Master Financial Education
Financial Planning Daily Commentary 2016
The  most intensive and extensive on the Web
E. F. Moody


I have asked EF Moody to provide a brief example of what he has actually found on behalf of a client who engaged his services to review the insurance contracts which funded the client's estate plan. You will be amazed. In my 30 years in the business, I have never seen an authoritative, objective, prudent expert speak so clearly on the use of insurance. What Errold can do is unique in the industry.

Steven Winks

Secretary of State John Kerry - In America,  "you have a right to be (as) stupid (as) you want to be."
(But too many Americans are abusing the privilege)

"our economics are based on an unjustified faith in rational expectations, market efficiencies and the techniques of modern finance"

 Paul Volcker

“The events of the past few years have revealed limits in economists’ understanding of the economy..."

“Extreme economic events have often challenged existing views of how the economy works and exposed shortcomings in the collective knowledge of economists,”

Janet Yellen

You must not believe everything you think

Stephan Thomas Vitas

You are entitled to your own opinion. You are not entitled to your own facts.

Kevin Kind

Words  are chosen in order to influence us as manipulable objects, not to inform us as autonomous subjects.

Stephen Colbert

language intentionally designed to influence rather than inform is now ubiquitous in the business of sports and politics and markets
 Why? Because it works.

Ben Hunt

Hatred is too strong an emotion to waste on someone you don't even like

Dr. Who

Be careful who you call your friends. I'd rather have four quarters than one hundred pennies.

 Al Capone

Investing is not easy. Anyone thinking that it is, is stupid

Charlie Munger

There is no sense in being precise when you do not know what you are talking about

        John von Neumann

“ . . . there is always a well-known solution to every human problem — neat, plausible, and wrong.”

 Henry Louis “H. L.” Mencken

“As skill improves, performance becomes more consistent, and therefore luck becomes more important.”
Michael Mauboussin

'The Federal Reserve is a giant weapon that has no ammunition left'

Former Dallas Federal Reserve President Richard Fisher

The reason the professors teach nonsense is that if they didn’t, what would they teach the rest of the semester?

Teaching people formulas that don’t really work in real life is a disaster for the world.”

Charlie Munger

“The expected rarely occurs and never in the expected manner.”

– Vernon A. Walters

Nations rise and fall with the quality of their leaders, and their leaders succeed and fail based upon who they are at their core – what they believe, how they think, and what they do. Nothing shapes a leader or a society like their education or lack thereof. Let me be clear: when I refer to an education, I’m not referencing earning a degree, I’m talking about developing a rich intellect – they are not always one and the same.

Mike Myatt

 "If you see fraud and don't shout fraud, you are a fraud"

Nassim Taleb

“We really can’t forecast all that well, and yet we pretend that we can, but we really can’t.”

Alan Greenspan

Arrogance diminishes wisdom

Fail with honor rather than succeed by fraud

Obi Wan Kenobi

. I do not base my forecasts on mathematical models or some finely honed methodology, but on my sense of where the economic world stands today and where I think it might likely be in the near future.

Actually, I’m going to spend the first few pages demonstrating that the mathematical models used to forecast GDP and all sorts of interesting economic events are basically nonsense.

John Mauldin

The essence of investment management entails the management of risk, not the management of returns.

Benjamin Graham

“For the foreseeable future any risks from tracker funds are far outweighed by their ability to offer cheap, diversified funds to retail investors. The real problem is not the rise of Vanguard and the other tracker funds; it is the rotten deal that retail investors have received from the fund-management industry for far too long.”
The Economist

“If you are not confused about the economy, you don’t understand it very well.”

Charlie Munger

The least competent are the most certain of their skills

Dunning-Kruger effect

"In equity markets, high-frequency traders (HFTs) ... account for a larger share of transactions. "Indeed, trading in the U.S. nowadays is concentrated at the beginning and the last hour of the trading day, when HFTs are most active; for the rest of the day, markets are illiquid, with few transactions."


The key to success is the ability to fake sincerity.

Many humorists

“I think the reason why we got into such idiocy in investment management is best illustrated by a story that I tell about the guy who sold fishing tackle. I asked him, “My God, they’re purple and green. Do fish really take these lures?” And he said, “Mister, I don’t sell to fish.”

Charlie Munger

It’s difficult to put in the hard work of reading a great work of literature, when we spend our time writing in 140 characters. 

Mark Myatt

…the current culture of education has displaced parents as the primary instructors of children in favor of professionals who try their best to recreate the home environment at school; has the federal government rather than the community determining the structure of equal educational opportunity; has deserted the idea that memorization trains the brain; has fostered a loss of literacy by replacing the study of original writings with abridged textbooks; and has created a populace unable to engage in reasonable discourse. We have rejected the historically successful model of rigorous, classical education in favor of entertainment and job training.”
Leigh Bortins

“You cannot manage returns but you can manage risk 

Peter L. Bernstein

There is an important methodological point here — distrust conclusions reached primarily on the basis of model results. Models are estimated or parameterized on the basis of historical data. They can be expected to go wrong whenever the world changes in important ways.
Larry Summers

“What you think is much less important than how you think.”
Philip Tetlock

“Doubt is not a pleasant condition, but certainty is absurd.”


Many aspects of investing are fun, but your future wealth isn’t a game. You should manage it in the most cold-blooded fashion. Emotion, pride, ego, dreams, and nightmares have nothing to do with the process, although some investors rely on little else. It is in this sense that volatility really matters

Peter Bernstein

Make everything as simple as possible, but not simpler


“We observe the world how it is today and make these very simple projections and turn them into a terrible scenario. “This approach fails to take into account that the world is changing.”

World Bank’s Social Protection and Labor Global Practice.

The most glaring problem with current risk tolerance questionnaires is its failure to add any perspective and context to what the risk score means.

Brian Leitner

Markets are supposd to be be based on informed consumers making rational choices. Instead, the point of marketing is to create uninformed consumers who will make irrational choices often against their best interests 

Noam Chomsky

Facts do not cease to exist because they are ignored.
Aldous Huxley

A lie can travel halfway around the world while the truth is getting its boots on.

Mark Twainn

A wise man can learn more from a foolish  question that a fool can learn from a wise answer

Bruce Lee

     The power to understand and predict the quantities of the world should not be restricted to those with a freakish knack for manipulating abstract symbols...

Brett Victor

In the absence of regulation, someone will always be willing to exploit our irrational tendencies, leading to a “phishing equilibrium” in which individuals are harmed.

Phishing for Phools; George Akerlof and Robert Shiller

“Essentially, all models are wrong, but some are useful.”

 George E.P. Box

A Single Death is a Tragedy; a Million Deaths is a Statistic


There are decades where nothing happens; and there are weeks where decades happen.


Great spirits have always encountered violent opposition from mediocre minds 

Albert Einstein


World Clock by


Remember this boys and girls. Never get hacked
Still need to finish  revising programs;

11/12: Dying

11/11: Robo advisers a no no.

EFM- I am finishing a paper on how one selects the inputs to understanding what one needs for retirement. Simply being a fiduciary with no effective knowledge is a waste of time. But selecting a software program may even be worse

Morgan Lewis - The firm believes robo-advisers can act as fiduciaries under existing regulations imposed by the Securities Exchange Commission (SEC), including the Adviser’s Act, and the Department of Labor (DOL), “because they are essentially offering the same services conducted by human advisers.” Moreover, Morgan Lewis argues that the applicable standard of care is not an absolute concept, but rather a flexible one that is “defined by contract” and extends only to the “scope of service agreed to by the client.” The firm notes, “Under common law, the standard of care an agent owes to a principal varies depending on the parties’ agreement and the scope of their relationship.”

EFM- these are contracts which the client will not understand.

11/11: This could be messy.

China fixes its currency at the lowest level in six years - The People's Bank of China fixed the yuan at 6.7885, its weakest since September 2010, amid worries President-elect Donald Trump could name China as a currency manipulator.

11/10: Trump

The first 100 days will be like the unknown of Brexit. No real idea how it will work over time.

But I will tell you this- no way the U.S. will see a 4% GDP. 

