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MOODY'S REVIEW
JULY 1998
COMMENTARY ON INVESTMENT AND PLANNING ISSUES
ERROLD F. MOODY JR.
MASTER OF SCIENCE IN FINANCIAL PLANNING
LIFE AND DISABILITY INSURANCE ANALYST
REGISTERED INVESTMENT ADVISER
WWW.EFMOODY.COM
CHILD DISORDERS: Boys have more autism, hyper activity, conduct disorder, stuttering, and attention deficit disorder. Boys and girls are depressed in equal rates after puberty, women's depression may be due to or hormonal changes or social pressure.
ETHICS: "It was a sunny Saturday afternoon in Oklahoma City. My friend and proud father Bobby Lewis was taking his two little boys to play miniature golf. He walked up to the fellow at the ticket counter and said, "How much is it to get in?" The young man replied, "$3.00 for you and $3.00 for any kid who is older than six. We let them in free if they are six or younger. How old are they?" Bobby replied, "The lawyer's three and the doctor is seven, so I guess I owe you $6.00." The man at the ticket counter said, "Hey, Mister, did you just win the lottery or something? You could have saved yourself three bucks. You could have told me that the older one was six; I wouldn't have known the difference." Bobby replied, "Yes, that may be true, but the kids would have known the difference."
As Ralph Waldo Emerson said, "Who you are speaks so loudly I can't hear what you're saying." In challenging times when ethics are more important than ever before, make sure you set a good example for everyone you work and live with."
Once again this is direct commentary against the major planning organizations in the United States who have actively condoned illegal and unethical activity for years since it was in their best interests. Nonetheless, I have felt for a long time (and as an instructor in ethics) that ethics is supposed to mean something- not just idle words. I have found this industry is saddled with the saying- "it's a lot easier to talk about your ethics than to live up to them".
LIFE ANALYST: In context with that above is the fact that I am now licensed as one of only 34 Life and Disability Insurance Analysts in California that has the legal right to offer fee advice on insurance and fee only comprehensive financial planning.
MEDICARE: Medicare and its beneficiaries pay out least $447 million more than they should have for certain Medicare covered prescription drugs in 1996.
The Department of Health and Human Resources indicated that doctors hospitals and other institutions paid 29% less than Medicare did for 22 common prescription drugs.
REM: The best type of sleep is REM- Rapid Eye Movement. But it does not occur until after 6.5 to 7 hours of sleep. "If you are getting less, you are missing out on the sleep necessary for learning, problem solving and memories" according to a sleep researcher.
MEDICARE: 5% of elderly beneficiaries account for more than 50% of all Medicare spending on the elderly
DIVERSIFICATION: (Frank Armstrong) "Investors are never compensated for risk that they could have diversified away. Securities are priced assuming investors hold diversified portfolios. Almost any basic finance textbook will explain the math, and no one with a an IQ over room temperature would dispute the benefits of diversification. You may assume that this is a fundamental, undisputed truth."
"And another fact of life: for every fundamental, undisputed truth, eventually someone will devise a ridiculous distortion. Diversification has been used as a rationale for some pretty dumb investments schemes. In the name of diversification, everything from collectible plates and dolls to oil wells, gold, diamonds, oil paintings, futures, commodities and even more blatant schemes have been panned off on unwitting investors by slick salesman. While diversification is the best thing an investor can do to reduce a risk, a dumb investment is always a dumb investment."
So, do you think you know what diversification is in a portfolio? The question is 'How many stocks do you need to have in order to insulate the portfolio due to unsystematic risk?' If you do not know this absolutely FUNDAMENTAL number, you should never buy individual stocks because you are simply stupid. Admittedly it is true that a portfolio may still gain in value, but that is mostly due to luck and statistics and, assuredly, extra risk. And planning your- and your loved one's- financial future on luck and unnecessary risk is totally flawed. DO YOUR HOMEWORK!!!!!
