Master Financial Education

Financial Planning Daily Commentary 2017
The  most intensive and extensive on the Web
  E. F. Moody


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

Steven Winks

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

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

 Paul Volcker

“The events of the past few years have revealed limits in economists’ understanding of the economy..."

“Extreme economic events have often challenged existing views of how the economy works and exposed shortcomings in the collective knowledge of economists,”

Janet Yellen

You must not believe everything you think

Stephan Thomas Vitas

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

Kevin Kind

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

Stephen Colbert

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

Ben Hunt

Hatred is too strong an emotion to waste on someone you don't even like

Dr. Who

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

 Al Capone

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

Charlie Munger

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

        John von Neumann

“ . . . there is always a well-known solution to every human problem — neat, plausible, and wrong.”

 Henry Louis “H. L.” Mencken

“As skill improves, performance becomes more consistent, and therefore luck becomes more important.”
Michael Mauboussin

'The Federal Reserve is a giant weapon that has no ammunition left'

Former Dallas Federal Reserve President Richard Fisher

The reason the professors teach nonsense is that if they didn’t, what would they teach the rest of the semester?

Teaching people formulas that don’t really work in real life is a disaster for the world.”

Charlie Munger

“The expected rarely occurs and never in the expected manner.”

– Vernon A. Walters

Nations rise and fall with the quality of their leaders, and their leaders succeed and fail based upon who they are at their core – what they believe, how they think, and what they do. Nothing shapes a leader or a society like their education or lack thereof. Let me be clear: when I refer to an education, I’m not referencing earning a degree, I’m talking about developing a rich intellect – they are not always one and the same.

Mike Myatt

“Some people die at the age of 25 only to be buried at 75.”

Benjamin Franklin

 "If you see fraud and don't shout fraud, you are a fraud"

Nassim Taleb

“We really can’t forecast all that well, and yet we pretend that we can, but we really can’t.”

Alan Greenspan

Arrogance diminishes wisdom

Fail with honor rather than succeed by fraud

Obi Wan Kenobi

. I do not base my forecasts on mathematical models or some finely honed methodology, but on my sense of where the economic world stands today and where I think it might likely be in the near future.

Actually, I’m going to spend the first few pages demonstrating that the mathematical models used to forecast GDP and all sorts of interesting economic events are basically nonsense.

John Mauldin

The essence of investment management entails the management of risk, not the management of returns.

Benjamin Graham

“For the foreseeable future any risks from tracker funds are far outweighed by their ability to offer cheap, diversified funds to retail investors. The real problem is not the rise of Vanguard and the other tracker funds; it is the rotten deal that retail investors have received from the fund-management industry for far too long.”
The Economist

“If you are not confused about the economy, you don’t understand it very well.”

Charlie Munger

The least competent are the most certain of their skills

Dunning-Kruger effect

"In equity markets, high-frequency traders (HFTs) ... account for a larger share of transactions. "Indeed, trading in the U.S. nowadays is concentrated at the beginning and the last hour of the trading day, when HFTs are most active; for the rest of the day, markets are illiquid, with few transactions."


The key to success is the ability to fake sincerity.

Many humorists

“I think the reason why we got into such idiocy in investment management is best illustrated by a story that I tell about the guy who sold fishing tackle. I asked him, “My God, they’re purple and green. Do fish really take these lures?” And he said, “Mister, I don’t sell to fish.”

Charlie Munger

It’s difficult to put in the hard work of reading a great work of literature, when we spend our time writing in 140 characters. 

Mark Myatt

…the current culture of education has displaced parents as the primary instructors of children in favor of professionals who try their best to recreate the home environment at school; has the federal government rather than the community determining the structure of equal educational opportunity; has deserted the idea that memorization trains the brain; has fostered a loss of literacy by replacing the study of original writings with abridged textbooks; and has created a populace unable to engage in reasonable discourse. We have rejected the historically successful model of rigorous, classical education in favor of entertainment and job training.”
Leigh Bortins

“You cannot manage returns but you can manage risk 

Peter L. Bernstein

There is an important methodological point here — distrust conclusions reached primarily on the basis of model results. Models are estimated or parameterized on the basis of historical data. They can be expected to go wrong whenever the world changes in important ways.
Larry Summers

“What you think is much less important than how you think.”
Philip Tetlock

“Doubt is not a pleasant condition, but certainty is absurd.”


Many aspects of investing are fun, but your future wealth isn’t a game. You should manage it in the most cold-blooded fashion. Emotion, pride, ego, dreams, and nightmares have nothing to do with the process, although some investors rely on little else. It is in this sense that volatility really matters

Peter Bernstein

Make everything as simple as possible, but not simpler


“We observe the world how it is today and make these very simple projections and turn them into a terrible scenario. “This approach fails to take into account that the world is changing.”

World Bank’s Social Protection and Labor Global Practice.

The most glaring problem with current risk tolerance questionnaires is its failure to add any perspective and context to what the risk score means.

Brian Leitner

Markets are supposed to be be based on informed consumers making rational choices. Instead, the point of marketing is to create uninformed consumers who will make irrational choices often against their best interests 

Noam Chomsky

Facts do not cease to exist because they are ignored.
Aldous Huxley

“It is not only a low interest rate world, it is also a low expected return world on any long-only investment. Low expected returns are going to anchor bad news for all of us for the rest of our working lifetimes. And maybe beyond.