Alzheimer's: Dealing with Difficult Behavior
By J B Buckley

As if it weren’t enough to deal with forgetfulness and confusion while caring for your loved-one with Alzheimer’s, but aggressiveness, wandering and paranoia can really put you over the edge. Managing your loved-one’s difficult behavior is your true testament of love and devotion. You know it isn’t their fault, it is their disease that is making them scream, cry or yell terrible things out at you. Who ever said patience is a virtue, didn’t care for a loved-one with Alzheimer’s or dementia. Perhaps a caregiver’s only defense is to understand how to react to difficult behaviors and be ready for them.

Difficult behaviors can be broken down into the following categories: Wandering, Sleeping and Eating Problems, Agitation, Paranoia and difficulty with personal tasks. This is not to say these categories are the only forms of behavioral problems displayed by people living with Alzheimer’s, but their remedies may intersect other problems.

Wandering is not an uncommon hallmark of Alzheimer’s disease or dementia. Stress in the variety of noise, clutter or crowding can cause your loved-one to wander. The best idea is to reduce excess stress. A person living with Alzheimer’s disease should be settled in a quiet, clean, and spacious environment. This will eliminate many of the unwanted stressors, which could cause your loved-one to wander. Other reasons why your loved-one may wander include: Feelings of being lost, boredom, need to use the restroom or medication side effects.

In order to prevent your loved-one from feeling lost or foreign to his or her environment, provide them with familiar objects and reassure them quite frequently that they are at home or in a safe place. Maybe a family photo or an award he or she has won always jogs their memory so keep it close by. If your loved-one displays signs of boredom, give them a task of limited difficulty. This will keep them entertained but won’t frustrate them. Folding laundry is a great activity for people living with Alzheimer’s or dementia.

It is possible that your loved-one is wandering because they need to use the bathroom. In which case, place elaborate signs or pictures on bathroom doors to help guide them. Also, it is a good idea for you to implement regular toilet times. This will keep both of you on schedule. If your loved-one is wandering due to medication side effects, contact their physician to initiate a change in prescription or to lower the dosage. Wandering can be a dangerous behavior. Caregivers should contact their local Alzheimer’s Association to obtain information about ‘The Wanderers Program’ in their area.

People living with Alzheimer’s or dementia often experience sleeping and eating problems. Common causes for these problems include: discomfort, medication, pain, dehydration, depression and excessive sleeping or eating.

Feeling discomfort can sometimes not be conveyed by your loved-one depending upon the severity of the disease but it can cause eating and sleeping disturbances. Frequently monitor your loved-one’s room temperature, lighting, noise level, and chair or bed position. If you think your loved-one’s medications could be curbing his or her appetite or ability to sleep, speak to their doctor about changing or eliminating prescriptions.

Pain can be a factor in eating or sleeping disturbances. Again, sometimes a person with Alzheimer’s or dementia cannot express their feelings; if you sense a change in appetite or sleeping pattern has suddenly occurred without due cause, set an appointment for a medical examination. Dehydration is a known factor of sleeping and eating disturbances. Make sure your loved-one is drinking plenty of water. Place a pitcher filled with water near your loved-one at all times. Remind them it is there frequently and check to make sure it remains somewhat full. Too full can result in another problem- slip and falls.

If you feel your loved-one is showing signs of depression, have him or her evaluated by their physician. Anti-depressants or bedtime sedatives may be a productive treatment option. Depression can also cause excessive sleeping or eating. In which case, increase their exposure to light and reduce or eliminate nap time or snack time.

Behavioral problems are defined as patient responses, which are considered noxious to staff, other patients, the patient himself, or family (Burgio, Jones, Butler, & Engel, l988). Behavioral problems have a profound impact on quality of care, staff, morale and the day-to-day operation of the long-term care institution

11/9: Employee retirement confidence

11/9: Figures for me. I need to retain the volatility.
Otherwise, just have fun with it.

11/9: “If a homeowner doesn’t follow the rules in HAMP they get knocked out of the program. If a bank doesn’t follow they still get paid by Treasury.”

11/9: Why should we keep on paying????

Wells Fargo is eligible for up to $1.5 billion in bailout funds over the next seven years. JPMorgan and Bank of America could receive $1.1 billion and $964 million respectively.

The continuous flow of funds is a remnant of the $700 bailout effort, known as the Troubled Asset Relief Program or TARP, put in place during the financial crisis. Some of that money, about $28 million, was carved out to help distressed homeowners by paying banks to lower their interest rates and monthly payments.

The program, the Home Affordable Modification Program, has undergone several revamps over the last few years and fallen short of helping the 3 million to 4 million homeowners the Obama administration initially hoped. But it continues to operate -- HAMP will accept its last homeowner application at the end of this year -- and big banks continue to be paid for helping.

“If a homeowner doesn’t follow the rules in HAMP they get knocked out of the program. If a bank doesn’t follow they still get paid by Treasury.”


The State of Retirement for Small Business Owners: Not Good, Says BMO

Three-quarters of small business owners have less than $100,000 saved for retirement, a survey by BMO Wealth Management found. Read more

11/9: Rich getting richer


Life After Caregiving

By Sandra O’Connell

The only way for me to survive is for the two people I love the most to die.” When I wrote those words, I was unable to foresee a future without the endless demands of caregiving. At the time, my beloved husband, Rev. Ralph Minker, and my mother were each suffering from a form of dementia. He was diagnosed with Alzheimer’s disease at age 69; Mom had vascular dementia, not uncommon for someone in her ninth decade. In the midst of the great balancing act that is the caregiver’s reality, another kind of life seems impossible. And when it is over (YES, caregiving does end), there are new challenges in finding a life not consumed by your loved one’s illness.

The intense pain and anguish of those years is behind me now. A “new normal” has emerged from the days when caregiving ended. Now I find contentment, if not joy. I laugh more than I cry. And at last, I have recovered my health. The journey has not been a straight line.

Detours abound for depression, resentment, loneliness and grief. Finally, there come moments—hours and then days, and at last, weeks and months—when the stress of those years does not dominate my life. Perhaps my experience will help those trying to find their way to a new normal after being a caregiver. There is no right or wrong way—each journey is individual. I only suggest a few guidelines to adapt as your own. 

The overwhelming feeling of most caregivers in the initial stage of loss is not grief, but relief. When my husband died, the days of repeated questions, skirmishes over meals and getting dressed, the sadness of watching his growing confusion, and the nights of interrupted sleep ended. For caregivers of someone with memory issues, relief will often trump grief. The person you once knew has been fading away for several years. With illnesses such as stroke or cancer, there is relief that the physical suffering is over, mixed with your loss. Most approaches to grief counseling don’t cover the unique feelings that come after years of caregiving.

I did not find it particularly useful, although a few of the books did offer helpful nuggets of advice. But then, so was lying on the couch in a semi-catatonic state for hours on end, although after a while that did get boring. It helps to not add guilt over feelings of relief to the grieving process. Eventually the pain of grief abates. Here are my suggestions to help the process:

Grief, however, does not vanish. Occasionally, without warning, like an errant wave, the pain of loss will tromp you. Each successive wave tends to subside more quickly and leave less damage.

Your body has most likely paid a price for your turn at caregiving: high blood pressure, incipient heart problems, rising sugar levels, weight gain (or loss), poor sleep and depression are among the calling cards it may leave behind. Now is the time to put YOU at the top of the priority list. Even if you sought support, went to yoga, took walks and had breaks, the stress of long-term caregiving wears away at your psyche and your body. No one with any real-world experience will deny what the researchers have well documented: long-term caring for a person with serious illness is a source of chronic stress, which is not good for your health.

No need to attack everything at once. I set small goals for weight loss and a moderate increase in exercise. After three years of effort, which included multiple ups and downs (and losing 30 pounds), I was able to stop the cholesterol medication and relinquish anti-depressants. Each success fueled my ability to be more active and take on a new challenge, such as volunteering at a local museum. In turn, feeling healthier gave me enough energy to do what is truly healing: engage with my community, develop new interests and friends, and spend time with people who care about you.

After the death of her husband and daughter, Joan Didion wrote in The Year of Magical Thinking, “I wanted to scream. I wanted my husband back.” Magical thinking, indeed. We all want our life back, the life we had before cancer, before the stroke, before ALS, before Alzheimer’s. Building a life with meaning and relationships is the challenge faced by each person after caregiving. Accept that it will not be the life you enjoyed before the illness. If you are still working, your time will quickly be consumed by the rhythm of daily life. You are changed in some ways.

