HOW FAST DOES THE ECONOMY HAVE TO GROW TO REDUCE THE UNEMPLOYMENT RATE? The experts can't seem to agree. Paul H. O'Neill, the Treasury secretary said the economy could grow at an annual rate of 3 percent to 3.5 percent and create more jobs. R. Glenn Hubbard, the chairman of the president's Council of Economic Advisers, said 3 percent would not be enough. And James E. Glassman, the chief domestic economist at J. P. Morgan Chase, wrote that growth of at least 4 percent was required. Well I hate to tell you but the general consensus for 2003 is about 2.6%. It will be another tough year for the market but it could eke out a positive gain.

JUNK BONDS: According to Merrill Lynch & Co. data, the spread of junk bonds to Treasurys is the highest since the mid 80's.

I like these when the economy is improving but with a falling economy, the default rates will more than offset any of the higher yields. You have to be careful with these.

EMOTIONS AND RISK. Some readers will recognize these two individuals- Kahneman and Tversky- who are the leaders in the research in the psychology of investing. Kahneman just won the Nobel award for his work. Here is some commentary on how people think regarding risk and reward that suggest seemingly irrational wrinkles in behavior.

In a 1981 article, they reported results of a study in which 152 students were given hypothetical choices for trying to save 600 people from a disease. Using one strategy, exactly 200 people could be saved for certain. Using another, there would be a one-third chance everyone would live, and a two-thirds chance no one would be saved. Seventy-two percent of the subjects, preferring the less risky strategy, chose the first option. But when the researchers presented 155 other students with the same choice worded differently — either 400 people would die for sure or there would be a one-third chance that no one would die — only 22 percent chose the first option.

The difference, Professor Kahneman and Mr. Tversky explained, stemmed from the presentation of the options as sure gains or sure losses. People in their experiments generally shunned risk when gains, like lives saved, were in question — they wanted to lock in the gains with certainty. Yet people preferred risk when the alternative was a certain loss, even if taking the risk implied the chance of an even greater loss.

You have two choices in life: You can dissolve into the mainstream or you can be distinct.

LTC: The average annual premium cost for policies purchased by individuals in the year 2000 was $1,677 per year and the average for policies purchased through a group plan like one offered by an employer was $722.

The vast majority of consumers (86% of all policies sold in 1999) buy Tax Qualified (TQ) plans, not NTQ plans (Health Insurance Association of America, 2001). True- but if you were in California, I would absolutely suggest a non tax qualified policy.

MEDICAID CARE AND LTC: There are several methods that people still use to divest themselves of assets so they can get care under Medicaid. Consider:

o People must meet stringent income and asset criteria to qualify for Medicaid benefits.

o The vast majority of the care Medicaid pays for is nursing home only; NO assisted living benefits

o There are serious quality of care concerns in predominantly Medicaid nursing homes; and,

o Many people do not want to give up control of their assets, income and ability to choose where they can receive care in order to qualify for Medicaid public assistance.

LIFE INSURANCE: September applications for life insurance in North America increased 7.2% as compared to last year; U.S. and Canadian applications activity was up 6.4% and 14.1% respectively on a year-over-year basis. Some of September's U.S. growth may be attributable to last year's terrorist attacks which severely hampered overall economic activity.

GERMANS BUYING U.S. REAL ESTATE. (NY Times, Real Capital Analytics, ) German investors have spent $3.4 billion, or a little more than 50 percent of the $6.4 billion in foreign capital that has been used to buy commercial real estate in the United States so far this year. In all of 2001, the firm tracked only $5 billion worth of purchases using foreign capital.

NASA: The president of the North American Securities Administrators Association says the states will pursue their (securities) investigations because "we have statutes that say you can't commit fraud in our states and we're willing to enforce those."

Also, there is an 81-year-old statute known as the Martin Act. Under that law, New York prosecutors do not have to prove intent to commit securities fraud, merely that fraud occurred because investors were not given all of the information they needed to make informed decisions.