Antti Ilmanen

"Get your facts first, and then you can distort them as much as you please."
Mark Twain

In science — unlike in politics — being hesitant when you don’t know something, and being willing to change your mind in the face of new evidence, are virtues.

Chris Mooney

It's also the same in financial theory and heuristics. Unfortunately, most in the finance field don't know what they don't know,

"Policy wonks design some rational solution, it goes through the political meat grinder, whatever emerges is implemented (often poorly), unintended consequences occur, and then – whether it works or not – it gets locked in for a long time."

Erin Beinhocker

A lie can travel halfway around the world while the truth is getting its boots on.

Mark Twainn

A wise man can learn more from a foolish question that a fool can learn from a wise answer

Bruce Lee

     The power to understand and predict the quantities of the world should not be restricted to those with a freakish knack for manipulating abstract symbols...

Brett Victor

In the absence of regulation, someone will always be willing to exploit our irrational tendencies, leading to a “phishing equilibrium” in which individuals are harmed.

Phishing for Phools; George Akerlof and Robert Shiller

A fact with an unknown truth value (a FWUTV)

Paul Romer

Knowledge is a rumor until your body knows it


Most economics students are not required to study psychology, philosophy, history, or politics. They are spoon-fed models of the economy, based on unreal assumptions, and tested on their competence in solving mathematical equations. They are never given the mental tools to grasp the whole picture. The economists are the idiots savants of our time.

"Policy wonks design some rational solution, it goes through the political meat grinder, whatever emerges is implemented (often poorly), unintended consequences occur, and then – whether it works or not – it gets locked in for a long time."

Robert Skidelsky

New economics does not accept the orthodox theory that has dominated economics for the past several decades that humans are perfectly rational, markets are perfectly efficient, institutions are optimally designed and economies are self-correcting equilibrium systems that invariably find a state that maximises social welfare. Social scientists working in the new economics tradition argue that this theory has failed empirically on many points and that the 2008 financial crisis is only the latest and most obvious example.

Eric Beinhocker

“Essentially, all models are wrong, but some are useful.”

 George E.P. Box

A Single Death is a Tragedy; a Million Deaths is a Statistic


“The general change in our culture toward numerical formulations will give room for explicit reference to uncertainty,”

Amos Tversky

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


Great spirits have always encountered violent opposition from mediocre minds 

Albert Einstein


World Clock by

US Debt Clock
Simply Amazing= includes almost all statistics you would need globally+

What General  George Patton might say today
2/20: I did NOT expect this

Philly Fed manufacturing demolishes expectations, hits its highest level since 1984

Much higher that I thought it could be. Trump is part of it...........

2/20: CFAs were asked about 2016

2/20: Short video (5 min) on what the human race might expect. 

Evidence of a New Economic Revolution - Nouriel Roubini

I agree

2/20: Don't read the article if you want to save your sanity.

The Myths and Fallacies about Diversified Portfolios

Ths is one of the most involved discussions of diversification you will ever read. My point is when you truly get to addressing something that, it has no benefit  to the average investor. It also appears in many articles on Advisor Perspectives that only but a very few advisor do subsequent questions... because they are the only ones that (assumingly) know what is being stated. It may make the writers feel good and soothe their ego but it does next to nothing to help 99 44/100% of the public

Just saying..............


In the behavioral world, this is called herding

2/19: Market Sentiment Indicator

2/19: Notice the vast difference in earnings last year

2/19: Military spending

2/19: A teaspoon for your bad thoughts

Put a teaspoon in the left or right pocket of your pants. Whenever you catch yourself thinking a negative thought, move it over to the other pocket. Do this without exception. Over time you will notice that you kick out the negative thought before it has a chance to be fully formulated in your mind. The first couple of days you will constantly have to move it back and forth between your pockets. After a month, sometimes less, it becomes a habit and you develop the reflex to dismiss negative thoughts, no sweat. If after a while they do creep back in, put the spoon back in your pocket and scoop them away.
2/16: No No No.......... It can't get worse
Yes Yes Yes it can

America’s February warmth is extreme, and it’s just getting started   
Read more »

Since this has been going on for years and it probably will not stop for a decade or more- if that. There goes a lot of the east coast, New Orleans, Texas and since I lived in Newport Beach CA for decades, the prime houses on the island and Balboa island will go bye bye very soon.

“Some people die at the age of 25 only to be buried at 75.”
Benjamin Frankln

State Well-Being Rankings 2016

Scientists have just detected a major change to the Earth’s oceans linked to a warming climate

paper, found a decline of more than 2 percent in ocean oxygen content worldwide between 1960 and 2010. The loss, however, showed up in some ocean basins more than others. The largest overall volume of oxygen was lost in the largest ocean — the Pacific — but as a percentage, the decline was sharpest in the Arctic Ocean, a region facing Earth’s most stark climate change. The loss of ocean oxygen “has been assumed from models, and there have been lots of regional analysis that have shown local decline, but it has never been shown on the global scale, and never for the deep ocean,”


  1. “Resolution of optimization problems and construction of efficient portfolios: An application to the Euro Stoxx 50 index"




Víctor Adame-García (Universidad Complutense de Madrid, Campus de Somosaguas, 28223 Madrid, Spain.) ; Fernando Fernández-Rodríguez (Universidad de Las Palmas de Gran Canaria, Campus de Tafira, 35017 Las Palmas de Gran Canaria, Spain.) ; Simón Sosvilla-Rivero (Complutense Institute for International Studies, Universidad Complutense de Madrid, Campus de Somosaguas, 28223 Madrid, Spain.)

