LE FastCounter
MOODY'S REVIEW
JUNE 1998
COMMENTARY ON INVESTMENT AND PLANNING ISSUES
ERROLD F. MOODY JR. BSCE, LLB, MBA, PhD
MASTER OF SCIENCE IN FINANCIAL PLANNING
REGISTERED INVESTMENT ADVISER
KNOWLEDGE MAKES OBSOLETE THE
INEQUITIES THAT IGNORANCE AND PREJUDICE
JUSTIFY
INVESTOR PROTECTION AND SECURITIES BUREAU: They set up a stock fraud survey on the Internet in July of 1997. Most interestingly, over half of those who claim to have been defrauded had a college education, and a third had had some graduate work. They did ask if they had complained to the firms and what the firm's response was like. All indicated they were dissatisfied with the firm's response or received no response at all. Forty percent rated the firm's response as "awful".
HIGH EQUITY MORTGAGE LOANS: You have seen ads to get 125% equity home loans so you can consolidate debt. But you can't write off all the interest from such loans. The IRS recently warned homeowners that deducting mortgage interest on loan amounts exceeding the fair market value of their homes is prohibited. As a general rule, you can't write off unsecured consumer debt, even if it's marketed as a mortgage. Penalties may be assessed by the IRS. A defense that Jim Palmer "said" that you could do it on TV ain't gonna hold up.
POISON: There were approximately 1.8 million poisoinings in residences in 1996.
ISSUE PER STIRPES: This is a designation for beneficiaries. For example, a father has two children- Joe and Sue. Sue has four kids. Under per stirpes designation, Joe and Sue each gets one half of the estate. If Sue dies, Sue's family still gets the ½ of assets from Dad. But if Sue was deceased and then Dad died and had used per capita, Joe and each of Sue's children get 1/5th. If per stirpes is not indicated on the beneficiary form, the money will be distributed Per Capita.
POVERTY: As additional evidence that not all people are doing well in this "fabulous" economy, recognize that the percentage of children living in poverty in the south is effectively unchanged since 1969.
NATIONAL MARROW DONOR PROGRAM: 3433 Broadway St NE, Ste 400, Minneapolis, MN 55413-1762, 800 654-124755 has information and provides a registry of bone marrow donors
NATIONAL ORGANIZATION FOR BURN SURVIVORS: 11 Rust Hill Road, Levittown, PA 19056, 800 888-2876. Information on the self help services available, provides psychological assistance
Anyone who thinks Index funds are lazy is fooling himself. The reality is people using passive funds have done more research than anyone else in the business.
RETIREMENT PLANNING: (ReliaStar) A survey of 400 Americans age 65 indicates that many of them are heading into retirement with a false sense of security. Many respondents apparently base their expectations of future financial security on gains made in the recent bull market-and do not for see a correction or downturn eroding those gains in the future (remember 1973 and 1974???). Only 10% percent of those polled viewed retirement as a time of financial worry and 8 in 10 sixty five year olds expect to be at least as financially well of during retirement as during their working years. The administration on aging reports that Social Security accounts for 42% of retiree income, while pensions assets and wages now account for 55% of retiree income.
Of Americans age 65, 71% had no written financial plan. 44% who said that they were worried about retirement security admitted that they waited too long to establish the retirement savings program.
Seventy percent of those 65 year olds considered themselves optimistic about retirement and their retirement security, even though the Census Bureau reported that 40 percent of those 65 and older live alone are poor. About 25% of 65 year olds trusted their employers more than anyone else to give them financial advice (Shoot me!)
U.S. DEPARTMENT OF LABOR: In 1985 there was $55 billion invested in 401(k) plans; in 1995, $675 billion, and by the year 2000 is estimated that the account will grow to $1.4 trillion. From 17,000 plans in 1984, the number has grown to 250,000 in 1997. Some estimate that the 401(k) plan market encompasses 26 million participants with an average account balance about $65,000. The Profit Sharing/401(k) Council of America reviewed 689 qualified plans and noted that the number of investment options was growing from 34% of plans offering five or more funds in 1991 (three are required) to 81% in 1996. The rate of participation in these companies was 84%. Most interesting is that an average of 28% of companies used just one mutual fund family- down from 31% five years ago. This is showing up with the additional competition of the various fund families and requirements by employees that they have more options (though knowing how to use them is an entirely different subject.)
