ALZHEIMERS- More than 5 million Americans are living with Alzheimer's disease, a 10 percent increase since the last Alzheimer's Association estimate five years ago. Age is the biggest risk factor. Already, one in eight people 65 and older have the mind-destroying illness, and nearly one in two people over 85.

Unless scientists discover a way to delay Alzheimer's brain attack, some 7.7 million people are expected to have the disease by 2030. By 2050, that toll could reach 16 million.

About 10 years ago I attended a meeting of the Bay area Alzheimers Association where a leading physician indicated that they would find a cure in five years. I likened that to the 50s and 60s where articles said they had found the "link" to cancer and it would be cured in just a few years for the bulk of people.

It just may be that the human brain was not intended to last that long. I’ll tell you one thing- it ain’t from overuse

Because it complicates treatment for every other illness, the report shows Medicare spends nearly three times as much for dementia patients' care as for the average beneficiary- $13,207 a year vs. $4,454. Medicare's spending on dementia-related care is projected to double to more than $189 million by 2015.

That doesn't include the value of the unpaid round-the-clock care that families and friends provide the vast majority of Alzheimer's patients who live at home- a tab the new report calculates at almost $83 billion or nursing home costs.

Also, Between 200,000 and half a million people under age 65 have either early-onset Alzheimer's or another form of dementia. I have a friend whose wife got it in her early 50s. She is pretty much 'gone' now. My mother has been institutionalized for over 10 years. Both my uncles had it. I think my sister will get it.

COMMISSION VS FEE: (Cerulli) There has been a fairly precipitous decline in commission-based advisors between 2005 and 2006 — 26.3 percent versus 13.3 percent. There’s a corresponding jump in the fee-and-commission model, 24.9 percent in 2005 as compared to 40.6 percent in 2007. Fee-based-only declined a tick, 48.8 percent in 2005 versus 46.1 percent in 2006. The long view suggests that fee-based-only is on the rise. It was just 34 percent of the mix in 2002. [Technically, there’s no uniform definition for “fee-based,” but most industry experts would likely agree it means that 50 percent or more revenues are generated from fees.]

BUT I THOUGHT I COULD TRUST HIM: (From a case I am involved in). Of course, I have paraphrased somewhat, but the bottomline was that they trusted someone they got from a referral. Had they done any homework at all, they would have found out he was a liar and fraud. But they didn't.

"How can I stand here and have my husband and our son embracing and my husband and both of them realizing that the family farm was gone and those that - there had been those that had done that whoever it was. And it seemed like **** and his associates and then we learned later that * **** was involved.

Now when you stand there and see a husband and son embrace and then all three of use embracing, how much emotion can you have? How much can you feel? To know that you have had a husband that has worked his life on a farm and then to realize that his efforts have been in vain to provide for his family and for us as a couple to stand tall as a successful farmer and have it all gone?

How much emotion? It's devastating.  

And since then, it's been so hard for all of use to realize the thing that has happened. And I won't say he's been depressed, but he's certainly been- it's been so hard to see him this past year realizing what had happened, and that we had been so trusting and the the things that had taken place illegally and everything was gone.

It is just- how to I explain that? I- you know, it's just a day to day thing. We get up and it's the same thing. In our mind, it's the same thing. We've been taken advantage of . There have been those that have done things illegal. We know that the signatures are illegal, if nothing else. It's gone.

So how do- where do we go from here? And how to we get back to a normal life? My husband has had three angioplaties. Do you want him to have another heart attack? Is that's what is going to happen? And I going to have a heart attack?

I went home from his deposition and I already a year ago gone to a doctor with chest pains And when we got home from his deposition, I woke up with chest pains because I had not slept.

You worry about money this money and we got in that IRA? If either one of us had a problem and had to be  in a care center the rest of our lives, how long do you think that money would last? And that's what we're counting one.

And we are both on- he's on medication for diabetes. This certainly does not help his diabetes- this kind of stress and tension that we've felt for a whole- a year and three months. Knowing that it could be all cone. And knowing that somebody knows what went on and to do what's been done. And it has to narrow down to ** and his associates and the false notaries."

