THE PERFORMANCE OF INTERNATIONAL EQUITY PORTFOLIOS (Charles P. Thomas) This paper evaluates the ability of U.S. investors to allocate their foreign equity portfolios across 44 countries over a 25-year period. We find that U.S. portfolios achieved a significantly higher Sharpe ratio than foreign benchmarks, especially since 1990. We test whether this strong performance owed to trading expertise or longer-term allocation expertise. The evidence is overwhelmingly against trading expertise. While U.S. investors did abstain from momentum trading and instead sold past winners, we find no evidence that these past winners subsequently underperformed. In addition, conditional performance measures, which directly test reallocating into (out of) markets that subsequently outperformed (underperformed), suggest no significant trading expertise. In contrast, we offer strong evidence of longer-term allocation expertise: If we fix portfolio weights at the end of 1989 and do not allow reallocations, we still find superior performance in the recent period.

WELL, THEY WERE ALSO STUPID- The Securities and Exchange Commission filed an emergency enforcement action against Peter J. Dawson and two of his corporations to halt an ongoing fraud in which the defendants have obtained over $2 million from at least seven investors, most of them senior citizens.

In connection with Dawson's advisory services, Dawson made materially false and misleading statements to his clients about their investments and the use of their funds. Dawson promised between a 12 and 15 percent guaranteed return on each investment, and he assured clients that he would arrange to pay their mortgages and/or pay monthly "returns" on the investments. To the extent that the 12 to 15 percent return exceeded the client's mortgage obligation, Dawson promised that excess return would be accrued in the client's account.

As recently as Oct. 25, 2006, Dawson, through BMG, assured investors in writing that their accounts contained a "certified balance" of the initial funds entrusted to him plus the guaranteed interest. Rather than investing the money as promised, Dawson abused his clients' trust and misappropriated, and is continuing to misappropriate, their funds for his own use within the last several months. Dawson withdrew over $100,000 of his clients' funds for his own benefit. At the same time, Dawson failed to make investors' mortgage payments as he had promised. During the past month, because some investors received notices that their mortgages were not being paid, they complained to Dawson, who has since refused to return their calls and closed BMG's office.

Me- I know this is harsh. But unless the 'clients' were dumber than a fence post, anyone knows you cannot get 12%- 15% guaranteed.

This is almost exactly like a case I am currently working on. Never trust ANYONE with money.

MEN AND WOMEN: In a study based on a sample of nearly 15; 000 individual investors, Barber and Odean (2001) find that men estimate the rate of return to their investments by nearly 3 percentage points higher than the market average return and women by almost 2 percentage points higher. Simply stated, Americans are way too confident about the future performance of their assets.

The chance of gain is by every man more or less overvalued, and the chance of loss is by most men undervalued.

OVERCONFIDENCE: Overconfidence does not just belong to those elite school students. If you think you are safer and more skillful than your fellow drivers, you are not alone: in Svenson's (1981) study of Texas car drivers, 90% of those assessed believe they have above-average skills and 82% rank themselves among the top 30% of safe drivers. Anything you think you are better at or have better luck with than others, your peers are likely to think the same way: 70% of lawyers in civil cases believe their sides will prevail; doctors consistently overestimate their abilities in detecting certain diseases; parents feel their children are smarter than others'; lottery pickers bet that tickets they choose have greater odds to win than randomly selected ones; professional athletes and military personnel may even be trained to be overconfident and overoptimistic.

The presence of overconfidence in the business world is also well known. A large body of literature documents that managers are prone to the wishful thinking that projects they have command of are bound to succeed. In a survey of nearly 3000 new business owners, 81% percent of those sampled believe their businesses have more than a 70% chance to succeed while 33% believe they will thrive for sure. In actuality, 75% of new ventures do not even survive the first five years. The phenomena of overconfidence and overoptimism are widespread and have long been documented in the cognitive psychology and behavior science literature based on data from interviews, surveys, experiments, and clinical studies. Perhaps what is more overwhelming than the mere existence of overconfidence itself is the fact that the degree of overconfidence is rather persistent and generally does not wane over time. In the car-driver example, Camerer (1997) notes that even after suffering serious car accidents, drivers still rate themselves as above-average, and Bob Deierlein reports in a 2001 issue of WasteAge that more experienced drivers can develop a higher degree of overconfidence in their ability to avoid accidents but can in fact have accidents more frequently.