While not faced with reconstructing your life, you should pay more attention to your own needs. For others, post-caregiving will involve major change, such as dealing with reduced finances, perhaps moving to a new home or new city.

Take the time to make these decisions with care. Focus on what you want and need, not others’ expectations. To re-engage with life, ask yourself what would:

Eventually, day-by-day and step-by-step, a new normal will emerge. The experience of caregiving will always be a part of who you are, but the experience needn’t define your future.


AMA Caregiver Self-Assessment Questionnaire
Bereavement after Caregiving, by Schulz, Hebert, and Boerner. Pamphlet from National Institutes of Health
Alzheimer’s Association Caregiver Center


Yes, You Should Worry About Market Corrections

11/8: The reason why a lot of small investors will be sent adrift

The median IRA account is $25,000. If a planner charges a level fee of 100 basis points for his or her advice, the median IRA account will generate $250 a year in revenue. The CFP Board has yet to explain how a CFP certificant, for $250, can provide a service that complies with the DoL’s conflict of interest rules, is based on the six-step financial planning process, meets the CFP Board’s Practice Standards and generates enough profit to offset the significantly increased liability associated with the DoL’s new rules.

11/7: LTC

 Lincoln found that only 19 percent of the survey participants who said they had talked about long-term care planning with a financial advisor had talked about life insurance with a chronic illness rider. Only 17 percent had talked with an advisor about annuity-LTC hybrids, and just 13 percent had discussed life-LTC hybrids.

One lingering barrier may simply be that some of the advisors who do have an interest in long-term care planning lack the professional certifications they need to talk about other options,

EFM-that would be a breach for a retirement planner/advisor. Since it is an almost certain cost, it needs to be accounted for at least in the later years. 

  1. Gender, competition and performance:Evidence from real tournaments




Peter Backus (University of Manchester& Barcelona Institute of Economics (IEB)) ; María Cubel (Universitat de Barcelona) ; Matej Guid (University of Ljubljana) ; Santiago Sánchez-Pages (Universitat de Barcelona) ; Enrique Lopez Manas (Google Developer Expert)

There is a growing literature looking at how men and women respond differently to competition. We contribute to this literature by studying gender differences in performance in a high-stakes and male dominated competitive environment, expert chess tournaments. Our findings show that women underperform compared to men of the same ability and that the gender composition of games drives this effect. Using within player variation in the conditionally random gender of their opponent, we find that women earn significantly worse outcomes against male opponents. We examine the mechanisms through which this effect operates by using a unique measure of within game quality of play. We find that the gender composition effect is driven by women playing worse against men, rather than by men playing better against women. The gender of the opponent does not affect a male player’s quality of play. We also find that men persist longer against women before resigning. These results suggest that the gender composition of competitions affects the behavior of both men and women in ways that are detrimental to the performance of women. Lastly, we study the effect of competitive pressure and find that players’ quality of play deteriorates when stakes increase, though we find no differential effect over the gender composition of games.


Competition, Gender, Stereotype threat, Chess


D03 J16 J24 J70 L83 M50


11/7 “Because there are worse states than death.”

Advances in medical therapies, in addition to their immense benefits, have changed death to dying — from an instantaneous event to a long, drawn-out process. Death is preceded by years of disability, countless procedures and powerful medications. Only one in five patients is able to die at home. These days many patients fear what it takes to live more than death itself.

Some doctors skirt the question of assisted suicide through opiate prescriptions, which are almost universally prescribed for patients nearing death. Even though these medications can slow down breathing to the point of stoppage, doctors and nurses are very comfortable giving them, knowing that they might hasten a “natural” death.

......Some doctors skirt the question of assisted suicide through opiate prescriptions, which are almost universally prescribed for patients nearing death. Even though these medications can slow down breathing to the point of stoppage, doctors and nurses are very comfortable giving them, knowing that they might hasten a “natural” death.

11/7: I'm so good

Studies have revealed significant overconfidence in the judgments of scientists, lawyers, engineers, doctors and those in other professions. The University of Pennsylvania psychologists Philip Tetlock and Barbara Mellers collected more than 25,000 forecasts from people whose job it was to anticipate how the future would unfold. All demonstrated remarkable overconfidence. When they were 80 percent sure of their predictions, they were correct less than 60 percent of the time.

In a 2012 study from the State Street Center for Applied Research, in which investors were asked about their financial acumen.

“Nearly two-thirds rated their financial sophistication as advanced,” said Mirtha Kastrapeli, a senior research analyst at State Street. “This seemed a little optimistic, so in our 2014 study, The Folklore of Finance, we ran a financial literacy exam. The average score was just 61 percent, barely a passing grade. This disconnect between actual and perceived financial sophistication, she explains, is evidence of how widespread the overconfidence bias is.”

study participants were directed to make predictions about real-life events, then were asked periodically to recall the events and their predictions after the fact. His findings? Participants consistently misremembered their forecasts, in ways that made them look smarter. Too often we look back not in anger but in awe, at least of our own capacities.

11/7: Cake, a start-up in Boston created at M.I.T.’s Hacking Medicine conference’s Grand Hack in 2015, helps users decide end-of-life preferences, like the extent of life support or what to do with their Facebook page. It then stores the choices in the cloud and shares them with those who are designated.

11/7: Yep, biodegradable is what I was looking for
the person could arrange for a biodegradable burial.

11/7: There are some investors/analysts that beat the market. But they probably will stay quiet about their success.

Despite the spectacular growth of index funds — passive investment vehicles that track market averages and minimize transaction costs — millions of amateur investors continue to actively buy and sell securities regularly. This despite overwhelming evidence that even professional investors are no more likely to beat the market than monkeys throwing darts at securities listings.

11/7: Parting ways

Parting, founded about a year ago in Los Angeles, an online directory of funeral homes searchable by ZIP code, which allows users to compare prices and services, and view the homes’ locations.

11/7: Willing, which provides state-specific estate planning documents online that can be updated any time,

  1. Prediction Markets: Reality and Theory




Daniella Acker

Data on individual trades in prediction markets relating to the 2008 and 2012 US Presidential elections reveal that traders vary enormously in their behavior. This contrasts with the standard prediction-market models, which assume relatively homogeneous participants who differ only in their beliefs and wealth. We show that risk-lovers have particularly strong distortionary effects on market outcomes even when beliefs are symmetrically distributed around the truth. Simulations of a model which allows traders to have different motives and tastes for risk indicate that including such traders produce the market outcomes we observe, such as herding, persistent contrariness, a skewed profits' distribution and favorite-long-shot bias. The attraction of such markets to risk-lovers means that caution must be exercised when using prediction-market prices for forecasting


Prediction markets, risk-lovers, herding and contrariness, favorite-long shot bias.


G10 G12 G14 G17


11/6: Priming   

Long article, intense and mandatory. You should see/recognize  the application on what financial articles provide. 

 Priming studies suggest that decisions can be influenced by apparently irrelevant actions or events that took place just before the cusp of choice.

The idea that the same experiments always get the same results, no matter who performs them, is one of the cornerstones of science’s claim to objective truth. If a systematic campaign of replication does not lead to the same results, then either the original research is flawed (as the replicators claim) or the replications are (as many of the original researchers on priming contend). Either way, something is awry.

Academic scientists readily acknowledge that they often get things wrong. But they also hold fast to the idea that these errors get corrected over time as other scientists try to take the work further. Evidence that many more dodgy results are published than are subsequently corrected or withdrawn calls that much-vaunted capacity for self-correction into question. There are errors in a lot more of the scientific papers being published, written about and acted on than anyone would normally suppose, or like to think.

Various factors contribute to the problem. Statistical mistakes are widespread. The peer reviewers who evaluate papers before journals commit to publishing them are much worse at spotting mistakes than they or others appreciate. Professional pressure, competition and ambition push scientists to publish more quickly than would be wise. A career structure which lays great stress on publishing copious papers exacerbates all these problems. “There is no cost to getting things wrong,” says Brian Nosek, a psychologist at the University of Virginia who has taken an interest in his discipline’s persistent errors. “The cost is not getting them published.

Understanding insignificance

In 2005 John Ioannidis, an epidemiologist from Stanford University, caused a stir with a paper showing why, as a matter of statistical logic, the idea that only one such paper in 20 gives a false-positive result was hugely optimistic. Instead, he argued, “most published research findings are probably false.”