Sad case. But you know what the problem is? Trust. Pure and simple. They were referred to *** by their son who had been referred by another friend. Nobody did any homework, checked on licenses- anything. They lost hundreds of thousands. Other elderly were victimized to well over millions upon millions. Almost all caused by referrals. You do not trust anyone in this business. Find someone how knows something first and foremost. Then work towards trust.

QUITE TRUE- (University of Virginia) Older adults are likelier than their young counterparts to make mistakes in memory, and are also more likely to insist that they are right. Researchers say the study, "I Misremember It Well: Why Older Adults are Unreliable Eyewitnesses," could have further implications when it comes to reliability of witnesses in courts.

People between 60 and 80 years old taking part in the research were "alarmingly" likely to commit errors when details were suggested to them and they were the most confident about their responses.

Meanwhile, when college-age study participants were uncertain about the accuracy of their responses, they were more likely to commit errors.

"Given that older adults will constitute an increasing proportion of the U.S. population, there may be a corresponding increase in the occurrence of wrongful convictions based on the testimony of highly confident but mistaken eyewitnesses."

The high confidence rate in the mistaken older adults might come from the detail they think they remember.

"Because the detail seems sharp, "they are highly confident that they are correct in their recollection, even when the recollection has been suggested to them, rather than actually witnessed."

LONG TERM CARE POLICY DENIAL- (NY Times) thousands of policyholders say they have received only excuses about why insurers will not pay. Interviews by Some long-term-care insurers have developed procedures that make it difficult — if not impossible — for policyholders to get paid. A review of more than 400 of the thousands of grievances and lawsuits filed in recent years shows elderly policyholders confronting unnecessary delays and overwhelming bureaucracies. In California alone, nearly one in every four long-term-care claims was denied in 2005.

“The bottom line is that insurance companies make money when they don’t pay claims. “They’ll do anything to avoid paying, because if they wait long enough, they know the policyholders will die.”

In 2003, a subsidiary of Conseco, Bankers Life and Casualty, sent an 85-year-old woman suffering from dementia the wrong form to fill out, according to a lawsuit, then denied her claim because of improper paperwork. Last year, according to another pending suit, the insurer Penn Treaty American decided that a 92-year-old man had so improved that he should leave his nursing home despite his forgetfulness, anxiety and doctor’s orders to seek continued care. Another suit contended that a company owned by the John Hancock Insurance Company had tried to rescind the coverage of a 72-year-old man when he was diagnosed with Alzheimer’s disease four years after buying the policy.

policyholders have lodged thousands of complaints against the major long-term-care insurers. A disproportionate number have focused on Conseco, its affiliate, Bankers Life, and Penn Treaty. In 2005, Conseco received more than one complaint regarding long-term-care insurance for every 383 such policyholders, according to data from the insurance commissioners’ association. Penn Treaty received one complaint for every 1,207 long-term-care policyholders. (The complaints touch on a variety of topics, including claims handling, price increases and advertising methods.)

By comparison, Genworth Financial, the largest long-term-care insurer, received only one complaint for every 12,434 policies.

Conseco is among the nation’s largest insurers, collecting premiums worth more than $4.2 billion in 2006, of which long-term-care policies contributed 21 percent. Penn Treaty focuses primarily on long-term-care products and collected premiums of about $320 million in 2004, the last year the company filed an audited annual report.

Insurance executives began warning they had underestimated how long policyholders would live after entering nursing homes. The costs of treating Alzheimer’s, Parkinson’s and diabetes ballooned.

As insurers began realizing their miscalculations, they persuaded insurance commissioners in California, Pennsylvania, Florida and other states to approve price increases of as much as 40 percent a year. Just this past month, Genworth- who had prided itself on not raising rates- did so on come policies due to persistency. That’s the opposite of lapsing policies and means that once a consumer bought a policy, they are notcanceling them. By 2002, Conseco’s long-term-care payouts exceeded revenue. Those and other disappointing results prompted the company to file for bankruptcy, from which it emerged 10 months later.

Few of the cases or complaints filed against Conseco, Bankers Life, Penn Treaty or other insurers have received much attention, in part because many lawsuits filed against long-term-care insurers have been settled with the requirement that depositions, documents and settlement terms be kept confidential. Frequently, say policyholders’ lawyers, the companies have been willing to pay millions of dollars in exchange for confidentiality.

