PRICES FOR MOST COMMON MEDICARE DRUGS CONTINUE TO RISE- Costs for many of the most commonly prescribed medications are continuing to rise under Medicare's new prescription drug plan. Government investigators found that "prices for 10 of the most prescribed brand-name medications have shot up an average of 6.8 percent since December under Medicare private insurance plans, while wholesale prices for the same drugs have risen just 3 percent." Over the same period of time, plan premiums have already jumped 13 percent. While both drug manufacturers and health insurers noted that overall program costs remain low due to a push toward generic drugs, the investigators note that the drugs tracked in the study were 2004's top 10 sellers, and only one has a generic alternative. In 2007 alone, while name-brand drug costs were predicted to increase 7 percent over the entire year, they had nearly climbed that high by mid-April. "We have all heard the promises, but the truth is that Medicare Part D is not bringing down prescription drug prices,"

LOSE YOUR HOME AND THEN PAY TAX FOR IT. (NY Times) Two years ago a man lost his home to foreclosure when he could no longer make the payments on his $106,000 mortgage. Wells Fargo offered the two-bedroom house for sale on the courthouse steps. No bidders came forward. So Wells Fargo bought it for. The man was relieved that his debt was wiped clean and he could make a new start. But he subsequently received a bill from the Internal Revenue Service for $34,603 in back taxes. The letter explained that the debt canceled by Wells Fargo upon foreclosure was subject to income taxes, as well as penalties and late fees. Foreclosure is one way that beleaguered homeowners can fall into this tax trap. The other is when homeowners are forced to sell their homes for less than the value of the mortgage. If the lender forgives that difference, they are liable for income taxes on that amount.

The 1099 shortfall, as it is called, stems from an Internal Revenue Service policy that treats forgiven debt of all types as income even if the taxpayer has nothing tangible to show for it, unless the debt is canceled through bankruptcy.

INSURANCE- 17% of institutionally managed policies will lapse prior to life expectancy

" 55% of institutionally managed policies have a management concern or a potential performance issue*

" 11% of institutionally managed policies are not competitive relative to peer products*

(Based on RIC's completed LifeTrack Baseline Reviews provided to Trust Fiduciaries. Retrieved from RIC database on March 6, 2007).

HEDGE FUNDS ARE SUPPOSED TO HEDGE- NOT CAUSE THE VOLATILITY IN THEMSELVES (WSJ) Amaranth Advisors, dominated the North American natural gas market in 2005, causing high prices and extreme volatility that ultimately led to its stunning collapse.

Amaranth held as many as 100,000 natural gas contracts in a single month, accounting for 5 percent of the total amount of natural gas consumed in the United States last year. The position was so large that it allowed the company to dominate trading in natural gas futures and push up prices.

By the end of February 2006, the fund held nearly 70 percent of the open interest in the November future contracts on Nymex and nearly 60 percent in the futures for January.

It was that size that led to its collapse: Amaranth made a huge bet that natural gas spreads — or the difference between two monthly future contracts — would rise, and it kept pumping more money into that bet. When prices fell, Amaranth found itself on the wrong side of the market and could not make up for its losses.

Some ask how this is possible, how it could have happened. Well, look at Long Term Capital. 27 PhDs and two Noble Laureates and it blows up requiring an effective bailout of $6 billion of the U.S. banking system by the FED.

Hedge funds can make lots of money if their bets are in the right direction. Otherwise......................

From now on, you will find the opportunities(?) in hedge funds evening out since the increased numbers are all trying to do the same thing at the same time. It limits any discrepancies they were looking for.

But all that said, you better have a whole mess of money before you attempt these- probably on the top side of $10,000,000.

FAIR?? (Rob Lambert, President of Asset Protection Corporation) "Justice is often said to be “blind.” This is usually a reference to the presumed universal fairness of our system and the infinitely wise judges and jurors who make it work. Justice is supposedly administered without regard to race, creed or position in society. Well, nothing could be further from the truth.