We assess the effectiveness of various portfolio optimization strategies (only long allocations) applied to the components of the Euro Stoxx 50 index during the period 2002-2015. The sample under study contemplates episodes of high volatility and instability in financial markets, such as the Global Financial Crisis and the European Debt Crisis. This implies a real challenge in portfolio optimization strategies, since all the methodologies used are restricted to the assignment of positive weights. We use the daily returns for the asset allocation with a three year estimation window, keeping the assets in portfolio for one year.In the context of strategies with short-selling constraints, we contribute to the debate on whether naive diversification proves to be an effective alternative for the construction of the portfolio, as opposed to the portfolio optimization models. To that end, we analyse the out-of-sample performance of 16 strategies for the selection of assets and weights in the main stock index of the euro area. Our results suggest that a large number of strategies outperform both the naive strategy and the Euro Stoxx 50 index in terms of the profitability and Sharpe's ratio. Furthermore, the portfolio strategy based on the maximization of the diversification ratio provides the highest return and the classical strategy of mean-variance renders the highest Sharpe ratio, which is statistically different from the Euro Stoxx 50 index in the period under study.


Optimization problems; portfolio choice; investment decisions; asset allocation;econometrics; minimum-variance portfolios; robust statistics; out-of-sample performance. JEL classification:C14, C61, G11.


2/15: I want to buy something

e-commerce will truly become the future of retail, as nearly all of the growth in the retail sector now takes place in the digital space.

BI Intelligence, Business Insider's premium research service, forecasts that U.S. consumers will spend $385 billion online in 2016. Moreover, BI Intelligence predicts that number will grow to $632 billion in 2020.

This is hardly surprising considering e-commerce's healthy growth. Though the U.S. retail average growth rate in the first half of 2016 was just 2% for total retail, it was 16% for e-commerce.

The number of online shoppers has grown by nearly 20 million from 2015 to 2016. And these 224 million shoppers are spending more, as the total amount spent online grew from $61 billion in the first quarter of 2015 to $68 billion in Q1 2016. Finally, these customers are transacting more frequently, as the number of online transactions has risen by 115 million from 2015 to 2016.

2/15:  The FED Tuesday

7 Essential Do’s and Don’ts for People Caring for Caregivers

By  Lisa Lopez


One year ago, my father was diagnosed with Wernicke–Korsakoff syndrome, a form of dementia resulting from chronic alcohol abuse. My dad, who worked hard his entire life, raised a family and built a strong reputation in his community, spent the last 10 years of his life succumbing to this terrible disease that befalls so many.  After the official dementia diagnosis, I was appointed his guardian and my family and I made the excruciating decision to place him in an assisted living facility. This past year, I’ve experienced everything from anger to guilt, from optimism to despair.

Since becoming one of my dad’s caregivers, the people I’ve leaned on the most are my friends. Somehow, my friends just get it. I don’t need to tell them what questions to ask, when to ask them or when to leave me alone. In the beginning, however, my husband and some other close family members had to be reminded how to react to the very fragile and stressed side of me. I am happy to report that after a few meetings of the mind and heart, my own circle of caregivers, including husband and family, is right on track. I decided to write this article to provide some tips to the wonderful people who are caring for caregivers.

The Do’s and Don’ts:

1. DO LISTEN - It may seem like a simple concept; but for some people, the idea of listening can be a hard job. Once, early on in my dad’s journey, I returned home from one of the worst days of my life. The day involved a neurologist, an escape attempt by my father and a deputy sheriff. You get the picture.  

When I walked into my house that evening, I was distraught and grief-stricken. My poor husband had no idea how to react to me.  When I tried to describe the day, his response was, “Well, you’re home now. Don’t worry about it.” He then proceeded to watch TV. After a little yelling and a lot of crying on my part, we came to an understanding. A word of advice to those caring for caregivers:  when your loved one is stressed or wants to talk about their day, just listen. Stop what you’re doing and give them your full attention. You don’t even have to speak. A hug every once in a while wouldn’t hurt either!

2. DON’T OFFER UNSOLICITED ADVICE – This is another toughie for the folks who love and care about caregivers. It’s hard because you hate to see your loved one in pain. Each time the caregiver in your life comes to you with another problem or unpleasant situation, you try to fix it. It’s very common and well-intentioned. In my case, a few family members were very eager to give unsolicited advice.

During his first memory care unit experience, my father was involved in an altercation with another resident. As with most of these cases, there were about five sides to the story. In the end, however, it was my father who was discharged from the facility. We all believed, including me, my aunt and the ombudsman I had enlisted for help, that my father had been treated unfairly. In the one or two hours my aunt and I had to make vital decisions about my father’s immediate care, I’m sure we made a few mistakes and in hindsight, probably would have done things a little differently. However, we did the best we knew how under the circumstances. But that didn’t stop a few family members from telling us exactly what we had done wrong. If you’re caring for a caregiver, stop before you offer advice. Remember, chances are the caregiver in your life has never had a dress rehearsal for this role. They’re doing the best they can and will ask you if they need your advice.

3. DO GIVE THEM THEIR SPACE  Space, the “vital” frontier. When you’re given the enormous responsibility of caring for someone else, you feel like you’re in a fishbowl. Family members, doctors, bill collectors, you name it are constantly in need of something. Occasionally, I need time and space to recharge my batteries. Whether it’s a nap, time with friends, a massage or a weekend away, caregivers need to take the time to care about themselves. When the caregiver in your life says they need a break, don’t hesitate – pack a suitcase, make reservations for a weekend away, or just follow their lead. Time and space away from the duties and responsibilities of caregiving is essential to avoiding burnout. 