That's almost funny. I doubt a state prosecutor has a clue to diversification. If you do not know that, Martin Act or not, you are just jerking people around. Admittedly, the huge fines will cause some redemption for a couple of years (if that), but you will see a move to status quo.

LIFE INSURANCE: Take a look at the improved guaranteed coverage for LIFE premiums on Manulife UL at older ages -- now offering even more competitive premiums Preferred over age 70.

Just to give you an idea of what is out there. But they all can be beaten in price. Ever heard of no lapse?

BETWEEN A ROCK AND A HARD PLACE: Prudential: a stock broker in Prudential's Marion, Ohio office, sold all equity holdings for about 250 elderly clients over a two-day period in October 1998 without informing them. A jury awarded $11.7m in compensation and $250m in punitive damages to investors who accused the firm of unauthorized trading in their accounts.

THEY ARE REALLY GOING TO HAVE TO CORRECT THIS: The number of Hispanics who dropped out or never attended high school surged by over 50% in the 1990s, especially in the South and West where many schools struggled to accommodate the fast-growing Spanish-speaking population

WE ARE BAD, THEY ARE WORSE: (Pan-American Health Organization) Almost half the population of Latin America, still stuck in poverty despite years of economic reforms, does not have health insurance. The report said 240 million people in the region of just over 500 million people had no private or public health cover.

THERE SHOULDN'T HAVE BEEN THAT MANY EMPLOYEES TO BEGIN WITH: (JP Morgan) Broker Dealer firms, hit by a dwindling number of moneymakers like stock offerings and acquisitions, are overstaffed by 17 percent despite thousands of industry job cuts. The securities industry has cut 61,000 jobs since the beginning of 2000, bringing employment down to 722,000, according to the Securities Industry Association.

And of the 722,000 employees left in the industry, there is probably less than 500 who know what diversification is- if that. That also includes the supervisors.

MONEY: In 1950, Americans invested about $1.2 billion in 98 mutual funds. Last year, some $7 trillion was entrusted to over 8,300 funds.

That’s quite a growth but a lot is unnecessary. Just look at your basic index funds. The rest is windowdressing for investors and brokers who rarely have a clue to what they are doing. So I will do this again. Literally no one knows what diversification is. Seems redundant? O.K., tell me what it is by the numbers? How many stocks do you have to have in a portfolio in order to insulate it from unsystematic risk?

LOWERED EXPECTATIONS: The Economic Policy Institute reports that "when the stock bubble burst, it left the average family facing the prospect of having only 43 percent of the income they need for an adequate retirement."

- Most households used the new wealth gained from the stock market to increase debt and consumption.

- Between 1992 and 2000, while the stock market grew by 13.9 percent per year, households increased their debt more than they raised their assets. The ratio of total household debt to income grew from 72 percent at the end of 1992 to 83 percent by March 2001.

- It will take the average household over 30 years to recover the wealth lost in 2000 and 2001.

Per the President of the Alliance for Retired Americans, "One of the saddest things about this situation is that retirees who had their 401(k) funds invested in the stock market do not have the luxury of 30 years to rebuild their so-called wealth. Most of them needed their funds to help pay the ever increasing costs of their prescription drugs."

MEDICAID: (AP) An Indianapolis company is helping elderly people avoid spending their life savings on nursing home care by turning them into absentee landlords - and leaving the bill to Medicaid.

Scores of elderly Indiana residents have invested in rental homes managed by CFS LLC, which leases and insures about 30 Hamilton County rentals, pays tax bills and handles repairs.

The move enables investors to shield their assets and inheritances from nursing homes while legally meeting Medicaid's definition of poverty.

The business forces taxpayers to unfairly finance nursing care for residents who can afford it. "The easier it becomes for people to shelter their assets in order to receive nursing home care, the greater the funding obligation on the state," per Indiana's Medicaid director.

To qualify for Medicaid, applicants must show their income does not cover the costs of care and that they are destitute, apart from limited assets.

When Congress exempted income-producing real estate from the list of assets that have to be spent, lawmakers likely did not envision middle-class residents buying rental homes to give away their wealth. Instead, the exemption was intended to protect lifelong farmers and small-business owners forced into nursing homes by poor health .Most families who do this are trying to protect $50,000 to $500,000. State officials can't abolish the exemption for income-generating property because it is in federal law, but they have tried to take the investments less attractive.

