Master Financial Education

Financial Planning Daily Commentary 2017
The  most intensive and extensive on the Web
  E. F. Moody


Trump Economics

60/40, 70/30 et al Prefabricated Allocations 

Target Date and Bond Funds

 Retirement Fiduciary Breach


World Clock by


US Debt Clock Simply Amazing= includes almost all statistics you would need globally+

United States Life Tables 2013

USA Facts

The Geography of U.S. Inequality

, the

4/24: Risk Aversion vs. Loss Aversion: What is the Big Difference?
Well, they got it wrong. Risk is how much you can lose. It's not an aversion if you know what you are doing going into an investments (and universally no one tells you) and  the risk aversion means ????. I suppose it might mean how sorry you would feel with losing $45,000 out of $100,000. But in my terms it means divesting your self of risk one a threshold meets are certain. About 12% is the cutoff point

4/24: The pro-E.U. Emmanuel Macron appears headed for a runoff with the far-right Marine Le Pen in the French presidential race

Why the headline??? If Le Pen wins France may leave the Euro. Then more countries will as well. This is a real ugly mess because the Euro could fall . Russia will look to extend power. China, North Korea as well. Worldwide recession at about 85%.

4/24: Is this an old article??? Didn;t say but the whole DOL stuff is to eliminate excess fees

Over 90% of Americans make this 401(k) mistake
Roughly 92% of 401(k) participants are unaware of the fees they pay in their plans, according to this article on Motley Fool, which cited a study by NerdWallet. This could mean many of them could lose a substantial amount of retirement savings, as many 401(k) plans charge hefty fees

EFM = If employees are NOT aware of that issue- well they are really behind the eight ball in determining what they should be doing 

4/24:  And more concern on TDFs :   Boston College
  • While nearly 60 percent of new 401(k) participants have savings in target date funds (TDFs), little research has looked under the hood of this investment vehicle.
  • This analysis uses a unique dataset with extensive information on the underlying mutual funds that TDFs hold.
  • The results show that TDFs:
    • often invest in specialized assets (e.g., emerging markets and real estate);
    • charge fees that are only modestly higher than if an individual investor assembled a similar portfolio on his own; and
    • earn returns that are broadly in line with other mutual funds.
4/24: TDF

Nearly all (97%) of consultants recommend target-date funds as the qualified investment default alternative (QDIA).

EFM- THAT'S WRONG. Read my article above. TDF types are all over the board. The risk of loss is all over as well. Can just be terrible for retirees,
4/24: Why Economic Reforms Are Stalling Globally

Then, at the same time. the headline below comes out saying everything is rosy

4/23: economic recovery is at its strongest since the crisis

Brexit and Donald Trump were supposed to bring doom, gloom and trade wars to the global economy, if not famine and populism-fuelled pestilence.

EFM- I don't remember being that concerned but I did feel then as I do now that the party has been going on for too long.

4/23: The Downside of Managing Downside Risk

Read it- I will debunk it later.

4/23. The mind in the machine. More of artificial intelligence below.

The scientific method might be the single most powerful idea humans have ever had, and progress since the Enlightenment has been simply astonishing. But we are now at a critical juncture where many of the systems we need to master are fiendishly complex, from climate change to macroeconomic issues to Alzheimer’s disease. Whether we can solve these challenges — and how fast we can get there — will affect the future wellbeing of billions of people and the environment we all live in. The problem is that these challenges are so complex that even the world’s top scientists, clinicians and engineers can struggle to master all the intricacies necessary to make the breakthroughs required.

At its core, intelligence can be viewed as a process that converts unstructured information into useful and actionable knowledge. The algorithms we work on learn how to master tasks directly from raw experience, meaning that the knowledge they acquire is ultimately grounded in some form of sensory reality rather than in abstract symbols

AI must be used responsibly, ethically and to benefit everyone. We must also continue to be highly cognisant of both the utility and limitations of AI algorithms. But with rigorous attention to programs’ capabilities, and more research into the effects of the quality of the data we use as inputs and the transparency of their workings, we may find that AI can play a vital role in supporting all manner of experts by identifying patterns and sources that can escape human eyes alone.

4/23: GUIDE TO VA Benefits & Long-Term Care

4/23: Retail is dying:

The profile of today’s angry working-class voter is someone who has found that tickets to middle-class life have run out because manufacturing jobs they once could live on have given way to low-paying service jobs.

Now, even many of these service jobs are disappearing. A recent report in The Times documented the decline of suburban malls as online shopping advances. The e-commerce share of total retail sales has doubled roughly every six years since 2004, reaching 8.3 percent at the end of 2016. One result is that employment at retail outlets has fallen. Department stores and other general merchandise stores, like supercenters and warehouse clubs, have been hit especially hard, shedding 89,000 jobs from November through March.

The government needs to effectively manage inevitable change for the greater good.

The immediate need is to ensure a strong safety net for displaced workers, including unemployment benefits and continuous health care coverage.

The bigger challenge is to ensure greater pay and security for jobs that survive the upheaval and those that are created. Service workers are poorly paid and have few benefits because of intentional policy decisions, not impersonal forces.
EFM- I don't think that AI can bring us nirvana. It might 'take over' most functions of our society. With this influx and the changes in retail etc. more young people will be removed from any type of a true labor source and cause a social upheaval because they have become useless. .

4/23: Why Employers Should Care About the Cost of Delayed Retirements.”

 For each individual who cannot retire, the cost averages an extra $50,000 a year, representing the difference between the salary of an older worker and hiring a younger person, according to Prudential. The annual cost across a workforce is an additional 1.0% to 1.5% a year.
EFM= Yet I see article after article showing older workers are more dependable, smarter, better workers. Maybe it is the cost of health care?????

4/23: MPT and standard deviation- broken

One modern portfolio theory (MPT) pillar that is unquestionably broken is the use of volatility, specifically standard deviation, as a measure of risk. This initial error in MPT’s development is a major contributor to active investment management underperformance.

In the 1950s, academics recognized that hundreds of years of statistics research thinking could be borrowed to analyze the performance of investment portfolios — if some of the definitions could be bent to their aims. Once standard deviation was transformed into “risk,” the work of analyzing portfolios could begin and theories could be developed.

Harry Markowitz states, “V (variance) is the average squared deviation of Y from its expected value. V is a commonly used measure of dispersion. Also, “We next consider the rule that the investor does (or should) consider expected return a desirable thing and variance of return an undesirable thing. . . . We illustrate geometrically relations between beliefs and choice of portfolio according to the ‘expected returns — variance of returns’ rule.”

EFM- the article notes that variance is exactly what an investor wants- to be able to capture great returns. By the same token, real life has some major hits due to an unequal variance. But my position is simply avoid. these hits beyond a 12%.

Markowitz again- 
“[This rule] assumes that there is a portfolio which gives both maximum expected return and minimum variance, and it commends this portfolio to the investor.”

EFM- In real life, current volatility will bounce around a "norm"- however one wishes to define it. But this is now real life-
the gauge’s- (VIX , volatility index)  average level this year is at its lowest point in its 24-year history. Gee, that is not possible. It is an impossible occurrence given  today's mess of Trump, North Korea, Russia, Ukraine, GDP, USA debt, Trump again.and on and on. But I have always noted in this game- things simply do not have to make sense. Robert Shiller noted that

The implication is that stock price changes are largely driven by something other than changing fundamentals. Volatility is the result of investors’ collective emotional decisions. Shiller’s contention has withstood the test of time. Numerous studies have attempted and failed to dislodge it.

So not only does volatility capture both undesirable down price movements along with desirable up movements, it is mostly driven by the collective emotions of investors and has little to do with fundamental risks. Since emotions are transitory and much of the resulting effect can be diversified away over time, volatility fails as a risk measure; 

EFM- Volatility IS a risk- but just one of many. It is NOT risk ipso facto. Can one get it to work for the real world? Yes, but that requires an interpretation of as many issues as the human brain can address with the recognition that risk CANNOT remain static.. So it's not perfect? Agreed- but where are the comments on the risk questionnaires where no one has a clue to all the human heuristics and dumb rationalizations entered by consumers and analysts alike.

some maintain that since investors enter and exit funds based on strong short-term upsurges and short-term drawdowns, volatility represents business risk for the fund. But why should fund business risk be intertwined with investment risk? There need to be separate measures since the risk faced by investors and funds is distinctly different.

possible Risk Measures

So if volatility as risk is flawed, how do we measure investment risk? The metric should focus on the chance of permanent loss — investment value dropping to zero, for example — or the opportunity cost of underperforming a benchmark.