4. DON’T GIVE THEM A GUILT TRIP – I live in the South and down here, guilt is something we pass down through generations, like broaches and pound cake recipes. Before I became my dad’s caregiver, my husband and I spent a lot of free time together. We don’t have children, so we had the luxury of spending the weekends hiking, gardening or doing a whole lot of nothing. When my dad was diagnosed with dementia, my home life and much of my work life was sucked away. I had to spend days on end with my dad and family visiting assisted living facilities, meeting with lawyers, and talking to social workers. When I was at home, I was either on the phone talking to my dad, talking about my dad or doing paperwork. My husband quickly felt abandoned. He got in the habit of making me feel guilty any time I spent attending to my dad’s needs. I explained that this only made my highly stressful situation worse and it only made me resent him. He eventually came to understand that this was my choice and the only way for us to be a functional, happy family was for him to support me. Again, the tough parts are only temporary and it’s a lot easier if you support the caregiver in your life.

5. DO HAVE EMPATHY – As Atticus Finch said in the wonderful novel To Kill a Mockingbird, “You never really understand a person until you consider things from his point of view—until you climb into his skin and walk around in it.” If your caregiver’s family member doesn’t already live with you, make a point to accompany them to visit their loved one from time to time. This will give you a glimpse into their world and what they are going through. In my case, my dad lives two and a half hours away. It takes every ounce of energy I have to get in the car, drive to see him, spend time with him and then drive another two and a half hours back home. Doing it alone can be downright drudgery. It’s nice to have my husband along so that I can vent, cry or even laugh. This has also really helped him see what I go through and why I sometimes need that two hour nap when I get home!

6. DON’T JUDGE – No matter what your loved one’s relationship is to the person they’re caring for, remember, it’s their choice to be the caregiver. In my case, my husband didn’t understand why I wanted to take on the responsibility of becoming my father’s guardian. My father and I weren’t very close when I was growing up. Add this to the fact that his dementia was most likely brought on by alcoholism and my husband had a couple of handy rationales as to why I should wash my hands of the whole thing. I had to explain to my husband that the past doesn’t matter and I wouldn’t be able to forgive myself if I didn’t do everything in my power to make the rest of my dad’s life comfortable. So, no matter the circumstances, leave the judgment out of it, accept your loved one’s choice and support them in any decision they make.

7. DO LAUGH – It’s been said that laughter is the closest distance between two people. No truer words have been spoken, especially when it comes to caregiving. Laughter is the main thing that has gotten me through this past year. My aunt and I have a saying, “If we didn’t laugh, we’d cry.” Even though there have been a few times when we never thought we’d ever see another ray of sunshine, my aunt and I have somehow been able to find humor, and sometimes in the most bizarre, morbid places. When I try to explain some of the perversely funny things I’ve seen and heard since taking over my dad’s care, some of my friends and family look at me as if I have two heads. I want to say to them, “Hey, lighten up! It’s okay to laugh.”  So, loosen up and follow your loved ones’ lead. If they’re laughing, join in. It’s contagious and that’s a sickness everyone can afford to catch.


2/15: Too big to fail???????

  1. Bank Ratings: What Determines Their Quality?


Harald Hau (University of Geneva, Swiss Finance Institute, Centre for Economic Policy Research (CEPR), and CESifo (Center for Economic Studies and Ifo Institute)) ; Sam Langfield (European Central Bank - European Systemic Risk Board Secretariat) ; David Marques-Ibanez (European Central Bank (ECB))

This paper examines the quality of credit ratings assigned to banks in Europe and the United States by the three largest rating agencies over the past two decades. We interpret credit ratings as relative assessments of creditworthiness, and define a new ordinal metric of rating error based on banksČŘ™ expected default frequencies. Our results suggest that rating agencies assign more positive ratings to large banks and to those institutions more likely to provide the rating agency with additional securities rating business (as indicated by private structured credit origination activity). These competitive distortions are economically significant and help perpetuate the existence of ČŘųtoo-big-to-failČŘ™ banks. We also show that, overall, differential risk weights recommended by the Basel accords for investment grade banks bear no significant relationship to empirical default probabilities.


Rating Agencies, Credit Ratings, Conflicts of Interest, Prudential Regulation


G21 G23 G28


2/14: Annuity info. You can get a fixed rate 5 year annuity at 3.5%. Or you can give a commission to agent of 5.5% and earn????




  1. The Determinants of Systematic Risk: A Firm Lifecycle Perspective




Jimmy Saravia ; Carlos Garcia ; Paula Almonacid

This paper investigates how of systematic risk varies over the lifecycle of the firm. If market equity beta is determined by firm characteristics as the literature on the determinants of systematic risk holds, and if those characteristics change over the lifecycle of the firm following a definite pattern as firm lifecycle theory suggests, then market equity beta should change over the lifecycle of the firm following a predictable pattern. Our findings indicate that, holding other determinants of beta constant, the coefficient of systematic risk tends to fall in magnitude following a nonlinear pattern as firm age increases. In addition, we find that the volatility of market equity beta also tends to fall over the lifecycle of the firm. We argue that our main variable of concern, i.e. firm age, proxies for variables that have hitherto been omitted in the literature on the determinants of systematic risk. In particular, we maintain that firm age may proxy for the positive reputation that firms acquire over time with shareholders. This research is useful for both practitioners and researchers in that it may suggest ways to adjust empirical estimates of systematic risk. In addition, our results are important for research on beta forecasting as they show that the length of the stationary interval of betas is shorter for young companies, so that beta forecasting may be less accurate for firms in the early stages of their lifecycle compared to beta forecasting for mature firms.