As of June 1, when a new state regulation took effect, people could no longer rent their homes to relatives at extremely low rates to exclude it from Medicaid.

And people who buy properties from CFS must remain invested during their lifetimes in order to avoid losing their Medicaid coverage. The state expects this to save taxpayers $12 million a year.

I understand the willingness to save money for beneficiaries, but Medicaid is substandard care. Don’t die under Medicaid if you have money.

FOREIGN INVESTMENT: (USA Today) U.S. foreign direct investment — which includes foreign purchases of U.S. companies and expansion of the U.S. divisions of foreign-based firms — fell to $124 billion last year, down from $301 billion in 2000.

Worldwide, foreign direct investment fell in 2001 to $735 billion, half the amount seen in 2000 and the first decline in a decade. That happened as a slow economy and stock market declines around the world dampened investors' appetites to pour money abroad, including into the USA.

HEDGE FUNDS: (WSJ) Under a new proposal, many hedge funds that are based offshore will have to register with the Treasury Department's Financial Crimes Enforcement Network if they have investments of more than $1 million and have U.S. clients or are organized or sponsored by someone in the U.S.. Because they are virtually unregulated and operate in secret, many investigators fear hedge funds are vulnerable to money laundering by terrorists and other criminals.

Also, there are few middle Americans that should use these. Find some other way to lose your money. For example, just send it to me.

SIMILAR TO 1974 (NY TIMES) The 3rd quarter was not quite as bad as the one in 1974 — the Standard & Poor's 500-stock index fell 18 percent, not 26 percent — but volatility was even higher, and more than 90 percent of the stocks in the S.& P. 500 declined.

None of that proves, of course, that the bottom has been reached. In 1974, it was reached in early October, then tested in December. This year's low came in late July, then was tested in September. In each year, the Dow Jones industrials set new lows during the later test, but the S.& P. did not.

Stocks are nowhere near as cheap now as they were in 1974, when single-digit price-to-earnings ratios were common.

The article included commentary that the recession may be over and that this could be a good time to buy stocks. How many times have you heard that in the last year? Because the market is low, it “can’t go any lower” and it is therefore a great time to get in. Well, did you look at how well consumer spending did over Christmas. The worst in a decade. Iraq. Now North Korea. Stock market down and probably going lower still. Iit rarely is never a good time for consumers to buy stock since they don't have a clue to diversification. So here is the answer you were looking for in the definition addressed above. You need about 50 stocks in order to be properly diversified. Ask your broker or planner how many is needed and compare their answer to the above. Then ask yourself why you are using them.

Everyone is born with genius, but most people only keep it a few minutes

Edgard Varese

HARD TO BELIEVE: A national survey of 1,219 parents across the country reports that while more American teenagers are using Ecstasy, parents remain clueless about the drug's deadly risks and accessibility

WHAT A DIFFERENCE: The current national 6 month CD rate is 1.35%. In October 1981 at about this time, it was 16.95%.

PROPERTY AND CASUALTY: The American Institute for CPCU's 2002 class of 1,034 graduates of the Chartered Property Casualty Underwriter (CPCU) program brings the total number of CPCU designations conferred since 1943 to nearly 54,000.

TAXES: "In 2002 individuals, businesses and non-profits will spend an estimated 5.8 billion hours complying with the federal income tax code. . .with an estimated compliance cost of over $194 billion." A separate report from the Internal Revenue Service points out that on average, individual taxpayers spend approximately 17 hours preparing and filing their federal taxes every year. With more than 130 million individual taxpayers in the United States, over 2 billion hours are consumed every year just to prepare federal tax returns. The average cost per person for completing their income tax return is $662.

THIS IS WHY I THINK SOME PEOPLE ARE JUST PLAIN STUPID WHEN IT COMES TO MONEY. According to a Merrill Lynch survey, more than half of all workers believe the federal government guarantees their 401(k) plans. And there is about the same number that believe that Medicare covers for long term care.