A statistically powerful study is one able to pick things up even when their effects on the data are small. In general bigger studies—those which run the experiment more times, recruit more patients for the trial, or whatever—are more powerful. A power of 0.8 means that of ten true hypotheses tested, only two will be ruled out because their effects are not picked up in the data; this is widely accepted as powerful enough for most purposes. But this benchmark is not always met, not least because big studies are more expensive. A study in April by Dr Ioannidis and colleagues found that in neuroscience the typical statistical power is a dismal 0.21; writing in Perspectives on Psychological Science, Marjan Bakker of the University of Amsterdam and colleagues reckon that in that field the average power is 0.35.

Unlikeliness is a measure of how surprising the result might be. By and large, scientists want surprising results, and so they test hypotheses that are normally pretty unlikely and often very unlikely. Dr Ioannidis argues that in his field, epidemiology, you might expect one in ten hypotheses to be true. In exploratory disciplines like genomics, which rely on combing through vast troves of data about genes and proteins for interesting relationships, you might expect just one in a thousand to prove correct.

With this in mind, consider 1,000 hypotheses being tested of which just 100 are true (see chart). Studies with a power of 0.8 will find 80 of them, missing 20 because of false negatives. Of the 900 hypotheses that are wrong, 5%—that is, 45 of them—will look right because of type I errors. Add the false positives to the 80 true positives and you have 125 positive results, fully a third of which are specious. If you dropped the statistical power from 0.8 to 0.4, which would seem realistic for many fields, you would still have 45 false positives but only 40 true positives. More than half your positive results would be wrong.

..........Victoria Stodden, a statistician at Columbia, speaks for many in her trade when she says that scientists’ grasp of statistics has not kept pace with the development of complex mathematical techniques for crunching data. Some scientists use inappropriate techniques because those are the ones they feel comfortable with; others latch on to new ones without understanding their subtleties. Some just rely on the methods built into their software, even if they don’t understand them

The number of retractions has grown tenfold over the past decade. But they still make up no more than 0.2% of the 1.4m papers published annually in scholarly journals. Papers with fundamental flaws often live on. Some may develop a bad reputation among those in the know, who will warn colleagues. But to outsiders they will appear part of the scientific canon.

As well as not spotting things they ought to spot, there is a lot that peer reviewers do not even try to check. They do not typically re-analyse the data presented from scratch, contenting themselves with a sense that the authors’ analysis is properly conceived. And they cannot be expected to spot deliberate falsifications if they are carried out with a modicum of subtlety.

Fraud is very likely second to incompetence in generating erroneous results, though it is hard to tell for certain. Dr Fanelli has looked at 21 different surveys of academics (mostly in the biomedical sciences but also in civil engineering, chemistry and economics) carried out between 1987 and 2008. Only 2% of respondents admitted falsifying or fabricating data, but 28% of respondents claimed to know of colleagues who engaged in questionable research practices.


To Rebalance or Not to Rebalance: A Statistical Comparison of Terminal Wealth of Fixed-Weight and Buy-and-Hold Portfolios


We compare expected value and variance of terminal wealth for two simple but distinctly different portfolio approaches: fixed-weight with regular rebalancing and buy-and-hold with no rebalancing. We carry out statistical analysis under a variety of return assumptions and portfolio settings. For long-only portfolios, we show buy-and-hold approach leads to higher expected terminal wealth but also higher variance of terminal wealth. When there are serial correlations in asset returns, we demonstrate quantitatively that for long-only portfolios mean-reverting returns are relatively more favorable to fixed-weight portfolios whereas trending returns are relatively more favorable to buy-and-hold portfolios. For long-short portfolios, however, the effects of portfolio rebalancing are markedly different from long-only portfolios, mainly due to portfolio leverage. For example, we prove that fixed-weight approach often leads to higher expected value of terminal wealth. But it may also lead to higher variance of terminal wealth although it is not always the case. Furthermore, the effects of serial return correlations on long-short portfolios could be opposite of the effects on long-only portfolios. The overall results suggest that theoretically fixed-weight portfolios with portfolio rebalancing are more likely to have better risk-adjusted terminal wealth than buy-and-hold portfolios.

11/6: Sharpe ratio

The most famous return - versus risk measurement, the Sharpe ratio represents the added value over the risk free rate per unit of volatility risk.


From Silicon Valley to the South Sea, bubbles can swell anywhere. Today, it’s arguably
the turn of the developed world’s artificially overheated government bond markets.
Government bond market valuations are at extremes, and yet the buying persists. The
trend is provoking fears that bond yields are entering bubble territory. Negative rates, after
all, virtually guarantee that investors will earn a negative nominal return on their bonds.
However, bubbles are not defined by valuation alone. We also need to consider four
elements that tend to be present in a speculative market environment
11/2: Rebalancing


Let’s now consider how rebalancing has played out over the past 46 years, from Jan. 1, 1970, to Dec. 31, 2015. Specifically, we will examine the performance of a seven-asset portfolio that includes large-cap U.S. stocks, small-cap U.S. stocks, non-U.S. developed stocks, real estate, commodities, U.S. bonds and cash. Each asset class was equally weighted with an allocation of 14.29%.

One version of the seven-asset portfolio was never rebalanced, and the other version was rebalanced annually at the end of each year. The big question: Did rebalancing produce a performance advantage? To determine this, we measured the performance of both seven-asset portfolios over 27 rolling 20-year periods to control for time-period bias. Taxation was not considered, which implies that the accounts in this analysis were tax-sheltered.

The first 20-year period was from Jan. 1, 1970, to Dec. 31, 1989. A total of $7,000 was invested into each seven-asset portfolio at the start of each year (representing $1,000 into each). The ending value of the non-rebalanced portfolio on Dec. 31, 1989, was $776,509, compared to $786,952 for the annually rebalanced portfolio, producing a rebalancing advantage of $10,443.

Over the next rolling 20-year period (from 1971 to 1990), annual rebalancing produced a $36,749 advantage over the non-rebalanced portfolio (see graph, Rebalancing by the Numbers).

We observe a rebalancing advantage in 78% of the 27 rolling 20-year periods. The average advantage was $13,722. The largest rebalancing advantage was $36,749 over the 20-year period from 1971 to 1990. The largest rebalancing disadvantage of -$24,631 occurred during the period from 1980 to 1999.

11/2: 5% return over 10 years

Research Affiliates looked at the default settings of 11 retirement calculators, robo-advisers, and surveys of institutional investors. Their average annualized long-term expected return? 6.2%. After 1.6 percentage points were shaved off to allow for a decade of inflation, the number dropped to 4.6%, which was rounded up

So on average we all expect a 5%; the report tells us we should start getting used to disappointment. To show how a mainstream stock and bond portfolio would do under Research Affiliates’ 10-year model, the report looks at the typical balanced portfolio of 60% stocks and 40% bonds. An example would be the $29.6 billion Vanguard Balanced Index Fund (VBINX). For the decade ended Sept. 30, VBINX had an average annual performance of 6.6%, and that’s before inflation. Over the next decade, according to the report, “the ubiquitous 60/40 U.S. portfolio has a 0% probability of achieving a 5% or greater annualized real return.”

Splitting a portfolio evenly among U.S. large-cap equities, U.S. small-cap equities, emerging-market equities, short-term U.S. Treasuries, and a global core bond portfolio produced an expected return of 2.3%. Taking 20% out of short-term U.S. Treasuries and putting 10% of that into emerging-market currencies, and 10% into U.S. Treasury Inflation Protected Securities, lifted the return to 2.7%. Shifting the 20% U.S. large-cap chunk into 10% commodities and 10% high-yield pushed the expected return up to 2.9%. Not a pretty picture.

11/2: Global Asset Classes: 10-Year Expected Returns​                  Keep this handy!!!!!!!!!!!!!!

Note that is the returns AFTER subtracting inflation.

11/2: Risk profiles and the lack thereof

Executive Summary

The requirement that a financial advisor must “Know Your Client”, including his/her tolerance for taking risks, is a universal requirement amongst investment regulators around the world.