Judges and juries are simply not fair. They are human beings and have prejudices. Do you think a rich man divorcing the much younger mother of his three children will get a fair trial? Or what about the white man facing an all black jury deciding if his herbal tea caused the death of a elderly black woman? Neither will get a fair trial. You can expect the judge evaluating the divorce to do his level best to stretch the law as far as he can to comfortably provide for the young soon-to-be-divorced mother. In the same way, you can take it to the bank that the black jury is going to separate the white vitamin salesman from his hard earned savings.

I have seen it again and again. Judges and juries don’t care about legal technicalities. They care about using the law to get to the result they prefer no matter how hard they have to stretch. If you are naive enough to believe that what you were taught in school about our judicial system being fair, then you are in for a rude awakening, especially if you manage to accumulate some money. Once you have two cents to rub together you can and will face attack."

I tend to agree. People lie in court and arbitrations all the time. Fairness does not have to be an identity of the court system.

Great ideas often receive violent opposition from mediocre minds

Albert Einstein

REBALANCING (NY Times) Say you started investing at the end of 1984, in a portfolio consisting of 60 percent stocks, 30 percent bonds and 10 percent cash. And further assume that you never rebalanced this portfolio back to that 60-30-10 ratio. Instead, you did what a surprisingly large percentage of individual investors do: you let the market take your investments for a ride.

Through the end of June, this strategy would have earned an average annual gain of 11.1 percent since 1984. Now, had you started in 1984 with the same strategy, but this time rebalanced your portfolio annually, you would have earned nearly as much on your investments: 10.7 percent a year, on average.

But at the same time, that portfolio would have been 18 percent less volatile, based on standard deviation

Unfortunately, a vast majority of individual investors fail to take that simple step. Only 18 percent of workers who invested in a 401(k) retirement plan rebalanced their portfolios last year.

This is about in line with historical trends, as only 17 percent of 401(k) investors rebalanced their accounts in 2005 as well as in 2004,

THERE'S A SUCKER BORN EVERY MOMENT- A poll surveyed investors on eight basic investing principles, including performing a background check on financial professionals and knowing the definition of diversification. Of the 1,255 people surveyed, just 1% of the respondents understood all the basic principles.

Given investment swindle scenarios, such as the opportunity to invest in an options-trading system with guaranteed returns of at least 100%, 43% of investors said they would take the bait.

66% of respondents would meet with a financial professional without first doing a background check with the Securities and Exchange Commission or NASD of Washington (pretty useless actually but better than nothing at all).

STOCKS FOR THE LONG TERM (Buffet) A shareholder from Indiana (who recently re-read a variety of material written by and about Buffett) perceived a “sea change” in Buffett’s thinking regarding risk. The shareholder said he thought Buffett sounded “worried.”

Buffett: I wrote a letter in ’69 in which I said that I felt prospective returns on munis and equities would be about the same. If I were managing a pension fund now, I would be 100% in stocks, long-term bonds or short-term bonds—not 60% of this and 40% of that. I don’t believe in layering stocks, bonds, short-term bonds. Over a 20-year period, I could choose an index fund or 20-year bonds, [but] it would not be a close decision—I’d buy the stocks. I’d rather buy cheaply, but I’d also prefer long bonds with higher yield. We don’t predict where markets will be.

Analyst Comment: If you are managing for long-term returns—20 years or more—as a pension fund needs to do, it makes sense to invest wherever you anticipate the highest returns. Buffett sees that in stocks. Today, however, the popular—nearly ritualistic—approach is to buy A% large-cap growth stocks, B% large-cap value stocks, C% mid-cap growth stocks, D% mid-cap value, E% small-cap growth, F% small-cap value, G% “alternative” investments, H% international stocks, I% long-term bonds, J% intermediate-term bonds, K% short-term bonds, L% real estate, M% precious metals and so on. Indeed, many of these categories are sometimes further subdivided. Compared to Buffett’s focus on wherever investment returns seem most promising, the alphabet-soup approach will typically do two things: (1) It will produce less short-term volatility, and (2) It will produce lower long-term returns. (It may also produce a certain amount of CYA for pension fund consultants and trustees.) Unfortunately for pensioners—and many other long-term investors—the questionable benefit of a reduction in short-term volatility is no match for the foregone benefit of higher long-term returns.

