angeles, Toronto and Oxford, UK.

This program will identify varieties of risk at portfolio and enterprise level, estimating its impact, and best practices for mitigating it. Several cases will be discussed, such as Barings Bank, Amaranth, LTCM and lessons learned will be discussed.  Excel spreadsheets will be provided so that participants can review concepts demonstrated in class.  All class notes and readings are provided, including a guide to additional sources (books, articles and websites).

Topic 1: Background - Introduction to Risk Management
               Review and Critique of Modern Portfolio Theory

   Concepts of Probability and Statistics
Topic 2: Value at Risk (VaR) Concepts

   Portfolio Risk, Incremental and Marginal Risk
Topic 3: Advanced Value at Risk

   Monte Carlo Simulation

   What is the Fat Tail and Black Swan?

   Weaknesses in VaR and how to address them
Topic 4: Regulatory Environment

   Basel II and Proposed Industry Regulation

   Disclosures and Measures, Sharpe Ratio et al.
Topic 5: Extreme Events

   Worst Case Scenarios

   Back Testing

   Stress Testing

   Extreme Value Theory (EVT)
Topic 6: Credit Risk

   Altman Z Score, Transition Models, Merton and Jarrow Models

   Collateralized Debt Obligations, (CDOs)

   Credit Default Swaps (CDS's) 

   Their Impact on World Markets

Topic 7: Multi Factor Models

   Alternative Way to Identify and Manage Risk
Topic 8: Liquidity Risk

   What Brought Down Bear Stearns
Topic 9: Operational Risk

   Control Self Assessments (CSAs) and Key Risk Indicators (KRIs)

1/4: Correlations:  Eugene F. Fama of the University of Chicago and Kenneth R. French of Dartmouth have calculated the returns of growth versus value categories back to 1926. But their database shows no correlation in performance from one year to the next for either class. That means that, while growth stocks this year may very well continue to lead the market, whether they do so won’t be determined by their 2009 performance.

1/4: Not very good 

According to the MSCI indexes, which measure virtually all stock markets using consistent criteria, an investor in the American market who reinvested all dividends — and who somehow avoided all taxes and transaction costs for the decade — would have ended 2009 with 12 percent fewer dollars than when the decade began. That is an annual return of negative 1.3 percent.

Even that calculation understates the sad news for stock investors. Because of inflation, as measured by the Consumer Price Index, a 2009 dollar is worth about 78 cents in 1999 dollars.

Over all, the developed world did manage to rise a puny 2.3 percent, or an annual rate of 0.2 percent, not enough to offset the transaction costs any investor would have faced, and far below inflation.

1/4: What a move: When the decade began, China had the 43rd-largest stock market in the world, trailing such countries as the Philippines, Peru and Poland. At the end of the decade, its market capitalization ranked ninth in the world, having passed countries like Brazil, Spain and Italy.


1/4:  Wheelchairs Abound : Discount Mobility Equipment & Healthcare Supply Store

While "hundred year storms" do occur, firms fail far more frequently because they have estimated the distribution of outcomes incorrectly, through model error or management myopia, or risk ignorance.

New England Economic Review, Federal Reserve Bank of boston  

1/4: Variable annuities:  (Times)

There are many variations of guaranteed-minimum variable annuities, but they typically involve keeping track of two figures: the actual value of the customer's funds and a guaranteed-minimum "benefit base," which is used to calculate the annual income if the funds tank and the owner opts to go this route.

When the owner is eligible to pull money out of the contract, it comes down to which is the better option: keeping control of his funds for withdrawals as he pleases, or collecting the guaranteed annual income pegged to the benefit base (in which case the insurer uses what remains in the funds to cover fees).

So how is this benefit base calculated? Under contracts that got many insurers into trouble, it is "reset" at least annually to incorporate gains from the owner's funds, and many contracts promise minimum annual boosts of 7%. Since the crisis, new contracts typically give 5% boosts. Typically, owners in their mid- to late-60s are eligible for annual income of 5% of the base.