If you shoot at mimes, should you use a silencer?

Steven Wright

• The average plan sold during the second quarter was $1 million. The average number of participants per plan was 62.

• The average account balance for sales during the second quarter of 2002 was $16,754.

• Of the sales in which the source was reported, 60 percent of the plans, 82 percent of the participants, and 95 percent of the assets were from takeover plans.

• Approximately $2.6 billion were reported as 401(k) assets lost during the second quarter. The annualized loss ratio was 6 percent for the 3^rd quarter.

OIL PRICES & GDP: a sustained increase of $10 per barrel in the price of crude reduces real GDP growth by approximately 3/4 of a percentage point in the year following the increase. In 1975 the economy used 1400 BTUs of petroleum to produce a dollar's worth of GDP. Now, it takes less than 700 BTUs to produce one dollar's worth of GDP today. The U.S. is more energy-efficient than it was 25 years ago.

In 1980 oil accounted for 6% of all of the personal expenditures for Americans. Even with the present high energy prices oil accounts for 2.7% of the present personal expenditures of Americans.

The fact is this: in most parts of the world, oil can be taken out of the ground at a cost of under $15/bbl. More oil can be taken out of the ground in Mexico and the North Sea. In the long run there is still large untapped capacity in China. Short term problems exist with Venezuela and Iraq, but we should be able to weather both given enough time.

DON'T GET SICK: Outpatient hospital care accounts for 37 percent of overall jump in 2001 health care costs.

BOY, THIS REALLY MAKES ME SICK: More workers are taking sick days for family and personal reasons rather than illness. Only a third of unscheduled days off are because of illness.

HEALTH CARE: (Census bureau) 1.4 million more people went without medical coverage last year, bringing the total uninsured to 41.2 million

Adults ages 18 to 24 were least likely of any age group to have coverage, with 28% lacking coverage.

Hispanics were less likely than non-Hispanic whites to be covered by health insurance, with 66.8% having insurance, compared with 90% of whites. Among blacks, the coverage rate of 81% was the same as that for Asians.

Families with incomes above $75,000 made up nearly 58% of the increase in the uninsured, although they make up only 30% of the population. Experts said that income group is most likely to have coverage and, therefore, in times of recession or job cutbacks, most likely to lose it.

HMO (American Association of Health Plans) An estimated 200,000 elderly and disabled Americans will be dropped from their Medicare HMO plans on Dec. 31, 2002,

Since 1999, approximately 2.2 million Medicare beneficiaries have been dropped from their health plans. Although far fewer beneficiaries are losing their coverage in 2002 than in previous years, the number is still significant. Since 1999, approximately 2.2 million Medicare beneficiaries have been dropped from their health plans by insurers who say they were forced to withdraw from the Medicare+Choice program due to inadequate government funding. Of the 40 million people with Medicare, only about 5 million have chosen the Medicare HMO option.

Medicare beneficiaries will be able to begin enrollment in the new PPO option in November 2002. The PPO plans, which go into effect on Jan. 1, 2003, will be available to more than 11 million Medicare beneficiaries in parts or all of 23 states: Alabama, Arizona, California, Florida, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Missouri, North Carolina, Nevada, New Jersey, New York, Ohio, Oregon, Pennsylvania, Rhode Island, Tennessee, Virginia, West Virginia, and Washington.

Beneficiaries will pay between $60 and $80 in monthly PPO premiums, compared with an average of $54 monthly for HMO premiums. Fee-for-service Medicare costs $54 a month and patients pay 20 percent of their medical bills.

INTERNET BANKING: (eMarketer's) The U.S. online banking population grew 37.6% in 2001 and is projected to continue growing at a robust 23.3% rate. One in every five households is currently banking online.

It takes as much courage to have tried and failed as it does to have tried and succeeded.

Anne Morrow Lindbergh

401(K)- If you left your firm and it went under with your 40i(k) money, call the US Pension and Welfare Benefits Administration at 866 275- 7922 and they will assign an adviser to track down your funds.