Furthermore, despite the complaints against long-term-care insurers, few states have conducted meaningful investigations.

SMOKING FAT: Nearly twice as many U.S. adults are obese compared to European, leading Americans to suffer more often from cancer, diabetes and other chronic ailments. Treatment of these and other chronic diseases adds between $100 billion and $150 billion to the annual health care tab in the United States.

The U. S. spends significantly more per capital than any European country on health care, about $2 trillion annually, or 16% of GDP. While the big discrepancy has been linked to higher U.S. prices for medical treatment, the report said a sicker population may also be a factor.

A key factor in many chronic illnesses is obesity and smoking. About 33 percent of Americans are obese, compared with 17 percent in 10 European countries reviewed. More than half of Americans are former or current smokers, compared with about 43 percent in the European sample

BAD MORTGAGES. I could not have said it better so I let Dick LePre offer this

“There is an important aspect to this story about B-paper. This is an example of the changes in folks' view of what the economy is and what is of economic value. It use to be the case that companies which made things were of value. With the change in the economy from goods producing to service producing a change in perception has occurred which has strangely had the effect of making the economy something which runs on the expansion of credit and money supply rather that profit. This B-paper mess would never have existed if property values had not been increasing sharply.

Let me expand that last point. If one were to look at appraisals over the last 10 year one would see that it is not in fact the value of homes that has been increasing sharply but the value of the land under then that has increased. That increase has been fueled by credit markets - the availability of a near infinite money supply for mortgage backed securities. It would be more accurate to talk about a "land bubble" rather than a "housing bubble." Going to the supply side one might simply offer that the lead time to get developments approved and do the actual construction was simply to long. Supply inelsaticity could be deemed the culprit for the large increase in values. The ready supply of money made demand more elastic than supply.

This expansion in credit has affected the economy in other adverse but less obvious manners. Everyone is modestly affected by gasoline prices but the fact is that oil futures are not affected solely by supply and demand but by derivative trading as well. Speculation in oil futures for the sole motive of greed is enabled by credit markets and affects everyone. Derivatives in general and hedge funds in particular are unregulated. I do not subscribe to the thesis that hedge funds are necessarily going to at some time create substantial shock on the economy but they certainly do have that capability.

The B-paper market was enabled by Wall-Street not from the motivation of providing home ownership to folks with bad credit but for profit. Now that it has headed south borrowers and loan officers will be castigated. The effect is similar to that of recent corporate scandals. Short-term profit has been sought even though it threatens the long-term viability of a company or something such as the housing market.

B-paper Angst Redux

Subprime mortgages have received a lot of press lately. What is involved is the perception of the value of B-paper mortgages. The expression "B-paper" merely means mortgages for folks with poor credit. This is also referred to as "subprime" and will probably gain a new handle once the dust settles.

B-paper is not new. What is recent and what is almost entirely responsible for the current problem is the proliferation of absurd lending. I mean specifically B-paper, stated income and especially B-paper stated income 100% combined loan-to-value loans. Many of these are loans which should never have been made. If someone has bad credit and I were lending them money I would like a complete look at their income so that I could answer the question, "can these folks really make this mortgage payment?"

What happened is that Wall Streeters were able to sell investors on high returns in exchange for this truly unknown risk. This was expedited by the fact that these pools of B-paper mortgages were insured. Third (or maybe it is fourth) parties were taking the derivative risk.

What happened was inevitable. This encouraged the funding of loans which had early defaults, default rates on these loans increased, the cost of credit insurance became prohibitive and the originators of these loans wound up with no one to sell them to. This creates serious illiquidity and has resulted in the shutdown of some of the largest players in this field. These changes can be abrupt. Investors simply announce at the start of a business day that they are no longer buying this paper. Individuals may have recently found that they signed loan documents and before the loans could fund investors stopped buying the loans that were about to be funded. This has occurred mainly with high CLTV B-paper seconds.

The B-paper industry will make a come back but hopefully it will do so with sensible underwriting. In short: no stated income 100% LTV B-paper. Maybe no stated income B-paper at all.