EFM- the Risk of Loss is the best measure- how much the investor is willing to lose given a buy and hold 'strategy'. One can easily determine where the client fits in 'conservative, moderate, aggressive, etc.  definitions. No wondering about artificial intelligence, miscellaneous hubris and  heuristics and the always utilized Ouija Board.

the truth is investment risk is complex and multifaceted, so no single number could suffice, much less an emotionally driven statistical measure like standard deviation.

Academics have little meaningful insight into measuring risk. This hasn’t exactly endeared a professor to department colleagues or to some of his students. In essence, he was saying that the research on measuring risk conducted at hundreds of academic institutions over the decades has largely been fruitless.

No discipline likes to admit such monumental failure. But this is where we are in finance today.

EFM- OK, you can get a reasonable measure of risk of loss given a recessionary economy. When the risk of loss is greater than a correction, then eliminate the risk. The 10% to 15%  bar been valid for decades and I think it will be for some time yet. In any case, the investor should and can easily circumvent large rages losses of 2000   (49%) and 2008 (57%). Or just sit there like a lump and suck  up losses that you may never be able to get back.


Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?

Robert J. Shiller

NBER Working Paper No. 456 (Also Reprint No. r0188)
Issued in February 1980
NBER Program(s):   ME 

This paper will develop the efficient markets model in Section I to clarify some theoretical questions that may arise in connection with the inequality (1) and some similar inequalities will be derived that put limits on the standard deviation of the innovation in price and the standard deviation of the change in price. The model is restated in innovation form which allows better understanding of the limits on stock price volatility imposed by the model. In particular, this will enable us to see (Section II) that the standard deviation of p is highest when information about dividends is revealed smoothly and that if information is revealed in big lumps occasionally the price series may have higher kurtosis (fatter tails) but will have lower variance. The notion expressed by some that earnings rather than dividend data should be used is discussed in Section III, and a way of assessing the importance of time variation in real discount rates is shown in Section IV. The inequalities are compared with the data in Section V.

4/23: Overvalued stocks
Comments and views of some heavy hitters

years of low interest rates have bloated stock valuations to a level not seen since 2000, right before the Nasdaq tumbled 75 percent over two-plus years. That measure -- the value of the stock market relative to the size of the economy -- should be “terrifying” to a central banker,

Stocks are trading at unsustainable levels. A few traders are more explicit, predicting a sizable market tumble by the end of the year.

margin debt -- the money clients borrow from their brokers to purchase shares -- hit a record $528 billion in February, a signal to some that enthusiasm for stocks may be overheating.

 U.S. stocks sit 2 percent below the all-time high set on March 1. The S&P 500 index is trading at about 22 times earnings, the highest multiple in almost a decade, goosed by a post-election surge.

dividends and buy back shares. About 30 percent of the jump in the S&P 500 between the third quarter of 2009 and the end of last year was fueled by buybacks, according to data compiled by Bloomberg Intelligence. The manager says he has been shorting the market, expecting as much as a 10 percent correction in U.S. equities this year.

4/23: From a woman age 92 to one of her nephews,"“Don’t live this long. Really, don’t do it.”

4/23: USA Facts

USAFacts is a new data-driven portrait of the American population, our government’s finances, and government’s impact on society. We are a non-partisan, not-for-profit civic initiative and have no political agenda or commercial motive. We provide this information as a free public service and are committed to maintaining and expanding it in the future


4/23: Felons and insurance

As life insurance professionals, we often get the question, “Will a felony conviction result in a “life Sentence” decline when trying to obtain a life insurance policy?”  The short answer is “yes, no, and maybe so”. The true decision will be made based upon the details of the conviction. 


Those with a criminal history are immediately considered high-risk. Roughly one-third of adults in the United States have a criminal record according to the Department of Justice. The consequences of this are numerous and far-reaching including the ability to obtain life insurance.


There are a great many factors that drive the underwriting of a life insurance policy.  If your client has criminal history, it is best to disclose it up front.  Higher amounts often require a background check and if a criminal past exists and was not disclosed, the case may not be seen in the proper light.  There are several reasons that history of felony conviction results in a higher life insurance premium and a non-preferred risk class.  Many applicants with a history of incarceration suffer from poor health caused by the stress of jail time and the poor health care that is received while incarcerated.  The possibility of a contractible disease is also higher amongst the prison population and there is a much higher likelihood of substance abuse and addiction. The highest risk of all is the likelihood of re-incarceration. According to the bureau of justice,

4/20: Well, at least they are not drinking a lot and driving. Then again.....


Effects of Alcohol on the Brain

4/20: VIX is low, low, low

The volatility crisis approaches What gives with Wall Street’s “fear gauge”? The Chicago Board Options Exchange Volatility Index, or Vix for short, should be reflecting the potential peril for markets —

4/20: Too much debt

A debt binge has left a quarter of US corporate assets vulnerable to a sudden increase in interest rates with the ability of companies to cover interest payments at its weakest since the 2008 financial crisis by one measure, the International Monetary Fund has warned

4/20: Better Decisions  

If you are not familiar with Kahneman, do some reading on him and Tversky. Try Kaheman's Thinking, Fast and Slow. Mostly understanable

One of the common decision-making shortcuts in the business world is to default to the highest-paid person’s opinion (HIPPO). Now, the highest-paid person likely receives that compensation for a reason. Maybe they’ve made superior decisions in the past and have expertise in the field — which can make this shortcut even more tempting. But, as Kahneman and others have shown, experts are fallible. So if we want our organizations to make better decisions and avoid the HIPPO effect, we need to create a culture that encourages dissenting opinions.

Here are three steps to do that:

1. Hand out some thinking hats.

In Six Thinking Hats, Edward de Bono outlines a process that encourages groups to consider an issue from six different angles. He describes the different hats as follows:

  • The White Hat (Facts) considers the information available and what additional data may be needed.
  • The Red Hat (Feelings) examines how the decision makes the group feel. What’s the gut reaction?
  • The Black Hat (Caution) plays the devil’s advocate. What could go wrong?
  • The Yellow Hat (Benefits) dwells on the positive side. How could the decision go right?
  • The Green Hat (Creativity) seeks ideas, the more imaginative the better.
  • The Blue Hat (Manager) sets the goals and plans and directs the process.

When using this The Six Thinking Hats method, if one group member has always played devil’s advocate or proposed crazy, creative solutions, the team can no longer take it for granted. What’s more, the group should rotate the hats so one person isn’t always in the same role.

The beauty of this structure is that the team is free to consider the various facets of almost every decision. And everyone has permission to do so.

2. Make debate a team sport. 

Another way to build a culture that values diverse opinions is for the HIPPO to model it.

At the venture capital firm Andreessen Horowitz, founders Marc Andreessen and Ben Horowitz routinely trash each other’s ideas and encourage others to join in. As a guest on The Tim Ferriss Show, Andreessen explained their process:

“Whenever [Ben] brings in a deal, I just beat the s— out of him. And I might think it’s the best idea I’ve ever heard, and I’ll just, like, trash the c— out of it. And I’ll get everybody else to pile on. . . . If at the end of that pile-on, the person is still pounding the table saying ‘No, no, no, this is the thing,’ we’ll say ‘Okay, we’re all in, we’re all behind you.’ . . . It’s a disagree-and-commit kind of culture.”

Rarely is there unanimous consensus around a decision or investment idea, but by using this method we can build an environment that encourages stress testing ideas. At the end of the day, better decisions should result.

3. Don’t add too much value.

If you are the HIPPO, be careful not to add too much value.

Patton famously said, “A good plan violently executed now is better than a perfect plan next week.” For our purposes, this means don’t hold out for a perfect decision at the cost of diminished execution. What good is a 90% ideal decision improved to 95% with HIPPO input if the commitment to execution declines from 100% to 30%?

If people are excited about an idea and it’s directionally correct, let them run with it. Better to have complete buy-in on the execution than to erode morale in an attempt to marginally improve the decision. Again, to quote Patton, “Never tell people how to do things. Tell them what to do and they will surprise you with their ingenuity.