EFM- There is one problem with all this- few retirees have the luxury of maintaining an equities portfolio for that long. No matter who is managing, you need to do a statistical analysis where it will show that there can be significant losses of up to 40%+ with that setup (2000-2002). Buffet can afford that loss and keep on trucking. Retirees on limited budgets to not have the luxury.

LIFE SETTLEMENTS: These investors have turned to older people who can qualify for life insurance, but don''t really need it. If you fit this description, they might offer you two years of "free life insurance" through a non-recourse loan. This means if you don''t pay back the loan, the only recourse is the policy itself. At the end of the two years you have three options:

* Give the policy back to the lender (the investor may even offer an upfront cash amount for "selling" the policy back to them -- sometimes hundreds of thousands)

* Shop the secondary market to see if you can get more than what the lender has to offer (remember, you''ll have to pay back the loan plus interest with this money)

There is currently no regulation on these types of transactions. In a few years, when you''re still alive and the hedge funds' margins of profit are getting slimmer they have every right to sell it without you knowing and it could end up in the hands of someone like a ''Tony Soprano''."

"In the event of a sudden loss of cabin pressure, masks will descend from the ceiling. Stop screaming, grab the mask, and pull it over your face. If you have a small child traveling with you, secure your mask before assisting with theirs. If you are traveling with more than one small child, pick your favourite."

West Jet Airways Stewardess

A HISTORY OF FORECLOSURES (NY Times) British Foreclosures are at an eight-year high; lenders have repossessed a record 14,000 properties in 2007, 30 percent more than at the same time last. An additional 125,100 households are behind in their mortgage payments.

And personal bankruptcies are at an all-time record, spurred largely by a crushing increase in mortgage debt. The situation has grown so dire — as has the threat of desperate homeowners being exploited — that the newly installed government of Prime Minister Gordon Brown is attempting to change the fundamentals of the mortgage system.

Currently, only 5% of British home buyers take out fixed-rate mortgages. The norm here is a mortgage with a fixed rate for the first two years, and then a floating rate for the duration of the mortgage.

But the rate on adjustable mortgages have skyrocketed as the Bank of England ratcheted up interest rates — five times over the last 12 months to 5.75 percent, their highest level since 2001. Add the rising costs of necessities, like food and utilities, and British homeowners are increasingly squeezed.

If there is a silver lining in Britain, it is that, unlike in the United States, home prices are still rising, for now, after more than tripling since 1997. Recent interest rate increases have yet to reverse the trend. In fact, the National Housing Federation recently predicted prices would rise an additional 40 percent in the next five years, taking the average price of a home, which already costs about 11 times the average British salary, to 302,400 pounds, or $618,000.

As long as home prices rise, distressed property owners can still sell their home and get enough money to repay their mortgage debt — in theory. In reality, selling a property here can take several months, and by the time many owners are threatened with foreclosure, they often do not have that kind of time.

Higher prices may push some prospective buyers out of the market, but others will simply take out larger mortgages. Owning a home is so entrenched in the British psyche that most consumers would rather take on additional debt than rent, even if they can’t afford it, say real estate experts.

Some debt advisers have warned that higher borrowing needs could result in an increase in lax lending practices and plunge more people into personal bankruptcy, which in turn could hurt consumer spending and slow economic growth.

DISTRIBUTION: (Buffet) An investor asked Buffet and Munger to address the topics of decreasing risk premiums, increasing correlations across markets, and the proliferation of a short-term mindset in investing.