I do not think that this will have a wide macroeconomic effect. The effect so far has been on the folks who have these mortgages and are going to lose their homes and on the folks in the mortgage business who made a very nice living by originating these loans. To be sure this will have the effect of creating a few more sellers and a few less buyers but hardly will have a dramatic effect of values in general To be sure there is probably a geographic clustering of B-paper and those places will see a consequent downturn in values but the overall nationwide effect will be a slight downward pressure on values.

It is not yet apparent that there is any significant damage to banks in general or the banking system. The only parties at risk here may be the commercial banks which extended credit lines to these now halted B-paper originators. I don't mean that these commercial banks will go out of business I only mean they will suffer some losses or diminished profits and stock value.

One other point. The is another mortgage space between subprime and "A" paper which is usually called "Alt-A." That may mean slightly different things to different lenders. Alt-A can mean: below 680 but not really terrible credit or it can mean good credit but high-ratios (housing expense divided by income and total debt obligation divided by income). The best description is that it is A-minus and not B paper.

Once the angst plays out Alt-A will probably be affected also but probably not as much a B-paper.

As for housing values I believe that we are looking at several years slightly lower to flat values (on a nationwide average) and in the long run that is healthy. The increase in values in the past few years produced more supply and the market is better balanced. Getting speculation out of the market is also healthy and relates to what I said about derivatives affecting commodity prices. With housing it is not hedge funds but individuals who helped push value too high with speculation.

The good news is that first time homebuyers will get lower prices.

CAREGIVING- approximately 44.4 million people in the U.S. in 2004 were involved in "family caregiving." If we use 2005 Census Bureau figures for adults age 18 or older, approximately 20% of the adult population nationwide is engaged in some aspect of family caregiving.

Increasing numbers of women in their late 40s, and 50s are caught in a "Sandwich Generation" squeeze. Many are dealing with "grown children" who have "issues," aging parents with increasing health and/or financial problems, and perhaps, health concerns of their own. For whatever reason, in any family there seems to be one sibling who is more responsible or caring than the others, or who is geographically closer, upon whom burdens fall disproportionately. Often, that person is female

There are growing concerns over the health of the caregiver. Recent surveys show that 87% of caregivers report a decline in energy and increased sleep deprivation; 70% worry about stress; 60% report higher levels of pain and aches (lifting and moving impaired adults is a factor); and, 52% show signs of serious depression. Depression rates are higher, up to 76%, for intense caregivers supervising those with maladies such as Alzheimer's disease, Parkinson's disease, Lewy body dementia, or other forms of dementia, or neuropathic and peripheral nerve diseases.

LET'S BE CAREFUL  OUT THERE. (GAO, David Walker) The head of the Government Accounting Office drew parallels with the decline of the Roman Empire. There were striking similarities between the US's current situation and the factors that brought down the Roman empire.,  including declining moral values and political civility at home, an overconfident and overextended military in foreign lands and fiscal irresponsibility by the central government. He condemned the current US policies on education, energy, the environment and immigrations as :unsustainable".  

There is another item. Civilizations rise and fall by the capability and willingness of each citizen to converse with each other. That means a commons language- in this case, quite obviously, King’s English. Go back to the early 1900s and you will find an assimilation of the Italians, Polish et al over a relatively short period of time. They became Americans. Now each race, ethnicity, religion etc., want to retain its unique image in the U.S. It wants everyone to recognize the differences. Sure it may be nice to remember where you came from. But if it was so good, stay there. Otherwise you will have to learn English.

ECONOMISTS PROJECTIONS ON OIL JANUARY 2007

Average oil price per barrel

Q1 $54

Q2 $57

Q3 $56

Q4 $58

Slightly off, wouldn’t you say??? As of this writing, it’s over $100.

LTC ABROAD- "Financing Long-Term Care: Lessons from Abroad" by Howard Gleckman

The brief's key findings are:

Many industrial countries have reformed their long-term care systems to broaden coverage and encourage home care over institutional care.  

Systems vary in structure: Japan and Germany offer broad social insurance, France targets coverage by income, and the United Kingdom uses a means test.

Financing arrangements range from a payroll tax (Germany and Japan) to general revenues (France) to a mix of federal grants and local taxes (United Kingdom).

 One common challenge, however, is keeping costs in check as populations age.