These methods are distilled from a Re:Think Decision-Making workshop I recently attended. Hosted by Shane Parrish and the Farnam Street crew, the workshop yielded more value than can be condensed in a single article, but one of the enduring takeaways was the enormous positive effect of making incrementally better decisions each day.

4/20: Explains a lot

• Galina Zapryanova and Anders Christiansen, writing for Gallup, find evidence that when people hold “low trust in government and low or static expectations for their future lives,” support for populist politics tends to surge. This should add clarity to the never-ending debate over whether populism is driven by “economic anxiety” or racial resentment. It can correlate with declining economic prospects or pre-existing racial animus, but this research suggests it’s more likely driven by, for example, a racial or religious group facing a declining level of privilege.

“If everybody is thinking alike, then somebody isn’t thinking.” —

General George S. Patton, Jr
4/19: Insurance is possible

4/19: Basic commentary on disability insurance

Minimizing Corporate Risk with Key Person Disability Insurance
By Joe Russo

Let me pose a simple question. What would happen to your company if you became disabled and were unable to work for a period of time? Now I want you to really give this sincere thought and imagine the possible consequences.

If you are an independent agent or an agency owner, the probable answer is that you would have to attempt to sell your book of business quickly or let your staff go and close-up shop. If you are an employee of a larger brokerage, your inability to personally manage your accounts could cause great financial detriment, especially in the short term, to your employers. Take a moment to realize that your clients, no matter their line of work, likely face those same potential predicaments. What happens when a key person to a business becomes disabled? The simple answer is that the business suffers.

The physical loss of a key employee or employer eventually leads to the loss of present and future business accounts, the loss of relationships with important contacts, not to mention the office workflow issues that would inevitably arise. Additionally, corporate capital would be allocated to finding a replacement employee who would then need to be trained and paid an appropriate salary. The costs of the loss of a key person due to disability can easily put a company into absolute chaos, both operationally and financially.

Businesses need short-term insurance solutions to minimize corporate risk against the disablement of an owner or key employee. Key person DI is the answer. Policies provide total and partial “own occupation” disability benefits after a short waiting period of usually three or fewer months. Monthly benefits can be scheduled for payout periods from six to 24 months, allowing for the insurance to pump much needed cash back to the affected business.

The insurance proceeds can be used however the powers that be see fit, and although the premium payments aren’t tax-deductible, the benefits are paid tax-free. The monthly benefits are meant to force a temporary corporate renaissance to hire/train a replacement employee for the progression of the firm or to economically steady the company for an eventual buy-out.

Key person disability insurance is an integral part of corporate succession planning and should be every bit as important to your clientele as life insurance in minimizing business risk.

4/19: Being married

Studies consistently show that married individuals live longer, they maintain better health, and they’re happier. Married individuals also do better financially than single individuals. Research has found that even after controlling for age, education and other demographics, married people make 10 to 50 percent more than single people. And it’s not because financially successful people get married, but because a healthy marriage between two people who complement each other naturally leads to financial success (Linda Waite and Maggie Gallagher 2000).

4/19: Inflation

Measures of market expectations for US inflation have eased to their lowest levels of the year, reflecting declining oil prices and doubts over the administration’s timeline for stimulative economic policies.

Bond market expectations for inflation over the next five years have eased below 1.80 per cent, while those for the next 10 years have dropped below 1.89 per cent. These are levels not seen since December and come as annualised US inflation figures for March slowed more than forecast. Break-even rates, or the inflation compensation implied by Treasury inflation protected securities, are also down from recent peaks as investors have faded the prospect of growth-supporting fiscal measures from the Trump administration and Congress. Big investors, such as Jeffrey Gundlach, have recently warned that expectations for an acceleration in US economic growth and inflation have been too high.

EFM- I thought the growth wa

s too high- though things may change if health care is enacted and then Trump goes for tax changes

4/19: IMF on Britain

In its latest assessment of prospects for global growth, published on Tuesday, the Washington-based organisation predicted that the UK economy will grow this year by 2 per cent, an increase of 0.5 percentage points from the forecast it made in January. The IMF also upgraded its UK growth forecast for next year, from 1.4 per cent to 1.5 per cent.

Before the EU referendum last year, the IMF forecast that the UK economy would grow 2.2 per cent in 2017. But it cut the forecast to 1.3 per cent last July, weeks after the Brexit vote, and downgraded its forecast further, to 1.1 per cent, in October.


Physical Exercise: Good Medicine for the Brain
By Leilani Doty, PhD

Regular physical exercise is important for brain health. Being active is important whether a person has normal memory and thinking abilities or has a memory disorder such as a Mild Cognitive Impairment, early/moderate Alzheimer’s disease or related progressive memory disorders.

Improvements have been measured in older men and women with normal memory who live independently in the community and are physically active, even if they start becoming active later in life. Research using the Folstein Mini-Mental Status Exam, a simple test of memory and thinking functions, on people with early-stage Alzheimer’s disease has shown that sedentary (inactive) people have a significant decrease in their scores when their scores are compared to those of more active people. A careful review of 10 research studies found evidence that exercise improves walking and slows the decline in ADLs (personal care activities of daily living such as eating, bathing, dressing, etc.) of people who have Alzheimer’s disease and live in residential care facilities.

Exercise That Helps the Brain
A routine that involves 30 to 40 minutes at a time of physical exercise for 5 days a week improves memory, attention, language skills, and other thinking functions. However, some research found improvements in older people who exercised as little as 2 or 3 times a week.

Any one or a mix of the following four types of exercise seem to be the most helpful:

  1. Walking - such as moderate walking that works up a light sweat

  2. Bicycling – 2 or 3 wheel bicycle or on a stationery or exercise bike

  3. Jogging

  4. Resistance training to improve muscle strength - using push-pull exercise machines in a gym; wide rubber stretch-bands (Sometimes called resistance bands, they range from easy-highly stretchable to a firm-heavy-duty stretchable.); or lifting small free weights

Healthy Changes in the Brain
As a bonus, regular exercise promotes the release of BDNF (brain-derived neurotrophic factor) in the brain. BDNF nurtures the brain cells. You could say that BDNF fertilizes the brain cells.

One research project measured the hippocampus, the brain area responsible for storing short-term memories. Measurements of the hippocampus took place at the beginning and again at the end of the study. In the older people who were in the walking-group, there was a 2% increase in their hippocampus while the comparison group which only did stretching and toning exercises had a 1.5% decrease in that area of the brain.

Researchers have concluded that routine physical exercise make a significant difference in brain health, brain function, as well as general health such as improving muscle and bone strength, reducing (high) blood pressure, strengthening the heart, increasing the effectiveness of insulin, helping the GI tract, and, especially reducing caregiver stress. And it is never too late to start being active and gaining benefit from physical exercise! A healthier caregiver can manage much better the ongoing challenges of decline in a loved one who has a progressive dementia

4/19: State disproportionately jobs


Simple DIY Modifications for a Dementia-Friendly Home

By: Cheryl Alo

Are you caregiving for a loved one with dementia?  Does your loved one share a residence with you?  If you answered yes to both of these questions, you most likely worry about your loved one’s safety, especially when he or she is alone at home.  You may even feel as though you can never leave your loved one unsupervised which is a difficult task to balance in the throes of busy, everyday life.  As an occupational therapy graduate student, I am interested in providing solutions to enable individuals to remain living in their homes as they age for as long as possible.  Occupational therapists are well-suited to recommend home modifications given their knowledge and skills to determine the role the environment plays in an individual’s ability to perform important daily activities such as self-care and tasks around the house.  Consideration of household safety is key in order to support independent living in this particular population of older adults.  Fortunately, there are several creative and affordable strategies available to keep your loved one with dementia safe as well as more independent in the home.

Strategy # 1: Contrasting Colors
A simple home modification which can be done virtually anywhere to assist the individual with dementia is incorporating contrasting colors to identify household items against their background with greater ease.  For instance, caregivers could consider changing the following within the loved one’s home:

Š  Change the light switch plate to a bold color which will sharply contrast against the current color of the wall to highlight its location.  
Š  Boldly paint hand rails, for example red, to better indicate their location near staircases and promote the loved one with dementia to actually use the rail for support while ascending or descending.  
Š  Select contrasting dishware colors to help the individual during meal time.
Š  Paint grab bars in the bathroom to sharply contrast against the bathtub or shower as well as the color of the wall near the toilet. 

