MOODY'S REVIEW

OCTOBER 2001

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

WAR: The country will face either a recession this quarter or something very close. As regards the long term economic scenario, I defer to the comments most recently by Greenspan, "....the foundations of our free society remain sound, and I am confident that we will recover and prosper as we have in the past."

DO YOU KNOW WHY THIS A JOKE?: Morningstar has introduced a Morningstar Rating for stocks. The ratings of from one to five stars are based on its analysts' estimates of a stock's fair value relative to its current market price. There is also an associated risk measure, identifying stocks as high, medium or low risk based on company and industry factors.

You can only buy stocks if you understand diversification by the numbers. And literally less than 1/4 of 1% may have a clue. (How many stocks must you have in a portfolio in order to insualte it from unsystematic risk? 10, 15, 20, 30, 50, 150, 350???)

Delusions of grandeur make me feel a lot better about myself

Jane Wagner

I AM NOT LAUGHING: When Michael Vranos, Kidder Peabody's head of mortgage securities, boasted to the Wall Street Journal that his job is to sell bonds to the dumb guys, some of his clients understandably resented the assessment. Sadly, however, many investors concede that Vranos' tactless remarks contain a kernel of truth. James Orford regarding CMO's (Collateralized Mortgage Obligations)

DEATH: (Labor Dept) The number of workers killed on the job last year dropped about 2% even though employment was up, and construction was the most deadly industry.

HMO (Weiss) the nation's HMO industry turned a profit last year for the first time since 1996. The 492 HMOs earned $990 million, compared to a cumulative loss of $1.8 billion in the three years from 1997 to 1999. No matter- premiums will go up substantially in 2001.

AIN'T THAT THE TRUTH: (FSO) Average investors may be in over their heads when buying stocks. In a recent survey, only 16% of the participants knew that there is no organization to protect investors from stock market losses.

JAILBIRDS: The number of adults behind bars, on parole or on probation reached a record 6.47 million in 2000 -- or one in 32 American adults

CAREGIVING (paraphrased from an article by Ted and Beth McLeod)- "The United States will be facing an ethical and economic challenge every bit as great as peace or poverty. The problem is simply put: more people are living longer than any society has ever had to provide for in the past. By 2050, there will be 3.3 adults over age 65 for every child below the age of 4."

As identified previously, the elderly may be healthier but about 130 million are likely to suffer some form of chronic condition. Even that said I have a problem with the statement. Will they actually be healthier or will it be that drugs are keeping them functioning longer until a major debilitating conditions takes over? That seems to make more sense to me. After all, considering the number that are overweight- in fact obese- most would have died from heart attacks at a much earlier age. Now we can keep them alive and "functional"- but for how long before they need extensive care and at considerable cost? Some statistics simply say that the age for nursing home care may be delayed beyond the current average of age 80, but that the care will be more costly and extensive overall and require a longer period of time than current since drugs will keep the patients from dying.  

Also, unless there is some cure, by 2050, about 14 million will suffer from Alzheimers and require round the clock care. Both my uncle and my mother have Alzheimers and, though some recent work says that Alzheimers may not be familial, I think there is a predisposition to the disease since it has affected so many in my family.

"22.4 million American families are now looking after a frail or disabled member of their family over age 50. Each month  families spend about $1.5 billion of her own money on the care of a sick relative or disabled acquaintance." From this number alone, you may understand that the government has no ability to ever pay for that cost. Medicaid and Medicare would be completely devastated. Its bad enough now with 75% of nursing home care covered by these two programs- and not very well. An article in The Nation indicated that a 1998 review by the GAO found that only 2% of California's 1,440 nursing homes met minimal health and safety standards. It clearly shows why caregivers will take care of a patients at home as long as possible, but the effort to balance both work and home quickly becomes overwhelming. "The war and tear on caregivers can only worsen as the demands they must meet increase."

75% of the elderly over 85 require nursing home care at some point. By the year 2050, it is estimated that the need will increase by another 70%.

A 1999 survey by the National Alliance for Caregiving and AARP indicates that 54% of U.S. workers have revised work schedules to take care of an elderly parent. This article also states that 99% of PAID caregivers are women and most of them of ethnic minorities who earn minimum wage and receive no benefits. As for the unpaid caregiver, over half are women. The Older Women's League (OWL) estimates that more that half of them lead sandwiched lives caught between caring for a dependent parent and their own children under 18 living at home.