PAST PRESENT AND FUTURE: Morningstar nine style box, 10-year annualized returns. Then and Now.:

On 6-30-00 Large-Cap Growth Funds had the HIGHEST return (17.85%); Small-Cap Value funds had the LOWEST return (11.80%).

On 12-31-06 Large-Cap Growth Funds had the WORST return (6.26%); Small-Cap Value Funds had the BEST return (13.52%). Exactly the reverse.

On 12-31-98 U.S. Growth had the BEST return of all Vanguard funds. On 12-31-2005 it had the WORST 5-year return..

In 1991 and 1992 Gold was the WORST Vanguard fund. In 1993 it was the BEST Vanguard Fund. In 1997 (now "Precious Metals") it was the WORST fund.

In 1991 Energy was the WORST Vanguard fund. In 2005 Energy had the BEST 10-year Return.

In 1994 Pacific Index was Vanguard's BEST fund. In 1996 Pacific Index was Vanguard's WORST fund.

In 1994 Total Bond Market had its WORST return (-2.7%). In 1995 TBM had its BEST return (+18.2%).

In 1999 Emerging Markets was Vanguard's 2nd BEST fund.

In 2000 Emerging Markets was Vanguard's WORST fund.

In 1998 REIT was Vanguard's 3rd WORST fund.

In 2004 REIT was Vanguard's 3rd BEST fund.

In 1998 L.T. Treasury was Vanguard's WORST fund.

In 2002 L.T. Treasury was Vanguard's 2nd BEST fund.

In 2002 Life-Strategy Income had the BEST 5-year return of all L.S. funds. L.S. Growth had the WORST.

In 2006 Life-Strategy Income had the WORST 5-year return. L.S. Growth had the BEST.

Morningstar Star Rating System is objectively based on past performance (risk and return). This is a portion of the Abstract (conclusion) from a recent study about past performance and the Star Rating System:

"This study investigates in a thorough empirical analysis the predictive performance of mutual fund ratings given by Morningstar over the course of a 10-year period beginning March 1995. From this analysis it becomes clear that the predictive performances of the different rating systems used by Morningsar do not beat a random walk."

The Grand Canyon of Expertise

Levels                     Characteristics

Pre-novice           Unaware of the Principles or rules of the field or process. Little or no direct experience in the field. The field and work in it is often incidental to what the novice does

Novice               The novice follows specific rules for specific circumstances. Doesn’t feel responsible for other (outcomes) than following the rule. Engages in working   backwards on a problem.

Advanced Beginner                New situational elements are identified. Principles and rules begin to be applied to related conditions. Decisions still made by rule application. Does not experience personal responsibility. Blames other-than-self for mistakes made.

Competent                      Pivotal level. Sheer numbers of Principles and rules become excessive. Develops organizing principles or perspectives. Perspectives permit sorting of information by relevance. The   experience of responsibility arises from active decision-making.

Proficient                       Intuitive diagnosis. Approach to problem molded by perspective arising from multiple real world experiences. Holistic similarity recognition. Learner uses intuition to realize what is  happening. Conscious decision-making and Principles /rules used to formulate plans.

Expert                      (10,000 hours; 50,000 chunks of fieldrelevant information) These are the people who discover the Principles and write the rules others follow. Do what works. Don’t make conscious    decisions. Don’t solve ;problems. No decomposition of situation into discrete elements. Pattern recognition extends to plans as well as diagnosis Relies on metaphors and underlying principles. Thinks strategically. Engage in forward reasoning. Knowledge stored in strategically significant ways Operates on autopilot so is typically unable to articulate to others how it     works at this level.

Consciously competent expert                  Able to articulate clearly to others how an expert thinks, operates.

WEALTH MANAGERS: Investment News says that maybe only 6.6% of those who call themselves Wealth Managers actually make the grade.

6.6% is pushing it.

THE MYTHS OF HIGH MEDICAL COSTS: ("Myths of the High Medical Cost of Old Age and Dying.")