Strategy #2: Memory Aids
Another simple modification for caregivers to consider is labeling household items with pictures to serve as helpful memory aids.  An example could be labeling the cupboard doors or dresser drawers with pictures of the items kept inside. Depending on the severity of the loved one’s condition, picture aids can also be incorporated in frequently used rooms.  For instance, picture aids in the bathroom can serve as detailed reminders of an activity’s sequence such as handwashing.  Memory aids can also include several strategically located message boards around the home such as erasable, white boards.  Message boards can depict the loved one with dementia’s schedule, the caregiver’s schedule as well as pertinent contact and emergency information.  

In addition, caregivers can ensure the living space is uncluttered and well-lit which is practical for all homes and residents.  Clutter can be very overwhelming for individuals with dementia so try to pare down and simplify the surroundings.  All of these suggestions can be done on a low budget without professional assistance so it truly is a DIY project for a rainy afternoon.  Home modifications can make a significant difference in the lives of older adults with dementia as these solutions promote aging in place, or in one’s home, rather than placement in a long-term care facility.  Caregivers can find comfort in knowing their loved ones are better able to safely navigate and perform tasks around the home as well as experience less confusion and frustration throughout the day.  


4/18: Artificial Intelligence      by Will Knight

A fascinating article "explaining"    AI will impact everyone, everyday and possible every minute. And maybe the programmer will have little clue to what is going on since the computer will make all the end results by itself. Can financial planning end up that way?? Possibly. Anyway it is not that technical and is necessary for anyone that has a lifetime in front of them. 

Artificial intelligence hasn’t always been this way. From the outset, there were two schools of thought regarding how understandable, or explainable, AI ought to be. Many thought it made the most sense to build machines that reasoned according to rules and logic, making their inner workings transparent to anyone who cared to examine some code. Others felt that intelligence would more easily emerge if machines took inspiration from biology, and learned by observing and experiencing. This meant turning computer programming on its head. Instead of a programmer writing the commands to solve a problem, the program generates its own algorithm based on example data and a desired output. The machine-learning techniques that would later evolve into today’s most powerful AI systems followed the latter path: the machine essentially programs itself.

4/18:Cerebral Palsy Guidance

The underlying cause of all cases of cerebral palsy is damage that disrupts the brain’s development. What causes this damage varies by individual and in some cases may not be known. Learn more about the factors that can cause early brain damage and cerebral palsy, like maternal infections or birth injuries, so that you can take steps to prevent it.

4/18: Clinical Trials

4/18: America gay marriage by state. It' interactive by the NYT

4/18: Active versus passive

"Given that active managers’ performance can vary based on market cycles, the newly available 15-year data tells a more stable narrative," said the report. "Over the 15-year period ending Dec. 2016, 92.15% of large-cap, 95.4% of mid-cap, and 93.21% of small-cap managers trailed their respective benchmarks."

"Funds disappear at a significant rate," . "Over the 15-year period, more than 58% of domestic equity funds were either merged or liquidated. Similarly, almost 52% of global/international equity funds and 49% of fixed income funds were merged or liquidated."

  1. Estimating the Relationship between Skill and Overconfidence




Feld, Jan (Victoria University of Wellington) ; Sauermann, Jan (SOFI, Stockholm University) ; de Grip, Andries (ROA, Maastricht University)

The Dunning–Kruger effect states that low performers vastly overestimate their performance while high performers more accurately assess their performance. Researchers usually interpret this empirical pattern as evidence that the low skilled are vastly overconfident while the high skilled are more accurate in assessing their skill. However, measurement error alone can lead to a negative relationship between performance and overestimation, even if skill and overconfidence are unrelated. To clarify the role of measurement error, we restate the Dunning–Kruger effect in terms of skill and overconfidence. We show that we can correct for bias caused by measurement error with an instrumental variable approach that uses a second performance as instrument. We then estimate the Dunning–Kruger effect in the context of the exam grade predictions of economics students, using their grade point average as an instrument for their exam grade. Our results show that the unskilled are more overconfident than the skilled. However, as we predict in our methodological discussion, this relationship is significantly weaker than ordinary least squares estimates suggest.


Dunning–Kruger effect, overconfidence, judgment error, measurement error, instrumental variable


D03 I23


  1. Economics and psychology. The framing of decisions




Schilirė, Daniele

In the Theory of Rational Decision Making the psychological aspects are set aside. This contribution seeks to point out the relevance of psychology into economic decisions. The essay treats the "framing of decisions", which is a pillar of Kahneman's behavioral theory. Framing must be considered a special case of the more general phenomenon of dependency from the representation. The best-known risky choice-framing problem, i.e. the "Asian Disease Problem", is shown where an essential aspect of rationality: invariance, is violated. In addition, the contribution explains Kahneman and Tversky's Prospect Theory and illustrates their value function. Finally, it discusses the reversals of preference in framing and framing of contingencies. The framing manipulation is viewed as a public tool for influencing the decision maker's private framing of the problem in terms of gains or losses, which determines the decision maker's evaluation of the options. In conclusion, the psychology of choice is relevant both for the descriptive question of how decisions are made and for the normative question of how decisions ought to be made.


Behavioral Economics; Framing of Decisions; Prospect Theory; Daniel Kahneman.


D01 D03 D81


  1. Reinterpreting the mutual fund theorem: the risk portfolio as a tactical overlay




Tenani, Paulo Sérgio

The Mutual Fund Theorem is an elegant way of describing how investors with different attitudes towards risk should construct their portfolios. It is, however, often misinterpreted. This paper revisits the topic by defining the Risk Portfolio as a self-financed tactical overlay portfolio in which all the overweight and underweight positions cancel each other out. In this sense no net resources are ever allocated to the Risk Portfolio and all the investment is allocated to the Minimum Variance Portfolio. Under these circumstances the Mutual Fund Theorem implies that the ratio of Bonds to Stocks in the Total Portfolio would depend on investoręs risk aversion; as it is actually observed in practice. The paper also argues that the Asset Allocation puzzle, as traditionally stated in the literature, only arises because of a misconception about the “the facto” definition of the Risk Portfolio.


4/18: The FUTURE. And there goes a bunch of unskilled jobs. So where will all the kids go that did not complete high school?? Gangs are my bet. 

This salad-making robot can build 1,000 different salads in 60 seconds each



(This is just for those in the industry. The counter is just marketing overall.. )


As Original 4/10 implementation date draws near, “Retirement Ripoff Counter” shows cost of retirement investment advice that is not in savers best interest.


HOMEBUYERS IN A PINCH - This year's spring selling season promises to be the toughest for homebuyers in a decade, as rising prices and mortgage rates combine with inventory near 20-year lows. "We think that 2017 will be the fastest market" since the peak of the last housing boom in 2006. So far this year, U.S. homes are selling an average of eight days faster than last year. Economists had predicted the inventory crunch would ease this year, as several years of solid price gains induced more sellers to put homes on the market and homebuilders to break ground on more new homes. Instead, inventory has tightened as demand has increased rapidly and the pickup in construction has lagged. Sellers also have become hesitant to put their homes on the market because rising prices and mortgage rates have made it more expensive to trade up.


HEALTHLY PEOPLE SPEND LESS - Health Affairs reports that the healthiest half of the U.S. population accounted for only about 3% of health care costs in the country over a 37-year period. The study also found that 13.4% of health care expenditures in 2014 came from the lowest-spending 75% of Americans. This is something of a no brainer but the percentages are remarkable. However, older people are not the healthiest and you might want to see
Planning for Health Care Needs in Retirement.

Evidence of a New Economic Revolution - Nouriel Roubini

6 minutes of great video.

Bell shaped curve versus real life


The Mutual Fund Distribution Fee Mess

4/17: Bonds are a changing

A confluence of bad circumstances may be coming together to topple bond markets. Bonds have held up pretty well despite all the turmoil since Trump’s election, but Treasury bears may now be set to thrive. Analysts say inflation is under-priced, as is an aggressive Fed and failing foreign demand for the bonds. All of this could send yields surging, as could political risks in Europe. JP Morgan says they have a “short-duration position in developed markets” because “Lower bond yields and stronger growth momentum” are offering a good entry point. Beyond just the Fed getting more aggressive on rates, they will also stop reinvesting proceeds into new bonds, shrinking their balance sheet and removing a big source of demand from markets.