Systematic risk, firm lifecycle, intrinsic business risk, financial leverage, operating risk.


G11 G12

2/13: Overview (FT)

US economic data Consumer prices are expected to show that CPI was unchanged on a monthly basis at 0.3 per cent in January but is expected to advance 2.4 per cent from a year ago. Investors also get updates on the health of US consumer and industrial output.

While estimates for a 0.1 per cent monthly rise in retail sales, following a 0.6 per cent gain in December, might lead some to believe that Americans tightened their purse strings last month, economists estimate that so-called core retail sales, which strip out autos and petrol, climbed 0.4 per cent.

Finally, industrial production, which was boosted by cold weather at the end of last year after an unseasonably warm November, is expected to have slowed in January as well. Economists forecast that output rose just 0.1 per cent, after a 0.8 per cent rise in December.

2/3: Inequality
According to a recent study by Oxfam International, in 2010 the top 388 richest people owned as much wealth as the poorest half of the world’s population– a whopping 3.6 billion people. By 2014, this number was down to 85 people. Oxfam claims that, if this trend continues, by the end of 2016 the top 1% will own more wealth than everyone else in the world combined. At the same time, according to Oxfam, the extremely wealthy are also extremely efficient in dodging taxes, now hiding an estimated $7.6 trillion in offshore tax-havens.[3]

history shows that too much concentration of wealth at the top, and too much stagnation everywhere else indicate an economy nearing collapse. For example, as Reich shows (Figure 1a & b), both the crashes of 1928 and 2007 followed on the heels of peaks in which the top 1% owned 25% of the country’s total wealth.

most common explanations for today’s situation include: the rise of technology which makes many jobs obsolete (Not going to change) ; and globalization which puts incredible pressures on companies to lower wages and outsource jobs to compete against low-wage workers around the world (Not going to change)

EFM- where does that leave the middle class worker who used to have great jobs on car assembly lines? Nowhere. They will become more and more obsolete as technology takes over more and more.  Those with little education (or bad education) used to be able to flip burgers. Technology will take over those tasks  leaving young people dispirited and angry.


  1. Investors’ Expectations, Management Fees and the Underperformance of Mutual Funds


Andreas D. Huesler (ETH Zürich) ; Yannick Malevergne (University of Saint Etienne) ; Didier Sornette (Swiss Finance Institute and ETH Zürich)

Why do investors keep buying underperforming mutual funds? To address this issue, we develop a one-period principal-agent model with a representative investor and a fund manager in an asymmetric information framework. This model shows that the investor’s perception of the fund plays the key role in the fund’s fee-setting mechanism. Using a simple relation between fees and funds’ performance, empirical evidence suggests that most US domestic equity mutual funds have added high markups during the period from July 2003 to March 2007. For these fees to be justified, we show that the investor would have expected the fund manager to deliver an overall annual net excess-return of around 1.5% the S&P 500 on a risk adjusted basis. In addition, our model offers a new classification of funds, based on their ability to provide benefits to investors’ portfolios.


Mutual Fund Fee, Mutual Fund, Asymmetric Information, Principal-Agent Relationship, Markup


G23 G11 D82


2/13: Would we or should we do the same???

One in 10 of Britain’s top 100 companies are considering ditching controversial “long-term incentive plans” as shareholders push back against excessive executive pay, according to consultants and investor groups



2/13: Oy, not again

EFM- this is bad!!!!!

Chinese-backed Forest City rises above the sea

Very interesting. Reclaimed land. Though doesn't indicate a future problem with rising seas.

2/12: Info


Junk bonds and investment grade debt see capital inflows


Trump’s promise of a ‘phenomenal’ corporate tax shake-up may swing investor sentiment

2/12: This is either 43.79% correct or 82.11% wrong

Bad statistics
The declining authority of statistics – and the experts who analyse them – is at the heart of the crisis that has become known as “post-truth” politics. And in this uncertain new world, attitudes towards quantitative expertise have become increasingly divided. From one perspective, grounding politics in statistics is elitist, undemocratic and oblivious to people’s emotional investments in their community and nation. It is just one more way that privileged people in London, Washington DC or Brussels seek to impose their worldview on everybody else. From the opposite perspective, statistics are quite the opposite of elitist. They enable journalists, citizens and politicians to discuss society as a whole, not on the basis of anecdote, sentiment or prejudice, but in ways that can be validated. The alternative to quantitative expertise is less likely to be democracy than an unleashing of tabloid editors and demagogues to provide their own “truth” of what is going on across society.

2/12: I knew we spent a lot on the military, but this chart REALLY puts it into perspective. WOW


One-Third Don’t Know Obamacare and Affordable Care Act Are the Same

A survey finds confusion, particularly among groups most likely to be affected by the repeal of the health law.

EFM: there is one of the scariest statistics on consumer literacy. It is 'impossible' to not be aware that they are the same products- certainly  if it involves their health. Switch now to investing and  it is much, much worse.
the only way to help the consumer is through knowledge. Not theirs- they will remain clueless. It is the industry that needs to ramp up.  But that is not going to happen.