In another study of 78, 000 individual investors, Barber and Odean (2000) also find substantial persistence of investor overconfidence, which results in high trading volume and high turnover rates in the face of repeatedly lower-than-expected realizations of asset returns.

The over-weening conceit which the greater part of men have of their own abilities, is an ancient evil remarked by philosophers and moralists of all ages.

Adam Smith

Behavioral Finance: Modern portfolio theory is premised on a universe of rational actors, but this species is very rare in the real world. In recent years, behavioral finance -- the science of real-life returns, which are driven not by investment performance but by investor behavior -- has come to the fore, and indeed one of its pioneers has been awarded a Nobel Prize in economics. Even Morningstar has recently been publishing research in what it calls "investor returns," showing the horrific gap between the nominal returns of mutual funds and the actual returns earned by the average investor in those funds, who typically buys and sells at the wrong times for the wrong reasons.

The implications of behavioral finance for the careers of financial advisors are very profound. For this approach suggests that much of the time and energy spent by today's advisors on selection and timing might better be directed toward identifying and moderating the classically self-destructive behaviors which cause investors to self-sabotage. In this presentation -- which might further be subtitled "behavioral finance in plain English" -- Nick Murray develops a theory of behavior modification as an advisor's value proposition, and identifies eight classic psychological traps ("heuristics," in the jargon) into which the vigilant advisor may prevent clients from falling, to return-enhancing effect.

ASSET ALLOCATION- During the early 50’s, Harry Markowitzsparked a revolution in investment management industry by demonstrating mathematically the benefits of asset allocation. Relying on linear programming techniques, he showed that the first two moments (Mean and Variance) of an asset’s return distribution along with its covariance among other assets could be used to construct optimal “hind-sight” portfolios. Subsequent work demonstrated that Markowitz’s portfolio selection model (the “Model”) could be populated with forecasted inputs and used to assist with the investment strategy process.

The Model is a very effective tool, but it should not be viewed as the only answer. Here the question asked is, “What if the Model understates the risk associated with a given policy?”

* Common sense indicates that positive surprises would be welcomed while negative surprises…disappointing. As such, the trick to superior results is as simple as exposing yourself to assets with frequent positive surprises while avoiding assets with frequent negative surprises. Unfortunately, there is no way to knowing for certain what waits behind moments one, two, three or four. More often than not, negative surprises outnumber the positive ones, and positive surprises can even set us up to be disappointed by negative surprises, lulling us into becoming over exposed to risk.

The simulated, or inferred statistics illustrate the mean, standard deviation, minimum and maximum monthly return for each asset class and an equal weighted composite produced by a Monte Carlo simulation utilizing the descriptive statistics as input variables. Based on the simulation, we would expect the diversification effect of the low-correlated assets to provide considerable downside protection for our composite, the worst case being no greater than negative 15%. However, the worst case over the sampled period was in fact negative 29.69%, relatively 100% worst than a mean-variance simulation would have lead us to expect, even if we had forecasted the mean, variance, and correlation variables perfectly. Such a dramatic understatement of risk would surely alarm most investors, causing many advisors to loose face or even a few clients. The simulation underestimated the worst case for asset classes (1 through 4) by a relative 51.63%, 75.88%, 25.08% and 99.32% respectively. (Notice that the underestimation was less severe for funds possessing descriptive distribution closer to normal.) Of course the reason for such a dramatic difference between our simulated and actual composite outcomes goes beyond the effect of each individual asset class’s higher moments; additional uncertainty is introduced by the correlation measurements.