4/17: Seward and Kissel Hedge Fund Study


The Geography of U.S. Inequality


What's working in Financial Education Workshops

Lots of statistics on how well they are received. But not one darn thing about what is being offered- meaning I need to know what they are truly saying about risk and reward. So while it is nice to know the statistical relevance- it;s pretty much useless without an understanding of exactly what is taught.

Catastrophe Bonds: Michael Edesess

Heavy hitters only

4/16: How things have changed. So think about this- will there be a reversion to the mean (returns will go back to an average established over decades)?? The investment industry will have you believe that everything that has been done over the last one/five/10 or 30 decades will be repeated. I do not agree, but even still, just exactly which decade will it be?? So buy and hold based on spurious statistics will definitely help the consumer/retiree?? How does one equate a zero or negative interest rate with past history??  Certainly one must be aware of what has happened in the past and certain elements will be repeated. But one has no idea that it is almost pure luck that it matches current economics.

This graph shows how bad the drug epidemic is. Use the link to use the interactive feature from the NYT

: Actively managed funds
few actively managed equity funds outperform their benchmark over the long term, only about 40% survived for 15 years and about 57% survived for 10 years, according to the analysis, know as the SPIVA Scorecard, which is based on data through Dec. 31, 2016. The funds were either liquidated or merged with another fund, usually due to poor performance.

International equity funds and global equity funds (global funds invest in U.S. and foreign equities) fared much better than their U.S. counterparts over the 10-year period, with survival rates just above 60%. Over the 15-year period, however, only 38% of global funds and 43% of international funds survived.

The survivorship rate among actively managed bond funds, excluding munis, was highest for mortgage-backed securities funds — about 60% over 15 years and 71% for 10 years — and lowest for intermediate government funds — 42% and 58%, respectively. But the number of bond funds analyzed was half the number of equity funds.

less than half of actively managed funds outperformed over the short and long term.

For the year ended Dec. 31, 2016, 40% of all domestic actively managed equity funds outperformed, but the percentages fell after that. Only 8% outperformed over three years, and bewteen 14 and 17% outperformed their benchmarkets over five, 10 and 15 years.

Value funds tended to perform better than growth, and large cap value performed best, but even then the best performance was over 10 years, with only 36% outperforming their benchmark.

Most actively managed international equity funds, including emerging market funds, also underperformed. At best, 33% of international funds outperformed over five years, but the percentage was smaller over shorter and longer time frames. Emerging market funds did best over the one-year time horizon with 36% outpacing their benchmark.

Actively managed bond funds, not surprisingly, outperformed at a much higher rate than equity funds, in certain categories. Between 62% and 80% of intermediate investment grade funds outperformed their benchmarks over 1, 3 and 5 years. The comparable numbers for short-term investment-grade funds were 62% to 73%.


Monetary policy in a low interest rate world


Nominal interest rates may remain substantially below the averages of the last half-century, as central bank’s inflation objectives lie below the average level of inflation and estimates of the real interest rate likely to prevail over the long run fall notably short of the average real interest rate experienced over this period. Persistently low nominal interest rates may lead to more frequent and costly episodes at the effective lower bound (ELB) on nominal interest rates. We revisit the frequency and potential costs of such episodes in a low interest-rate world in a dynamic-stochastic-general-equilibrium (DSGE) model and large-scale econometric model, the FRB/US model. A number of conclusions emerge. First, monetary policy strategies based on traditional simple policy rules lead to poor economic performance when the equilibrium real interest rate is low, with economic activity and inflation more volatile and systematically falling short of desirable levels. Moreover, the frequency and length of ELB episodes under such policy approaches is estimated to be significantly higher than in previous studies. Second, a risk-adjustment to a simple rule in which monetary policymakers are more accommodative, on average, than prescribed by the rule ensures that inflation averages its 2 percent objective – and requires that policymakers systematically seek inflation near 3 percent when the ELB is not binding. Third, commitment strategies in which monetary accommodation is not removed until either inflation or economic activity overshoot their long-run objectives are very effective in both the DSGE and FRB/US model. Finally, raising the inflation target above 2 percent can mitigate the deterioration in economic performance; the desirability of such an approach ultimately hinges on the economic costs of inflation averaging more than 2 percent and assessments of the feasibility of commitment strategies.

4/16: Life can be hard- this is unbearable


Great journalism, very sad story

4/16: Recent commentary on linkedin

Investment Risk Goes Down Over Time


Risk of Loss Goes Up


Here is a straight forward reason why so many people get screwed by themselves or through their selected agents when investing. And just wait for the new mess that will happen again.

(I do not like doing projections when the market might go south, but one needs to address Russia, Syria, North Korea, ISIS, immigration, taxes and on and on from a president who is all over the board. I did note this April 9th)



Back to point: The quote below is from an article on Retirement from a major advisor site. As verification of inconsistency in advisor competency, he merely noted a conundrum in the industry regarding risk:

"The key question asked here is: do equities become more or less risky as you extend your horizon?  Most advisors and investors would say less."  

EFM- If one perceives risk as standard deviation, then the "risk" goes down. Is such perception wrong? Yes- it is a part of old rules of thumb such as Modern Portfolio Theory, Buy and Hold, Dollar Cost Averaging and much more that do not work in the real world. The problem is that time does reduce the standard deviation but the risk of loss INCREASES. That’s what matters- how much will you lose if you just sit there as the market tumbles into a recession.

The S&P 500 has a three year average standard deviation of slightly less than 11% currently (it has been much higher in the past. If there has been a long period of gains, the volatility/SD drops simply because there are few peaks or valleys. The gains do not have to make sense- momentum carries a lot of fools along until it finally crashes.) Anyway, under the old heuristics, if the portfolio looks out 5 years, the SD drops to 4.91.  So the twits indicate that the risk of investing goes down. Illogical, wrong, dishonest- you get the picture. The more time that is involved, the greater is the risk of loss. Think about an option- you extend the time and the option costs are far greater. Same as why a 30 year CD pays more than a 5 year.  As time extends on almost anything, there has to be an increase in what can go wrong.

Looking at the risk of loss (RoL), a 5 year period shows a potential 21% loss. A 10 year period has about a 30% loss. It is still less than the market losses in 2000 (49%) or 2008 (57%). So the investor/consumer must calculate the losses based on potential economic upheavals. (There will be a web site soon where one can do that for most mutual funds and ETFs.) And whether you think of a one standard deviation move only. Not for a recession. So one should provide for larger SDs or those occurring over more years. Therefore offering a range of losses is preferable. You can do this for various allocations of funds and ETFs, but recognize it does not account for correlation.

Perfect? Of course not. But the acceptance of Standard Deviation as risk that goes down over time is simply wrongheaded.  And basing such nonsense for allocations that defy common sense- well, it won't hold up as a defense when acting as a "fiduciary".

United States Life Tables 2013

This is the table to now use. Extensive with definitions and more 

4/16: Risk questionnaires

assessing risk tolerance and representing it as a unidimensional index may only serve to exacerbate client communication difficulties… Focusing clients’ risk definition in terms suitable for mathematical optimization models may only serve to impede effective risk communication between client and advisor

 “Pick up any 401k enrollment kit from virtually any company you choose. Nationwide, ING, Great West, John Hancock, etc. They all typically have an enrollment book that includes a risk tolerance questionnaire with points attributed to the answers that then correlate with a specified ‘model’ portfolio.” Koos believes “the reason companies still do this is because it’s a more ‘blanket’ method of getting a portfolio constructed – which means it’s less expensive than alternative methods that would be more efficient and useful to the plan participant

Clients need to understand there is no cookie cutter allocation as everyone is different, has diverse needs, goals, resources and expectations. Everything has to be taken into account and not just their age and experience which is where many tests fall short.” (EFM- true but the issue is if you took and gave a specific client the 20/30/40 or whatever "best" questionnaires, you would get widely varying risk profiles.  That should not happen)

4/16: FICO mortgages

4/16: More risk

What is your risk tolerance?