401(k): Only 40 % of 401(k) plans invest in Mutual Funds. The other 60 % consists of variable annuities, guaranteed investment contracts and bank collective funds.
At companies with 100 employees, the percentage of administrative costs on 401(k) plans have jumped more than 10 % in the past two years, from $49 in 1995 to $54.42 in 1997 according to HR Investment Consultants. The company noted that there were huge discrepancies in fees ranging from $176 to $767 per participant, with the average cost being $411 annually.
INTERNAL REVENUE SERVICE: The number of returns filed 118.8 million; number of returns with a paid preparer's signature, 59.2 million or 49.8%; number of returns with Itemized Deductions, 34.5 million or 29%; returns audited, 1.67%; number of returns filed by computer, 14.5 million or 12%.
ALZHEIMERS: (Eldercare Journal) "Natural Wonders"- One of the goals for care givers is to provide a rewarding experience for anyone with Alzheimers or senile dementia. They may wish to consider a topic called "natural landscape". It is simply trying to get the demented person to focus on something in the landscape in front of them. But it is not necessary that they get the subject right. Caregivers can allow the patient to see what he or she sees regardless of their accuracy. For example the caregiver may draw attention to cloud. But if the patient mistakenly focuses on the street lamp, a tree your something else, the caregiver may follow them to this item remembering that what is important is their appreciation of an object- whatever it is- and not necessarily the accuracy or correctness in identifying what it is that the caregiver wanted to point out.
LTC INSURANCE COSTS: (John Nyman) "The adoption of long term care insurance would substantially decrease the price of formally provided long term care to consumers."
PROSTATE CANCER: Blacks are two to three times more likely to get prostate cancer and die than whites.
CORRELATION: This is a relatively "simple" concept but absolutely mandatory in the use of investments. It basically refers to whether or not "different" investments will move at the same time for the same reason and in the same direction. If true, they have a correlation of plus 1. If, on the other hand, they were to move in exactly opposite direction they would have a negative correlation of minus 1. Rarely do portfolios have exactly either- most of the investments have correlations greater than 0 but less than 1.0. In another words, there is some movement of one investment based on the movement of the other(s).
A more specific note is the use of stocks and bonds. Going back 20+ years ago, stocks and bonds were effectively negatively correlated. That's why most investors were told to use some of each- or one instead of the other depending on economic conditions- mostly the movement of interest rates. But as the inflation rate and the interest rates have dropped, the correlations between these two is now maybe 0.8. That's a pretty strong positive correlation Therefore the old 60 % stocks and 40 % bonds-used in a number of supposedly of low-risk portfolios- effectively will not provide the diversification that one might expect. Foreign stocks might provide some of this reduced correlation, but even here one needs to be careful since, if a foreign investment has a negative correlation AND also a negative return, there has been little gained. You also have the increased risk of currency devaluation.
BRAIN TUMORS: According to the American Brain Tumor Association, the estimated number of new cases of primary brain tumors diagnosed each year is approximately 20,000. Brain tumors have their highest incidents between the ages of 40 in 60 years, with a slight preponderance in men.
ADULT LITERACY: The 1992 U.S. Department of Education's National Center for Education Statistics estimated at about 21% of the adult population-more than 40 million Americans over the age of 16- has only rudimentary reading in writing skills. A subgroup in this category representing approximately 4% of the total population or about 8 million people, were unable to perform even the lowest literacy tasks.
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."
WEALTH: (Federal Reserve Bank of Minneapolis)
The bottom 40% of all households have only about 1% of all the wealth in the nation.