The rising cost of medical care in the United States is often erroneously linked to the growing population of older adults. Despite public perception, health care costs associated with aging are limited in scope and expense.,

DEATHS: Preliminary Data for 2005. The good news included in the report is that life expectancy at birth rose to a record high of 77.9 years, up from 77.4 years in 2003 and 77.8 years in 2004. Life expectancy for females was 80.4 years and for males 75.2 years. The black population had a lower life expectancy of 73.2 years, compared to 78.3 years for the white population. The data also indicate that a person aged 65 years in 2005 could expect to live an average of 18.7 additional years for a total of 83.7 years. Overall, there were 2.45 million deaths in the U.S. in 2005.

LET'S BE CAREFUL OUT THERE: Habana Health Care Center, a 150-bed nursing home in Tampa, Fla., was struggling when a group of large private investment firms purchased it and 48 other nursing homes in 2002.

The facility’s managers quickly cut costs. Within months, the number of clinical registered nurses at the home was half what it had been a year earlier. Budgets for nursing supplies, resident activities and other services also fell. The investors and operators were soon earning millions of dollars a year from their 49 homes.

Residents fared less well. Over three years, 15 at Habana died from what their families contend was negligent care in lawsuits filed in state court. Regulators repeatedly warned the home that staff levels were below mandatory minimums. When regulators visited, they found malfunctioning fire doors, unhygienic kitchens and a resident using a leg brace that was broken.

The Times analysis shows that, as at Habana, managers at many other nursing homes acquired by large private investors have cut expenses and staff, sometimes below minimum legal requirements.

The typical nursing home acquired by a large investment company before 2006 scored worse than national rates in 12 of 14 indicators that regulators use to track ailments of long-term residents. Those ailments include bedsores and easily preventable infections, as well as the need to be restrained. Before they were acquired by private investors, many of those homes scored at or above national averages in similar measurements.

In recent years, large private investment groups have agreed to buy 6 of the nation’s 10 largest nursing home chains, containing over 141,000 beds, or 9 percent of the nation’s total. Private investment groups own at least another 60,000 beds at smaller chains and are expected to acquire many more companies as firms come under shareholder pressure to sell.

The typical large chain owned by an investment company in 2005 earned $1,700 a resident. Those homes, on average, were 41 percent more profitable than the average facility.

At 60 percent of homes bought by large private equity groups from 2000 to 2006, managers have cut the number of clinical registered nurses, sometimes far below levels required by law. (At 19 percent of those homes, staffing has remained relatively constant, though often below national averages. At 21 percent, staffing rose significantly, though even those homes were typically below national averages.) During that period, staffing at many of the nation’s other homes has fallen much less or grown.

Nurses are often residents’ primary medical providers. In 2002, the Department of Health and Human Services said most nursing home residents needed at least 1.3 hours of care a day from a registered or licensed practical nurse. The average home was close to meeting that standard last year.

But homes owned by large investment companies typically provided only one hour of care a day

For the most highly trained nurses, staffing was particularly low: Homes owned by large private investment firms provided one clinical registered nurse for every 20 residents, 35 percent below the national average. Federal and state regulators also said in interviews that such cuts help explain why serious quality-of-care deficiencies like moldy food and the restraining of residents for long periods or the administration of wrong medications; rose at every large nursing home chain after it was acquired by a private investment group from 2000 to 2006, even as citations declined at many other homes and chains.

LTC- The average age of buyers has dropped from 69 in 1995 to 61 in 2005. That's due to the offering of policies to the younger, mainly through businesses.

NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS AMENDS THE NAIC VIATICAL MODEL REGULATION:

Viatical settlements allow a terminally ill person (one with a life expectancy of two years or less) to sell his/her life insurance policy to collect cash while he/she is alive. A life settlement transaction is similar to a viatical settlement except the insured’s life expectancy is generally between two and ten years and the names of the players in the transactions are slightly different. The viator (known as the “insured” in a life settlement), sells his/her life insurance policy for more than the cash surrender value but less than its net death benefit to a “viatical” or “life” settlement provider. In return, the settlement provider pays the future premiums to keep the policy in force and receives the face amount of the life insurance policy when the viator/insured dies.