IRA AND NEW AUDIT PRIORITY AREAS : Offshore credit card users. For the last two years, the IRS has been turning up the heat on Americans who send income to offshore banking havens and tap their wealth with credit cards issued there. Federal courts have approved IRS requests to compel credit card processors and merchants to help identify scofflaws.

Unreported income. The IRS says it has developed a new formula for flagging returns that have a high probability of omitting income.

High-risk, high-income taxpayers. The IRS plans to focus on reported transactions that appear to be motivated more by their tax benefits than by their potential economic benefits.

Promotion and schemes. The IRS promises greater scrutiny of promoters of schemes such as compensation claims for descendents of slaves.

THE DEPARTMENT OF LABOR IS ALSO AT FAULT: The Department of Labor said former Enron chief executive officer Ken Lay and other top executives could be personally liable for millions of dollars in retirement plan losses. The document is significant because it spells out the agency's position on an employer's duty to 401(k) plans and potential liability if there are losses.

Labor Department lawyers say that if Enron executives were aware that workers were misinformed about the stability of Enron stock, they were obligated to protect them.

The duty to protect workers doesn't rest only on the trustees who directly oversee a 401(k) plan per the Labor Department. Any top executives or directors who appoint the trustees are responsible for monitoring the plan and are liable for breaches in fiduciary duty.

PORTFOLIO OPTIMIZATION: It is another way sophisticated mathematical tools can be applied to financial management problems. Optimizers have been used for years to allocate portfolio assets; however, the traditional optimizers have not always proven that they can do the following: 1) add investment value, 2) produce intuitively plausible portfolios, or 3) provide a means of testing whether an existing portfolio needs rebalancing.

So why are they- and so many other methods so adept at attracting investors? Marketing. Very good marketing.

YEA, BUT IT'S STILL CHEATING: (NY Times) Executives and investors with $5 million of stocks and bonds contribute at least $1 million of their stock in a single company to a pool into which others in the same situation contribute their own shares. In return they receive shares of a partnership that owns the pool.

When they are ready to withdraw from the pool, the partnership gives them not their original shares or cash but instead shares of a variety of stocks held by the pool. As a result, someone with too much money in one stock can quickly diversify into a more balanced portfolio. But unlike other investors, who have to pay taxes on profits when they sell a stock, no taxes are owed on the profits of the shares contributed to the pool.

If investors stay in the pool for seven years, the stocks they get when they withdraw their investment do not incur the tax on investment profits that other investors must pay. Only if the investors then sell the various stocks they received from the pool are they supposed to pay taxes.

Those taxes are by law owed on their investment profits all the way back to the time they bought the stock that they put into the pool. But cheating is easy because the investors can merely report only the profit made since they took back the stocks from the pool. An Internal Revenue Service auditor would have to know about the pool, and do a lot of work, to determine the full profit made on the original stock contributed to the pool.

RISK: Most investors realize that portfolios have risk, but many do not understand the implications of this risk on their investment goals. For investors, however, the greatest risk is not portfolio volatility; rather, it is the risk of failing to achieve their investment goals.

EAT THIS: Dietary guidelines issued by the Institute of Medicine estimate the daily energy requirements, in calories, for people age 30 and of various heights, weights and levels of activity.

I am 7'7" with my arms above my head and I am active because I am breathing so I am able to eat a lot more.

HEALTH PLAN (Kaiser) Although fewer small employers seem to be offering health care coverage than in the past, less than 1% of firms say they are very likely to stop offering the benefits in the future.

The percentage of businesses with three to 199 employees has decreased from 67% in 2000 to 61% this year, most likely due to the softened economy and escalating health insurance premiums, which surged an average of 12.7% last year, the largest increase since 1990.

Premiums for individual coverage in group plans cost an average of $3,060 this year, while family coverage averages $7,954, according to the survey of 750 employers. Employee costs for single coverage average $454 per year. The employee share of premiums for family coverage averages $2,084. Deductibles for in-network providers in PPO plans rose 37% to $276, up from $201 in 2001.