The top 1% of all households have nearly 30% of all the wealth; the top 5% have about 55% of wealth and the top 20% have about 80% of the wealth
CHANCE OF LOSS: If we look at the S&P 500 from 1926 up to 1993, there was about a 30% chance that in any one year, you would lose money. If you do the formula for standard deviation over a period of five years, the chance of loss drops to 11%; over ten years the loss drops to 3% and over 15 years the loss goes down to 0. Those are statistics however and do not necessarily refer reflect the real-life scenario that can really hurt. Take 1973 and 1974 for example. During those two years, the stock market lost over 40 %. My point? Statistically the markets risk does drop the longer you happen to be in the market; but if it does drop at the worst time for you, statistics will offer little consolation. If you do a continual review of economics, I think you can stay well within the range of statistics and also limit you loss to anyone year period to perhaps no greater than 10%.
ANNUITIES: The lapse rate for annuities sold by stock brokers is three times higher than for those sold by agents; despite consumer surveys indicating many people prefer to buy direct, only 2% to 3% actually do
DEPRESSION
The Temporary Death of the Soul
William Styron
STOCK MARKET VOLATILITY: (Federal Reserve Bank of New York) Their article indicates that although volatility increased in 1996, the rise simply reflected a return to post World War II norms from the unusually low volatility experienced between 1992 to 1995. In fact, the daily volatility of the Dow from 1992 to 1995 was at its lowest level in decades. They note that a doubling of the Dow's level causes a 5 fold increase in the number of days in which the index closes up or down 50 points. The Dow Jones industrial average increased more than 60 % between 1992 in 1995 alone. Therefore they indicate that the daily swings in the Dow by 50 points, until recently an aberration, will continue to occur regularly.
INVESTMENT BEHAVIOR: (Frank Armstrong). While there are exceptions, "economists are constantly amazed at the ability of individual investors to obtain such poor investment results. In an efficient market, individuals should not be able to do as poorly as they do. An entire branch of economics has devoted itself to trying to explain Investor behavior, and how to explain their results in the markets."
MARKET TIMING: (University of Utah and Duke University) They reviewed 132 newsletter portfolios from 1983 to 1995. The average return was 12% with 11.9% volatility. An S&P portfolio and cash designed for the same volatility returned 16.8% for the same period. Some of the more notable newsletters had the worst performance. Granville Traders Portfolio lost 2.2% annually and the Elliot Wave Theorist Traders portfolio was down 10.1%
ALASKA and DELAWARE OFFSHORE TRUSTS: These states are now offering the availability of trust to protect assets in a similar manner now (supposedly) offered by offshore trusts drawn up in the Cayman Islands and the Bahamas, for example. Creditors seeking assets in such state trusts would normally be barred from making a claim if the trust was in existence for four years or more. Furthermore, in addition to a spouse or children, a client could name themselves as the beneficiary of a trust, providing him or are with full control of the assets. Alaska did note a caveat however-anyone more than 30 days behind in child support payments loses protection from creditors.
Will these work? It's too soon to tell and I would not recommend that anyone put large amount of assets in these until at least several years have gone by and the courts have tested these extensively.
C CORPORATIONS: If you are buying or starting a new business, you probably want to limit your personal liability and can do so by operating under it a C or S Corporation. However, in order to utilize the C Corporation., you must pay the regular corporate tax-usually 34%-on capital gains that would otherwise qualify for the 20% rate which would be available to owners under the S Corp. Another issue with the C corporation is the double taxation when corporate profits are paid out as dividends. This does not happen with an S Corporation. Additionally, Corporations- along with partnerships and limited liability companies-are able to deduct more of the health insurance premiums they pay on behalf of the owners. The ability to fully deduct these costs was an advantage previously reserved for C Corporations- however that will be phased out over the next ten years.
ELDER ABUSE: (Senior Update) This includes psychological and emotional abuse such as threats, fear and humiliation; physical abuse from beating to prolonged deprivation of food water; financial abuse which is the abuse of money, jewelry or property; neglect which includes failure to assist personal hygiene to failure to protect from safety hazards; and abandonment such as a willful force taking of another by a person responsible for the care and custody.