That is the question investors need to ask themselves before they start investing. There are a number of components that go into answering this question. Key ones are:

Your age: In general, the younger you are, the more tolerance you will have for risk. The reason is simple: you have more time to make up lost ground if your investments turn south.Conversely, older investors tend to be more conservative. They are less able to tolerate a drop in their investments because there is less time for them to ride out a bad market wait for it to bounce back.

Your investment horizon: This is closely related to age-but subtly different.

In general, the younger you are, the longer you can wait before cashing out your investments. But there are exceptions. Maybe you want to own a home before turning 30. Maybe your dorm-room start-up will need cash in the next three years. In those cases, you can be young and have a short-term investment horizon.

Your life stage: Getting married, buying a home, having children-these are different stages of life. And your financial needs will vary depending on the stage of life you're at.If you're planning to buy your first home, you'll likely need to save a chunk of money for a downpayment. On the other hand, if you're retiring, you probably will need a steady stream of income for your living expenses. In each case, your tolerance for risk will be different.

EFM= It is possible to select risk if you know how much you could lose. And then what to do to avoid it

4/16: HPV- this is hard to believe

More than 42 percent of Americans between the ages of 18 and 59 are infected with genital human papillomavirus, according to the first survey to look at the prevalence of the virus in the adult population.

The report, published on Thursday by the National Center for Health Statistics, also found that certain high-risk strains of the virus infected 25.1 percent of men and 20.4 percent of women. These strains account for approximately 31,000 cases of cancer each year

7.3 percent of Americans ages 18 to 69 were infected orally with HPV, and 4 percent were infected with the high-risk strains that can cause cancers of the mouth and pharynx.

HPV is a ubiquitous virus, the most common sexually transmitted infection in the United States. About 40 strains of the virus are sexually transmitted, and virtually all sexually active individuals are exposed to it by their early 20s.

4/16: India- is it really being developed??

Intense article describing a country that could really make a difference but is in cultural instability.

4/16: Long Term Care Task Force

The task force will start by looking into matters such as LTCI issuer solvency, state LTCI rate regulation procedures, regulation of short-term care insurance policies, and efforts to update the rules for the guaranty funds that protect policyholders against LTCI issuer defaults.

The task force could eventually affect agents and advisors in some of the following ways:


A different kind of target-date investor

Roughly one-third of plan participants who are in target-date funds at Vanguard are "mixed" target-date investors. In other words, they combine a target-date fund with other plan investment options. There are concerns that mixed target-date investors are misusing what are meant to be all-in-one funds and take on added risk in their portfolios through overlapping securities and unintended concentration in certain sectors.


Worker Retirement Confidence Waning (PDF)
"Conducted in January, the survey polled 1,671 workers and retirees to judge their confidence in their ability to retire comfortably. Even with the stock market soaring to record highs and the economy showing signs of strength, the percentage of workers saying they are 'Very or Somewhat Confident' in their retirement prospects fell to only 60% from last year's 64%."


Boomers Abandoning Target Date Funds at or Near Retirement
"[O]ne possible explanation for Boomers taking their money out of TDFs is they are putting their assets into a payment strategy... [G]uidance issued by the DOL and [IRS] in 2014 formally permits DC plan investment options such as target-date funds to include income annuities as part of their fixed-income holdings ... Yet, there has still been relatively little product development in this area."

Prostate cancer reversal

An influential government health task force now says that the benefits of getting screened for prostate cancer may slightly outweigh the risks. For that reason, the U.S Preventive Services Task Force (USPSTF) is advising men to discuss with their doctors whether screening makes sense for them, rather than skipping the test as they'd previously recommended for most men.

The new recommendation is a reversal from the one they issued in 2012, when the USPSTF advised most men not to get screened for prostate cancer using an inexpensive blood test, called a prostate specific antigen (PSA) test. Based on the evidence they had available at that time, they concluded that the risks of screening—which include false positive results, overtreatment of slow-growing cancers and side effects from those treatments—outweighed the small benefits. But with more data on the subject, the task force now leans toward the benefits of screening.


"The Behavioral Paradox of Boilerplate" Free Download
USC CLASS Research Paper No. CLASS17-12

TESS WILKINSONRYAN, University of Pennsylvania Law School

Although assent is the doctrinal and theoretical hallmark of contract, its relevance for form contracts has been drastically undermined by the overwhelming evidence that no one reads standard terms. Until now, most political and academic discussions of this phenomenon have acknowledged the truth of universally unread contracts, but have assumed that even unread terms are at best potentially helpful, and at worst harmless. This Article makes the empirical case that unread terms are not a neutral part of American commerce; instead, the mere fact of fine print inhibits reasonable challenges to unfair deals. The experimental study reported here tests the hypothesis that when a policy is disclosed as a boilerplate contract term, it appears more legitimate, both morally and legally, than if it is disclosed elsewhere—even if the term would be plausibly subject to legal challenge in either case. Subjects from an in-person sample recruited by the Wharton Behavioral Laboratory were randomly assigned to read about a consumer policy communicated either as a standard term in a form contract, or as a company policy available on the firm’s website. They were more likely to think that harsh policies were legally enforceable, and morally defensible, when the policies were in the fine print—and more likely to object to a policy that was publicly available but not within the standard terms. Disclosing onerous terms up front does not affect consumer choice ex ante but creates a problematic assumption of enforceability when the terms turn out to be troublesome ex post. These results were also replicated using a sample of subjects from the general population. If correct, this phenomenon presents a substantial challenge to the traditional economic analysis of private bargaining in contract. The Article concludes with an analysis, in light of these findings, of doctrinal, political, and market mechanisms for policing unfair terms.


The Rich Live Longer Everywhere. For the Poor, Geography Matters.

In some parts of the country, adults with the lowest incomes die on average as young as people in much poorer nations like Rwanda, and their life spans are getting shorter.

Lump Sums don't last

The MetLife analysts found that 62% percent of the lump-sum recipients surveyed said they still have at least some of the cash.

Another 17% of the survey participants claimed that they did not know what had happened to the money.

About 14% said they had spent all of the cash in less than five years.

About half of all of the consumers surveyed said that, within the first year of receiving the large sum of cash, they had spent some of the cash on what they might have seen as good investments in themselves or their children: 27% used the money to pay down debt, 20% used the money to repair or improve their homes, and 4% used the money to pay for education.

About 12% said they had used a significant amount of the lump-sum cash to pay for vacations, and 1% said they had used a significant amount to pay for boats, jewelry or other luxury items.


Let's Not Talk About That Now...
By Jennifer Kay

Too often families do not like to talk about issues surrounding death, dying and funerals. Why should they ask? Soon enough we all will have to deal with these issues. So what’s wrong with waiting till the need arises?

Just like you need to know about health insurance, life insurance, social security benefits and living wills, knowing about funeral arrangements and cemetery property helps you make the financial and emotional decisions you will be comfortable with in years to come.

Over the years, the funeral and cemetery industry has changed. It makes sense for the consumer to pre-plan their arrangements, not only because there is incentive to do so, but even more, because there are also many emotional benefits to pre-arrangements.


What’s really involved in a funeral arrangement? 
Most families, if asked this question will answer “They pick up the body and take it to the cemetery.” Nothing could be further from the truth! A good funeral director will sit with your family and hear what your family members are saying. Do you all want the same kind of funeral? Do you all agree on the same casket? Are there “Feuding Members of the family” who will all want to be heard at the funeral? Who will speak? What type of clergy will be appropriate for your family? How will your loved one’s memory be reflected at the service? Will you have a service at all? And if not, will you regret that afterwards.

In addition to preparing many documents and obtaining appropriate signatures, arranging for the death certificate to be signed and notifying Social Security of the death, the funeral director is also a liaison between the family, clergy and the cemetery staff. If selected wisely, your funeral director will be your family’s advisor, helping them to feel comfortable and making sure your wishes are being honored. Funeral directors “work behind the scenes” from the moment they are contacted, insuring things are being done correctly and in a timely manner.

What is involved in purchasing cemetery property? 
Most cemeteries have many different properties that you may purchase. You may choose a niche (A space in a mausoleum to place the cremated remains), a grave in a section with a headstone or a grave in a section which only has flat markers, a crypt in a community mausoleum or a separate, private family mausoleum. There may be a requirement for an outer enclosure (sometimes called a vault) as well as labor fees for burial.