The viatical settlement market emerged in the 1980s as a way to give terminally ill AIDS patients access to their life insurance death benefits. Now a secondary market has developed in which viatical and life settlement providers sell interests in a large policy to investors (settlement purchasers) or create a pool of purchased policies and then sell shares of the pool in the anticipated payout (i.e., death benefits when the viators/insureds die). This secondary market has captured the attention of the NAIC, as well as securities regulators and legislators, due to a steady stream of bad press involving accusations of sales abuses. For example, viatical settlement providers have been accused of making secret payments to suppress competitive bids and not disclosing extraordinarily high commissions that significantly cut into what the seller could have received. Settlement brokers have been accused of, among other things, failing to disclose the risks associated with investing in viatical settlements and selling “wet-ink policies.” (“Wet-ink policies” are life insurance policies that were applied for to sell immediately after being issued, before the “ink has time to dry.”) The North American Securities Administrator Association (“NASAA”) listed viatical settlements in its 2005 list of top ten threats investors face.

The Model Regulation attempts to address some of these abuses with a particular focus on deterring a form of a life settlement transaction called stranger-originated life insurance (“STOLI”). In a STOLI arrangement, individuals are approached by “strangers” (speculators) to apply for life insurance policies on themselves in return for cash. Premiums are paid by the insured but are funded by a loan during the two year contestability period so the insured doesn’t experience any out of pocket loss to pay the premiums. At the end of two years, the investor group will offer to buy the policy at its fair market value or the insured can choose to pay back the loan for the premiums and keep the policy. To deter this practice, the Model Regulation amendment restricts the sale of a life insurance policy for five years (previously two years) when the policy is purchased for the purpose of selling it into the secondary market.

In addition to the NAIC, other regulators such as the National Association of Securities Dealers (“NASD”) and the Securities and Exchange Commission (“SEC”) are taking notice of the viatical and life settlement market. While it is relatively clear which regulators oversee transactions in the primary market (i.e. when someone purchases a life insurance policy from a life insurance company), regulatory oversight in the secondary market by state departments of insurance, NASD and the SEC can be less clear. State insurance departments have differing views on whether or not sales of interests in viatical or life settlements are securities. Depending on a particular state’s point of view either the state’s securities division or insurance department may oversee these transactions.

The NASD made its position on life settlements clearer with the publication of NASD Notice to Members (“NTM”) 06-38. The NTM reminds NASD members that life settlement transactions involving the recommendation to sell an existing variable life policy to a third party is subject to applicable NASD rules. More interestingly, the NTM closes with the following comment “…entities participating in the sale and marketing of interests in life insurance policies, variable or not, for investment purposes may trigger broker-dealer registration requirements under the Securities Exchange Act of 1934.” This statement may foreshadow a time when all viatical and/or life settlement transactions, whether they involve fixed or variable policies, will be subject to NASD rules.

The SEC argued in a recently settled civil case against a Florida based viatical company that investments in viatical settlement contracts are securities and under the jurisdiction of the SEC. The company was accused of cheating investors out of nearly $1 billion by using false projections of how long the insured people would live and not informing investors of the risks in investing in viatical settlements. The defendants argued that interests in viatical settlement contracts were insurance products and did not come under the purview of the SEC. However, their motion to dismiss was denied when the courts concluded that viatical settlement contracts are “investment contracts” within the meaning of the Securities Acts of1933 and 1934.

Viatical and/or life settlements involve sick and elderly people (aka “constituents”), a demographic of particular interest to regulators because of their vulnerability to deceptive sales practices. As the market expands and complaints of abuses are brought to the regulators attention, viatical and life settlement companies can expect more scrutiny around sales practices, supervision, suitability and more from both state insurance and securities departments and the NASD and SEC. The recent amendments to the NAIC Viatical Settlement Model Regulations represent only the beginning of increased scrutiny in this unique market.

LONG SHORT: (NY Times) JPMorgan Chase & Co., Charles Schwab Corp. and ING Grope NV mutual funds designed to protect investors when markets fall left clients with bigger losses than the Standard & Poor's 500 Index. JPMorgan's $1.4 billion Highbridge Statistical Market Neutral Fund dropped 4.7 percent and ING's 130/30 Fundamental Research Fund declined 2.3 percent in the past three months, a period when the S&P 500 fell 0.3 percent, data compiled by Chicago-based Morningstar Inc. show. The average so-called long- short fund lost 1.1 percent of its value.