Pundits don't like that type of (real life) comment. The proof, if you will, involves my MSFP in 1991. Hardly any of it was really viable  after 2000. The insurance and securities business caused a complete overhaul of theory, heuristics, taxes, and so on.  And then 2008 radically changed finance. Now we have Trump that is radically changing the U.S.
The average person is out to lunch.  So are most advisors

2/9: Hard to comprehend

The median home value in San Francisco — the nation's most expensive housing market — in January was $1,146,800

2/9: Gives you a good idea what is going on. Not very pretty

CalSTRS to cut assumed rate of return to 7%

CalSTRS on Wednesday evening approved lowering the pension fund's assumed rate of return to 7% from 7.5% over the next two years because of diminished capital market and inflation forecasts.

Fitch lowers Illinois' credit rating to BBB

Fitch Ratings lowered Illinois' credit rating to BBB from BBB+ on Wednesday because of the state's continued budget impasse.

   How Investors Should Deal With the Overwhelming Problem of Understanding the World Economy;

by , Very  good professional article

2/8: Having a bad day? No you're not

She felt a ‘crawling sensation.’ Doctors found a live cockroach in her skull.

2/8: This only happens in recessions

2/8: Now this is interesting

Uber hires veteran NASA engineer to develop flying cars

After years of research into so-called VTOL - vertical takeoff and landing - cars, Mark Moore is leaving the confines of the U.S. National Aeronautics and Space Administration, where he has spent the last 30 years, to join Uber Technologies Inc. Moore is taking on a new role as director of engineering for aviation at the ride-hailing company, working on a flying-car initiative known as Uber Elevate.

2/8: Guaranteed Disability Insurance (GSI)  for Heavy hitters

The personal income protection GSI market is all abuzz and is just beginning to be exploited, but the business GSI market remains completely unsaturated. Have you ever come across a guaranteed-issue key person DI plan? What about guaranteed-issue BOE coverage? Ever heard of GSI buy/sell or severance insurance? While extremely uncommon and with limited scope in the traditional disability market, these programs do exist through Petersen International. High-limit, robust benefit structures make for unique and exciting corporate solutions.

Encompassing the same incredible attributes and large multi-life premium discounts of more familiar guaranteed-issue group personal DI products, business insurance plans are great sales tools and door openers when approaching small to large companies with multiple proprietors or with a number of key personnel. Business GSI benefits aren’t readily known to anyone outside the specialty DI world which makes them new and exciting, providing your business clients with something they haven’t seen before. And it doesn’t hurt that these benefit platforms can be true saviors to companies affected by the unforeseen and premature disablement of employees and employers.

Besides the obvious use for multi-life key person, BOE, buy/sell and severance coverage, the GSI benefits platform has also proven to be very useful with regards to buy-in funding, contract guarantees, loan indemnification and salary continuation funding. Petersen International has the rare ability to financially protect a business, virtually no matter the size, on a multi-life chassis with a guaranteed issuance of high-limit disability insurance. Leveraging your relationship with Petersen International offers you the chance to provide your clients with unique products that others don’t have, making you a true disability insurance superstar.


Pot’s Lingering Effect on the Business of Insurance

Cannabis use for medicinal purposes is now legal in 28 states as well as Washington, D.C. Recreational use of marijuana is now legal in seven states as well as Washington, D.C., and after recent elections, several more states will soon be added to both of those lists. Encompassing multiple generations, America has grown more liberal in its attitude toward herbal intoxicants in the last 15 years.

That fact has carried over into the life and health insurance industry. Disability and life underwriters have become more accustomed to seeing clients who smoke marijuana or use pot-laced products on a regular basis. In the past, these prospects would have been automatic declines by most life insurance and disability insurance companies. But underwriting methodologies have liberalized to a greater extent in the past few years and pot users are generally classified and rated similarly to tobacco users. Bottom line, persons who use marijuana can now find sufficient levels of income and asset protection from disability and life carriers.


Annuity Investors Life Announces Rate Increase Today!


This A rated carrier may not be the most well-known carrier, however, for you 403(b) producers, you're well aware that they are the sister company to Great American Life.

We have a long standing relationship with the Great American family of carriers. Today's rate increase not only pushes their flexible products to the top of the list, but their single premium product could now be the King of the Hill, take a look!


Annual Pt-Pt

Annual Monthly Avg




Bail Out Cap**



Fixed Rate





Up Front

Option 2

Trail Option

Year 1




Year 2




Year 3




Trails yr 2+




10 Yr  comp yield assuming AV earns 3%





* Rates shown are for CA.  Current caps are .25bps higher in many other states.  

Plus - the caps are not linked to some volatility strategy or brand new index created to make a buzz, these caps are based on the S&P 500.

** Bail Out: This feature allows the client to withdraw money from an indexed strategy at the end of a term without penalty if the cap for that strategy for the next term is less than the bailout cap. 

The Art of Compassionate Communication for Elder Caregivers

By: Jill Sarah Moscowitz


“No one can ever be fully prepared for the challenges of care-giving. The tasks and responsibilities involved can be demanding, even more so when caregivers themselves are frail, have been thrust into their role unexpectedly or reluctantly, or must care for someone who is uncooperative or combative.” - The Merck Manual of Health and Healing

Caregivers can face overwhelming physical, financial, and emotional demands as a function of their service. In the face of these challenges, communication can sometimes be difficult. This article presents techniques for compassionate communication, as well as ideas for caregiver self-care and empowerment.