How important is the location? Is convenience for visiting, beauty of the cemetery or being in or near the family plot the greatest priority? 
If a cemetery is located in a residential neighborhood, how will you feel as the neighborhood changes? Is this your second marriage and which spouse would you like to be buried with? Do you want to purchase extra plots for unmarried siblings or children and their families? These re just a few of the questions you need to consider.

What are my family’s values about funerals and cemeteries?
Often, I hear people saying things like “Just give me the cheapest funeral possible: I wont be here to know the difference.” While this may make economic sense to you, it frequently leaves those behind without a sense of closure. Funerals are a time for people (whether it is 2 or 200) to come together too say good-bye and honor the deceased. It is important for your family to have a dialogue and have everyone’s feelings considered. In addition, not everyone in a family has the same religious beliefs. These feelings need to be considered also. Usually most everyone’s needs can be respected if discussed in advance.

Remember that pre-arrangements are a blueprint for your wishes. While funeral or cemetery pre-need counselors can help you with these decisions they cannot anticipate all your family’s needs. Therefore these arrangements are flexible and can be changed. At the time of death, your funeral director will meet with a spokesperson for the family and review all the arrangements to make sure the family information is correct and current. At that time, adjustments will be made if needed. Before you choose a funeral director and cemetery, you might want to take the time to visit the facility and meet the staff who will be working with you.

Consider whether or not you have talked with your family about this important topic. While many people feel that their family can take care of this at the time of their death, they do their surviving family no service by leaving it till then! Like any other major purchase you would make, you should be an informed consumer and get the information in advance.

4/12: Overvaluation

4/12: Flood Insurance

Premiums under the National Flood Insurance Program rose an average of about 6 percent. The average annual premium is now about $878, not including various surcharges that apply in some cases,

Some properties, however, may see much higher increases, according to FEMA. They include those in areas at very high risk, second homes and properties that have experienced multiple flood claims.

Flooding often catches homeowners off guard, because damage from floodwater typically is not covered by standard homeowner insurance policies. Rather, consumers must purchase separate coverage, from the federal program or from private insurers.

Despite a spate of serious floods, however, many people remain unaware that they must buy flood coverage separately. In a recent survey by the website, more than half (56 percent) of people queried said they believed flood damage was covered by a standard homeowners policy.

4/12: Flood tools
Great app- you can put in your address to see your exposure

4/11: Wells Fargo

Executives at the community banking division “resisted and impeded outside scrutiny or oversight”, the board found, while former group chairman and chief executive John Stumpf “was too slow to investigate or critically challenge” sales practices.

EFM- oh heck, it was only about money. No need to get too concerned.


4/11:A tweet that I have not researched as valid but if correct........................

Half of the arrests made by the federal government each year are now for immigration crimes (up from 28% in 2004)   — John Gramlich



Coping with the Emotional Aspects of Parkinson’s Disease
By Helen Hunter, ACSW, LSW

It is important to examine the various emotions that a person living with Parkinson’s disease (PD) can undergo in living daily with the condition. The emotional factors that affect your loved one can be both internal and external. Some changes that occur can be directly due to the disease process, which causes an alteration in brain chemistry. Other emotional changes are influenced by external factors and the person’s reaction to those factors. Having a chronic neurological condition is stressful, and people react to stress in different ways. Some see it as a challenge and others see it as a problem. Parkinson’s disease has a significant impact on family and friends and can create many emotions.  These emotions include:
Denial, a feeling of shock and disbelief (Not me!) is a common reaction, especially at the time of initial diagnosis and early in the disease process. Since PD can have a subtle onset before an actual diagnosis is made, people often attribute symptoms to other causes. People also sometimes report a general feeling of uneasiness or an anxious, depressed feeling prior to diagnosis. When a diagnosis is finally made, it can come partially as a relief, but there is often shock and fear of the future.
Depression is one of the most common reactions to Parkinson’s disease, occurring in roughly 50 percent of clients. Some doctors feel that depression may actually be part of the disease process. PD medications can also cause depression in some patients.
A depressed mood is also a common and normal response in many who are dealing with the losses and lifestyle changes that come with living with a chronic disease. Losses and changes often occur in the areas of social activities, work, relationships, physical mobility and general independence. Depression often leads to anger, in both the patient and the family.
Depression is treatable and can improve. It is important for you and your loved one to recognize the symptoms of depression and inform their doctor for appropriate treatment. The symptoms of depression include:

  • Sad mood
  • Diminished interest or pleasure in activities
  • Loss of appetite or overeating
  • Sleeping too much or too little
  • Fatigue or loss of energy
  • Feelings of worthlessness or hopelessness
  • Difficulty concentrating
  • Restlessness, feeling keyed up or being slowed down to the point that it is noticed by other people
  • Recurrent thoughts of death or suicide