ALCOHOL AND DRUG ABUSE: The Columbia University National Center on Addiction and Substance Abuse states that almost 3 million women above the age of 59 are addicted to prescription drugs and 2 million are addicted to alcohol. This same group is also taking a combination of five drugs daily. It costs an average of $1,800 to put an older woman through substance abuse rehabilitating- it costs almost $16,000 to treat her in a hospital. Fewer than 1% of the doctors properly diagnose the problem- many times indicating it is depression and simply prescribing more medication.
JEWELRY: The Alzheimer's Foundation recommends that both an Alzheimers patient and a caregiver wear some form of jewelry that identifies the Alzheimers patient as having Alzheimers but also the fact that the caregiver is caring for somebody with Alzheimers.
They note that a type of jewelry is provided by Medic Alert. When an emergency medic responds or sees the problem engraved on an individual with a personal ID number and essential medical condition, they can call Medic Alert's 24 hour emergency response 800 number and receive the rest of the individual's medical information.
NATIONAL CAREGIVERS SURVEY: The National Alliance for Caregiving, AARP and Glaxo Welcome found that nearly one in four households in United States is involved in caregiving. The average time spent in caregiving each week is 18 hours and almost half of caregivers devote eight hours weekly to the duties of caregiving. Intense caregiving is going on in a quarter of the 22.4 million households with 4.1 million households providing at least 40 hours per week of unpaid, informal family assistance to an older relative-usually a woman caring for mother- and another 1.6 million households providing 20-40 hours weekly.
Caregivers are spending out-of-pocket about $2 billion per month for groceries, medicine and other cash supports related to caregiving.
More than 40% of caregivers for older family members are also caring for children or youth under the age 18;
almost 66% of caregivers are employed part-time. About half of those in the research study said that caregiving responsibilities result in their arriving at work late, leaving early or taking time off during work days.
ADAPTING THE HOME FOR ALZHEIMER'S
PATIENTS: (Chrisa DeNoia RNC) "The goal of a caregiver should be
facilitating a low stimulus environment. It is not the time to move furniture
around, paint the walls dramatic colors or re-decorate. Instead, restructure
the room that the Alzheimers patient spends most of their time in to minimize
unnecessary environmental stimuli. These particular rooms should not be a
place where a phone rings and door bells are heard loudly and the television
is played all at the same time. Such excess simulation may precipitate an
anxious or agitated episode.
Mirrors may also confuse the Alzheimers patient. The patient is often perplexed by seeing their own reflection. You may wish to cover or remove all mirrors. In addition, bright, glaring lighting is also a potential source of agitation.
FINANCIAL ADVISER QUESTIONNAIRE: (Gary Karz, CFA) "The following is a collection of questions you may want to use in evaluating advisors and their organizations. You can choose any that you feel are relevant to your needs (or you can ask all of them if you're looking for weaknesses or trying to get rid of an advisor that will not leave you alone)." At the end of each of his questions, I have put my answers.
Yes- California Department of Corporations, SEC, California Department of Insurance, California Department of Real Estate
As RIA, not required. However, I am a NASD arbitrator
BSCE, LLB, MBA, PhD (Real Estate)
Masters of Science in Financial Planning (Estate Planning major, 1991)
Life and Disability Insurance Analyst, 1998
Certified Financial Planner
California Real Estate Broker
California B-1 General Contractor
Series 7, 24, 27 and 63 Securities Licenses- inactivated
Series 65 Securities License (Multi State Adviser)
California Life and Disability License
Certificate as instructor for California private post secondary educational institutions.
Comprehensive financial planning- mostly fee
Mostly middle income and totally non discretionary accounts. Clients must stay fully involved in all activities.
Involved in investments for 25 years- involved in financial planning for 16 years.
Reasonably conservative with focus on basic economic risk and reward of diversified portfolios. NO INDIVIDUAL STOCK PICKING
Almost diversified portfolios exclusively.
Extensive- see WEB site for verification of knowledge and competency.
More background and intensive study than any other planner probably in the industry.
See WEB site
Extensive reading of innumerable articles
See returns on the Vanguard S&P 500 and Vanguard PrimeCap- they reflect a good portion of equity portfolios. Since almost all investments are mutual funds, a list can easily indicate how well they and others have done. However, the allocation is not as apparent.
Professional references but I do NOT like to give out client references. I hold all clients matters as personal and private- even their Names. They are nobody's business except mine.