The Model assumes correlation measurements are constant across the entire holding period when in fact correlations fluctuate across time, usually increasing at the most inopportune times. Assuming static correlation measurements and normal expected return distribution, the Model identifies optimal mixes of assets that minimize the risk associated with each level of return, but when major corrections occur across asset classes simultaneously, the pain resulting from downside beyond what was originally inferred can be particularly sharp.

Markowitz’s study demonstrated the important concept of diversification. However, when vested with a great deal of overconfidence, the Model becomes a “clever black box” that conveniently spits out optimal allocations while masking potentially disturbing events. It can be argued that investors’ willingness to pursue a more aggressive policy would be reduced if they had a more realistic assessment of the uncertainty that accompanies such a policy.

Markowitz himself suggested that utilizing measures of risk that focus more on downside would likely improve the value of a given analysis, and Blazer [1995] presents an exhaustive treatment of alternative measures (alternative to variance or standard deviation) that help highlight the importance of downside risk. Additionally, rather than assuming normality, which implies with 99% certainty that our worst case will be no more than 3 standard deviations from the mean, advisors could utilize the wisdom of Tchebychev, who’s theorem demonstrates that the 99% certainty level is not likely to be reached until after 7 standard deviations from the mean (A considerable difference). I am fond of saying, “I don’t mind if you let me down, as long as you let me know beforehand that such a possibility exists.” Unfortunately, some practitioners have a vested interest in perpetuating the “exactness” of the Models, or at least their version of the Model. As such it is likely that the acceptance of uncertainty will be a long time in coming.

PUBLIC PENSIONS- (NY Times) As local officials take stock of unexpectedly large obligations to retired public workers, some are starting to question whether service cuts, sales of government property and politically acceptable tax increases can ever go far enough to bring things into balance.

Some places, including Oregon, Rhode Island, Milwaukee County and several cities and towns in Texas, have already cut public workers’ pensions on the basic argument that their pension funds had gone disastrously out of balance. Whether because of investment losses, faulty calculations or other factors, these places have declared that they can no longer sustain a level of benefits that had looked affordable just a few years ago.

Oregon rolled back $6 billion worth of public pensions in 2003, but the cuts have been snarled in legal challenges. Last year the courts affirmed that Oregon could stop paying a guaranteed rate of 8 percent a year to participants with individual accounts.

Mercer Human Resource Consulting estimates that when all the calculations are done, the nation’s states and cities will find they have promised a total of about $1.4 trillion. Little, if any, money has been set aside to fulfill these obligations.

Pension funds can normally operate for many years with a shortfall, because they have investments to call upon and pensions are paid out slowly. But health claims, with little or no money set aside to pay them, can come due right away.

WHAT A FUTURE!: 2 out of 3 Americans will fail to realize one of their major life goals of either owning a home, providing a college education for their children, or retiring on enough income because of poor money management skills.

56% of Americans think things will be worse for their own children or for future generations.

80% of parents believe that their children are being taught personal money matters in school, yet 90% of high school students and 87% of college students say that whatever they know about money they learn from their parents.

Most children merely imitate the saving and spending habits they see modeled at home.

56% of parents believe high school graduates are totally unprepared to manage their personal finances responsibly.

Among parents with children 5 and older, only 26% felt well enough prepared to teach their kids about personal finances.

55% of college students acquire their first credit card during their first year in college, and 83% have at least one credit card.

Bankruptcy filings reached all time highs in 2005 exceeding more than 2,000,000 individuals. This represented an increase of more than 28% from the previous year.

Today, 18-24 year olds represent the fastest growing age group filing for bankruptcy.

The personal savings rate in the U.S. has declined sharply from 7.6% in the mid-80s to less than 1% in 2006. At several times during late 2005 and early 2006, the rate actually fell below zero to a negative 0.6%.