A 1997 study by United Hospital Fund places the value of caregiving at $196 billion annually versus only $32  billion for formal home health care and $87 billion for nursing home care.

A 1999 CBS News report said that at least 50% of patients over 65 who go to a hospital emergency room suffered from malnurishment.

In summary, the statistics and reports should make clear- the government is clearly unable to take over the care for the elderly. What the government can pay for- and this is not a reflection of the caregivers per se- is provided at a lower cost than quality care needed. This will all get worse to the point of potentially taking over 50% of all taxes paid.

According to a U.S. Census Bureau report, about 22% of people age 85 and older live in nursing homes, and 45% need help with daily activities. According to the Federal Agency for Health Policy and Research, half of all women and one third of all men who reach the age of 65 will later spend time in a nursing home.

If you have money, buy a Long Term Care policy not only that allows you to go into a quality home- and use home health care and Assisted Living Facilities as applicable- but also to relieve the huge burden on the caregivers. It is not only a financial issues but an emotional one as well.

Eternity's a terrible thought. I mean, where's it all going to end?

Tom Stoppard

MEDICINE: About half of the $20.8 billion increase in retail drug spending in 2000 occurred in just 8 categories of medicines, including depression, arthritis, diabetes, and chronic pain.

ARBITRATIONS: (NY Times) 3,950 cases had been filed by mid 2001, 25 percent more than at the same point in 2000.

One attorney noted that "stock investors' immense losses since last year and the troubling conflicts of interest coming to light among research analysts and other brokerage firm employees will encourage arbitrators to give plaintiffs at least some of what they are seeking. "

The article noted "Arbitration may be more fruitful for investors, especially those suing over losses in stocks recommended by biased analysts, because in federal court, investors can bring a fraud case only if they bought or sold based on the recommendation. Arbitration, on the other hand, allows for cases in which an investor already owned the stock and simply held on because of the analyst's call."

This may be true in part because as an arbitrator in the past, we did hear issues that probably would not have been addressed in court.  By the same token, I don't think the arbitrators were well versed in the application of securities- nor were the attorneys. I think a jury would have been more open minded to a proper presentation.

"(People) think active managers will know when to time the market and when to get out. I'm not sure why people think they have such great analytical abilities in a bear market when they don't distinguish themselves in a bull market."

 George U. Sauter, Vanguard Funds

YOU FIGURE IT OUT: Federal Funds rate= 1+1.5 x inflation rate + 0.5 Output Gap

Output gap= the difference between actual and potential GDP 

A REASONABLE DETERRENT: (USA Today) This year an estimated 28,230 college students were denied federal financial aid because they have admitted to a drug conviction. This is the first time aid is being denied to applicants who leave the drug-conviction question blank on their applications. That could keep 11,417 more students from getting aid.

MOMENTUM INVESTING (WSJ) They say that  it can work -- "if executed in a rigorous fashion with a big portfolio of stocks. In fact, a pile of academic research shows that it is among the most successful long-term investment strategies -- though the ride it provides can have off-the-charts volatility, with short but very nasty downturns."

You buy the stocks that have risen the most over some recent time period, usually the previous six or 12 months. Soon after they stop soaring, you sell.

The basic assumption behind momentum is that the trends that have been in place will stay in place, and usually they do. With the stock market going up and down but ultimately nowhere this year, momentum hasn't worked especially well lately.

Many academics, who generally believe the market is so efficient that investors would be better served simply by buying index funds than by trying to beat the market, believe that momentum actually works, though there is no agreement about why.

Friends don't let friends wear Speedos. Ever.

OUT TO LUNCH: The Standard & Poor's 500 and Nasdaq composite indexes haven't dropped 2 consecutive years since 1973-74.

The Dow Jones industrial average hasn't done it since 1977-78.

But per Meir Statman, Despite the Nasdaq's 54% plunge from January 2000 through March 2001, the number of investors who felt they would still meet their investment objectives in the next 5 years fell by just 1 percentage point, from 81% to 80%. I admit that the tragedy upset the market tremendously, but it was already in a downspin and was going to have some big troubles getting back to a 10% annulalized return, nevermind 15% or more which a lot of them were betting on.