Buffett: We do think it’s unhealthy. Many people think a portfolio should be evaluated daily. If you take the degree to which either bonds or stocks are owned by people [who] would change their mind tomorrow based on one event, it increases turnover. Bond turnover has increased dramatically. If you are trying to beat the other fellow on a daily basis, you are going to hit the [“enter”] key faster. It’s not new—markets have done crazy things over time. Human beings do things that are entirely irrational, such as in 1987, 1998, and 2002. It’s a different game [in modern times], and there are different consequences than in a buy-and-hold environment. Five to six sigma events don’t mean anything. That’s fine only with coin tossing—not when people are involved. It’s a fool’s game to watch a portfolio daily. In my original partnership, I said, “You’ll hear from me once a year.” Munger: Bad things in markets are not Gaussian. When people talk about sigmas in terms of disastrous results in markets, they’re all crazy! People who use Gaussian distributions have to believe in the Tooth Fairy to believe that—but it’s easy to teach. I once asked a surgeon why he still did an outdated procedure. “Because it’s so easy to teach!” There’s more of that in (university) finance departments than you’d believe. That stuff has no utility at all, but they’re teaching it.

Comment: If investors acted randomly, then models of investor behavior based on Gaussian (“normal”) distributions would be valid. However, investors frequently act emotionally and thereby create events that would seem to be highly improbable in a normally-distributed world. (For an interesting discussion of the actual distributions of financial market prices, read Benoit Mandelbrot’s The (Mis)Behavior of Markets, or check out some books on “behavioral finance.”) Munger’s point that the use of unrealistic models is commonplace because most finance professors know and can easily teach them, is a scathing criticism. Outside academia, many financial salespeople incorporate outdated and unrealistic models into their sales pitches, because the math involved—unrealistic as it is—provides an illusion of exactness, and it may bully clients into submission.

HIGH RETURNS- Munger: I have a young friend who sells private partnerships promising 20% returns. When I asked how he arrived at that number, he said, “I chose that number so they’d give me the money.”

Buffett: There’s nobody in the world who can earn 20% with big money. I’m amazed at the gullibility of big investors.

OLD AND WORKING (NY Times) It often takes many weeks, or even months, for older workers to find jobs, distinctly longer than their younger counterparts. In 2006, for instance, workers age 55 or older spent an average of 22 weeks looking for work. That was down from 24 in 2005, but still far longer than the 16-week job hunts of workers under 55,

the number of workers 55 or older is expected to increase by 11 million from 2004 to 2014, accounting for most of the 17 million increase in overall employment,

Alabama, Mississippi, Iowa, and Tennessee were each more Heavily populated than California.

With a mere 1.4 million people, California was only the 21st Most populous state in the Union.

Instead, they attended so-called medical schools, many of which Were condemned in the press AND the government as "substandard."

Most women only washed their hair once a month, and used Borax or egg yolks for shampoo.

Canada passed a law that prohibited poor people from Entering into their country for any reason.

The American flag had 45 stars. Arizona, Oklahoma, New Mexico, Hawaii, and Alaska hadn't been admitted to the Union yet.

Marijuana, heroin, and morphine were all available over the counter at the local corner drugstores. Back then pharmacists Said, "Heroin clears the complexion, gives buoyancy to the mind, Regulates the stomach and bowels, and is, in fact, a perfect guardian Of health."

BLAH, BLAH, BLAH: An astute reader had this to say about an article in Financial Planner- "It's all about trust, relationships, etc. blah, blah, blah. If you can't show the client on paper that you can help them get from point A to point B, what's the point of hiring an advisor - handholding and fancy quarterly statements?"

MORE ON CREDIT CARDS- almost 48% of households headed by someone under age 35 have card debt, according to the Federal Reserve's 2004 Survey of Consumer Finances. The typical, or median, sum owed is $1,500. But watch it balloon over the next few years. Already a lot of credit card defaults.

NOTHING NEW ABOUT FAT- overweight and obese employees are more likely to be injured on the job than other workers.

The study is based on a review of the medical and accident records of more than 7,600 people employed by an American aluminum manufacturing company at eight plants.

In the three years looked at, 29 percent of the workers were injured at least once. Almost 70 percent of those injuries could be treated with first aid alone, but the rest were serious enough to require the filing of a government report.

When the researchers looked at the health records of those injured, they found that 85 percent were overweight or obese. The injuries included strains and sprains, as well as back and shoulder injuries.