PRIVATE VERSUS PUBLIC NURSING HOMES: (Brookings institution) Nursing homes with private care patients generally provide higher quality care than facilities dependent on Medicaid patients. National Senior Citizens Law Center states that nursing homes discriminate against Medicaid patients versus private pay. The difference may be a special wing of a home, eviction of Medicaid patients and inferior food and services. One expert noted that nine out of ten attorneys give bad advice on qualifying for Medicaid. Approximately 63% of nursing-home patients of cognitively impaired.
MEDICAID PLANNING: Readers know that I do not agree with many Eldercare attorneys in attempting to get the elderly on Medicaid. If money is available, I unquestionably believe that the purchase of some type of long-term care policy is beneficial. Some of the detriment to Medicaid planning comes from a book called Advising the Elderly Client by William Overman, "planning for Medicaid eligibility severely restricts options, it would not be in the best interest many clients." For example, consideration should be given to the following possible consequences of transferring resources in an attempt to meet resource eligibility requirements: 1 possible loss of economy, pride, and dignity; 2 inability to purchase services not available under Medicare or Medicaid; 3 reluctance of nursing homes to admit Medicaid as opposed to private pay patients; 4 donees of transferred assets may be or become unwilling to provide financial assistance to the donor when needed; 5 resource depletion and 6. limited accessibility of obtaining entry to facilities that do not accept Medicaid patients. Frankly, I think this all can be summed up by one statement that must be made to the elderly person. "Mom we want you to die in a Medicaid ward with a bunch of other screaming Alzheimers patients." Given all the objections above, I submit that most people would opt to pay for long-term care policy.
HAVE YOUR CAKE AND EAT IT TOO?: Hartford Life has announced a new and very innovative life insurance program. Called the Shared Ownership Program, it establishes one policy with two owners. One owner (an irrevocable life insurance trust) gets the
death benefit free of estate tax, while the other owner (the insured) has access to the cash value via loans, withdrawals, etc. If all the "i's are dotted and t's crossed," this could be a very powerful estate and financial planning tool that both protects the policy's death benefits from estate taxes, while giving the policy owner access to the cash value. But I have my misgivings. It looks to good to be true and until I see something further- like a private letter ruling from the IRS, I would be extremely hesitant to recommend this.
FIRES: Most people think there is plenty of time to get out of a home once a fire starts. Untrue- you have about 2 minutes. In 1996, there were 417,000 home fires causing 4,035 deaths and about 23% were caused by smoking.
EFFICIENT MARKET: (Federal Reserve Board Philadelphia) There's an old debate as to whether stock prices move into their fundamental value or whether market psychology and other extraneous factors can cause prices to deviate substantially from an assets fundamental value. According to the efficient market, security prices fluctuate only when investors respond to new information concerning changes in the market- say a new discount on some of the future cash flows. Further, the efficient market theory implies that whatever change occurs in the stock price tomorrow will be completely accounted for by new information on market fundamentals. Nonetheless, they submit that short-term fluctuations occur on shifts in market psychology or perhaps even by events that have no direct bearing on business prospects or economic conditions. For example, they noted that individual investors may rush into the stock market because they believe everyone else is making money in the market. In such a case, they prefer to buy stocks immediately rather than miss an "excellent" buying opportunity. As such, the anticipation of rising prices becomes a self fulfilling prophecy and they therefore may enjoy profits that may not necessarily reflect favorable business prospects. Bernard Baruch wrote "in all economic events, by their very nature,.... men are motivated by crowd psychology.. Men think in herds; it will be seen that they go mad in herds together, while they only recover their senses slowly, and one by one."
THE CORRELATION OF INTEREST RATES AND GDP: (The Federal the Reserve Board of Philadelphia) When current output rises, the yield curve tends to flatten; when short-term interest rates tend to rise, long-term interest rates move relatively little. Similarly, when current output declines, the yield curve tends to steepen, and short-term interest rates tend to fall with output and long-term interest rates tend remain about the same period
In general, interest rates on bonds of different maturities are highly correlated with each other, with the highest correlations occurring between bonds of similar maturities. Long-term interest rates are "determined" by the average of expected short-term interest rates plus the risk premium for the length of maturity.