Communication is a process that allows a cyclical exchange of information through speaking and listening. However, as we all know, communicating is not as simple as that. Effective communication requires clarity from the person who is speaking and openness and attention from the person who is listening. This takes great commitment.

And to be compassionate, the communication should touch the heart. Compassionate communication can be understood through a breathing exercise. Put a hand on your heart; this is the center of compassionate communications. Notice your state of well-being. Imagine your whole being is entirely cared for. Take a breath in, and imagine this as a listening breath. Allow the breath to be touched by your heart, to be oxygenated and returned out. As you breathe out, imagine this as a speaking breath. And so is the cycle of breath and communication – incoming breath – touched by heart – and out going breath.

Compassionate communication includes:


2.Speaking with Clarity

3.Listening with Openness and Attention.

1. Awareness

Compassionate communication begins with an awareness of your own well being because when we focus on our well-being we create a space for the well-being of others around us. We create a space for authentic listening and speaking.

Identify Needs and Values. To create a dialogue of compassion, become familiar with your needs, values, expectations, and motivations. How did the role of caregiver come to you? Was it out of choice, obligation or circumstance? Does this role fulfill an underlying need or value to give or to feel appreciated? What other needs or values may be present for you? Perhaps there may be the need or value for connection, sense of purpose, or financial security. Marshall B. Rosenberg, Ph.D. describes a list of “universal needs and values” that all humans share. To become familiar with this list visit

Options for Meeting Needs and Values. Once you’ve identified some of your core needs and values, you can evaluate how you might have these needs met. It’s possible that your needs are met through care giving. It’s possible that you hope or expect these needs to be met through care giving, but they are not. Clarify for yourself what your expectations and motivations are and then determine what is realistic for this relationship. Use the “here and now” in your determination, rather than remembering how things were at one time or how you wish things to be. Consider all of the ways your needs and values can be met, including but not limited to this relationship.

 2. Speaking with Clarity

We all have many years of experience in speaking, but may not have skills in expressing ourselves with clarity. Here are some suggestions:

Use “I” statements. Probably the easiest tip for compassionate communications is to use “I” statements. These statements begin with the word “I” and they clearly express something about our own view, not something about the other person. For example “I am finding it hard to believe what you are saying” Notice the difference between the “I” statement and the following “You” statement. “You are lying!” When we start sentences with the word “You” we tend to put the other person on the defensive.

Use observations, not evaluations. An observation is a statement of fact, similar to what might be recorded on a video camera. For example, the statement “Aunt Ann has been talking on the phone for one hour”. An evaluation is a statement of fact with an added value (a judgment of good or bad). The statement “Aunt Ann talks too much on the phone” is an evaluation.

Speak Authentically. There are times when we choose to protect those we love from the truth about our feelings. We are the best judges of the impact of such non-disclosures. It’s possible that when we choose not to share our feelings, an opportunity for distance not closeness is created. Although it may feel very risky, the loving and heart-centered sharing of your feelings may be a beginning to more open communications. Sharing of feelings could begin with a sentence like “When you said [insert the Observation], I felt [insert the feeling].” See Marshall B. Rosenberg, Ph.D, ( for more tools for authentic speaking.

Know many realities exist. If a group of five people go to the same movie and each is asked the question “what happened in the movie”, we would get five each different stories. Each person’s story is based on the unique backdrop of each person’s perceptions. Many times our perceptions are based on our values or experiences. Remember, your reality belongs to you. Another person’s reality belongs to them. Neither reality is “right” or “wrong.” We simply perceive and interpret things based on our own values.

3. Listening with Openness and Attention

Many communication breakdowns occur because of difficulties in listening.

Waiting is not Listening. So often in our conversations we are “waiting to speak” while the other person is talking. We are formulating our ideas in response to what is being said. We become engaged in our own thoughts and their importance. Anxiously waiting for the other person to stop talking, we find that we are not listening.

Avoid Unspoken Stories. Another pitfall in listening is when we interpret rather than listen. While the other person is speaking, we create a story about what is being said. For example, a simple statement like “I think you look very nice today” can be incorrectly interpreted to mean, “Today, unlike any other day, you look very nice.” So, you can see how easy it is to create your own a story about someone’s communication.

Active Listening. Listening is truly an art. It is a skill that can be acquired. One way to practice this skill is through active listening. Active listening is a technique in which the person listening re-states his or her understanding of what the speaker has said, before introducing their response to what has been said. For example; “What I heard you say is …,” followed by “Does that sound about right?

Reframe Hostile or Difficult Communications. It’s possible that the person you are caring for may speak to you in anger. It may be helpful to consider that their anger may be due to their own frustrations, and not about you. For example, “You are no good! You never help me!” This statement might be reframed: “What I hear you saying is that you are wanting help and it feels like I am not helping now. Is that what you meant to say?” In hostile or difficult communications, it is sometimes helpful to involve a third neutral person to help with this type of communication.

At the very heart of compassionate communication is our desire to be collaborative in our communications – to hold a balance between our needs and the needs of the other. This is particularly important for caregivers who are so often looking after the needs of the other.


Nonviolent Communication: A Language of Life by Marshall B. Rosenberg, Ph.D. (c) 2005 by Center for Nonviolent Communication Website:, Email: Phone: (818)957-9393.

Loving What Is by Byron Katie,

Elder Companion, by Elizabeth B. Bolton. Lesson 3: Communication. University of Florida, IFAS Extension.