There are a number of possible explanations. Overweight people may be more prone to fatigue, which can help lead to injury. Their overall health is likely to be worse, and they may be taking medications that could affect alertness.

Then there is the problem of using safety equipment designed for smaller people.

“It is possible,” the study said, “that personal protective equipment, such as gloves and eye goggles, are less likely to be used by obese workers because of lack of comfort, fit or availability.”

ILLITERACY REIGNS- Bipartisan letter asks SSA to clarify that medicare does not cover long-term care. More than three dozen House members sent a letter to the Social Security Administration asking the agency to clarify that Medicare does not cover long-term care. The bipartisan letter urges SSA Commissioner Michael Astrue to include in Social Security statements sent annually to 143 million U.S. residents the sentence: "Medicare generally does not pay for long-term care."

The statement currently says that Medicare provides some coverage for "nursing care," which the lawmakers wrote "creates an unnecessary risk that individuals will assume Medicare covers an extended stay in a nursing home, when in fact it does not." While Medicare covers care delivered in skilled nursing facilities for beneficiaries who require longer-term medical treatment, it does not pay for custodial care, such as assistance with eating, bathing and other daily living activities. A December 2006 AARP survey found that 59% of adults ages 45 and older overestimated Medicare coverage for long-term care

EFM- As stated repeatedly, Medicare covers for skilled care only and then only for 20 says. Thereafter, patients have a large daily amount to pay. It’s the skilled care that is the problem. Very few people are on skilled care. Further, once you get better, the payments cease. There are no payments for Intermediate care either.

SECOND HOME SALES (NAR) Second-home sales dropped from 40 percent of all home sales to just 36 percent.

That happened despite a rise in vacation-home purchases, one of the two components of second-home sales. These were actually up 4.7 percent during the year to a record 1.07 million units.

But a precipitous decline in investment-home sales, they fell 28.9 percent in 2006 to 1.65 million units, led to the overall drop in second-home sales.

Some 79 percent said the primary reason for their vacation-home purchase was to use the home for vacations or as a family retreat.

Other factors that influenced the buy include: 34 percent to diversify investments; 28 percent to use as a future home; 25 percent for the tax benefits; 22 percent for use by a family member or friend; 21 percent because they had extra money to spend and 18 percent to rent to others.

Rural areas, at 29 percent of all purchases, were most popular destination with 24 percent buying in resorts, 22 percent in suburbs and 10 percent in cities.

FAIR ARBITRATIONS?: (WSJ) In 2006, investors in NASD arbitration won 42% of cases decided by arbitrators, down from a recent high of 54% in 2001. (A win is when a claimant receives monetary damages or nonmonetary relief.). What's more, if their claim is against a large firm, any winnings they receive are likely to be only a small fraction of what they claimed.

Most claims don't get to an arbitration panel. In 2006, 81% of customer claims were resolved by other means, mostly via settlement or mediation. Over time, the share of claims resolved before a hearing has grown substantially. (That’s the reason that you hear about so few claims. Nothing need be noted in the FINRA files. You do not know how many claims have been filed against your broker). The remaining 19% of claims that made it to a panel last year may represent the cases brokerage firms think they have the best shot of winning.

DERIVATIVES: Lots more derivatives- the size of the credit derivatives market doubled in 2006 for the third consecutive calendar year. The International Swaps & Derivatives Association (ISDA) year-end market survey showed that the national principal outstanding volume of privately negotiated credit default swaps (CDS) rose 102 percent, to $34.5 trillion, from $17.1 trillion a year earlier.

The year-over-year growth rate was virtually unchanged from the 102 percent of 2005. But ISDA noted a more pronounced slowdown in the sequential growth that it measures on a semiannual basis. The $34.5 trillion was 33 percent higher than the $26 trillion of June 30, 2006, but the latter figure had grown 52 percent from the end of 2005. Then again, the 2005 pattern was similar to 2006, with second-half sequential growth of 38 percent comparing with 48 percent in the first half.