SOCIAL SECURITY: (Federal Reserve Bank of Richmond): Everyone knows that the Social Security surplus is a myth and that payments to beneficiaries will exceed revenues from their own taxes by 2012, and by 2029 the Social Security trust fund will be depleted.
Social Security receives contributions of taxes from workers and their employers and pays out benefits to retirees, their dependents, and those on disability. Excesses in receipt over expenditures are handed over to the U.S. Treasury to be used in financing other governmental activities. By applying an accounting fiction, the Social Security system treats these transfers as investments in government securities and adds them to an imaginary portfolio that also collects fictitious interest payments. From the perspective of the government's total budget, this practice implies that the Treasury issues fewer bonds to the public than it would given there was no surplus received from Social Security. Unlike Treasury Bonds issued to the public however, the IOU's from the Treasury to Social Security are not counted as government debt.
Social Security was created in 1935 as an inter-generational transfer program from workers to retirees. It is a pay a you go system. However, as such, there is a potential that the promised payments could become increasingly difficult to honor.
At the time of its inception, the Old Age Survivors Insurance (OASI) part of the program was fairly small. In 1940, its benefits equaled 0.03% of GDP. By 1950, it risen to only 0.33 %. But by 1996 it had risen to over 4% of GDP. In terms of taxable payrolls, benefits reached 10.7% in 1994 and represented roughly 90% of all federal outlays. Over time, the fraction of the labor force covered by Social Security has risen from 63.7 % in 1940 to 97.6 % in 1993.
Social Security has played a major role in reducing the number of people over 65 who lived below the poverty line. In 1959, 35.2% of the elderly were characterized as poor. By 1994, the figure had dropped to 11.7%. The increase in Social Security benefits is largely responsible for this decline. Expressed in 1995 dollars, the average monthly benefit in 1950 was $269.30, in 1968 was $381.38, in 1995 it was $719.80. Also the number beneficiaries has risen substantially from 222,488 in 1940 to 37.5 million in 1995. In terms of the percentages of the population over 65, only 7% receive benefits in 1940 whereas 91.3% receive benefits in 1995. Social Security, provides over 90% of income for half the seniors below the poverty line and 50% of income for two-thirds of all beneficiaries.
The original Social Security act provided benefits only to those that contributed, but in 1939 benefits were extended to spouses and surviving widows. There have been other changes over the years, but perhaps most importantly was the 1950 Act that brought an additional 10 million new workers into the system.
Initially there was a 2% tax rate, equally divided between employer employee and levied on income up to $3,000. The first benefits were not paid until 1940. Further, no benefits were to be paid in any month that a retiree earned more than fifteen dollars, and to put that number into perspective, the average annual wage in 1937 was $797. It must be very clear to note that the major feature of the system was that Social Security was at least in part envisioned as insurance against destitution.
Over its history, Social Security has probably never been sound primarily due to Congress providing benefits more generous than originally intended and by effectively refusing to raise tax rates as fast as a 1939 Act indicated. The article noted that perhaps the most severe problem for the system was created by the 1972 Act which included automatic price adjustments. Such an adjustment ended up over compensating workers. Due to these problems, another act was initiated in 1997 that supposedly would provide a soundness to the program well into the next century. Wrong.
In 1953, the maximum benefit was 30.5% of the average wage; in 1981 it was greater than 50%; in 1995 it was equal to 60.5%.
Additionally, in 1945 there were 42 workers per retiree. In 1995, that number had diminish to 3.3 and it is projected that by 2030, there will be only two workers per retiree. Along with this problem, the life expectancy of individual has increased dramatically thereby requiring payments not only for the retiree, but potentially for the survivor, normally the woman, who was living a much longer number of years. A 65 year old woman today has a 19.4 remaining actuarial lifetime.
In the report by the 1994-1996 advisory council, Social Security indicated that taxes would have to be raised immediately by 2.13 % to attain a 75 year balance.
SMOKE DETECTORS: About 92% of homes have smoke detectors but about 25% of those don't work.