The PPO still is the most common type of plan, with a little more than half of all employees enrolling in it. HMO enrollment, with about 26% of employees, seems to have stabilized after falling for the last few years. But most small firms – about 93% of all small companies that offer coverage – only offer one health plan, compared to 40% of larger companies.

BYE BYE (USA Today) Since the bear market began in March 2000, 414 stock mutual funds have been liquidated, says Morningstar. That's half the liquidations in its database, which stretches back dozens of years and covers 4,074 stock funds. An additional 566 stock funds merged into other funds.

Bond funds have been a big victim of fund mergers. Morningstar says 584 bond funds have merged or liquidated since March 2000.

LONGEVITY: Heart disease remains the nation's number-one killer, claiming the lives of 725,000 Americans in 1999. The figure is down slightly from 20 years ago. Meanwhile, deaths from cancer increased by 32% between 1980 and 1999, reaching nearly 550,000 in that year.

Infant mortality rates remained at 7.2 infant deaths per 1,000 live births in 1998, the last year for which data were available. The figure was unchanged from the previous year but is the lowest of the 20th century. The US ranks 28th in the world in infant mortality, down from 12th in 1960. Hong Kong was ranked first, with an overall infant mortality rate of 3.2 deaths per 1,000 live births.

Officials said that they were encouraged by continued improvements in life expectancy, a crude measure of Americans' overall health. But along with the improvements come challenges. The number of Americans over 65 has nearly tripled since 1950, now comprising 13% of the US population. In 1950, seniors accounted for just 8% of the population. "The aging of the population is one of the great challenges the country will face

The U.S. spent $1.3 trillion on healthcare in 1999, a figure that is expected to rise as the population ages and requires more care. The US already spends 13.1% of its gross domestic product on healthcare, far more than any other nation, according to the report. More than 40 million Americans were without any form of health insurance in 2000.

Officials also remain concerned about exploding rates of obesity among Americans. As many as 61% of Americans are now considered overweight or obese, including 13% to 14% of children. The percentage of overweight children and adolescents has nearly tripled since the 1960s. Experts are beginning to see the effects of obesity on the nation's health. Deaths from diabetes, a leading consequence of obesity, doubled between 1980 and 1999

ANNUITY DEATH BENEFIT: (WSJ) Many newer variable annuity policies guarantee a death benefit that may be no less than the last time the market was pegged. If a annuitant dies, they get the higher value of the guaranteed amount or whatever the current market value is. Unfortunately, the market’s steep dive can expose an insurer to excess risk. For example, Cigna guaranteed the death benefit and didn't take out protection against its exposure because, like many, it didn't foresee stocks' steep declines. When the market fell, so did the value of the mutual-fund portion of the annuity, leaving Cigna responsible for making up at least the difference between the original investment and its value when the policyholder died. Cigna has since stopped providing such reinsurance.

VIATICAL FRAUD: A Florida judge has closed down Future First Financial Group, a viatical settlement provider, in order to protect as many as 9,500 consumers who have more than $300 million invested in death benefits with the firm.

In 1999, Future First and its then-vice president, William Sweeney, were charged with 81 counts of grand theft and one count of organized fraud in the marketing of policies valued at $6.9 million.

Although Gallagher revoked Future First's Florida insurance license in May 2002, the company continued to sell viatical settlements through Life Settlement Services Corp. under the same president, at the same office location, and with most of the same employees. That's absurd.

COBRA (Charles D. Spencer and Associates) only about 16% of eligible people -- about 1.7% of the entire surveyed workforce -- opted for COBRA this year, down by more than three percentage points from 2000. Researchers link the election-rate decrease to the recession, even though some larger employers are subsidizing nearly half of the claims costs.

Currently, average active employee costs are $4,947 per year, compared to annual costs of $7,438 annually for those under COBRA. But the survey points out that it is almost impossible to predict COBRA costs in any one year. What is more, administrative COBRA costs do not appear to be related to other COBRA costs, with administrative costs ranging from $36 per covered individual per year to $1,080.