In any event, credit default swaps remain by far the fastest-growing derivative asset class tracked by ISDA, whose numbers aggregating single-name CDS, baskets and portfolios of credits and index trades are closely followed as a barometer not only of business growth, but also of the need to strengthen operational procedures to handle the volume.

Did you follow all that? Neither did I. And that is the problem- it is really hard to figure out what these things are really doing. Fed Chairman Bernanke said, just as the mortgage debacle was getting bad- “I like to know what these (derivatives) damn things are worth.” Hence the problem overall. Some “smart” people put stuff together in a package and sell it to those who are effectively clueless, gullible or willing (supposedly) to take the risk. They can work- but if the investment gods go against you............ Picture Long Term Capital again. 27 Phds, two Nobel Laureates and it goes belly up and almost takes the U.S. banking system with it. Feel better now???

VOLATILITY IS NOT RISK: A Buffet shareholder referred to the fact that many people talk about “sigmas” (the standard deviations of price changes) and equate volatility with risk. He asked why a rational person would substitute the opinions of the public (as reflected in volatility caused by mass decisions) for one’s own measurement of the inherent risk of a company.

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

Munger: Finance taught in business schools is about 50% twaddle. We early recognized that very smart people do very dumb things. We wanted to figure out when and why…and who, so we could avoid them.

Comment: This was one of the best questions asked, and Buffett and Munger were characteristically straightforward in their answer. If volatility is risk, then an investment that does nothing but shoot sharply upward—that’s volatility, too—is risky. Similarly, suppose that an average worker regularly saves a modest amount from each paycheck and invests in T-Bills for retirement. It’s unlikely that this worker will amass sufficient purchasing power to retire comfortably, but because T-Bills aren’t volatile should we say that this investment approach is low risk? Investment managers may be quick with their opinions, but at least you can usually see their investment track records before you judge their insightfulness. Academics are free to spout nonsense, and there is usually nothing to alert the public that they may not know what they’re talking about. As the questioner implied, it’s a mistake to let Mr. Market—or Professor Beta—decide what’s risky and what isn’t.pooled income funds in existence less than three tax years must use a 4.8% deemed rate of return.

HOUSE OR HOME: (Bell Investment Advisors) 68% of surveyed 60-year-olds count their personal residence as a retirement asset. And of that 68%, one in four say their home represents half or more of their retirement savings.

IS THE WAY THAT PEOPLE MAKE RISKY CHOICES, OR TRADEOFFS OVER TIME, RELATED TO COGNITIVE ABILITY? This paper investigates whether there is a link between cognitive ability, risk aversion, and impatience, using a representative sample of the population and incentive compatible measures. We conduct choice experiments measuring risk aversion, and impatience over an annual time horizon, for a randomly drawn sample of roughly 1,000 German adults. Subjects also take part in two different tests of cognitive ability, which correspond to sub-modules of one of the most widely used IQ tests. Interviews are conducted in subjects' own homes. We find that lower cognitive ability is associated with significantly more impatient behavior in the experiments, and with greater risk aversion.

EFM- I thought however that they might actually take on more risk. Learn something new everyday.

EQUITY INDEX ANNUITIES: Approximately $25 billion in equity-indexed annuities were sold last year.

Equity-indexed annuities are quite similar to equity-participation securities, which are traded on the American Stock Exchange under various brand names. Equity-participation securities guarantee that investors will receive the initial face value of the security plus the increase in the value of a stock or stock index reduced by an annual spread. The correspondence between equity-indexed annuities and equity-participation securities is closely analogous to the correspondence between variable annuities and mutual funds.

Insurance companies have added trivial insurance benefits, disadvantageous tax treatment and exorbitant costs to equity-participation securities and sell them as equity-indexed annuities.

investors in equity-indexed annuities cannot determine the costs they are incurring. Moreover, equity-indexed annuities’ complexity makes it virtually impossible even for brokers and agents to properly evaluate the annuities. Salesmen can readily determine though that commissions paid for selling equity-indexed annuities – as high as 10% or 12% – are much larger than commissions paid on mutual funds and variable annuities.