SOCIAL SECURITY AND THE STOCK M,ARKET: Because of mounting SS deficit, there are viable considerations about putting some employee funds into the stockmarket in order to potentially raise the return on the funds. Between 1926 to 1993, the S&P 500 real rate of return was approximately 9%, while the real yield on intermediate term U.S. Government Bonds averaged only 2.2 %. Put a different way, earning 9% indicates that your investment doubles approximately every eight years as compared to every 35 years with a 2.2% return. And, in every 22 year period since 1926, equities have outperformed bonds- but with added risk
DIVIDENDS: The Standard & Poor's 500 index has a dividend of approximately 1.5 %. That compares with an average of 4.9 % from 1871 to 1994. Even during the 1980s, the dividend yield averaged 3.9 % annually. In no year from 1926 to 1992 did the S&P ever yield less than 3 %. That was then, this is now.
DEMOGRAPHIC TRENDS: (New England Economic Review) The United States, France, Germany, Japan and United Kingdom will all experience population aging due to a drop in fertility and a rising life expectancy. But most foreign countries will face an aged dependency problem more severe than the United States. In 2030, the ratio of people older than 64 to those between the ages of 15 and 64 will be about 30% in United States, 40% in France and United Kingdom, an nearly 50% in Germany in Japan. Germany, France, and Japan also face financing problems with their Social Security programs that are much more severe than those of United States.
FALLING DOWN: Falls are blamed for about 8,200 fatalities in 1996. About 163,000 injuries were caused by falling in the bathtub or shower. Therefore, the easiest solution is to not bath.
PREVENTING FALLS AT HOME: (Lux Gargiullo) Accidental falls are a leading cause of hip fractures and even death among older adults. While most falls are actually caused by alcoholism, the Alzheimers patient is likely to fall because they are confused and forgetful and often wander or pace. In order to reduce serious injury here are some suggestions:
In the bathroom:
In the kitchen:
In the bedroom
Clothing:
Outdoor walkways:
GOD HELP US: (America's Research Group) "The typical American makes investment decisions based on information and tips picked up from family and friends rather than readily available information sources like stockbrokers, newspapers and investor newsletters, according to a recent national survey of 1000 small U.S. investors. It's the small investor seeking assurance from those he knows best and trusts most. Not only that, but one out of five respondents (19.70%) said they consulted friends and relatives as often as once a month."
My commentary: maybe these people will be successful- but it will be due to luck and statistics, not knowledge and skill. Using friends, family and co workers is fraught with risk. Admittedly , it is much easier than reading and research. Also stupider.
BEST AND WORST INSURANCE: There are new insurance products that will give large discounts to the healthiest of people. Called the Runners Edge, it offers discounts based on the race time in completed 5K runs. If you don't race but meet other in stress test results, other discounts apply.
On the other hand, if you happen to engage in certain outside other activities, or are not the best of health, your rates rachet up exponentially. According to Bank Rate Monitor, assume a couple are 30 years of they each take out a basic five-year level term policy from State Farm at $100,000. Sue's will cost $125 annually; Bob's- $155. If they race sports cars or scuba or sky diving, then a can add increases of $300. If they smoke, add $47 annually for Sue; $86 dollars yearly for Bob. In the worst-case situation, assume that they also had had three auto tickets within the last year. Now you can add another $300 premium annually.
So you can see that living dangerously and living unhealthy can cost a lot just in basic insurance.
NURSING HOMES: (Smart Money) While I continually focus on the need for a long-term care policy, I must stress the absolute necessity of extended review of a nursing home before you would ever commit a loved one. In such regard, I urge you to take a look at my WebSite and the commentary by the nurses who at work in such institutions. Books also include, "Nursing Homes" by Forest and "How To Find a Nursing Home" by Joanne Meshinsky. As is quite obvious, not all the homes are the same. An article in the February Smart Money magazine noted some of these major problems that existed in nursing homes.
According to the health care financing administration, the percentage of nursing homes cited for dispensing unnecessary drugs has risen steadily to 11% in 1996 from 2% in 1992. I have commented on this previously but is not solely the nursing homes fault. Druggist's are not being informed of the various prescriptions that may come from various pharmacies.