No.
Yes
I do analysis and provide written documentation of all research. Client must make final decision and that usually entails additional conversations.
Primarily fee only though some offset may occur with insurance products. Fees are defined per contract based on the anticipated time involved, complexity and assets under review.
Normally $3,000
Advice on all financial matters as delineated by contract
No one- No discretionary accounts
Me
At least monthly
Quarterly review- less formal on daily, weekly and monthly
OVERCONFIDENCE: (Simon Gervais & Terrance Odean) You have read my previous comments about the inability of individual investors to really understand what they are doing. Basically, if they do not know what the fundamentals of investing are- alpha, beta, correlation, diversification, Sharpe ratio etc., then you are primarily kidding themselves about their inherent capabilities. Secondly is my (slightly) irreverent definition about the male ego and is effect on investing:
MALE EGO: A genetic mutation that flourished. Responsible for more bad investments and bad investment decisions than any tax law changes by Congress. Though usually noted in the male species, females are also prone to its insidious faults- lack of reading and adequate research followed by defective decision making based on insufferable narcissism and the rationalization it was someone else's fault when the investment tanks. Used a lot by stupid people or intelligent people acting stupid. Caution advised when using this as the main rationale for investing.
Lastly is the oft repeated psychological effect of losses-
PEOPLE ARE A LOT MORE LOSS ADVERSE THAN THEY ARE RISK ADVERSE.
Gervais and Odean did a survey in 1997 of many investors. While their comments are in more fluid terms than mine, you'll see they simply match my comments of many past years.
They referred to the fact that a novice investor does not know why he/she is successful until enough time passes so that they can gauge how they are doing by the increases or decrease of their portfolio. They noted that they take too much credit for their successes and take less responsibility for the losses. Therefore the overconfident man (usually a man so I will dismiss the "she" in further commentary) tends to become more risky in the investment orientation than his ability sustains. "An overconfident trader trades too aggressively, thereby increasing trading volume and market volatility." "Overconfidence does not make traders wealthier, but the process of becoming wealthy can make traders overconfident."
The problem that I see is that such overconfidence in this type of market is invariably due to luck- not skill- or at least limited skill. And should they take such overconfidence into retirement and the market changes, they can then put their families into an untenable financial situation when the risky investments possibly fail- or at least exhibit too much volatility for retirement use.
In terms of losses- Tversky and Kahneman noted in as early as 1979 that "contrary to expected utility theory, people placed different weights on gains and losses and on different ranges of probability. They found that individuals are much more distressed by prospective losses than they are happy by equivalent gains." They noted that some economists think people are twice as likely to feel the pain of a loss than the joy of a gain. context of losses or gains. And from their 1979 article they "found that people are willing to take more risks to avoid losses than to realize gains. Faced with sure gain, most investors are risk-averse, but faced with sure loss, investors become risk-takers."
Additionally- and noted here previously- people have a tremendous aversion to selling a stock or fund that is doing terrible- even when presented with all the fact indicating the lowered ranking by independent services. Professor Statman is an expert in the behavior known as the "fear of regret." "People tend to feel sorrow and grief after having made an error in judgement. Investors
deciding whether to sell a security are typically emotionally affected by whether the security was bought for more or less than the current price. One theory is that investors avoid selling stocks that have gone down in order to avoid the pain and regret of having made a bad investment. The embarrassment of having to report the loss to the IRS, accountants, and others may also contribute to the tendency not to sell losing investments." I have often found another issue- emotional or sentimental familiarity. Some "investors" may have been given stock by a family relative, a deceased member of the family, through a divorce, etc. The emotional attachment may preclude them from selling since the benefactor- though possibly deceased- would think less of them.. Same scenario where so many employees are using employer stocks- primarily in 401(k) plans. The attachment to their work precludes selling a stock that may well be fundamentally flawed but where they are actively involved with the company that they "cannot possible consider" a sale. As proof, consider Digital. Once a solid company with value escalating from the mid 30's to $200 per share, it plummeted to as low as $16 a share before recovering only slightly. But I know of some that did not even remotely diversify when presented with independent Value Line ratings of D.