HMO INCREASES: (Milliman) HMOs will increase renewal rates by approximately 17% in 2003. Responding HMOs also reported that 2002 premium rates were 16% to 22% higher than 2001 premium rates. Rising health care expenses continue to drive up premiums. This is the fifth year in a row that premiums have increased after four years of little or no increase.

HMO executives say they expect employers to increase workers' share of health care costs, while stepping up efforts to educate employees about making wise health care decisions.

The prescription drug cost increase in 2002 was 12.5%. Hospital inpatient costs also rose at a rate lower than the overall average premium increase. The hospital inpatient cost increase in 2002 averaged 7.1%.

AND HERE IS PART OF THE PROBLEM- A senate panel criticized the SEC for its passive approach to rooting out financial fraud and rebukes credit rating agencies for failing toa ct as watchdogs. The SEC, "utterly failed to fulfill its mission to protect investors." The agency must to more to prevent abuses from injuring shareholders.

Sure something will be done. But I bet there is not a singular entity at the SEC who knows diversification by the numbers. So the exposure to risk and fraud will never stop. You have to know how something is supposed to work if you are going to oversee its development.

NURSES (NY Times) The lack of nurses contributed to nearly a quarter of all the unexpected problems that resulted in death or injury to hospital patients.

COLLEGE LOANS: According to the Education Department, some 39 percent of student borrowers graduate with unmanageable levels of debt, meaning their monthly payments absorb more than 8 percent of their take-home pay.

The Medicare Part B premium that beneficiaries pay will rise 8.7% in 2003 (from $54 to $58.70) and the Part A deductible will increase 3.5% (from $812 to $840). These increases are significantly greater than the Social Security COLA for 2003 which will increase only 1.4%.

ETHICS AND COMPETENCY: (Weiss) Among the 62 brokerage firms covering companies filing for bankruptcy between May 1 and August 31, 2002, 46 firms, or 74 percent, continued to recommend that investors buy or hold shares in the failing companies (1) even as they were filing for Chapter 11.

A total of 54 publicly traded companies filed for bankruptcy during the four-month period studied. Of this group, 19 bankrupt companies were rated by the brokerage firms covered in this analysis, receiving a total of 126 ratings. Those ratings break down as follows:

Weiss Ratings determined that 90.9 percent of the ratings issued on companies filing for bankruptcy were either "buy" or "hold" ratings, compared to the 66.6 percent issued in this most recent four-month period. Conversely, the previous Weiss study found that only 9.1 percent of the ratings issued to the bankrupt companies were "sell" ratings, whereas "sell" ratings comprised 27 percent of the total ratings reviewed in the current Weiss study.

47% of Failing Companies Continued to Receive Unanimously Positive Ratings - Of the 19 failing companies rated by brokerage firms, nine, or 47 percent, continued to receive strictly positive ratings on the date of their bankruptcy filing. For example, on the day it filed for Chapter 11, APW Ltd. received two "buys" and five "holds." Another nine companies received a mix of positive and negative ratings, including Adelphia Communications, which received five "buys," three "holds" and two "sells," and WorldCom, Inc., which received seven "buys," six "holds," and fourteen "sells." Only one company, Panaco, Inc., received a "sell" rating exclusively. The table below summarizes the ratings received by the 19 rated companies that filed Chapter 11 between May 1 and August 31, 2002 as of the date of failure and six months prior to failure.

34 Brokerage Firms Fail to Issue Any Warnings to Investors - Among the 62 brokerage firms studied, 34 failed to issue a single "sell" rating on any of the companies filing for bankruptcy during the four-month period ending August 31. For example, CIBC World Markets maintained three "buy" ratings and two "hold" ratings on failing companies, while Thomas Weisel Partners maintained three "buy" ratings and one "hold" rating up through the date the rated companies filed for bankruptcy. In addition, Goldman Sachs and Credit Suisse First Boston each maintained five "hold" ratings on failed companies at the date of bankruptcy. Also sticking with "buy" ratings until the very end were ABN Amro, Argentina Research, Banc of America, Buckingham Research, Commerzbank Securities, Dresdner Kleinwort Wasserstein, Jesup & Lamont Securities, JP Morgan, Kaufman Brothers, Pacific Crest Securities, Performaxx AG, Raymond James, RBC Dain Rauscher, Robertson Stephens, Sanford C. Bernstein, SG Cowen, SoundView Technology, and USB Piper Jaffray.