Yet a recent survey of the global landscape for best practices in risk profiling by Canadian financial planning software provider PlanPlus reveals a disturbing lack of quality risk tolerance questionnaires (RTQ) and support tools for financial advisors. In part, this appears to be driven by the fact that regulators articulate the principle of “know your client’s risk tolerance” but provide little guidance on how it should be done to ensure that it’s right. And to a large extent, the problem stems from the reality that neither regulators, academics, nor advisors themselves, even have agreement on exactly what key factors of a client’s “risk profile” should be evaluated in the first place.

Nonetheless, a growing base of academic research is beginning to articulate a clear risk profiling framework, from recognizing the separation of risk tolerance from risk capacity, the role of risk perception (and misperceptions) on client behavior, and how “risk composure” (the stability of a client’s perceptions of risk) itself can vary from one cline to the next. Of course, just because these factors can be identified doesn’t make them easy to measure with a questionnaire, especially when it comes to “subjective” abstract traits like risk tolerance. On the other hand, the research suggests that financial advisors just trying to interview clients about risk may not be doing a better job, either.

In the end, the optimal approach may eventually be a combination of both, where psychometrically designed risk tolerance questionnaires assess a client’s willingness to pursue risky trade-offs, and the financial advisor can then assess the client’s risk capacity, financial goals, and ability to achieve their objectives given the constraint of their tolerance. And ultimately, an effective risk tolerance questionnaire may not only make it easier to properly match investment solutions to a client’s needs, but also make it easier to manage client risk perceptions and investment expectations on an ongoing basis. Or at least identify which clients are most likely to be challenged when the next bear market comes along!

PlanPlus Searches For Global Best Practices In Investment Risk Profiling

Assessing a client’s risk tolerance, as a part of providing investment management advice or investment product recommendations, is universally recognized as essential by regulators around the globe.

Notably, though, there’s a wide range of perspectives amongst regulators about what, exactly, “risk tolerance” actually is, how it should be measured, what factors are and are not relevant, and how those factors should be weighted when evaluating if an investment recommendation was appropriate or not.

To understand the landscape, the Ontario Securities Commission of Canada engaged PlanPlus (a leading financial planning software provider in Canada that has a global footprint, albeit little presence in the US) to assemble a research team that would compare Canadian practices on risk tolerance assessments to the best practices globally.

Unfortunately, though, what the researchers found was that most regulators around the world are “principles-based” in requiring that advisors understand and assess the client’s risk profile – an essential step fulfill any advisor’s “Know Your Client” (KYC) obligations – yet provide little guidance about how, exactly, that should be done.

Of course, if there was a clear and universally accepted academic framework for evaluating risk tolerance, this might not necessarily be an issue. For instance, in the U.S., an investment fiduciary has an obligation to provide the advice that a prudent expert would have given a similar client in similar circumstances. And although this principles-based “prudent expert” standard isn’t explicitly defined, the courts have recognized it to mean that the expert should have followed the principles of the academic Modern Portfolio Theory framework. Yet when it comes to risk tolerance, regulators have provided a principles-based expectation and obligation on advisors to make an assessment, but without any acknowledgement of the missing academic framework that would/should clarify how advisors actually do it.

In fact, the researchers found that there’s a surprising paucity of any academically research to validate most key concepts associated with a client risk profile. The situation is further complicated by the fact that there isn’t even clear agreement about what all the relevant factors are that should be considered, not to mention how they should be incorporated together to make a recommendation. And what little research has been done is difficult to bring together, because there isn’t even a consistent usage of terms regarding risk tolerance and a client’s overall risk profile!

EFM- I do have one. Once I finish with funding, it will grasp the reality of risk.

11/2: Mutual fund assets leaving the UK. A precursor to bad times for leaving the Euro

"Post Brexit, international investors continue to head for the exit. Since the Brexit vote, holdings of the UK have fallen by more than 100 basis points. Relative to history (on a z-score basis), the UK is now the most out of favour region globally.


"The Competitive Effects of Online Education" Fee Download
NBER Working Paper No. w22749

DAVID DEMING, Harvard University
Cornell University - Department of Policy Analysis and Management, National Bureau of Economic Research (NBER)
United States Military Academy, Cornell University - Department of Policy Analysis and Management

We study the impact of online degree programs on the market for U.S. higher education. Online degree programs increase the competitiveness of local education markets by providing additional options in areas that previously only had a small number of brick-and-mortar schools. We show that local postsecondary institutions in less competitive markets experienced relative enrollment declines following a regulatory change in 2006 that increased the market entry and enrollment of online institutions. Impacts on enrollment were concentrated among private non-selective institutions, which are likely to be the closest competitors to online degree programs. We also find increases in per-student instructional spending among public institutions. Our results suggest that by increasing competitive pressure on local schools, online education can be an important driver of innovation and productivity in U.S. higher education.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at

11/1 Factor investing

Factor investing leans on a particular trait to pick stocks, such as relative cost, momentum, or low volatility, which research shows outperforms the general market. But multifactor investing rolls several such strategies into one product, and could prove to be the next big thing in investing

Assets held in multifactor ETFs have grown 8% in the past year to $251 billion invested across 299 ETFs,

10/31: Will the bad news ever stop?????

Japan's industrial output was unchanged September, falling short of forecasts, in a worrying sign for the economy as the BOJ board gathers to consider monetary policy. Separate data showed retail sales fell more than expected last month, dropping 1.9% from a year earlier, providing further evidence that private consumption remains a drag on growth.

EFM- I said that Japan would get better after the fiascos of the late 80s. After all, it was a progressive country that would just rearrange its economy. Over 20 years later and.............nothing.

  1. Gender Interaction in Teams: Experimental Evidence on Performance and Punishment Behavior




Seeun Jung (ESSEC Business School - Essec Business School, PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC), PSE - Paris School of Economics) ; Radu Vranceanu (Economics Department - Essec Business School)

This paper reports results from a real-e ort experiment in which men and women are paired to form a two-member team and asked to execute a real-eff ort task. Each participant receives an equal share of the team's output. Workers who perform better than their partner can punish him/her by imposing a fi ne. We manipulate the teams' gender composition (man-man, man-woman, and woman-woman) to analyze whether an individual's performance and sanctioning behavior depends on his/her gender and the gender interaction within the team. The data show that, on average, men perform slightly better than women. A man's performance will deteriorate when paired with a woman, while a woman's performance will improve when paired with a woman. When underperforming, women are sanctioned more often and more heavily than men; if sanctioned, men tend to improve their performance, while women's performance does not change.


Gender studies,Real-e ort task,Team production,Performance,Punishment,Discrimination


  1. Altruistic and risk preference of individuals and groups




Yoshio Kamijo (School of Economics and Management, Kochi University of Technology) ; Teruyuki Tamura (School of Economics and Management, Kochi University of Technology)

This study examines whether attitudes toward risk and altruism are affected by being in a group or being alone. Subjects in our experiment were requested only to show their faces to other members without any further communication, differing from previous studies. In experiments of both anonymous investments and donations, we found that subjects who made decisions in a group offered significantly lower amounts than individuals who made decisions alone, even controlling for individuals' risk and altruistic preferences. Our results indicate that people are more risk averse and self-interested when they are in a group.


Group decision, Altruism, Decision under risk


C91 C92 D81


10/30: Bonds are going no place

The current bull market in bonds dates back to September of 1981. U.S. Treasury 30-year bonds yielded an astounding 15.32% then. In October of that year, U.S. Treasury 10-year notes reached their high yield of 14.68%. With just a few blips along the way, it has pretty much been all downhill for fixed income ever since — for a remarkable 35 years

 87% of its 815 CFA participants believe that owning at least some types of fixed income no longer makes sense.

To put a finer point on it, 30% of respondents believe all bonds are in bubble territory. Another 24% see a bubble in sovereign bonds and at least one other class of fixed income; 14% of poll participants think that only high-yield bonds are over-inflated. When combined with other classes of bonds, 54% of poll respondents view high-yield bonds as in bubble territory. Meanwhile, only 13% don't see a fixed-income bubble anywhere.

Since the start of the great bond bull market (1981-2015), investors in 10-year U.S. Treasury notes have, on average, earned well over 8.5% annually in an instrument that is, at least in definitional terms, risk free. Only five of those 35 years have seen negative returns. Long-bond investors have done substantially better.

But the real risks of U.S. government paper are all too apparent to current investors. We may continue to assume no default risk (despite what has been said during the current political campaign), but interest rate risk, inflation risk and duration risk are in fact real risks.