Of redesigned products now hitting the market, "Retirement Cornerstone" from AXA SA's AXA Equitable Life Insurance Co. incorporates market gains into customers' benefit bases just once every three years. But a big selling point is expected to be its use of a floating rate to determine minimum rises to those bases and the size of annual checks ultimately pegged to them, rather than the static 5% in most rival products.

Should interest rates rise as many economists expect, the floating rate would put more money in the pockets of buyers who use the safety net. The rate will be set annually at one percentage point above the 10-year Treasury, ranging from 4% to 8%, according to the insurer's marketing material. The product has launched with a 5% rate; the 10-year Treasury currently yields 3.8%.

In November, insurer MetLife Inc. teamed with Fidelity Investments for the Boston fund giant to sell "MetLife Growth and Guaranteed Income" variable annuity. It restricts buyers to a single Fidelity asset-allocation fund, annually locking investment gains into the benefit base. Depending on the investor's age, lifetime withdrawals range from 4% to 6% of the base. All-in cost: 2.7% a year.

Buyers of "AnnuityNote" from Manulife Financial Corp.'s John Hancock unit invest in a designated indexed-based stock and bond fund.

After five years, the contract guarantees 5%-a-year lifetime withdrawals based on the amount invested or the investment's value at that point, whichever is higher. Buyers must be at least 55. Fees total just under 2%; a sales charge may apply.

"The first rule of investing is don't lose money; the second rule is don't forget Rule No. 1."

Warren Buffet

1/4: “innumeracy” -- or mathematical illiteracy.
According to the Department of Education’s National Assessment of Adult Literacy, U.S. adults are terrible at solving real-world math problems, like calculating tips or comparing prices in grocery stores. Some dismal results:

*Only 42 percent were able to pick out two items on a menu, add them, and calculate a tip.

*Only 1 in 5 could reliably calculate mortgage interest.

*1 in 5 could not calculate weekly salary when told an hourly pay rate.

*Only 13 percent were deemed “proficient.” Worse yet, only 1 in 10 women, 1 in 25 Hispanics and 1 in 50 African Americans made the grade.

*Americans are terrified of numbers when it counts most: 20 million Americans pay someone to file their 1040EZ, a one-page tax form with around 10 blanks to fill out.

1/3: Four Key Elements of Investing (Bogle)
Ability to Control
Risk                  Yes
Time                 Yes
Cost                  Yes
Reward                            No

none of us can control  Reward. With few exceptions, generous investment rewards
have been generated in the financial markets over the long-run. But we have the ability to predict neither
when the rewards will occur, nor when they will depart from past norms. Our markets are remarkable
arbitrageurs that reconcile past realities with future expectations. The problem is that future expectations
often lose touch with future reality. Sometimes hope rides in the saddle, sometimes greed, sometimes
fear. No, there is no “new paradigm.” Hope, greed and fear make up the market’s eternal paradigm.


1/3: Efficient market (Bogle) The conventional wisdom is wrapped up in what we call “Efficient Market Theory,” which holds
that since the financial markets incorporate all knowledge of all investors about all things, they are by
definition efficient, eternally priced to perfection. But I wonder, and no one has ever been able to explain
to me why the market was perfectly priced on August 31, 1987, or January 2, 1973, or September 8, 1929,
each of which was followed by a catastrophic market decline, ranging from 35% to 85%.
(Comments made in 2000).

1/3: Efficient Market Theory (Bogle)  All of these statistics leave me apprehensive. Why? Because the future is not only unknown but
unknowable. Yet with the acceptance of Modern Portfolio Theory; the ease of massaging data with the
computer; and our existence (at least in the U.S.) in today’s era of remarkable political stability combined
with powerful economic growth, investors seem to have developed growing confidence that they can
forecast future returns in the stock market. If you fall into that category, I send you this categorical
warning: The stock market is not an actuarial table.
To which I add: When everyone assumes, at least implicitly, that the market is an actuarial table,
that the past is inevitably prologue, and that common stocks, held over an extended period, will always
produce higher returns than bonds—and at lower risk—then stocks inevitably will be priced to reflect
that certainty. At that point, however, the certainty becomes that stocks will produce lower future returns,
and at higher risk at that. It is impossible to escape the suspicion that such an actuarial mindset, if you
will, is extraordin