CARE: Prenatal care intervention in the home delivered by nurse specialists with master's degrees can reduce infant mortality, improve maternal and infant health, and lower healthcare costs.

HEALTH CARE: The Health and Human Services Department indicated that  the number of Americans without health insurance dropped about 8 percent this year. The number of uninsured Americans fell to 39.3 million from 42.8 million last year. It's attributed the drop to the department's granting states 800 waivers to their Medicaid programs for covering 800,000 more Americans and expanding benefits to 2.5 million existing Medicaid recipients.

DON'T GET SICK: (USA Today) hospital admissions are on the way back up -- and so is medical inflation. In the last quarter, for-profit hospitals saw an average increase of 6% in admissions, compared with 1% to 2% historically.

Not all hospitals are benefiting. About 40% of the nation's hospitals are still bleeding red ink in terms of operating profits. Many of those are in the not-for-profit sector, inner cities or rural areas. But in the for-profit sector, the news lately has been mainly good.

SO YOU WANNA BUY STOCK AND YOU THINK AN ANALYST KNOWS WHAT HE/SHE IS TALKING ABOUT: Well consider this from an article in the NY Times: Last Dec. 5, Andrew J. Neff, a computer analyst at Bear, Stearns, issued a report extolling the virtues of Palm Inc. (news/quote), the maker of hand-held computers. After meeting with Palm's management, Mr. Neff had come away a believer in the company's future and its battered shares. With the stock near $44, Palm was well below its March 2000 peak of $165, reached on its first day of trading. He put a 12-month price target of $80 on the shares, reflecting his belief that they would trade at 19 times his 2001 sales estimate for the company.

By the next week, Palm shares had climbed to $56.625. But then they began to sink, until, on Jan. 3, they had reached $27.88. That day, Mr. Neff cut his target to a range of $37 to $48. Two months later, with Palm in the mid-teens, Mr. Neff lowered his target again. Finally, on May 17, the shares stood at $7.05 when he slashed his target to around $5. It closed on Friday at $5.36.

O.K., if you were just investing purely discretionary money (gambling money) I may not have an issue. But if you were trying to develop a stock portfolio with info like this, you are so far out to lunch it's unbelievable. You have to know what diversification is by the numbers. Without this, you cannot determine risk. Without determining risk, you cannot determine suitability.

MORE DEATH: (CBS) 5 children under the age of 17 are killed by guns very day.

CHARITABLE PLANNING WITH LUMP SUM DISTRIBUTIONS: A potentially useful lifetime charitable giving technique for donors who own appreciated employer stock in a qualified retirement plan. The technique involves obtaining favorable tax results for the transfer of the stock to a charitable remainder trust when the stock is distributed from the plan in a lump sum distribution during the donor's lifetime.

CHARITY: In Ltr. Rul. 200045038, the Service held that the division of a charitable remainder unitrust into two separate unitrusts upon the divorce of the husband and wife income beneficiaries would not cause the unitrusts to fail to qualify under Code Section 664. The unitrust was also flipping from a net income with make-up charitable remainder unitrust to a standard charitable remainder unitrust but no rulings were issued on that point.

HEALTH INSURANCE- Managed care didn't work. (NY Times) Oh, for a while it did and it kept premiums lower. Premiums increased on average only 2% a year from 1994 through 1998 as business-hungry insurers fought for market share. Now, though, the biggest jumps in health premiums in a decade are forecast for next year -- 10% to  13% for larger employers, 20% or more for smaller ones.

Spending continues to rise, driven by an aging population, expensive new drugs and treatments, consumer demand and a growing ability of doctors and hospitals to resist managed care payment cuts. Although most health insurers are making profits this year -- because they've been able to raise premiums higher than the underlying medical inflation -- PacifiCare and Aetna have reported lower earnings, blaming their inability to control costs.

Medicare spending is increasing faster than previously forecast, with the cost of the $218 billion program expected to double by 2010. An advisory panel last week said rapidly rising spending means Medicare's hospital trust fund will go broke four years earlier than expected, in 2021.

With the strong economy, patients and employers have fled the tightest forms of managed care, HMOs, for looser, more expensive versions that allow patients to, among other things, refer themselves directly to specialists or see "out-of-network" doctors.

Spending on health care is creeping toward 14% of the gross domestic product. By the end of the decade, some projections show that nearly $1 of every $5 could be spent on medical services.