If we look 10 and 15 years out from historical rates at levels similar to those at present, annual returns have been less than 2% per year, on average, even before inflation. The average and median real (inflation-adjusted) returns for yields under 3% over 10- and 15-year periods are actually negative while even the best performing years are only slightly positive. Clearly, the next 35 years are very unlikely to be nearly so kind to investors in long-term bonds as the previous 35 years have been.


The Academic Failure to Understand Rebalancing

10/30: Michael Edesess and Dalbar


10/30: returns

Equity prices, as measured by the price-earnings ratio of the S&P 500 stocks, are now nearly 60% above their historical average. The price of the 30-year Treasury bond is so high that it implies a yield of about 2.3%; given current inflation expectations, the yield should be about twice as high. Commercial real-estate prices have been rising at a 10% annual pace for the past five years

These inflated asset prices reflect the exceptionally easy monetary policy that has prevailed for almost a decade. In that ultra-low-interest environment, investors have been reaching for yield by bidding up the prices of equities and other investment assets.

US households now own $21 trillion of equities, so a 35% decline in equity prices to their historic average would involve a loss of more than $7.5 trillion. Pension funds and other equity investors would incur further losses. A return of real long-term bond yields to their historic level would involve a loss of about 30% for investors in 30-year bonds and proportionately smaller losses for investors in shorter-duration bonds. Because commercial real-estate investments are generally highly leveraged, even relatively small declines in prices could cause large losses for investors.

The fall in household wealth would reduce spending and cause a decline in GDP. A rough rule of thumb implies that every $100 decline in wealth leads to a $4 decline in household spending. The return of asset prices to historic levels could therefore imply a decline of $400 billion in consumer spending, equal to about 2.5% of GDP, which would start a process of mutually reinforcing declines in incomes and spending leading to an even greater cumulative impact on GDP.

10/30: DOL RULE

A new survey claims that most advisors are "confused" about the DOL rule. The majority of advisors manage retirement accounts: 52% say more than half of their customers are retirement clients, 20% have between one-fifth and one-half of their clients in retirement accounts, and 6% only serve retirement investors, according to a survey of 300 Massachusetts investment advisors conducted by the state’s securities regulator. But only 61% of respondents believe the rule will have an impact on them, according to the survey. The survey demonstrates a need for training advisors on the rule, claims the regulator, which promised to do the job

10/30: A comfortable retirement?????

the report looks at the typical balanced portfolio of 60% stocks and 40% bonds. An example would be the $29.6 billion Vanguard Balanced Index Fund (VBINX). For the decade ended Sept. 30, VBINX had an average annual performance of 6.6%, and that’s before inflation. Over the next decade, according to the report, “the ubiquitous 60/40 U.S. portfolio has a 0% probability of achieving a 5% or greater annualized real return.”

Overall  the report hopes people will  learn   that the high returns of the past came with a price: lower returns in the future.

“If the retirement calculators say we’ll make 6% or 7%, and people saved based on that but only make 3%, they’re going to have a massive shortfall. “They’ll have to work longer or retire with a substantially different standard of living than they thought they would have.”

Splitting a portfolio evenly among U.S. large-cap equities, U.S. small-cap equities, emerging-market equities, short-term U.S. Treasuries, and a global core bond portfolio produced an expected return of 2.3%. Taking 20% out of short-term U.S. Treasuries and putting 10% of that into emerging-market currencies, and 10% into U.S. Treasury Inflation Protected Securities, lifted the return to 2.7%. Shifting the 20% U.S. large-cap chunk into 10% commodities and 10% high-yield pushed the expected return up to 2.9%.

10/30: Correlations

10/30: We are dying faster

The average 65-year-old American man should die a few months short of his 86th birthday, while the average 65-year-old woman lives two years longer, barely missing age 88.

This new data turns out to be a disappointment. Over the past several years, the health of Americans has deteriorated—particularly that of middle-aged non-Hispanic whites. Among the culprits are drug overdoses, suicide, alcohol poisoning, and liver disease, according to a Princeton University study issued in December.

Partly as a result, the life expectancy for 65-year-olds is now six months shorter than in last year’s actuarial study. Longevity for younger Americans was also affected: A 25-year-old woman last year had a 50/50 chance of reaching age 90.

This year, she is projected to fall about six months short. (The average 25-year-old man is expected to live to 86 years and 11 months, down from 87 years and 8 months in last year's estimates.) Baby boomers, Generation X, and yes, millennials, are all doing worse.

10/28 But it is the quality not quantity

Studies of life expectancy in  the U.S. support the observation that people are leading longer, more active lives.  Women who reach age 65 have an average life expectancy of 86; men who reach age 65 have an average life expectancy of 84.  One in four 65 year-olds can expect to live past 90, one in ten past 95.  Approximately half of 65 year-old couples can expect one spouse to live to age 90; about one in five couples can expect one spouse to live to age 95. 


"Who Has Terror Angst? Perceptions of the Effects of Terror on the World Economy" Free Download
CESifo Working Paper Series No. 6049

DORINE BOUMANS, CESifo (Center for Economic Studies and Ifo Institute)
CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute
University of Freiburg - Department of Economics

We examine sources of biased terror perceptions. In particular, we investigate how international experts of the IFO World Economic Survey assess the effect of terror on the world economy and the economy of their own country. The results show that respondents from terror stricken countries have more favorable views on the effect of terror on the word economy (but not on their own countries). Male respondents and those from democratic and richer countries are likewise more optimistic.

10/28: Market History

10/28: 5%??????

Research Affiliates.The company looked at the default settings of 11 retirement calculators, robo-advisers, and surveys of institutional investors. Their average annualized long-term expected return? 6.2 percent. After 1.6 percent was shaved off to allow for a decade of inflation1, the number dropped to 4.6 percent, which was rounded up.

For the decade ended Sept. 30, VBINX had an average annual performance of 6.6 percent, and that’s before inflation. Over the next decade, according to the report, “the ubiquitous 60/40 U.S. portfolio has a 0% probability of achieving a 5% or greater annualized real return.”

10/27:  Mutual Fund Sales by Intermediaries: Fall-Out from DOL Fiduciary Rule and FINRA Enforcement (PDF)
"As the mutual fund industry continues to evaluate the plans and proposals that may be advanced by intermediaries in light of these developments, it is important to be mindful of potential business, legal and regulatory implications, each of which presents distinct challenges. This [article] summarizes recent enforcement and regulatory developments thought to be primarily responsible for this re-examination, as well as responses that are reportedly being proposed or considered by intermediaries with respect to mutual fund sales charges and share class structures."
Dechert LLP

EFM- many finds have already reduced fees and you will see a lot more by March 2017. A lot of companies are eliminating commissions (not Morgan Stanley, Ameriprise) . Many
brokers will leave the business. Those left will universally work only with substantial clients becuase they will not be able to charge enough for the lower income clients.

10/27: Retirement limits 2017

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $18,000. In addition, the catch-up contribution limit for employees age 50 and older who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $6,000.

Other limits also remain unchanged. The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) remains unchanged at $120,000, and the dollar limitation on premiums paid with respect to a qualifying longevity annuity contract under Section 1.401(a)(9)-6, A-17(b)(2)(i) of the Income Tax Regulations remains unchanged at $125,000.

The limit on annual contributions to an individual retirement account (IRA) remains unchanged at $5,500.  The additional catch-up contribution limit for individuals age 50 and older is not subject to an annual cost-of-living adjustment and remains at $1,000.

However, some limits have changed. Effective January 1, 2017, the limitation on the annual benefit under a defined benefit (DB) plan under Section 415(b)(1)(A) is increased from $210,000 to $215,000.  For a participant who separated from service before January 1, 2017, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2016, by 1.0112. The limitation for defined contribution (DC) plans under Section 415(c)(1)(A) is increased in 2017 from $53,000 to $54,000.

The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $265,000 to $270,000.

The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is increased from $170,000 to $175,000.

The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan (ESOP) subject to a five-year distribution period is increased from $1,070,000 to $1,080,000, while the dollar amount used to determine the lengthening of the five-year distribution period is increased from $210,000 to $215,000.