EFM- Can they work? Yes, but generally not as presented. They are really bond funds in disguise. I have stated years ago that these might pay more than a fixed annuity about 65% to 80% of the time; the same as a fixed return about 10% to 20% of the time and less than a fixed bond fund about 10% to 15% of the time.

The wholesale marketing as an ability to get a return similar to the market is bunk.

ARBITRATION AND AWARDS (Solin) investors have won less frequently as this decade has progressed. Over the period studied, the high point of wins for investors was in 1999, when 59% of arbitration cases resulted in some kind of award to investors. That percentage declined to 44% in 2004.

Solin and O'Neal also found that investors who take on the largest brokerages for big claims--$250,000 or more--recover just 10% to 12% of the amounts for which they ask. For claims of less than $10,000, however, they recovered 30% on average. Against the industry as a whole, the recovery percentage was 34%. For all firms receiving claims greater than $250,000, investors' recovery percentage was 20%.

The third most significant finding was that advisors at the three largest broker-dealers had a better chance of winning in arbitration than brokers at nearly 5,000 other licensed firms in the industry. When investors went up against the three biggest wirehouses (Merrill Lynch, Smith Barney and Morgan Stanley, based on number of registered reps), they won 38% of the time. Those results were not too different for investors opposing the 17 next largest firms. Customers won 43% of the time against investment houses such as UBS, Edward Jones, A.G. Edwards, Ameriprise, Goldman Sachs and Raymond James & Associates.

Against the remainder of NASD member firms, however, clients won 57% of the time. That means that firms from No. 21 on down were looking at a 19-point disparity in arbitration success versus the top three wirehouses and a 14-point gap against the next 17 largest.

NASD statistics show that more than 80% of claims are settled, withdrawn or dismissed prior to adjudication

YOUNG AND OLD (NY Times) The Social Security Administration estimates that the number of Americans 65 and older will double during the first three decades of this century, to 70 million, while the nation’s overall population will grow only about 25 percent, to 360 million

MANY MEN RELY ON WIVES FOR MEDICAL ATTENTION- Wives often push their husbands to see doctors long before they think they need medical attention, and are frequently the first to notice subtle changes in their husbands' health, the Wall Street Journal reported earlier this month. Since females tend to have more contact with pediatricians, obstetricians and gynecologists, they also regularly ask for advice and referrals that their husbands do not. But because they tend to wait, men are more often diagnosed with more serious and difficult to treat later stage diseases, with serious implications for both spouses. According to the U.S. Administration on Aging, seven in ten female baby boomers will outlive males, and over half of the impoverished elderly widows living today were not poor before their husbands' death.

HERDING BEHAVIOR - (NY Times) When making changes in their portfolios, people pay a great deal of attention to what their neighbors are doing. There is the likelihood that a household would follow the lead of other investors was greatest when they lived nearby. It tended to shrink quickly as the distance grew.

One possible cause of this pattern is that investors — by word of mouth, whether over the garden fence or at the gym — learn which stocks their neighbors are buying and then tend to favor those stocks themselves.

But the professors also looked into other possible causes, including the fact that some local economies are dominated by a single company or industry. In Silicon Valley, for example, investors are more apt to buy tech stocks than investors elsewhere, even if they never talk to one another about the latest hot software company.

Is the word-of-mouth effect necessarily bad? You may be inclined to think so, especially if you have a statistical bent. But the professors are careful to stress that your neighbors’ influence may have some benefits. It may be that in an increasingly complex world, word of mouth is an efficient, inexpensive way to find out about promising opportunities.

Nevertheless, there are obvious pitfalls to basing stock selections on what your neighbors are buying. One that the professors addressed is its effect on portfolio diversification. When we discuss the latest hot stocks with our neighbors, it’s unlikely that we will talk about more than just a handful of companies. As a result, this word-of-mouth effect is likely to make our portfolios too concentrated in just a few stocks. All other things being equal, underdiversified portfolios tend to be riskier than those with a broader sampling of stocks.