Worries about personal money problems are now the leading cause of stress in the family as well as at work.

40% of Americans currently live on 110% of their monthly income. This is leading to greater amounts of family debt and or a depletion of already scarce personal savings.

American households with debt have an average of nine credit cards and carry about $11,000 in revolving debt.

The average credit card debt among those university students who carry debt is $7,800.

Graduate students accumulate more than twice the average balance of final-year undergraduate students; $7,800 vs $3,260.

Poor money management skills usually translates into a poor credit rating which can seriously impact the following:

With today’s trends, only 1% of the population at the age of 65 will become wealthy, 4% financially independent, 15% will have modest savings, while the remaining 80% will be financially broke or dependant on others for survival.

LET'S BE CAREFUL OUT THERE: Thrift Savings Plan, a 401(k)-type program where retirement accounts have been established by more than 3.7 million people.

And maybe that cautious streak isn't surprising, given that the government seems to draw a sizable share of workers attracted by promises of job security and a decent pension. Still, the TSP survey reinforces the perception that the government's workforce is a careful crowd.

29 percent of respondents said they take a "no risk" or "low risk" approach to investing.

11.6 percent are following a "high risk" investment strategy, allocating almost three-quarters of their savings to U.S. and international stock funds.

The analysis of the survey concluded that federal employees are "more conservative investors than private-sector employees."

48 percent of private-sector 401(k) accounts are invested in equity funds and an additional 13 percent in company stocks.(so that's 61% in stocks)

Overall, the government survey found, the 50% on average of TSP account are in a short-term government securities fund, called the G Fund, or in a fixed income bond fund, known as the F Fund.

One explanation for why TSP participants seem to be more conservative investors than private-sector employees may be historical. The G Fund -- Treasury securities with no risk of loss of principal -- was the first TSP fund, started in 1987. It was followed by the bond fund and a large common-stock index fund, called the C Fund, the following year.

The TSP added investment options in 2001 and 2005, but many federal employees have stayed with the original funds.

The survey analysis prepared by the TSP noted that federal employees take great pride in their jobs and may "view the G Fund like private-sector investors view their company's stock."

Education about investing, the survey found, is a key to ensuring that federal employees make appropriate choices based on their age and the time they have available to save for retirement.

Employees who had received financial planning advice or reviewed information on the TSP Web site tended to put a greater share of their money into stocks and create more risky asset portfolios, according to the survey.

The survey turned up some troublesome indicators, such as employees who may be underestimating how much income they will need in retirement.

More than a 25% either believed they need less than what financial planners generally recommend or could not estimate their retirement needs.

Of the 3,467 TSP members who completed the survey by the Federal Retirement Thrift Investment Board and Watson Wyatt Worldwide,

TSP officials plan a follow-up this year with a larger sample size and said some results, such as those based on age group, should be taken as preliminary.

While government employees are cautious -- in some cases maybe too cautious -- in their investing, the survey shows they are good savers compared to the private sector.

Respondents said they save on average 10.5 % of their income, a contribution rate more than 3 percentage points higher than those seen in typical private-sector plans.

Nearly 11 % of military personnel and other members of the uniformed services said they contributed 20 percent of their pay or more to the TSP,

The policy recommendations of most economists are based on the rational actor model of human behavior. Behavior is assumed to be self-regarding, preferences are assumed to be stable, and decisions are assumed to be unaffected by social context or frame of reference. The related fields of behavioral economics, game theory, and neuroscience have confirmed that human behavior is other regarding, and that people exhibit systematic patterns of decision-making that are "irrational" according to the standard behavioral model. This paper takes the position that it is these "irrational" patterns of behavior that uniquely define human decision making and that effective economic policies must take these behaviors as the starting point. This argument is supported by game theory experiments involving humans, closely related primates, and other animals with more limited cognitive ability.