10/27: This will only stop when 2/3 of the humans are gone

The number of wild animals living on Earth is set to fall by two-thirds by 2020, according to a new report, part of a mass extinction that is destroying the natural world upon which humanity depends.

stemming the overall losses of animals and habitats requires systemic change in how society consumes resources. People can choose to eat less meat, which is often fed on grain grown on deforested land, and businesses should ensure their supply chains, such as for timber, are sustainable

Guess which food also causes the most CO2 no matter cars, planes, manufacturing etc.  Cows

10/26: Another housing bubble????

According to S&P/Case Shiller, the index of national house prices is within 0.1% of the record it set 10 years ago. 

10/25: UK is doing a much better job

The U.K. government has canceled plans to create a secondary annuities market, concluding that the development of a competitive market could not be balanced with sufficient consumer protections.

10/24: Newest US and UK growth data

After a sluggish start to the year, data on Friday are expected to show that the US economy gathered steam in the thirdquarter. Wall Street estimates that GDP rose at a 2.5 per cent pace, a pick-up from the 1.4 per cent rate in the previous quarter. Consumer spending growth isexpected to have slowed sequentially but economists still expect a strong contribution due to auto sales.

The same cannot be said of the UK however, where economic growth is expected to slow to 0.3 per cent year-on-year in the third quarter, following 0.7 per cent growth in the second. 


Duration is a measure of a bond portfolio’s sensitivity to changing interest rates. A one percentage point rise in a portfolio’s yield typically causes the price to fall in line with its duration. That translates to a 5.5 percent price decline for a core bond fund with a 5.5-year duration if rates were to rise one percentage point.

10/24:  Bond history.   

Readers know I don't like to gauge the future by merely looking at the past. In the case  below, most focus should focus on what is going on or anticipated- not easy to do. Reliance on the past is limited...... 

  1. T-bills paid less than inflation in 2015, earning 0.1% in a 1.3% inflationary environment. We paid the government to use their mattress, as we have for the past ten years, with a 1.21% return in a 1.85% inflationary environment.
  2. Bonds were more "efficient," delivering more returns per unit of risk than stocks in the first 45 years, but they have been about as efficient in the most recent 45 years. The Sharpe ratio for bonds is .48 versus .34 for stocks in the first 45 years, but the Sharpe ratio for both is about the same in the more recent 45 years. Both stocks and bonds have returned about .32% per unit of risk.
  3. Average inflation in the past 45 years has been more than twice that of the previous 45 years: 1.83% in 1926-1970 versus 4.09% in 1971-2015.
  4. Bonds returned 2% above inflation in the first 45 years, and that doubled to above 4% in the past 45 years.
  5. Stock market volatility was much higher in the 20-year period 1926-1945 than it has been since. Volatility subsided from 20-35% down to 15% in the most recent 70 years.
  6. By contrast, bond markets have become more volatile, more than doubling in the most recent 45 years to 9.23%, versus 4.52% in the first 45 years.

10/23: Declining incomes

10/23: The recession signals are not necessarily valid any more   good article

the once-dependable indicators traders relied on for decades to send out warnings are no longer up to the task. The so-called yield curve isn’t the recession predictor it once was. Swap spreads are so distorted they can’t be trusted. Even the vaunted VIX — sometimes referred to as the “fear gauge,” is leading its followers astray,

The curve is created by tracing a line through yields on bonds of different maturities. Normally, longer-maturity debt has higher yields than short-dated securities. When that inverts, it’s seen as a sign the economy is at risk of contracting. In fact, it’s happened before each of the past seven recessions.

While the curve has yet to invert, it’s flattened significantly. Strategists say the shift is the product of disentanglement between financial markets and macro-economics. The gap between yields on two- and 30-year Treasuries touched 1.4 percentage points on Aug. 30, the lowest since 2008.

10/23: They certainly are smart enough. Is it the wage discrepancies????

The percentage of women in the computing workforce is expected to fall to 22% from 24% by 2025 if current trends continue. And that’s down from 37% in 1995. This at a time when there are hundreds of thousands more computing jobs available in the U.S. than college graduates to fill them.

Getting more women involved in these high-quality, high-paying jobs would go a long way to helping women’s overall earnings. Currently, the report finds “the salary gap between men and women in U.S. computing roles has widened in recent years from $8,540 in 2011 to $12,661 in 2015.” According to Julie Sweet, Accenture’s group chief executive for North America, women’s cumulative earnings could increase by $299 billion if three times more women pursued computer science careers.

10/23: I gave up on Japan since the early 90s. I kept saying that they were a world leader, etc. but they could not get their act together. What a mess. Deal with this at at a medium/high risk.

Will Japan ever escape deflation? This should come as no surprise to anyone, but Bank of Japan Governor Haruhiko Kuroda has said that the BOJ may once again push back its 2% inflation target, which currently sits somewhere in fiscal 2017. Recall that when Kuroda started his job in early 2013 and began his turbo-charged asset-purchase policy that continues to this day, he originally hoped that inflation would hit 2% by late 2014 or 2015. Almost four years later, inflation has disappeared after an initial rise.

10/23: Remember when they said that housing prices never fall? Wouldn't surprise me that prices will tumble.

China's house-price index dropped to 4.3% in September from 9.2% in August amid attempts by central and local governments to dampen the red-hot sector with purchasing restrictions in a number of cities as fears mount about the huge debt in China. Despite the early signs of cooling, analysts are skeptical about the government actions. "The most powerful property control is credit tightening, which we haven't seen," UBS economist Wang Tao said. "The purchase restrictions currently imposed can still be bypassed."

Then there is this:

Chinese hackers targeted US aircraft carrier

Chinese hackers targeted government personnel associated with US Navy exercises at the time of a contentious international court ruling on the South China Sea, according to a US cyber security company.

The China-based group created an infected document impersonating an official message addressed to personnel visiting the USS Ronald Reagan, a nuclear-powered aircraft carrier that conducted patrols of the South China Sea in July. 


The largest managers of proprietary mutual funds used by DC plans

10/23: Small business slowdown???\\


10/23: Euro hits 7-month low against the dollar

Somewhat expected with Brexit but tough to know all the repercussions with Mosul. election, China, Japan, Philippines, and more. We are no longer in Kansas and a lot is new and troubling.

10/23" Hints of Trump????

Canada walks out of trade talks with EU

Canada's trade minister walked out of talks with Belgium's French-speaking regional government, drawing a last-minute attempt to rescue the free-trade deal between the EU and Canada to a temporary close. 

Speaking after fruitless negotiations, Chrystia Freeland said: "It seems obvious for me, and Canada, that the EU is not able to have an international agreement even with a country which has such European values as Canada, and even with a country so kind, and so patient as Canada"

10/23:  Cash is king?????

Mutual funds have pushed cash balances to 5.8 percent of their portfolios in October, up from 5.5 percent last month, matching levels not seen since the aftermath of the Brexit vote. The share of cash hasn’t been higher than that since November 2001, shortly after the terrorist attacks in the U.S.

10/20" Bonds are in a bubble.

the biggest concerns on investors' minds right now are a breakup of the European Union, a bond market crash, and a Republican winning the US presidential election.

10/20: Asset-Based 401(k) Admin Fees Are Unreasonable, So Fiduciaries Should Avoid Them
"The problem with 401k providers charging asset-based administration fees is that plan assets have little to do with their level of service, meaning a 401k plan with lots of assets can pay way more than a 401k plan with fewer assets for the same 401k administration services. That's not right and a potential source of liability for 401k fiduciaries with a responsibility to keep 401k fees reasonable."

That was an opinion from a web site. I understand it completely but it would put a LOT of fiduciaries out of business real quick

10/20" They are going to have to keep being skeptical. It is possible to have a smooth running ship but retirement planning requires knowledge that is not taught. How would an employer know that?. It is not addressed in the DOL rules

Companies Struggle to Understand How Retirement Plan Industry Works

10/19: Way in debt

$1.47 trillion of total student debt outstanding and the average student debt balances outstanding of $29,400.

10/18: Janet Yellen: “Extreme economic events have often challenged existing views of how the economy works and exposed shortcomings in the collective knowledge of economists,”

“Even though the tools of monetary policy are generally not well suited to achieve distributional objectives, it is important for policymakers to understand and monitor the effects of macroeconomic developments on different groups within society,

Yellen also suggested that changes in spending and behavior among some groups could have outsize effects on the health of the broader economy — a nuance that current mathematical models may not capture well.
EFM- And yet another eminent economist dismissing the (supposed) elegance of mathematics as the be all and end all of how the world economy works and what to do next to make it better

10/17: Worth while BEFORE you buy. Some can work well but in other cases, some officers are making the work a stepping stone to run for office in the city/county et al. Can be lots of politicing, just hearing minor issues including planting the wrong shrubs, putting up Christmas lights and so on. I ran a lot of these in my prior life. The bickering  was too much. 