Like hedge funds, long-short funds engage in short selling, in which managers seek profits by selling borrowed shares and buying them later at lower prices. More than 95 percent of mutual funds are prevented from short selling, according to U.S. regulatory filings.

Long-short funds are posting the worst declines since Morningstar started tracking them almost two years ago. San Francisco-based Charles Schwab and Geronimo Financial LLC of Denver are shutting offerings.

Long-short funds charge fees of $22, or 2.2 percent, for every $1,000 invested, compared with 1.5 percent for actively managed long-only mutual funds. Managers say the higher fees are needed because shorting strategies carry higher trading costs and require more research.

EFM- years ago when Barra had one that just was terrible, the manager stated that it happened "because the market did not do what it was supposed to do" (??????????)

Well, in most cases it never will since it is emotionally driven at the most inopportune times.

IT'S ONLY MONEY: Students at public colleges graduate with an average of $17,277 in loan debt; for private school graduates, the average is $28,138.

WELL, DUH!: Ben S. Bernanke said that the growing turmoil from increasingly permissive subprime lending had demonstrated a need for tougher restrictions on what borrowers and lenders can do. He noted, the recent problems in subprime lending have underscored the need not only for better disclosure and new rules but also for more-uniform enforcement in the fragmented market structure of brokers and lenders.

EFM- I get tired of this crap from effectively all the government and state officials. Real estate brokers, securities agents, life agents, financial planners et al have not been taught the fundamentals of investing. Now, admittedly with real estate, it is more clear cut. The product is a hard asset versus the more esoteric element of securities and insurance. And the home buyer wants it more than securities and insurance and is apt to make statements, along with the mortgage broker, that do not reflect true employment  or income. So the problem escalates because the underlying problem might simply be telling the truth- in other words, ethical conduct. If one wants something bad enough and sees everybody else getting one, then they are very apt to change their ethical stance to try and get one too.

20 MOST OBESE STATES: 127 million Americans are overweight, not counting the 69 million that are obese. Where we live influences our diet and lifestyle and maybe even how much we pay for life insurance. Understanding how carriers use different health ratios to determine policy rates, is the beginning to realizing savings.

Someone who is 40% overweight is twice as likely to die prematurely as an average-weight person. This is because obesity has been linked to several serious medical conditions, including heart disease and strokes. When determining life insurance policy costs, carriers use a simple adage: The more a person weighs, the more they pay. Specifically, the formula begins with an individual’s proportion of body weight to his/her height, known also as physical build. It’s no secret that the more a person weighs in relation to their height, the greater their risk for long-term health complications and a shortened life span.

1 Mississippi

2 West Virginia

3 Alabama

4 Louisiana

5 (tie) South Carolina, Tennessee

7 Kentucky

8 Arkansas

9 (tie) Indiana, Michigan, Oklahoma

12 (tie) Missouri, Texas

14 Georgia

15 Ohio

16 Alaska

17 North Carolina

18 Nebraska

19 North Dakota

20 (tie) Iowa, South Dakota

ERROLD F. MOODY JR.

BSCE, LLB, MBA, MSFP, PhD

Life and Disability Insurance Analyst

13461 Aurora Dr #E

San Leandro, CA 94577

Phone & Fax 510 352-4127

EFM@EFMoody.com

MORE OIL: India and China are home to about a third of humanity. People there are demanding access to electricity, cars, and consumer goods and can increasingly afford to compete with the West for access to resources. In doing so, the two Asian giants are profoundly transforming the world’s energy balance.

Today, China consumes only a third as much oil as the United States, which burns a quarter of the world’s oil each day. By 2030, India and China together will import as much oil as the United States and Japan do today.

global demand is expected to rise to about 115 million barrels a day by 2030, a level that is likely to tax the world’s ability to pump more oil out of the ground. Already, the world is running on a limited cushion of spare capacity; any interruption in supplies, whether from hurricanes or armed conflict, causes prices to spike.

CARE GIVING: The National Alliance for Caregiving notes that nearly 23 million  households are currently home to a caregiver, most often a woman who is taking care of someone 50 or older . Some 43% of them are also over age 50. 13% are over age 65.

LTC: All private LTC insurance policies combined paid about $3.3 billion in benefits in 2006,