Statman also acknowledged the "conventional wisdom to avoid the possibility of feeling regret in the event that their decisions prove to be incorrect. Many investors find it easier to buy a popular stock and rationalize it going down since everyone else owned it and thought so highly of it." (That's the standard "herd mentality" that many articles comment about.)
As regards my MALE EGO, the professors noted that "People are overconfident in their own abilities, and investors and analysts are particularly overconfident in areas where they have some knowledge. However, increasing levels of confidence frequently show no correlation with greater success. For instance, studies show that
MEN CONSISTENTLY OVERESTIMATE THEIR OWN ABILITIES IN MANY AREAS INCLUDING ATHLETIC SKILLS, ABILITIES AS A LEADER, AND ABILITY TO GET ALONG WITH OTHERS.
Money managers, advisors, and investors are consistently overconfident in their ability to outperform the market, however, most fail to do so. (That's why the use of index funds is, to some degree- valid investing asset allocation.) "In summary, people trade for both cognitive and emotional reasons. They trade because they think they have information when they have nothing but noise, and they trade because trading can bring the joy of pride. Trading brings pride when decisions turn out well, but it brings regret when decisions do not turn out well. Investors try to avoid the pain of regret by avoiding the realization of losses, employing investment advisors as scapegoats, and avoiding stocks of companies with low reputations."
The different "spin" I put on the commentary is the reference to the use of the term "investors". These people are NOT investors- they are novices with limited background and skills and with a lot of emotional baggage they bring to the "game". For all intents and purposes, there is no emotion to investing. It is simply research of numbers and estimates of company and worldwide economics. If you play it any other way, you still might reach high financial goals. But it was undoubtedly due to luck and extra risk- not skill. Will you be lucky?????
50 YEAR OLD IDIOT: I know some will think this crass, but I have to get this point across . A " 54 year old friendly secretary heard about "investment desert land" in California from a close friend. She was "dazzled" by the sales pitch and subsequently put down $20,000. It was a scam, worth essentially nothing, and now she can't get her money back. She said, "I feel very ripped off. I am not a wealthy person. I am a single woman in my 50's worrying how I am to survive retirement. That $20,000 is a lot of money to me".
So why am I so mad? Because she was worried about retirement but unwilling to do any proper research to protect herself. Getting a referral from a friend that has the I.Q. of a radish, being dazzled on desert land, and then complaining about getting ripped off seems a little amiss as to the real problem- she was stupid. Grow up and read a book or prepare to be in the same situation.
QUALITY OF LIFE: A Harvard professor at the School of Public Health has come up with a way of calculating the quality adjusted life years that makes direct use of clinical trial data of various drugs. He calls it Q-twist or Quality Adjusted Time without symptoms of disease or toxicities of treatment. The point being that a toxic drug against cancer may prolong life but also have substantial side effects.
LONG TERM CARE COSTS: "Researchers at the Health Care Financing Administration, which supervises the Medicare program, have identified 44 different types of care a facility could provide. In the absence of standard terminology, it's impossible to know whether one facility's enriched residential care is similar to another's intermediate. Price isn't necessarily related to quality. One firm compared daily rates at 60 facilities in metropolitan centers around the country, trying to compare price with the quality of care. There was no relationship."
MEDICARE AND MEDICAID APPROVED: About 11,000 facilities are certified for both Medicare and Medicaid, but some 1,100 homes are certified only for Medicare. If your relative needs continued nursing care, and Medicaid will at some point have to pay the bills, choose a facility that's certified for both.
HOME OWNERSHIP: The rate of home ownership for whites is about 72%, 43% for Hispanics and 46% for blacks.
401(K): Of 130,000 companies with less than 100 employees, only 26% have 401(k) plans. Of the 1.7 million companies with less than 50 employees, only 11% have such plans.
MEDICARE HOME HEALTH REIMBURSEMENT: (Eldercare Journal) In October 1997, the Health Insurance Financing Administration changed its method of reimbursement to licensed Medicare certified agencies. Prior to this, agencies were paid on a fee per visit rate for all the visits they made to a patient, as long as the patient met the Medicare home health criteria.