5 things to know about condominium associations and insurance

10/17: This is not going well. I know it was thought of before the vote. If the vote was done again, the UK would remain in the EU (financial times)

UK looks at paying billions into EU budget after Brexit


Britain would continue to pay billions of pounds into the EU budget after Brexit to maintain cherished single-market access for the City of London under plans being discussed by Theresa May’s cabinet.

The prime minister’s demand that Britain controls its borders and throws off the jurisdiction of EU judges has led many in London and Brussels to conclude that British-based banks and insurers would inevitably lose the “passporting” rights that allows them to trade freely in Europe.

And more
In August, the annual rate of CPI inflation stood at 0.6 per cent, having risen gradually from a low of -0.1 per cent in October 2015. The inflation rate is moving up partly because previous falls in petrol prices are leaving the annual comparison and partly because companies are beginning to pass on rises in import prices. Economists expect the measure to rise to 0.9 per cent in September and to continue to rise gradually through the rest of 2016. The big question for early 2017 will be how quickly, and to what extent, importers pass on the rise in their costs to consumers

10/17:Market Efficiency

The idea that financial markets are efficient is one of the core tenets of modern portfolio theory. This concept, championed in the efficient market hypothesis, suggests that at any given time prices fully reflect all available information on a particular stock and/or market. Since all market participants are privy to the same information, no one will have an advantage in predicting a return on a stock price because no one has access to information not already available to everyone else. In efficient markets prices become unpredictable, so no investment pattern can be discerned, completely negating any planned approach to investing. On the other hand, studies in behavioral finance, which look into the effects of investor psychology on stock prices, reveal some predictable patterns in the stock market

EFM- what the bulk of MPT misses- you can state that all information is offered etc. but it is the consumer.investor.analyst that may have little insight or capability in taking that information and turning it into knowledge valuations. EVERYBODY would/should  come up with the same .valuation. Not even close . After all, the instruction that they get from universities and CFA should force the analysts into conforming methodologies that demands that all follow the same system. Not even close. Further the analysts don't necessarily do much of anything since they simply can  wait for some guru with the most recent adulation to come up with an answer/narrative they they will accept.

One can talk about the efficient market theory and the fact that whatever 'information' is received, that all investors will/must do the same thing with the same facts. Not even close. So the efficiency is all over the board and one cannot know if their analysts/advisors have offered much at all.

If there is no efficiency after the fact, what is the point of trying to rely/react on a theory that cannot work in the real  world.

10/17: Bill Gross short interview

You should view this

10/17: Adjustable Life versus Universal

Adjustable life insurance is a “flexible premium” “adjustable death benefit” type of permanent cash value insurance. It is essentially a hybrid combination of universal life and ordinary level premium participating life insurance

Good overview

  1. Updating the Recession Risk and the Excess Bond Premium




Giovanni Favara ; Simon Gilchrist ; Kurt F. Lewis ; Egon Zakrajsek

Beginning with the publication of this Note, we will provide updated estimates of the EBP and the associated model-implied probability of a U.S. recession every month.


10/16: Frankly, anything based solely on the MPT is not real world. 

Modern Portfolio Theory

Modern portfolio theory is the basis for much of the conventional wisdom that underpins investment decision making. Many core points of modern portfolio theory were captured in the early 1960s by the efficient market hypothesis put forth by Eugene Fama from the University of Chicago. According to Fama’s theory, financial markets are efficient, investors make rational decisions, market participants are sophisticated, informed and act only on available information. Since everyone has the same access to that information, all securities are appropriately priced at any given time. If markets are efficient and current, it means that prices always reflect all information, so there's no way you'll ever be able to buy a stock at a bargain price.

Other snippets of conventional wisdom include the theory that the stock market will return an average of 8% per year (which will result in the value of an investment portfolio doubling every nine years), and that the ultimate goal of investing is to beat a static benchmark index. In theory, it all sounds good. The reality can be a bit different.

Read more: Modern Portfolio Theory vs. Behavioral Finance | Investopedia 

10/16: Elder Care- basic stuff for many of you but always good for a review.

1. How can I afford long term care for the rest of my life?

This is a common question with no easy answer. “You can’t make money magically appear,” Furman says. Instead, he suggests that you “take a look at what your needs are and will be, what resources you have and find ways to 1stretch those out.”

To do this, you’ll need to consider:

2. How can I protect my assets from Medi-Cal (in California) taking my estate from me when I die? (referring to the Medicaid lien).

Most people have a “false impression that when they apply for Medi-Cal that anything that is exempt under their application is also exempt from recovery under the Medicaid recovery statutes,” Furman says. This is not the case.

“One of the common misconceptions people have is that they confuse the wording used in Medi-Cal. Often, people confuse eligibility exemptions with recovery exemptions. If their house is exempt, and thus not counted for eligibility determination, it doesn’t mean that it is also exempt from the recovery. This confusion often leads to families having a Medi-Cal recovery lien placed on their home when they thought their home was exempt from the program,” Furman explains.

Unfortunately, your local Medi-Cal or Medicaid office cannot offer advice on how to protect assets.

However, there are legal methods to protect your house from a Medi-Cal lien but there are myriad issues to address with each strategy. Options to protect a home also vary by state, so you should consult with your elder law attorney.

3. Can I get a living will* so that there is no probate?

*Actually, when people ask this question they often confuse the language, Furman mentions. When they say ‘living will’ they are actually referring to a ‘living trust.’ “A living will and a living trust are two different legal documents. A living will is a life directive in which you would ask someone to ‘pull the plug’. A living trust is a tool used to avoid probate,” he explains.

You can use a living trust as a tool to avoid probate, but the rules and regulations surrounding living trusts vary by state, so it’s important to talk to your attorney about your unique situation.

4. Can I change my trust once I create one?

Yes, you can.

There are two types of trusts:

5. Am I giving up any control if I create a living trust?

No, you aren’t.

With a traditional living trust, change of control only happens upon death or legal incapacity. “You are in control until death (the death of you and your spouse, if applicable) and the living trust is then distributed to the beneficiaries,” Furman explains. “If you are legally incompetent, the successor trustee will assume control of your trust without court involvement,” he concludes.

These elder law topics are significant, and require a discussion of your unique situation with your elder law attorney. You can reach Stuart Furman, Esq. by:

In 33 US states it costs more to send your kid to childcare than college

Considering that the average family saving for college didn't start saving until their oldest child was 7 years old, it's likely that many are unprepared to cover the costs of childcare. Currently, a family earning the median household income spends 18% of its earnings on childcare costs, while minimum-wage earners spend 64% of their income on childcare.

What's more, those who prefer in-home care, like nannies, to childcare centers are shelling out an average of $28,353 a year, equal to about 53% of the median household income or 188% of earnings for minimum-wage workers.

The study also found that the cost of childcare for children under age 4 — also known as infant care — is 12% higher than for older children.

Here are a few reasons why childcare costs are rising, according to the The Care Index report:

the average cost of full-time, in-center care for one child under age 4 has eclipsed that of in-state public college tuition. Overall, across the country, childcare now costs $9,589 a year on average, compared with $9,410 for in-state college tuition.

0/14: I think I will call in sick

about 11.5 percent of men between the ages of 24-54 are neither employed nor looking for a job. Economists say that these people are “out of the labor force” — and they don’t figure into statistics like the unemployment rate.

Apparently a lot are sick-

In a recently released draft of his paper, which he will present at a Federal Reserve conference in Boston on Friday, Alan Krueger finds that 44 percent of male, prime-age labor force dropouts say they took pain medication the day prior — which is more than twice the rate reported by employed men.

Comments from a legal case. Not very pretty but definitely worthwhile reading

How Much Information Do You Share With Your Spouse?

5th Annual Dynasty Trust State Rankings Chart Good stuff

What appeared to be easy= leaving the EU- is now fraught with problems. It's still uncertain how bad the exit will be but it is getting more contentious as time goes on.