Staffing: it is true, and one of the major problems with nursing homes, that the staffing may be inadequate. Some say that the federal regulations established in the nursing home reform act of 1987 are unduly vague: they merely require a facility to have "sufficient staff" without addressing any minimum ratios. According to a professor at the University of California,a nurses aid-the person providing the bulk of care by feeding, bathing and clothing patients-should have no more than three people to care for during a meal and no more than six during non-meal times. The ratio may be one aid for 15 patients during the night however. The article noted, however, that it is not unusual to find a lone nurses aid caring for his many as 30 people.
The article additionally noted that just 38 % of a nursing homes budget goes directly for a patient care including nursing costs. Nurses aids average wage is $6.65 per hour.
According to the New York State attorney, 25 % of nursing home aids prosecuted for abusing residents had a prior criminal record. A 1994 survey indicated that approximately 5 % of the nurses aids on file with state regulators had a criminal record involving violence and/or theft.
Malnutrition: A professor of German to at St. Louis University estimated that the rate of patients malnutrition varies from about 4 % in the good nursing homes to perhaps 50 % at the bad ones.
RESTRAINTS: Pursuant to the passage of the Nursing Home Reform Act of 1987, the use of physical restraints has dropped about half. However it is indicated that still as many is 20 % of nursing home residents are at some point restrained. But I wouldn't necessarily be concerned by that figure unless something comes up later to show that this is also excessive. There are simply times when some of these patients must be formally restrained.
HIGH FUND FEES: Jason Zweig recently indicated his maximum permissible levels of annual expenses by fund category: investment-grade bonds, 0.75%; junk bonds, 1.00%; big U.S. stocks, 1.00%; small U.S. stocks or sectors (like real estate or technology), 1.25%; foreign stocks, 1.50%. If you buy a fund with higher expenses than these, you should have your head examined. (And maybe your pocketbook)
BANK FUNDS: For the fourth year in a row, bank holding companies managed just 14% of mutual fund assets. While holding their own, banks are no longer making strides in building their proprietary funds.
WHETHER THIS IS A TURNAROUND OR A DEAD CAT BOUNCE, THAT IS THE QUESTION.
Quote from a stock analyst on the movement of the market
REAL ESTATE: (Home magazine) based on a survey of homeowners around the country on what they want in a house, here are the top 10:
1. Quality and value, not glitz. They want a home that they can live in comfortably not just a place to show off.
2. Suitability for the elderly. As the homeowners get older, or have elderly parents living with them, they need to recognize certain conveniences such as a downstairs bedroom, bathroom grab bar, etc.
3. A sense of tradition. People are seeking neighborhoods and houses that remind them of kinder times. These could include houses with front porches and communities with sidewalks.
4. Cars are no longer the major focus and homeowners don't want have a garage that dwarfs the front of the house. Rear entry garages are now more popular.
5 Design diversity. They don't want their house to look like every of the house on the block. Maybe the house has an extra room for an office, a bonus room for a grandchild, something that makes it unique.
6. "In filling", or location in older neighborhoods. Many are looking for established areas for quick access to downtown culture or other City center amenities.
7. Flexible floor plans. Since people are moving less often, floor plans should adapt as lives and priorities change. A garage can become a room for an in law, the nursery or a home gym.
8. Home office for adults and kids. Parents want spaces where they can supervise their Internet surfing children and interact with kids as they do homework.
9 Revised formal and informal spaces. People do not want to have unused rooms, such as a formal living room that gets little activity. The article also suggested that underused spaces be turned into reading rooms or music rooms so they are more functional overall.
10. Minimal conflicting elements. Rooms often have competing features such as TV AND a fire place. Such uses are mutually exclusive and should be put in separate rooms.
INFLATION IS GOING DOWN WITHOUT GOING DOWN: Say what? Noted previously, Greenspan has said for a long time that the CPI was not truly reflecting the buying practices of the consumers. So the CPI is now being adjusted for the 6th time since 1921 and should slow the CPI's annual growth by 0.1% to 0.2%. Each 1% CPI increase will cost the government about $6 billion by 1999. That's due to the fact that there are CPI adjustments for 47.8 million Social Security recipients, 4.1 military and civil service retirees, 2.4 million food stamp recipients and 26.7 million children who receive school lunches.