Under the Prospective payment plan, agencies will be assigned a reduced per visit rate and be given a capitated rate of anywhere between $3,600 to $4,200 per patient per year depending on the region where the agency is located. (This article was written for the Phoenix, AZ area.) This is the maximum revenue per year that each Medicare resident will receive for the home health visits, which means a total of 40 to 52 visits per year for nursing, physical therapy, special therapy, occupational therapy, Medical social workers, and home health aides.
This reduction in overall services will mean that patients/residence will receive far fewer home health visits than they had received in past years.
"In the past, nurses and therapists provided care and treatments; now they will be educating adult home care staff and expecting that caregivers to take a more active role in providing treatment and follow through as decreased funding reduces their number of visits."
The author noted that they expected patients to receive visits for shorter overall periods of time and that some residents will be sent to nursing homes for transitional care because the level of care needed in the home will be more than the agency can afford to provide.
CREDIT REPAIR: Does your credit report contain erroneous information? Well, you can correct it. Write a certified letter to each of the three credit reporting entities and indicate the facts in error. Once you have identified that something is supposedly amiss, they must go back to the entity that provided the information and ask them to prove that it should be there. If they cannot establish within 30 days that it is valid it must come off.. If you do not hear from them, follow up with another certified letter demanding that the disputed issue be immediately removed.
BIOETHICISTS: Is it right to allow someone to die who is in severe pain and wants to die? Who should get organ transplants? The issues of medical ethics can be reviewed by patients and family and a bioethicist who can help them through the quagmire of the law and ethics. For information, you can contact the National Reference Center for Bioethics Literature at 800 633-3849.
ALZHEIMERS: A new study by the Southwestern Vermont Medical Center memory clinic utilizes a eight minute word and picture test that supposedly is 90 % accurate in identifying patients with early Alzheimers. The exam uses four separate recall and thinking quizzes. Recognize that the problem with Alzheimers patients is the inability with short-term memory and the test asks for recall of objects the patient is shown. Further tests are being conducted now.
LOW SALT DIET: Literally every article discusses the health benefits of a low salt diet. A study by the Albert Einstein School of Medicine tends to indicate that the less salt people eat, the higher their risk of untimely death. As with all-new and controversial studies, this is being reviewed worldwide. Under no circumstances should one violate current doctors orders, but it is "food" for thought.
IPO'S: (WSJ) A University of California Associate Professor said "I believe that most firms manipulate earnings. Around an equity offering, it becomes economically meaningful because of the economic benefits. Another Associate Professor said, "my advice for anyone who is not an expert in the area: don't invest in IPO's."
The problem is due to a "legal" accounting system that allows companies to beef up apparent earnings at the time of the offering. They do that by recognizing revenue as swiftly as possible or by delaying expenses, or both. Again, if you do not know diversification by the numbers, you don't have the foggiest idea of the intricacies of individual stocks. And certainly not for investing in IPO's.
OLD STATES: Half of all senior citizens live in only nine states: California, Florida, Illinois, New York, New Jersey, Ohio, Texas, and Michigan. In Michigan, 1 in every 8 residents is a senior citizen. By 2030 21.2% of the U.S. population will be senior citizens.
SUITABILITY: SEC Law page has an article called "Brokers Have to be Their Own Judge" wherein it discusses the issue of "Did a broker have a reasonable basis for believing that the recommendation was suitable?" The author states "it requires brokers to make a determination of the essential facts relating to his customers, their financial situations and goals, and their investment experience. The doctrine also requires the broker to learn all essential facts regarding the particular investment being recommended and to have a reasonable basis for recommending that investment to that particular customer." Nice rule. Unfortunately, it sucks. What good does it do to supposedly learn all the facts about an issue if you have little idea of what anyone is talking about in the first place and effectively no background to put it to proper use. Suggesting that a janitor in a hospital learn all the facts about a patient for brain surgery in no way implies competency in developing a plan for care. Brokers are NOT taught alpha, beta, diversification, asset allocation, standard deviation, correlation, Bill Sharpe or many of the other basics needed to comprehend risk and reward. And if you do not know those, there is no way you can determine suitability. How do I know what has been taught????- I taught many of the licenses for years. The above info is NOT tested on the exam- therefore not required in the licensing instruction. And the securities firms wouldn't let me teach it anyway since it would reduce sales.