MORONIC BUT EXCELLENT MARKETING: (NY Times) Some readers probably get annoyed with my continued berating of the competency of brokers and agents. Here's a dandy from the NY Times

Two Morgan Stanley Dean Witter brokers, partners in the firm's office in Chevy Chase, Md. told a Microsoft salesman that they would handle all his financial, tax and estate-planning needs as he took a break from work. He had never traded in the market and entrusted them with retirement accounts and stock options worth roughly $700,000.

Within 16 months what had taken him years to build was gone. By this April, all that was left of his portfolio was $403.95 and a $40,000 tax bill due next April. Now he's fighting back.

The attorney for the salesman stated, "Young, inexperienced brokers preyed on hard-working people with little or no investment experience. They lost my clients' retirement and life savings." They still miss the point. The fundamentals of investing were never taught to brokers. Being "young" is not the issue (though it could be) but the term "experience" is irrelevant. If you give a witch doctor 50 years of experience, do you think you have a better "doctor"? Experience is good but it is not a substitute for the needed knowledge that is never even provided in continuing education.

The article further noted, "these brokers, encouraged by the fee structure at Morgan Stanley, subjected their customers to high-risk strategies involving the heavy use of borrowed funds. Furthermore, by following the recommendations of the firm's research department, the brokers submitted their customers to what their lawyer calls biased analysts peddling overvalued stocks." In essence, if you take bad recommendations and then margin them further, you risk become almost exponential.

Of the 23 stocks that the brokers bought , 12 were companies which Morgan Stanley had brought public or provided with other investment banking services. Ten were rated buys by Morgan Stanley analysts when they were bought. Three rose slightly, but seven fell, generating $85,000 in losses. By the time he sold all his shares in those seven, they had lost, on average, half their value.

The salesman says he should never have trusted the brokers. (If I hear "trust" again, I am going to throw up) But they seemed like nice guys, he said, and investing was something he knew nothing about. (You'd think for $700,000, he would have done a little homework)

So how did he find these two guys?- at a pool party given by mutual friends. The brokers were there and struck up a conversation. They also told him that they had been given "permission to do a series of seminars at the Microsoft office in D.C." One also told he often flew to Seattle to work with Microsoft employees based at company headquarters.

At a later seminar, "As Morgan Stanley Dean Witter Financial Advisors (we) provide affluent individuals with customized professional money management services. Each portfolio is individually managed to meet the personal goals and risk tolerance of the client." Bite me. Retirement planning determines risk- not what the client has done or would like to do.

One said had a good background in economics and finance (actually false) at a major university but also noted he "has developed a unique and customized educational program for employees with large concentrated stock positions such as those with incentive stock options." Sure- just like the two noble laureates that created the hedging program for Long Term Capital. It blew up requiring an effective $3.5 billion bailout of the U.S. banking system by the FED.

The comments also included statements like "Advice would also be given on "how to protect the loved ones against any unforeseen liabilities and events."

The poor guy took their advice and sold all his Microsoft options and margined the account to pay for the taxes. He ended up buying bunches of tech stock just before the debacle. By the time the brokers told him to sell, his account value was down to $33,000  (from $700,000) and he had $72 cash in his retirement account. The regular account kept dwindling: only $403.95 was left in it on April 30.At the same time he had to pay $98,000 in taxes on the options he had exercised. Morgan Stanley made $36,000 on the fees and margin interest, or 4.25 percent of his assets on an annualized basis.

The attorney for the salesman stated that the arbitrators would need to hear about "the suitability of each individual customer for the firm's recommended course of action." They still don't get it though. You have to know diversification first before you can determine risk. Neither of the brokers knew that, neither did Morgan Stanley (apparently) and I bet the attorney doesn't know it yet. "How many stocks do you have to have in a portfolio in order to insulate it from unsystematic risk."

Eagles may soar, but weasels don't get sucked into jet engines.

John Benfield

Our scientific power has outrun our spiritual power. We have guided missiles and misguided men.

Martin Luther King Jr.