EFM- This irrationality leads to all sorts of inconsistencies with investing. The issue for almost all investing is trust. But that’s it. The individual things he can trust his adviser but it is generally because he met him as a referral from others with absolutely no review of the capabilities, background or anything else.

COMPANY STOCK PERILS:. Federal Mogul, a manufacturer reeling from asbestos litigation, saw its share price collapse from $70 to $1 per share, at which point the company ended employer-matches of stock contributions to its retirement plan and eliminated company stock as an investment option altogether.

As a rule, investors should not expect to be rewarded for assuming single-stock risk, since investing in a single stock must be a zero sum game across investors, with participants in the aggregate earning the market return. Retirement plan participants would therefore, according to this view, hold in their portfolios no more than a market-weighted share of their firm’s company stock. Further, workers would theoretically be expected to value company stock holdings according to their certainty-equivalent: namely, due to an individual stock’s volatility, a 401(k) plan with a match in stock would be valued at less than a 401(k) plan with the same dollar match in cash. Deviations from the diversified “norm” would lead well-informed employers and workers to discount benefit packages that encouraged or mandated the holding of company shares.

A critical issue in assessing the value of employer stock contributions is how to account for the underlying volatility of the stock. The certainty-equivalent of company stock may be worth much less than the dollars contributed by the employer, depending on the participant’s risk aversion and the fraction of other wealth in company stock (Lambert et al., 1991). In other words, a smaller cash contribution with no volatility might be deemed as valuable to plan participants as a higher stock contribution with stock-specific volatility.

My comment- “well informed"??? The point being is that they are NOT well informed- never have been and perhaps never will be. Because, who is going to inform them? Brokers who have not been taught diversification, risk, etc., etc.? CFPs who have not been taught standard deviation- effectively just one semester on money?

NOT A CLUE- In addition to investment recommendations, clients are looking for their financial advisors to provide meaningful advice, build trust and attend to personal needs. Another survey reveals that "60% of [surveyed 401(k)] participants agree that they're making correct investment decisions in their 401(k) account. But at the same time, only about half of all participants feel they know how much money they will need in retirement and less than 40 percent believe they're in a good position to meet financial goals when they retire."

RELIABILITY DIMENSION: The effect of uninformative messages on asset prices is higher the higher is the reliability of the message sender

401(K) PLANS: 69% of 401(k) plans allow workers to start saving their own money within three months of being hired. That is up from 65% a year earlier. Fast eligibility for deferrals is even greater in large companies with 1,000 or more employees, where 85% of companies offer eligibility within 90 days - up from 79% a year earlier.

KIDDIE TAX: investment income above $1,700 for a child younger than 18 typically is charged at the parents' higher tax rates.

PRAISE GOD!! Contrary to popular belief, savvy investors are the most likely victims of financial fraud against seniors.

The NASD says fraud victims score higher for financial literacy than the general population does. Victims scored an average 57% correct on an eight-question financial quiz, vs. 41% of non-victims.

The NASD study, to be released today, found that elderly victims of financial fraud also tend to be:

• Male, well-educated and married. Most have higher income than the average population.

• More likely to have had recent "negative life experiences" — loss of job, illness, injuries or legal problems.

The survey also examined tapes of con artists' pitches and found them to be remarkably intricate, tailoring an average of 8.6 ploys per pitch to fit the victim's personality. Popular tactics:

Con artists tend to chat with victims and get to know their weaknesses. One con artist, knowing his victims were often religious, would spend the first 15 minutes of a call praying with his victim.

The SEC's Cox says- Senior fraud is of high concern because 91% of the USA's net worth is in households led by people 40 and older. "It's never good to be a victim, but for older Americans, there's no second chance."

Yet the NASD and SEC and never required a broker to know the fundamentals of investing. Go figure.