RETIREMENT SURVEY: (Scottrade) its 2007 Study found 56% of would-be investors surveyed said they were going to begin investing to save for retirement, while 51% said they want to build a future "nest egg" for themselves or their family. For advice, they look to family members (44%), independent financial Web sites (41%), the broker where they will have an account (36%), or an independent financial adviser (28%) for investment ideas and information.

GOING BROKE- MEDICARE AND SOCIAL SECURITY WON'T FIX THEMSELVES - By 2017, Social Security will pay out more in benefits than it collects in taxes and the "trust fund" is projected to be exhausted by 2041. Medicare is in worse shape since it will pay more than it collects this year, with its hospital insurance trust fund projected to be bankrupt by 2019. Both plans will be strained by the aging of nearly 78 million baby boomers. While these predictions are slight improvements over last year, it is obvious that we have a severe problem that no one appears ready to tackle. FYI, Social Security expenditures will be $594 billion this year. For Medicare, the figure is $438 billion.

“More than 90 percent of all civil cases settle. Therefore, a deposition may wind up being the real 'trial' in a case. If the opposing party makes a weak showing, he or she may be more willing to settle.”-

Henry L. Hecht, U.C. Berkeley School of Law

LIFE SETTLEMENTS- A 2006 report estimated that life-settlement transactions in 2005 rose to about $9 billion to $11 billion, based on policies' face value, from $5 billion in 2004.

IT'S JUST MONEY- the U.S. government has promised $63.7 trillion more in benefits then it will collect in taxes. Do not drive and car or live in a home- Home Safety Month – Is Your Home Safe? Did you know that approximately 20,000 Americans die each year from unintended accidents in their homes and more than 20 million seek medical treatment for home injuries? The home is the second most common location for accidental fatal injuries in the U.S. (autos rank first).

POVERTY About 12.3% lived in poverty this past year. The drop in the poverty rate from 12.6 percent in 2005 to 12.3 percent in 2006, meanwhile, was almost entirely driven by a decrease in poverty for those over 65.

The number of Americans without health insurance rose to a record high of 47 million in 2006. In all, 15.8 percent of Americans lacked health coverage last year, up from 15.3 percent in 2005

HEALTH CARE- Fidelity Investments estimate, the average 65-year-old couple needs an estimated $215,000 to cover health care costs in retirement.

Health care costs are expected to increase 11% in the next 12 months. More than 70 health insurers found that Preferred Provider Organization (PPO) plans are expected to see the greatest cost increase at 11.2%, followed by health maintenance organizations (HMOs) (10.9%), Point-of-Service (POS) plans (10.8%) and consumer-driven health plans (CDHPs) (10.7%). For each of the plan categories, the rate of increase was lower than a year ago, when increases were 12% or more for all but POS plans

INDEXING- In response to a question about why Buffett recommends index funds to investors, he said that for "a know-nothing investor, a low-cost index fund will beat professionally managed money." He also said he had a standing offer to anyone who could name 10 hedge funds that will beat a low-cost index fund. No one has taken him up on his offer.

56% of parents with children under 18 believe that their current life insurance coverage is inadequate, and that they need additional coverage.

43% say they are likely to buy life insurance within the next year. However, 50% also say they don't know how much to buy, and 39% worry about making the wrong decision.

76% of parents say they have no trusted advisor to turn to if they need life insurance, and no one they can rely on for financial advice or information.

45% of parents would like to speak with a professional advisor, because they find buying life insurance complex and confusing, and are also unlikely to initiate the purchase.

22% of families with dependent children admit that they will have immediate trouble meeting everyday living expenses if a parent dies, and another 26% can cover expenses for only a few months.

22% of families with dependent children admit that they will have immediate trouble meeting everyday living expenses if a parent dies,and another 26% can cover expenses for only a few months.

75% parents with children under 18 buy life insurance to replace lost income, and 43% buy life insurance to pay off the mortgage.

25% of parents say they haven't bought life insurance because no one has contacted them, and 40% admit that they just haven't gotten around to it.