The statements go on--"The National Association of Securities Dealers' (NASD) Rule 2310 (formerly Article III, section 2 of the Rules of Fair Practice) provides, "[i]n recommending to a customer the purchase, sale or exchange of any security, a member shall have reasonable grounds for believing that the recommendation is suitable for such customer upon the basis of facts, if any, disclosed by such customer as to his other security holdings and as to his financial situation and needs." While the rule defines suitability by using the term "suitable" (thereby rendering the rule virtually useless for determining what is suitable), it does make clear that the only requirement is "reasonable grounds" for making the recommendation."
O.K., here again how can one determine "reasonable grounds?" If you are suggesting that a prudent man's determination of suitability/reasonableness is simply passing an exam on which the basics of risk and reward are ineffectively addressed, if at all, and you find that element sufficient, then go ahead, call up a broker. It is my opinion that one does NOT possess the basics for a suitability application unless they have been properly trained in alpha, beta, correlation, diversification, etc.
And further, "Over the years, the NASD has attempted to provide guidance to the industry...." CRAP. I have tried repeated times to get the SEC and NASD to recognize their responsibility to include basic risk reward criteria for brokers and arbitrators -only to be rebuffed at every turn (letters on file at my WEB site).
He does state however that , "even in-house compliance manuals do not provide sufficient guidance. Some firms attempt to address the issue by limiting recommendations of broker to "pre-approved" securities, or to securities trading on national exchanges. But like any general rule, such policies are often too inclusive and run the risk of being blindly applied." My comment- in house compliance manuals are designed and written by attorneys and other back office reps who have apparently never taken a true course in the application of securities. I have read many. Pitiful.
The article suggests that a broker "Understand the investment or strategy, the essential facts relating to the security and the reason it is being recommended to any customer. Once you have identified an investment that you believe is worthwhile, make sure that you have adequate and timely information regarding your customer. As discussed in earlier columns, simply obtaining information on a new account form when an account is opened may not be sufficient. That information should be reviewed and updated periodically, and should be reviewed at least once a year, perhaps during an annual review of the account with the customer
Make sure your customer has all of the necessary information regarding a particular security, issuer or investment strategy. While an obligation to provide information regarding widely known securities may be less than for more obscure securities, it is important that the customer have all of the relevant information at hand regarding any investment. Even the most sophisticated and wealthy customer can be unsuitable for a sophisticated options trading strategy that he cannot understand.
Be sure that you have determined the percentage of a client's liquid net worth being put into a particular investment or investment strategy that involves any significant degree of risk. While not stated in any rule, a particular investment may be suitable when using 10 percent of a customer's net worth, but it may be entirely unsuitable when it uses 90 percent of his net worth. Make sure that your customer understands why the investment is being made, and that you answer any questions he or she has regarding the investment or strategy."
Well, it all sounds very nice. But to suggest that your broker, planner, insurance agent (remember, an agent can sell indexed annuities without a securities license) who has almost nil background in risk an reward is going to ascertain whether or not a standard client understands the nuances, complexities and economic scenarios of an emerging mutual fund with 50 securities and a 12b-1 fee has a screw loose. The onus is clearly on the customer.
GROW UP AND READ A BOOK
I NEED A HUG: University of Miami school of medicines touch research Institute found that:
Touch can lift Depression. A 30 minute back massage given daily for five days to hospitalized, depressed and adjustment disorder children reduced their depression, decreased stress hormones and improved sleep.
Massage therapy also increased immune function particularly for those people affected with HIV.
Massage also reduce job stress.
Premature infants subject to a gentle 15 minute massage three times a week showed remarkable improvement over preemies left untouched in their incubators. Massaged infants gained weighed 47 percent faster, had better motion response and were released from the hospital six days sooner.
Autistic children, who often have an aversion to touch, can actually benefit from massage therapy. A group of autistic children were given a half-hour massage two times a week for five weeks. At the end of the study the massaged children showed significantly less off task behavior and better social relations with their teachers.