RETIREMENT: One in three affluent retirees (with at least $100,000 in investable assets, excluding retirement accounts and real estate) has no formal retirement income plan, but many have already begun dipping into their nest eggs. A bare majority (52%) of pre-retires age 55 or older do not have an income plan in place, and over a third of these do not plan to even discuss an income plan with their advisor for another six or more years, if ever. The expected retirement age for pre-retirees is 66 (mean), while 17% of pre-retirees plan to work beyond 70. In contrast, retirees reported on average that they stopped working at 59. More than 70% of retirees rank pensions as a source of income compared with only 54% of pre-retirees. Conversely, nearly three-quarters of pre-retirees rank 401(k) plans as a source versus just a third of retirees.

KILL THE ATTORNEYS: "It is hard to open any publication on employee benefits these days without reading about more lawsuits filed against plan sponsors. The latest wave alleges, among other things, that plan sponsors agreed to fee arrangements that were undisclosed to participants and were excessive. You may remember that, just a couple of years ago, plaintiffs' lawyers busied themselves by filing a flurry of lawsuits challenging plan investments in employer stock. There appear to be no limits to the perseverance of plaintiffs’ lawyers when it comes to developing new legal theories on which to allege fiduciary breaches against plan sponsors. In order to make sure your plan is not the next one under plaintiff’s counsel’s microscope, it is a good idea to review periodically the plan’s fiduciary governance structure and procedures."

The real problem- why can't the powers to be ever get their act together and teach some fundamentals of investing. Then they leave it up to some attorneys to try and figure it out. I don't dispute their getting a percentage of the money from the suit. But it is the breach of duty by the SEC, NASD, NASAA , DOL and a bunch of others. For crying out loud, this never should have happened. But arrogance at the highest level is the "excuse". The suits will not stop until the fundamentals of investing is taught. But I do not see it happening in my lifetime.

DEFINED CONTRIBUTION: As recently as 1990, 62% of United States retirement assets were held in professionally managed accounts. By 2003, 51% of retirement assets were held in professionally managed accounts and 49%, or 5.8 trillion dollars, were individually managed (Investment Company Institute, 2004).1 This trend will continue as employers have begun en masse to shift from defined benefit pension plans2 to defined contribution plans.

the percentage of full-time employees in medium and large size establishments participating in defined benefit plans has fallen precipitously from 80% in 1985 to 36% in 2000.

MORE OVERCONFIDENCE: With growing empirical evidence on persistent overconfidence, much attention has been paid to the question of why people are overconfident and experience does not lead them to become more realistic, especially in activities like investing where results can be calculated ex post. Existing studies demonstrate that self-serving attribution bias (past successes tend to exacerbate overconfidence as people take too much credit for their successes, while past failures tend to be ignored as people blame their failures on forces beyond their control), confirmatory bias and cognitive dissonance (tendency to overweigh data confirming prior beliefs while to dismiss data contradicting prior beliefs), illusion of control, and forces related to evolution and tournaments or contests, can all contribute to generating persistent overconfidence throughout the life cycle. Gervais and Odean (2001) find that, with attribution bias at work, people may even learn to become more overconfident rather than more realistic over the life cycle.

It was a beautiful day in March 1995, when my mother and father gathered their family around and my father told us, in his usual intellectual matter-of-fact way, he was going to die.

He talked of living wills, powers of attorney, who would do what and when. How things would be. He cried, and we cried. He talked to all of his grandchildren individually. We spent the day, each of us talking with Dad, alone and together, each of us crying. My father had recurrent 4th stage melanoma. Untreatable. Incurable. His expected life span was 5-6 months.

My father was the one who took care of our family. He had been father, friend, mentor, colleague, business associate, therapist, home repair advisor, ad infinitum, to our entire family. Who would take care of me when he was gone? We were losing a true caregiver.

Knowledge did not prepare us, nor could it comfort us. And there was no time for us to get used to the idea, as if that would ever be possible. Throughout my father’s valiant attempts at treatment (he endured them all without complaint, knowing they might buy an extra few weeks) he still took care of us all. He stayed in charge. He made all of the necessary appointments and travel arrangements and comforted us about our grief. Even in the last few days of his life, when he could barely speak, he knew my sadness and would pat my check when I cried.