DECEPTION: In material sent to CFP's, the Board indicates that the CFP is the Highest Standard of Practice. Further, that the CFP exceeds any governmental threshold standard. That is deception at its "highest". First, even the College for Financial Planning "disagrees" since it offers a Masters of Science in Financial Planning. The College states, "the Master of Science degree program was developed for individuals who want to significantly enhance their existing knowledge in specialized areas of financial planning." Having taken both, I can assure readers that the Master's is far more intensive and extensive than anything offered at the CFP level. In fact, when I got the CFP in 1984, I thought "is this all there is?" I did not feel comfortable in my expertise and  certainly it was not at the level where the Board states- "demonstrably able to practice financial planning with the public". Secondly, the CFP is not recognized by states (perhaps all but I am not sure) regarding insurance and long term care criteria. California's threshold for insurance encompasses a 52 hour course in insurance PLUS an exam PLUS 25 hours of continuing education each year for the first four years of licensing. The CFP's are far below that- in fact they don't have to take ANY continuing education in insurance. (It is irrelevant if you don't like insurance. You still have to know what you are doing. And insurance is the most mind numbing area of planning that exists.) Additionally, any involvement with agents in long term care requires a special 8 hour course each two years. The College of Financial Planning is woefully inadequate in this area requiring no special education at all. You CANNOT do financial planning without long term care. You CANNOT do estate planning without addressing long term care. You CANNOT do retirement planning without addressing long term care. I am not mandating that someone has to buy a policy. But I am stating, once again, that the knowledge of both financial and emotional issues affecting the elderly is crucial to such planning. If you don't know this material cold, you are not a financial planner.

Admittedly, if you have planning requirements, it is better to seek a designation than none at all. But if money is important to you, and you stop at the level of a designation, then don't complain later if something goes wrong.

Probably my greatest critique is the continued commentary- both written and orally- about the Ethical standards the Board supposedly requires CFP's adhere to. You really need to understand what is required. You are required  to sign an ethical statement BUT YOU DO NOT HAVE TO ADHERE TO THEM. The Board will not enforce ethical standards upon CFP's. It will impose legal standards. In other words, if you have been found guilty in a court of law, then you can be dismissed. As corroboration, there are about 35,000 CFP's. But in 1998, there were only 241 cases submitted (.69%)  for review to the Board and 187  of those (78%) were for legal actions by court or professional discipline by the NASD, etc. My point with this discussion- well known by past readers- is that hundreds of planners nationally- many in California- have been actively violating state law with effective impunity for years. That is NOT the highest standard. That breaches any and all fiduciary responsibilities to consumers. I sat in a ethics course in 1995 where over 30 CFP's lied on an ethics course. Subsequent filings with the CFP Board brought a statement direct to me that the board would impose an ethical violation only when preceded by a legal one. As an instructor in ethics, I can assure you that there is not a text I have ever seen on ethics that utilizes that rationale. Literally every author states:

"Ethics starts where the law leaves off."

This is a sad commentary on this industry but the true impact is on the consumers who end up using incompetent and illegal planners.

MINORITIES: Minority Americans often are at greater risk of poor health, social isolation, and poverty. Currently, minority elders comprise over 16.1 percent of all older Americans (65 years of age and older). In the future, their numbers are expected to increase dramatically. Between 1999 and 2030, the older minority population 65+ is projected to increase by 217 percent, compared with 81 percent for older white population.

CLOSED END FUNDS: There are about 500 U.S. closed end funds comprising about $140 billion or about 2% of the 14,000 funds. The remaining $7 trillion is invested in the standard open end fund. These are tough to use since they are sold at a discount to NAV. Do a LOT of homework

IT'S THE LITTLE THINGS YOU MAY NOT RECOGNIZE: A new client, in an extended conversation about his assets, commented that he might want to get into some individual real estate. He said he would like to get some writeoffs. But I had his taxes for the past three years. And I simply told him he was out of luck in that there would be no pass through of any losses- just an adjustments to basis upon sale. Why is this? Because if your AGI is over $100,000, there is a phaseout of any losses that may be passed through. This was a result of the 1986 tax act (you remember that, don't you?) that also forever changed the limited partnership scene.

Opportunity is missed by most people because it is dressed in overalls and looks like work.

Thomas Edison

BANKRUPTCY: By last summer, 12 percent of the 1.7 million nursing home beds were operating under Chapter 11 bankruptcy protection.

EMPLOYEES DON'T HAVE A CLUE: (NY Times) Most employees are unaware that they may be paying hundreds of dollars of administrative fees and even fewer know that fund companies often rebate part of the fees to employers or outside administrators.  