MEDICARE: Elderly people spend about one-fifth of their income (approximately $2,149) on medical care and prescription drugs. Poor Medicare beneficiaries-those who do not qualify for Medicaid- spend about half their income on health care. A recent study showed that 60% of elderly people under the official poverty level are not on Medicaid since, in many states, the income ceiling for Medicaid recipients is far below the states poverty level.
Medicare provide health insurance for about 33 million people age 65 and older and five million people under 65 who have long-term disabilities. The most affluent beneficiaries- those with incomes four times the poverty level-spend an average of 10 percent of their income for health-care
60% of Medicare beneficiaries are women. Women live about 7 years longer than men with more complex, chronic diseases. 83% of women on Medicare have less than $25,000 income per year. The typical Medicare beneficiary requiring home health care is 75 years old and has a median income of $8,365. She requires an average of 3 home health visits per week.
S&P 500: (WSJ) Money indexed to the S&P 500 represented only 6.7% of all U.S. Stock in the beginning of the year. Prudential estimates that the amount is about $600 billion. In real numbers it seems like a lot- put into perspective of the entire market and indexing does not "control" that much in funds.
CREDIT REPORTS: Few people ever review their credit report- including myself- but a new study indicates we really should. According to the U.S. Public Interest Research Group, consumers may be rejected for loans or jobs because nearly one-third of all credit bureau reports contained serious errors.
The study indicated that 5% had incorrect birth dates; 5%had misspelled or incorrect names; 33% had addresses that were incorrect; 3% had incorrect Social Security numbers or were numbers belonging to total strangers; 13% were incorrectly listed as delinquent; 19% contained accounts that could not be identified or did not belong to the consumer and 26% contained credit accounts that had been closed by the consumers but were listed as open.
SOCIAL SECURITY: If you reach age 65 this or next year but elect not to take social security benefits, you get a 5.5 % "delayed retirement credit" for each full year that you do not receive benefits up to the age of 70. That means that if you do not start collecting social security till age 70, the monthly benefits will be 27.5%t higher than if you started taking them at age 65.
WHAT DOES IT MEAN TO BE ADOPTED
asked one child to another??
IT MEANS THAT YOU GREW IN YOUR MOTHER'S HEART INSTEAD OF HER TUMMY
SMALL CAP ILLIQUIDITY: (Michael Brush) Many smaller stocks are sold on NASDAQ-National Association of Security Dealers Automatic Quotation system. It essentially is a computer listing of bid and asked prices by firms called market makers. A firm making a market in a stock must agree to buy and sell a certain amount of shares at the price they quote. But they are not forced into any transaction beyond the shares they indicate-say several thousand. Therefore, if selling pressure gets too great, the price too low, whatever, they can simply walk away and buyers/sellers are then forced into uncompetitive transactions. The issue became a significant problem after 1996 when the SEC imposed rules to keep the bid and asked prices narrower. This obviously reduced profits which therefore reduced the number of market makers per stock. As a result, the market for the stocks is, according to one analyst, "very thin and illiquid. The market makers are not supporting the small stocks. The result is that prices can plunge when a large investor-say a mutual fund-tries to sell even a relatively small position in a stock."
NASDAQ currently has 5,487 stock listings.
401(k): About 29% of people enrolled in 401(k) plans have loans averaging about $6,000. According to one firm, the number of loans have remained unchanged for about the past four years. Normally, you can borrow as much as half of the balance in your 401(k) plan up to $50,000. The interest-rate you get charged is the prime rate plus 1%. The loan must be repaid immediately if you change jobs or within five years if you remain with the same firm. However, if your company allows, you may use the money to buy your first home and you may be able to get up to 30 years to pay the money back.