Here are the spending weights for the
CPI
| Old | New | |
| Food and Beverages | 17.5% | 16.3% |
| Housing | 41.5 | 39.6 |
| Apparel | 15.3 | 4.9 |
| Transportation | 16.6 | 17.6 |
| Medical Care | 7.4 | 5.6 |
| Recreation (formerly entertainment) | 4.3 | 6.2 |
| Education and Communications | N/A | 5.5 |
| Other Goods and Services | 7.4 | 4.3 |
LONG DISTANCE CAREGIVING: A recent survey conducted by the National Council of Aging states that long distance care-giving for seniors is on the rise. This number is estimated at over six million people and expected to double over the next fifteen years.
INTELLIGENCE: According to a British psychologist, intelligence has increased worldwide for decades but differences in population growth could reverse the trend within the next 100 years. A decline in population growth in the developed world could lead to a drop in intelligence- "The genetic component for higher intelligence is being passed on to fewer children." Scores on intelligence tests have risen an average three points a decade since the 1930s.
ARTHRITIS: It is the leading cause of disability in the U.S. and will afflict 1 in 5 Americans early in the next century. An estimated 40 million Americans have arthritis, with numbers expected to grow to 59.4 million to more than 18% of the population from around 16% now- by the year 2020
Arthritis Consulting Services, 4620 N. State Road 7, Ste 206, Ft. Lauderdale, FL 33310, 800 327-3027. Free information
DOWNSIZING: (Business Week) by early 1996, 79% of workers that were displaced a few years ago were back to work; 7% remained unemployed and 14% had dropped out of labor force. The least likely to be re-employed were workers over age 54- though some of them opted for early retirement. But that isn't the real key since some other jobs were part time and/or at lower wages. Of 2.2 million full-time workers laid off in 1993/1994, only two-thirds had full-time jobs in early 1996. Further, over half this group were earning less than at their former jobs and greater than a third suffered pay cuts of 20% or more. On average, the weekly earnings of those the reemployed dropped by about 14%. Those in their late '50s and '60s who found jobs, had wage declines averaging 37%. In essence therefore, while the economy has provided substantial gains and jobs, those that did find themselves displaced have ended up farther behind the eight ball. And I would estimate that, in today's technological climate, the downsizing will continue and the elderly job seeker will get hurt all the more
ONCE YOU ACCEPT YOUR OWN DEATH, ALL OF A SUDDEN YOU'RE FREE TO LIVE. YOU NO LONGER CARE ABOUT YOUR REPUTATION. YOU NO LONGER CARE EXCEPT SO FAR AS YOUR LIFE CAN BE USED TACTICALLY TO PROMOTE A CAUSE YOU BELIEVE IN.
Saul Alinsky
LIFE INSURANCE: The NALU (National Association of Life Underwriters) provided these statistics for the cost of insurance:
The average cost per $100 of new annual premium for policies sold direct was $97 (much higher than often reported) and $139 for policies sold through a GA (General Agency) system. However, the lowest GA company had a cost of $103- "a clear indication that companies using agents can deliver" a competitive product.
Other comments- the lapse rate for annuities
sold by stock brokers is three times higher than for those sold by agents;
despite consumer surveys indicating many people prefer to buy direct, only
2% to 3% actually do.
DEPRESSION: The general tendency is to believe that women become more depressed in men. The study by the Research Institute on Addiction's indicated that men drink alcohol and get depressed just as often as women when work and family clash.
However, the worst problem is with teenagers. Over 2,000 committed suicide last year. 87% of boys ages 14- 18 who attempt suicide have a previously diagnosed disorder- usually depression. Here are a few sites where one can get help:
Covenant House Hotline: 800 999-9999. Crisis intervention, referral and information for troubled teens and families
Families Anonymous: 800 736-9805. Support for friends and family concerned about a loved one's drug or alcohol use