Administrative fees cover the costs of keeping track of account balances, sending out statements and answering questions. For large 401(k) plans, industry consultants say, they usually amount to about 25 basis points, or 0.25 percent of assets

Rebates would never have arisen if employers had not begun shifting administrative costs to plan participants. In 1991, 78 percent of sponsors absorbed these costs themselves. By 1999, only 62 percent of sponsors were doing so.

The trend is particularly noticeable in large plans. By 2000, only 36 percent of plans with more than $1 billion in assets absorbed these costs.

One-third of plan participants have no idea how much their plans cost, while another third think they are getting their 401(k) plan free.

CHRONIC ILLNESS: (NY Times) About 50% of Americans have at least one chronic disease from allergies to heart disease. Researchers suggest that the current number - 125 million out of 276 million could reach 157 million by 2020. One fifth of all Americans have two or more chronic illnesses. Annual medical bill are expected to almost double to $1.07 trillion by 2020.

Someone without a chronic illness pays an average of $182 a year in out-of-pocket health expenses, Anderson said, compared with $369 in out-of-pocket payments by patients with one chronic illness and $1,106 for someone battling three or more.

Total annual health costs for someone with one chronic illness are more than five times higher than for a healthy person -- $6,032 vs. $1,105 -- and rise even higher the more disabling the chronic illness is.

A READER EMAILED- "Since I have made the mistake of staying in Technology too long [four different mutual funds].. what do you see in the tea leaves? Stay put and they will recover, sell take loss and go on with life. I've lost almost 30%... not broke but that much out of any portfolio hurts. My finance guy keeps showing me graphs that reflect drops in stock market since inception, yet an overall significant gain over the years. I know all about that but I feel as though that reflects the market as a whole not a particular segment as technology?"

My reply: "I cannot give specific advice due to my fiduciary obligation and financial liability. But I have to ask, why were you in 4 tech funds to begin with? Was it your selection? If you used the "advisers" advice, what was it based on? It seems like he took a shot at a big gain and now he is trying to justify it. Sure tech will come back. But when? In those funds? Further, why 4 tech funds? Why not one or two? Why not the NASDAQ index? If you stay in tech, your risk is very high. It sounds like you cannot afford such risk. Do you otherwise have a basic portfolio?

He is showing you charts. Did you receive anything in writing? It would appear to me that you should hire an adviser. I think you got a salesman."

WOMEN: Women make up around 40% of the global work force

I just need enough to tide me over until I need more.

Bill Hoest

LIQUIDATIONS: 223 Funds liquidated in 2000. 90% of all fund money is controlled by 10% of funds. 

RANDOM WALK: A theory which states that the movements of the stock market are completely random and there are no predictable patterns where one would spot an advantage in trading. Been proven to be, at least in part, invalid. The December/January and Friday/Monday patterns have been proven to exist- though the costs of analysis and commissions do not necessarily make the trading profitable. Other more recent analysis shows that the market may NOT be random and that certain types of investing provides consistent returns. But I have also learned something which I wish to impart. In pure randomness, there will always be patterns that emerge simply due to randomness. Think about this. 30,000 people in a stadium flip coins. Each flip is 50/50. But someone might flip heads 5, 6, 7 or so times in a row. That is a pattern, but it is clearly unsupportable. You can do the same thing with investments though I do admit there are times when outside influences do impact the odds. But, over time, the randomness is apt to/probably will alter the odds in our lifetime, or 10 years, or two months or two seconds. We just never know what that time frame will be. If human beings were perfectly oriented to set patterns, then formulas could determine what will happen with great reliance. But ask yourself this: why did the Pet Rock become a phenomenon? How about Billy Bass? Makes no logical sense. Which is what the market does most often. We just like to think we can find a reason because we think we are smart. But then came Travis Trout, Larry Lobster, etc.

It is better to have a permanent income than to be fascinating

Oscar Wilde

EUTHANASIA IN THE NETHERLANDS: In 1995, Dutch physicians received 9,700 requests for euthanasia or assisted suicide, half of which were carried out. Surveyed on the bases for their decisions, a sample of a few hundred doctors described the most recent request they had granted, and the most recent one they had refused. The most common reasons for denial, each named by a third of the participants, were that the patient was not suffering unbearably, had remaining treatment options, or was depressed.