HOSPICE: The average cost or hospice care at home is $96 a day compared with an average of $426 a day in the hospital during the last year of life. These are some questions suggested by Money Magazine to ask regarding hospice- you can also call the National Hospice hotline at 800-658-898
1. Does the program treat only terminally ill patients
2. Does the hospice provide a team approach to one's home health care
3. Has the hospice established connections with doctors, hospitals and pharmacies
4. Will a written plan for care be drawn up that spells out what the patient wants and how the hospice will help him or her achieve it
5. Is support available 24 hours a day, seven days a week.
CONTRACTOR CHECKLIST: (Money Magazine)
1. Drop in on your contractor's crew in the middle of a renovation
2. Request a copy of your contractors workers compensation or liability insurance policies.
3. Find out if the contractor's business is financially sound.
4. Determine who will actually perform your work.
5. Get everything in writing, including bids.
6. Arrange a payment schedule.
7. Nail down an arbitration process for disagreements.
8. Request a warranty
REAL ESTATE: (June Roesselein) If you are selling your house, the first look by a buyer can make a HUGE difference in price and negotiating. She suggests
1. Put a fresh coat of paint on the front door. She also says you might consider a fresh coat of paint throughout. Most appealing for most people is a shade of off white, with bright white for the woodwork
2. Put pots full of blooming flowers on either side of your door. (Works wonders!) Put mulch around shrubs.
3. Hang a large mirror in a small foyer to make it look larger
4. Install bright light in all fixtures and shine them up.
5. Get rid of heavy window treatments. She indicates its best to show the home with the windows open and unobstructed.
6. Unclutter the house. She states that in some homes, half the accessories should be removed. Take half the clothes out of a closet to make it appear larger. Take as many things off the kitchen counters as there is possible. If the cabinets look dark and shabby, consider painting them.
7. Don't use too many area rugs since it makes the house look chopped up.
8. Make the house smell fresh. Put scented oils on furnace filters.
ALZHEIMERS: In a recent study in Rochester, Minnesota, the age specific rates of Alzheimers per 100,000 residents were: 60- 69 years of age- 51.3; 70- 79- 457.9; 80 and above, 1685.7. Late stage Alzheimers accounts for 85% of all cases.
RETIREMENT EXPECTATIONS: (Princeton Survey Research Associates) Approximately 48% of people who are still working think retirement will give them a chance to make a fresh start. People between the ages of 35- 49 were most likely to have this attitude. Yet approximately 60 percent of retirees state that their lives are about the same as before (39%)or a step down from when they were working (20%).
MEDICAL COVERAGE BEFORE AGE 65: If you leave your employer before acceptance by Medicare, how can you continue medical coverage? Under current Cobra law, you can continue group coverage at 102 percent of the premium cost. Unfortunately, Cobra lasts for only 18 months to 36 months and does not apply to retirees whose former employers dropped their coverage. Also, under the Health Insurance Portability and Accountability Act, you are guaranteed access to health insurance if you had group coverage for 18 months with no break longer than 63 days.
MONEY CAN'T BUY HAPPINESS: Almost all people believe that if they have more money they will be happier. But that may not actually be true. It appears that once society reaches an acceptable level of happiness- as measured by the percentage of people who rate themselves happy- additional money doesn't make their situation or perception any better. Most notable was a study of Japan from 1958 to 1987. Real income increased almost five times, the average levels of reported satisfaction did not change at all.
GOD HELP US: Going to church DOES help. A survey of older North Carolinians by Duke University has found weekly worshippers had lower levels of Interlukin 6- that's a protein associated with many diseases of old age. "Researchers theorized that old time religion might just help lower stress and strengthen the immune system. A similar study by Yale University showed that regular church attendance greatly enhances the lives of the elderly."
AVERAGE AMERICAN SPENDING: The Bureau of Labor Statistics says that the average American household spends $90 a day- $32,000 per household and up 37% since 1985. An American Demographics report says that households with more than $50,000 income accounted for 44% of all consumer spending in 1995 thought they are only 25% of all households. Average after tax household income in 1995 was $33,893.
LONG TERM CARE: As of December 31, 1996, nearly five million long-term care insurance policies had been sold, mostly directly to individuals. However, the employer-sponsored private long-term care insurance market accounted for 14% of these sales,
DESTINY IS NOT A MATTER OF CHANCE, IT IS A MATTER OF CHOICE; IT IS NOT A THING TO BE WAITED FOR, IT IS A THING TO BE ACHIEVED
William Jennings Bryan