First National Symposium on Ethical Standards for Elder Mediation, April 19-20, 2007,

Mediation Resources For Caregivers, Help For Those Taking Care Of The Seriously Ill,

2/7: Eurozone projections


2/7: Bill Gross

An investor must know that it is this money that now keeps the system functioning. Without it, even 0% policy rates are like methadone - cancelling the craving but not overcoming the addiction. The relevant point of all this for today's financial markets? A 2.45%, 10-year U.S.Treasury rests at 2.45% because the ECB and BOJ are buying $150 billion a month of their own bonds and much of that money then flows from 10 basis points JGB's and 45 basis point Bunds into 2.45% U.S. Treasuries. Without that financial methadone, both bond and stock markets worldwide would sink and produce a tantrum of significant proportions. I would venture a guess that without QE from the ECB and BOJ that 10-year U.S. Treasuries would rather quickly rise to 3.5% and the U.S. economy would sink into recession.

EFM- this is not going to end well

2/7: An omen??? Vancouver home sales drop 39.5% over a year.

Vancouver's housing market has cooled down dramatically over the past several months after British Columbia introduced a 15% tax on overseas buyers in August in an effort to prick the city's housing bubble. Even before the tax was introduced, prices had already begun to decline.  

However, the drop in home prices seems to be starting to accelerate. Residential home prices for Greater Vancouver fell 1.2% month-over-month in December to a median price of $897,600. Over the last six months, they are down 2.2%.Despite the recent price drop, prices in the Greater Vancouver area are still higher by 17.89% versus a year ago. 

And the pain could just be getting started as foreign buying has evaporated. Luxury foreign buying has plunged 91% drop since July as a result of China cracking down on money flowing out of the country. 

EFM- This is way out of whack. Just like the lead in to another 2008

2/7: Then look at the U.S. Not quite as high as Vancouver but definitely overvalued year to year. Not a good omen


2/7: Could get messy

Overseas Chinese acquisitions of $75bn cancelled last year


Regulatory hurdles and crackdown on capital outflows challenge China investors

Mexico warns of global impact if Nafta collapses


Officials prepare to fall back on WTO rules should discussions fail

Modi’s clean-up of electoral funding is set to leave a bad smell


India prime minister will struggle to lift veil of secrecy

Just be aware

What You Should Know About Bipolar Disorder


  1. Macroeconomic Determinants of Stock Market Volatility and Volatility Risk-Premiums


Valentina Corradi (University of Warwick) ; Walter Distaso (Imperial College Business School) ; Antonio Mele (Swiss Finance Institute, University of Lugano, and Centre for Economic Policy Research (CEPR))

How does stock market volatility relate to the business cycle? We develop, and estimate, a no-arbitrage model to study the cyclical properties of stock volatility and the risk-premiums the market requires to bear the risk of uctuations in this volatility. The level of stock market volatility cannot be explained by the mere existence of the business cycle. Rather, it relates to the presence of some unobserved factor. At the same time, our model predicts that such an unobservable factor cannot explain the ups and downs stock volatility experiences over time - the "volatility of volatility." Instead, the volatility of stock volatility relates to the business cycle. Finally, volatility risk-premiums are strongly countercyclical, even more so than stock volatility, and are partially responsible for the large swings in the VIX index occurred during the 2007-2009 subprime crisis, which our model does capture in out-of-sample experiments.


Aggregate stock market volatility, volatility risk-premiums, volatility of volatility, business cycle, no-arbitrage restrictions, simulation-based inference


C15 C32 E37 E44 G13 G17

2/6: Passive Investing

exchange traded funds and index-trackers now control more than a fifth of the fixed-income market — and rising fast.

The shift towards passive investing is most advanced in equities, with now nearly 40 per cent of US equity assets under management in the hands of ETFs and index-tracking funds. But there has been a similar but accelerating trend in the US bond market in recent years, pushing the share of passive vehicles to more than 20 per cent of the total,

The flows into passive bond funds have been steadily rising since the financial crisis, but were long outpaced by gains from traditional fixed-income mutual funds, managed by the likes of Pimco and Franklin Resources.

But investor flows into active funds began to reverse course after the “taper tantrum” of 2013, when the Federal Reserve triggered a bond market rout by warning that it planned to unwind its quantitative easing programme.

2/6: Make America Great again with manufacturing increases is tough for the low income less educated

Trump seeks to “make America great again” by increasing industrial employment. With automation on the rise and unionisation on the decline, manufacturing jobs no longer guarantee a secure middle-class life as they often did in the past. Much of the new work is low paid and temporary. Staffing agencies sometimes supply factories with workers who have little training or experience — and who can quickly find themselves in harm’s way.

2/6: How the mighty have fallen. The U.S. is now flawed

According to the EIU, "full democracies" are countries in which basic political freedoms and civil liberties are respected, and are "underpinned by a political culture conducive to the flourishing of democracy." The government functions satisfactorily; media are independent and diverse; the judiciary is independent and their decisions are enforced; and there's an effective system of checks and balances.

Meanwhile, "flawed democracies" have free and fair elections (with possibly some issues such as infringements on media freedom) and respect basic civil liberties. However, there are governance problems and low levels of political participation.

The US's overall "Democracy Index" score fell from 8.05 in 2015 to 7.98 in 2016 — just below the EIU's threshold of 8.00 for a "full democracy." The analysts write that a key factor in the drop was Americans' growing distrust in governmental institutions.