Patients whose requests were refused, compared with patients whose requests were granted, were more often female and aged over 80; were less likely to have cancer; were more likely to have depression as a predominant complaint; were more likely to have a remaining life span of over six months; were less likely to have made a highly explicit request; were less likely to be competent; were less likely to be suffering utterly "hopelessly and unbearably," and were more likely to have access to alternatives for treatment

BUY OR SELL: Years ago the WSJ had statistics that the number of buys suggested by a broker or firm far exceeded the sells. I hadn't seen anything like that for some time but this was in the SF Chronicle recently. According to IBES, 19.2% of all ratings last year were the equivalent of a strong buy, 57.95 are a buy, 22.2% are hold and only a minuscule 0.79% are underperform and sell combined.

It's fine to be optimistic about a stock, but the statistics show that what brokers do misses real life application by a wide mark. One analyst, commenting about the ratings used by Merrill Lynch, noted "in 12 years of reading Merrill research, I have never understood their ratings system.

REAL MONEY?: Retirees are one of the wealthiest segments of the U.S. population, and today's retirees have more wealth than any previous generation's. Some have conjectured that bequests out of this wealth will significantly boost the resources of the baby boomers-the next generation of retirees-bridging the gap between their retirement needs and resources. This Economic Commentary argues against such a view and explains why.

Health costs will grow faster than the government now assumes, partly because of advances in medical technology, and the long-term financial outlook for Medicare is therefore less rosy than officials assume. The trustees of the Medicare program said in April that the hospital insurance trust fund, which pays hospital bills for Medicare beneficiaries, would be solvent until 2025. But under the new assumptions recommended by the advisory panel, the trust fund would run out of money four years sooner, in 2021. On remember of the panel noted "Health spending is currently about 13.5 percent of gross domestic product. In 75 years, under the assumptions suggested by our panel, it would be 30 percent of G.D.P."

SECOND HAND SMOKE: Women who live with smokers absorb five to six times more chemicals linked to lung cancer than do women who live with non-smokers

PURCHASING MANAGERS: I have focused on  the survey of purchasing managers for years as a key to future economic conditions in the U.S. A commentary says that Greenspan uses that as one of his two key indicators. The other happened to be the price of steel.

TAX NON COMPLIANCE: (NYTimes)   For all federal employees and retirees, the noncompliance rate as of October 2000 was just under 3 percent. For I.R.S. employees, the rate was less than 1.7 percent. For all Americans, the rate was 5.7 percent, meaning that 1 in 17 Americans was out of compliance. (percentage of workers that  either did not file a tax return or have unresolved debts for back taxes.

RICH GETTING RICHER (NY Times) The 1998 incomes, after taxes, of the top 1 percent of taxpayers increased at more than three times the rate of the bottom 90 percent, according to an analysis of this data by the Center on Budget and Policy Priorities. Over a longer period, from 1989 to 1998, the incomes of the richest 1 percent, adjusted for inflation, grew about eight times as fast. But the share of their income they paid in federal taxes in 1998 was at its lowest level since 1992. This group, whose 1998 gross income averaged $816,189, paid 27.1 cents of each dollar earned in federal income taxes, down from 27.9 cents in 1997 and 28.9 cents in 1996. For the other 99 percent of Americans, the share of income going to taxes was nearly unchanged, at 11.5 percent of income in 1998 and 1996 and 11.7 percent in 1997. About a third of all long-term capital gains taxes are paid by fewer than 13,000 taxpayers each year.

The article also notes that the tax cuts are skewed since "the top 1 percent would get 40 percent of the tax breaks, more than their 18.5 percent share of income taxes paid."

The center's analysis showed that the top 1 percent of taxpayers had an average after-tax income of $594,814 in 1998, up $69,000, or 13.1 percent, over 1997. The bottom 90 percent -- everyone who made less than $83,220 in 1998 -- saw their average income rise by $984 from 1997, just 3.9 percent.

From 1989 to 1998 the incomes of the top 1 percent, adjusted for inflation, grew by 40.4 percent, nearly eight times the 5.2 percent increase of the bottom 90 percent.

As a result, the top 1 percent earned 15.7 cents of every dollar of personal income in 1998, up from 14.7 cents in 1997 and 12.5 cents in 1989, the I.R.S. data show.