My father’s illness was not drawn out for years. It was as if he was fine, and then he wasn’t, and then he was gone. I wouldn’t be his Caregiver in his long twilight years; repaying him for all the times he was there for me. I began to wonder if I could do the job right, if I had the ability, the skills to take care of others the way my father so effortlessly took care of us.

As the cancer wore him down, I realized that he had long ago given me his wonderful life skills to connect with. He taught me to love and have strong passionate convictions. He taught me how to care for myself: to rest when weary, to take a break when needed. He taught me to sit close and be quiet and how to find the peace of having someone you love nearby. He taught me to be realistic about death and acknowledge its presence. My father gave me the skills I needed to be there for him, and for my mother, the last week of his life. Long before we ever knew it would be necessary, he taught me how to help him die at home. Without ever noticing the lessons, I had learned how to be a Caregiver.

INSURANCE LITIGATION: The average U.S. insurance company faces nearly 1,700 separate lawsuits pending in U.S. courts..." - which is more than FIVE TIMES the litigation pending in the next highest sectors.

The report goes on to reveal that "the average insurer spent $36 million on litigation in 2005". While it is noted that "only a modest fraction" arose from "contract and other causes of action", 31% of legal counsel surveyed listed contracts as primary concern, and 38% listed class actions and regulatory proceedings as their primary concern.

The survey included property & casualty - not just life insurance - but the survey still begs the question: how many millions of dollars are spent on PREVENTION? On agent training and education? Or on supervision, due-diligence, suitability screening, and DISCLOSURE?

Annuity Market News reported (October 10, 2006) the results of an independent online survey made in August, where 44% of the over 4,000 U.S. adults surveyed said they view the insurance industry UNFAVORABLY.

401(k): By law, all assets in 401(k) plans must be covered by private insurance policies known as fidelity bonds. But the bonds are required to cover just 10% of the retirement plan's assets or $1 million, whichever is less.

At companies with fewer than 100 employees the plans are not subject to annual independent audits that could deter embezzlement.

An estimated 9 million Americans have their savings in 401(k) and profit-sharing plans small enough to be exempt from the annual audit requirement. That's about 20% of the people in defined-contribution retirement plans.

The Department of Labor, which is responsible for safeguarding pension and retirement benefits, says it brings about 1,500 cases a year against employers accused of illegally diverting their workers' retirement money.

AH, NOTHING LIKE INTEGRITY: Removing any doubt that many tycoons in the financial industry are becoming thieves and "white collar mobsters," former NYSE chairman Richard A. Grasso invoked the Fifth more than 150 times in a deposition about whether he urged traders to shore up AIG stock prices while he was head of the NYSE. Same guy that New York State is suing over the $189.5 million pay package he received from a "not-for-profit" organization.

FREQUENCY DIMENSION: .The effect of uninformative messages on asset prices is higher the more frequently messages are released.

MORONS: The NASD continues to ask for more "clarity" (read, involvement) in the oversight of insurance products...annuities in specific. "The degree of protection that investors get when buying annuities is far from equal. For example, sales of variable annuities are covered by extensive suitability rules, but the sales of fixed annuities are not. These disparities are indefensible, and the only way to erase them is for the various regulators to work together on harmonizing the rules covering the three annuity types. NASD recently took the first step in this direction by convening a summit meeting of securities and insurance regulators to start discussing how to achieve this goal."

There is literally not anyone at the NASD who knows what diversification is by the numbers.

BAD HEALTH: A Watson Wyatt study found that 95% of Fortune 500 companies expect to continue restricting retiree health care plans over the next five years, with 14% planning to discontinue the coverage entirely. Further evidence of the decline in retiree health benefits...a recent Kaiser Family Foundation study found that only about one third of U.S. employers offered retiree health coverage in 2005, down from about two thirds in 1988.