Fourteen firms avoided issuing positive ratings on failing companies, issuing only "sell" ratings at time of bankruptcy, including Argus Research, BB&T Capital Markets, Davenport & Co., Fortis Bank and HSBC. Another 14 firms issued "sell" ratings by the date of the bankruptcy filing but also maintained at least one positive rating on other bankrupt companies.

WOULD PROBABLY WORK: The IRS is considering using private agencies to collect back taxes. A study commissioned by one collection company estimates that as much as $50 billion of the roughly $240 billion in unpaid taxes could be collected over the next 10 years.

LIFE INSURANCE: Almost one-third of Americans age 18 and over have no life insurance protection. Of those households that do have protection, 30% have coverage that's less than one times their annual income. Disturbingly, 76% of those households with life insurance protection that's less than their annual income thought that the amount of coverage was adequate.

The survey also revealed alarming statistics concerning the "prime needs" segment - those full-time employees with dependents, such as a non-working spouse or minor children. Only 64% of this demographic have any type of life insurance protection. Of those that do have coverage, 58% revealed that the amount of coverage is less than three times their household income. The majority of those with this minimal coverage also reported that they believed the amount of coverage was adequate. Employees need to consider whether three years or less of household income will be enough to provide for a child's education and pay monthly expenses such as a mortgage, rent, car loan, or childcare over a long period, especially if they have not adequately saved for these expenses.

MEDICARE: The magnitude of the looming Medicare cuts is significant: $1.4 billion annually. Nursing homes have used these funds to increase staffing hours and provide much-needed wage and benefit increases to frontline workers. These cuts - the so-called Medicare "cliff" - threaten nursing home residents' access to quality care, restorative therapy, and assistance with daily activities.

NURSING HOME CARE: (Cowles Research Group's "2001 Nursing Home Statistical Yearbook") on a national level, government-owned and not-for-profit nursing homes averaged more direct patient care staff time than did for-profit facilities. Total registered nurse (RN) time averaged .90 hours per patient day (ppd) in not-for-profit homes, compared to .82 in government-owned facilities, and .56 hours ppd in for-profit homes.

The number of residents and the number of facilities have been falling steadily since 1998 when they peaked at 1.51 million residents in 17,259 facilities. The total number of beds in certified facilities has been falling since hitting a peak of 1.83 million in 1997. There were 1,779,924 nursing home beds, in America's 16,675 certified nursing homes in 2001. On an average day in 2001 these homes cared for 1,469,001 residents.

The proportion of residents for whom Medicare was the primary payor reached an all time high of 9.55 percent in 2001. The previous high was 9.41 percent in 1998. There remains considerable interstate variation in payor mix. Medicare and Medicaid combined accounted for fewer than 60 percent of all nursing home residents in Nebraska in 2001, while in other states, like Georgia, Mississippi, and North Carolina, the two programs accounted for more than 85 percent of residents, and in Alaska Medicare and Medicaid were the primary payors for more than 91 percent of residents in 2001.

Nursing home resident acuity increased in 2001, continuing a long running trend. This is reflected in increases in ADLINDEX, ACUINDEX, PROPAC, and ADLSCORE and decreases in the percentage of residents who were independent at various activities.

Nationally, occupancy rates have remained stable over the last 7 years at between 82 and 83 percent, although in some cases there have been strong counter-trends at the individual state level. Oregon, for example, has seen occupancy rates drop from 89 to 73 percent between 1995 and 2001.

Survey deficiencies continue to vary dramatically by state and class of ownership. In some states, such as Maryland, Rhode Island, Vermont, and Virginia, the standard annual health survey results in an average of three survey deficiencies while in others, such as Arizona, California and Nevada, the average survey results in 10 or 11 deficiencies. The not for profit facilities continue to average fewer deficiencies than government and for-profit facilities. This finding holds both nationally and at the individual state level.