USE IT OR REALLY LOSE IT: Yet another study shows that the onset of Alzheimers is delayed by education and by intellectually demanding professions. Those that exercise their brains are 2.5 times less likely to get Alzheimers and leisure time spent watching TV may increase risk. Intellectual activities (chess for example) seemed particularly protective. It is surmised that the brains builds ups protective neuron connections.

LTC: "seventy-eight percent [of survey respondents] said securing long-term or institutional care insurance is important and 61% said they understand that nursing care can be very expensive. But only 50% said they know first-hand about the actual costs of long-term care and only 5% of those surveyed own long-term care insurance policies."

"By the time all the baby boomers have retired, in approximately 2020, more than 70 million older Americans will be in need of some form of long-term care."

In 1999, the most current year for which data are available, Americans spent $133.8 billion on long-term care nearly thirteen percent of total national spending on health care. That is slightly more than the nation spends on the combined costs of prescription drugs and nondurable medical supplies.

VOLATILITY: (Journal of Finance by John Campbell, Martin Lettau, Burton Malkiel and Yexiao Xu) Between 1962 and 1997, the volatility of the entire market did not change much. But over the same stretch, the volatility of individual stocks more than doubled.

MONEY LAUNDERING: Grenada's government pulled the licenses of 17 offshore banks earlier this year in an attempt to clean up the industry and protect Grenada's image. The action came after a U.S. Senate report named several foreign banks allegedly linked to money laundering. Of the 2700 agents in the IRS's Criminal Investigation Division, 300 (more than 10%) participated in efforts to stop offshore trust scams.

You cannot shelter money from tax by going off shore. You can make it far more difficult for creditor's to attach assets, but you still have to pay income taxes.

The best substitute for experience is being sixteen years old.

EF Moody's Financial Education Videos

Don't buy anything or do financial planning without seeing them first.

"Your tapes are a bargain education!"

Video 1. WHO CAN YOU TRUST? WHO SHOULD YOU USE? WHO KNOWS ANYTHING? WHO IS LEGAL? WHO IS ETHICAL?: It definitively covers all the issues in selecting an advisor and analyzing competency. It cannot guarantee the selection of the best advisors, but it will weed out 99% of all the ones you shouldn't hire. Includes commentary on: fees versus commissions; double dipping by planners, why you should not choose anyone  solely based on an affiliation with a national firm or organization and much, much more.

Video 2. BASIS: This tape will cover one of the least understood and most misapplied concepts of financial planning, taxation, estate planning and more. It covers both types of annuities, 401(k)s, IRAs, ROTH IRAs, mutual funds, real estate, life insurance, etc. along with details on how they work when you are alive and what the implications are when  you die. Absolutely MUST reading for consumers, advisors and all attorneys.

Video 3. FUNDAMENTALS OF INVESTING: The fundamentals are MANDATORY to an intelligent understanding of investing. Some of the issues include alpha, beta, diversification, correlation, R squared and standard deviation. Mandatory material/background for 401(k) employees since it will address stuff you should have been taught in your seminars but was normally "missed" because your instructor didn't have a clue to investing- and neither did your company. Remember, brokers have NEVER been taught the fundamentals of investing as part of licensing training. So, since they don't know the fundamentals, you have to!

Video 4. ANNUITIES: I will tell you some real life elements that have never been presented to consumers. Annuity chapter included for reference.

Video 5. ESTATE PLANNING FUNDAMENTALS: here is a concise commentary on dying intestate (no will), wills, why wills may not work, trusts, probate, who is a good attorney, and more.

Video 6. RETIREMENT: Here are the basics of what I review and why- Inflation, Investment returns, Life Expectancy, Social Security, Long Term Care, Budgeting  (a must to proper planning and risk), etc.  

Video 7. LONG TERM CARE (LTC): Coverage includes caregiving with specific reference to women, Activities of Daily Living, Alzheimers and senile dementia, contractual elements, tax deductibility (and whether you actually want it!), Medicaid and Medicare, daily costs, statistics and more that should definitely help you or a loved one make a more rational decision in selecting a LTC policy.

Video 8. SECURITIES ARBITRATION: I will explain how to go about the process, what roadblocks the Broker/Dealer firms will put up, who are the players in arbitration and whether they are knowledgeable and prepared. Direct discussion on suitability and sophisticated investor since they are the most contentious issues in arbitration.

The price per video is $34.95 plus shipping. Call 800 215 9865 for more information.