GRANDPARENTS PAYING FOR EDUCATION – A MetLife survey found that about 55% of grandparents say they are helping to pay for their grandchildren's education, and 35% plan to provide a total of $50,000 or more over their lifetimes.

EQUITY NEWSLETTERS: Most of the several hundred newsletters now being published didn't exist in 1980. The Hulbert Financial Digest tracked 35 in 1980, for example, and just 13 of them are still here today. Of the other 22, just two were ahead of the market when they discontinued publication, as measured by the S.& P. 500. Of the 13 survivors, just three outperformed the index over the nearly 26 years from mid-1980 through May 31. This means that, of the original 35, just 14 percent can claim to have beaten the stock market.

BUILT-IN DIVERSIFICATION: Lifecycle and lifestyle funds are gaining popularity with independent advisors. The poll showed that advisors who recommend these funds do so because they enable advisors to offer clients “built-in diversification,” “ease of use” and “automatic rebalancing,” while at the same time offering advisors “ease of administration.” Russell defines lifestyle funds as “static asset allocation funds based on risk tolerance,” and lifecycle funds as “dynamic asset allocation funds with respect to a specific retirement date.”

Jane Bryant Quinn likes these to. Can they work? Sure- but here is the problem. Will the retiree have enough money? You can invest in bonds. You can invest in cat litter. The bottom line is you have to figure out how much money is needed for retirement and then work back to figure out the risk that one needs to take. If a life cycle fund will work. Fine. But if not, what's the point. Investing in something that will not work is a breach of fiduciary duty to the employee.

Ever wanted a chance to talk about anything in Financial Planning? Here is your chance. Check my website to sign up. You may submit anonymous questions beforehand.

CRAP: A friend of mine is dealing with a loan officer at a bank. Her "adviser" took half of her IRA and put it into a penny stock that was sure to solve Alzheimers. Lost it all.

My god, how do these people (consumers) do it? How could they ever pick an adviser that stupid? How could they be that stupid themselves?

Actually, it is easy. It is all about trust. Once they 'trust' someone they do no more homework (if they did any to begin with). But at a certain point, this gets real old to me.

Meanwhile, paying down debt is a priority of 38%, up from 25% in 2003, while saving for unexpected expenses is a priority of 34%, up from 27% in 2003. As workers struggle to save, their confidence about retirement drops, the study found.

Asked how confident they were about being financially ready for retirement, 49% said they were "very confident" or "somewhat confident," while 51% said they were "not very confident" or "not confident at all."

One of the more troubling findings in the study was that two-thirds of respondents acknowledged they were not saving enough for retirement — and about the same percentage believed they would have time to catch up on contributions to their company-sponsored 401(k) retirement savings accounts.

DYING- (USA) If you are dying in Miami, the last six months of your life might well look like this: You'll see doctors, mostly specialists, 46 times; spend more than six days in an intensive care unit and stand a 27% chance of dying in a hospital ICU. The tab for your doctor and hospital care will run just over $23,000.

But spend those last six months in Portland, Ore., and you'll go to the doctor 18 times, half of those visits with your primary care doctor, spend one day in intensive care and stand a 13% chance of dying in an ICU. You'll likely die at home, with the support of a hospice program. Total tab: slightly more than $14,000.

Portland and Miami reflect that tremendous variation among regions. The most expensive city out of 309 hospital referral regions is Manhattan, at a cost of $35,838 for the last six months; the least expensive is Wichita Falls, Texas, at $10,913.

Estimates show that about 27% of Medicare's annual $327 billion budget goes to care for patients in their final year of life.

Experts on the end-of-life care say one main reason for the vast difference between the two cities may be that in Oregon, doctors, or staff at hospitals and hospices, encourage patients with life-threatening illnesses to talk about the end of life, what kind of medical care they want and where they want to die. In 1994, voters there became the first in the nation to approve doctor-assisted suicide, a referendum signed into law in 1998.