The diagnosis of depression can sometimes be difficult because the physical signs of Parkinson’s disease and depression, such as fatigue, slowness of movement and changes in eating and sleeping, are similar. Depression is often underdiagnosed because people do not often talk about it. Depression can be successfully treated through medication and counseling.
Anxiety can range from a general feeling of tenseness or uneasiness to a full-blown panic attack. Sometimes these feelings are experienced prior to the diagnosis of PD. Anxiety can be the result of worrying about how PD will affect a person’s lifestyle and future or concern about how quickly the disease will progress and what kinds of limitations to expect. Anxiety can be treated by medications and counseling.
When diagnosed with PD, many experience anger (Why me?) Why did this condition happen to me? Frustration often also sets in – frustration over the fact that the body doesn’t work as well as it used to. As the disease progresses and physical mobility issues increase, the feelings of frustration become more pronounced. Frustration and anger are also very evident in the caregiver, who often is the recipient of the feelings vented by their PD loved one and feels helpless in the situation. Frustration and anger can be controlled through counseling and participation in a support group.
Stress and chronic illness are interconnected. Stress comes from a variety of different sources that can be physical as well as emotional. Stress can come from daily life tasks, events, problems, fatigue, anxiety and frustration with having to deal with the limitations and life adjustments that PD often creates. Stress can worsen Parkinson symptoms, especially tremor. It is therefore important to focus on stress management and relaxation in your daily life.
Apathy is a decrease in motivation or interest in events, reduced spontaneous interactions with others, decreased concern or indifference with family and friends and a loss of interest in hobbies or enjoyable things. There is a feeling of “I don’t care” and no emotional response among those who feel apathy. Among those who are diagnosed with PD, approximately 40-45 percent will suffer from apathy. Apathy may be connected to the thinking and mood changes that occur in PD. Medications are commonly used to treat apathy, but it is also important to develop a structured set of activities to keep the PD client physically, mentally and socially active.
Loss of impulse control, or disinhibition has been reported in some people living with PD as a side effect of some medications and as a side effect of deep brain stimulation (DBS). The behaviors most commonly reported involve gambling and sexual preoccupation. Usually, such behaviors were not present prior to starting the medication or prior to the DBS procedure. Changes in medication often improve this condition – for those who have had DBS, this side effect can simply improve with time.
Those with PD sometimes report an increase in emotions. One of the more common examples is becoming more tearful when watching a movie. Although not always a problem, it is a clear change from how the person used to be. These episodes often come out of the blue and pass quickly. It is thought that increased emotions may be related to damage to the nerve pathways that connect the frontal lobes with the area that controls facial expression. Medications can be prescribed to treat this condition.
Hallucinations are best described as deceptions or tricks played by the brain that involve the body’s senses. There are five types of hallucinations:
Visual – Seeing a furry creature run by your feet, or seeing a deceased loved one sitting or standing in the room
Auditory – Hearing a voice that is coming from inside your head and not from another person or object
Olfactory – Smelling an unpleasant odor that is not related to another source
Tactile – Feeling imaginary bugs crawling on your skin
Gustatory – Tasting a bitter or abnormal taste in your mouth that is not related to another source
Visual hallucinations are the most common, followed by auditory, olfactory, tactile and gustatory. 
Delusions are defined as fixed thoughts or ideas that are often illogical, irrational or dysfunctional. The person truly believes these thoughts, even though they are not based on reality. The most common types of delusions reported in PD are:
Jealousy – the belief that your partner is being unfaithful
Persecutory – the belief that you are being attacked, harassed, cheated and/or conspired against
Somatic – the belief that your body functions in an abnormal manner or an unusual obsession with your body or health
Delusions are less common in PD compared with visual hallucinations, affecting about 8 percent of patients. Delusions generally represent a more obvious decline or deterioration in the person’s condition. Delusions of jealousy and persecution are most widely reported.
Dementia is a permanent decline in memory and thinking skills which causes problems in everyday functioning. Not everyone who has Parkinson’s disease will develop dementia, but there are a number of risk factors that can increase the likelihood that a loved one will develop dementia:
Increasing age
Older age at PD onset
Longer disease duration
Family history of dementia
Greater severity of motor symptoms
Hypertension (high blood pressure)
Poor medication tolerance
Those with dementia also are unable to solve simple problems and are not able to follow simple, everyday tasks. Those with dementia can experience a variety of emotions, such as depression, anger, frustration, anxiety and confusion. As dementia symptoms increase, there is a greater need for assistance from family or from outside home health agencies, and there might be a need eventually for a move to an assisted living or skilled nursing facility.
There are a variety of coping techniques to help your loved one in dealing with the daily challenges brought on with the diagnosis. These coping techniques include the following:
Attitude is something that anyone can control. It is important for patients to focus on the aspects of life that are positive; take stock of things to be grateful for each day. 
Knowledge is power. Learn as much as you can about Parkinson’s disease and its treatment. The more that is understand, the more you can collaborate with doctors on treatment and become active participants in their medical care. You and your loved one are your own best advocates for their care, and families can also be instrumental advocates for their loved ones.
Doing something pleasurable will help your loved one cope better with the daily challenges of the disease. Watching a movie, listening to peaceful music, reading a good book, gardening are some activities that help.
Exercise has been found to be very helpful in minimizing the symptoms of Parkinson’s disease, increasing mobility and improving quality of life. It can also be very emotionally beneficial, improving depressed and anxious moods in many patients. Yoga and tai chi are very relaxing exercises, which improve flexibility and balance.
Isolation can only make depression worse. It is important to maintain some social contacts, be involved in activities that bring you pleasure and keep lines of communication open with family and friends.
There is definitely some truth to the adage “Laughter is the best medicine.” Being able to laugh a little about the situation helps clients keep things in perspective and relieves some of the stress. It can also help in awkward situations because it tends to put others at ease, and this can promote communication.
Connecting with other people who also are dealing with Parkinson’s disease can be very helpful in coping with the disease. Support groups offer a safe place to talk about feelings, questions and concerns.  All members of the family can gather valuable information through their active participation in a support group.
Individual and family counseling can be very helpful in dealing with the emotional issues related to chronic illness. Speaking to someone who is objective can help people examine their feelings. Social workers, psychiatrists and psychologists are professionals that are trained to assist clients and families through counseling services.
Treatment for Parkinson’s disease does not only involve medication, but also includes diet, exercise, support of family and friends and a healthy attitude. 
Stress can have a very negative impact on the symptoms of Parkinson’s disease, so it is important to focus on managing the stresses in daily life and finding ways to relax. Stress management techniques include: deep breathing exercises, progressive relaxation, relaxation books/tapes or CDs, meditation and massage. Different techniques work for different people, so it important for clients to find the stress management technique that works for them.
People living with Parkinson’s disease can find a good balance in keeping their emotions in check by seeking out the support of their families and others in the community, by keeping active, by keeping a low stress level in their daily lives, by maintaining a good diet and exercise regime, by keeping a positive attitude and taking care of themselves. It is important for everyone affected by the disease to remember to ask for help when needed – it is available. Everyone needs support; all you have to do is ask!!


4/11: Economics  Gertjan Vlieghe  "Forecasting the macro-economy is hard. No economist can do this accurately, even if some get it right some of the time. We only have an imperfect notion of how the economy works, we only have partial information about the state of the economy at any point in time, and the economy is constantly hit by unanticipated shocks." 

It is simply unrealistic to expect economists to be completely accurate in all of their forecasts. Circumstances change, economic actors do not exhibit behaviour entirely in line with what models suggest they will, and nothing is ever certain.

Now think about this- you pay a planner to do a 30 year retirement plan with monte carlo, rebaalancing, 4% income distribution et al and where all the numbers are guesstimates.  It is necessary to get a sense of where a client is going into retirement. Fine, but the numbers will be pretty invalid five years out. Did your planner ever tell you that? To pay top dollar to get a leather bound (cardboard?) binder that covers not only all the diverse issues of economics, but the budget, health care, discount rates, college education, annuities etc. and then layer it with buy and hold so you can lose 50% of your equities and x%  of  bonds etc. seem OK to you???

  1. Picking Funds with Confidence




Groenborg, Niels ; Lunde, Asger ; Timmermann, Allan G ; Wermers, Russ

We present a new approach to selecting active mutual funds that uses both holdings and return information to eliminate funds with predicted inferior performance through a sequence of pair-wise comparisons. Our methodology determines both the number of skilled funds and their identity; funds identified ex-ante as being superior earn substantially higher risk-adjusted returns than top funds identified by conventional alpha ranking methods. Importantly, we find strong evidence of variation in the breadth of the set of funds identified as superior, as well as fluctuations in the style and industry exposures of such funds over time and across different volatility states


equity mutual funds; Fund confidence set; risk-adjusted performance


G11 G17 G2


"There are two types of people who will tell you that you cannot make a difference in this world: those who are afraid to try and those who are afraid you will succeed." 

Ray Goforth  


"Life Insurance and Life Settlement Markets with Overconfident Policyholders" Fee Download
NBER Working Paper No. w23286

HANMING FANG, University of Pennsylvania - Department of Economics, National Bureau of Economic Research (NBER)
Peking University

We analyze how the life settlement market – the secondary market for life insurance – may affect consumer welfare in a dynamic equilibrium model of life insurance with one-sided commitment and overconfident policyholders. As in Daily et al. (2008) and Fang and Kung (2010), policyholders may lapse their life insurance policies when they lose their bequest motives; but in our model the policyholders may underestimate their probability of losing their bequest motive, or be overconfident about their future mortality risks. For the case of overconfidence with respect to bequest motives, we show that in the absence of life settlement overconfident consumers may buy “too much” reclassification risk insurance for later periods in the competitive equilibrium. In contrast, when consumers are overconfident about their future mortality rates in the sense that they put too high a subjective probability on the low-mortality state, the competitive equilibrium contract in the absence of life settlement exploits the consumer bias by offering them very high face amounts only in the low-mortality state. In both cases, life settlement market can impose a discipline on the extent to which overconfident consumers can be exploited by the primary insurers. We show that life settlement may increase the equilibrium consumer welfare of overconfident consumers when they are sufficiently vulnerable in the sense that they have a sufficiently large intertemporal elasticity of substitution of consumption.

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


US stock funds record biggest outflows in more than 18 months

investors extended their rotation into cheaper valued European equities.

EFM- well the US is at least having some decent numbers (save for the recent low new jobs) but the EURO is still remains in bad shape (think Spain, Greece, Italy etc) coupled with a messy Brexit and perhaps France (who cares). Not necessarily a good place to invest.  When you look at the chart, recognize this was BEFORE Syria. Going to get messy.

I am fully aware that we cannot control everyplace. But certain actions are necessary to keep some moral responsibility in a civilization severely lacking same.

4/10 6 questions

most Americans come up short on the quiz, from The American College of Financial Services and the New York Life Center for Retirement Income, and are only able to correctly answer two or three questions out of the six.

EFM- actually, a couple answers are wrong or at least overrated. Particularly involving the 4% "rule".  The concern about selling at the wrong time and not reentering is not real life. More on that later.

  1. Diversification measures and the optimal number of Stocks in a portfolio: An information theoretic explanation




Adeola Oyenubi

This paper provides a plausible explanation for why the optimum number of stocks in a portfolio is elusive, and suggests a way to determine this optimal number. Diversification is dependent on the number of stocks in a portfolio and the correlation structure. Adding stocks to a portfolio increases the level of diversification, and consequently leads to risk reduction. However the risk reduction effect dissipates after a certain number of stocks, beyond which additional stocks do not contribute to risk reduction. To explain this phenomenon, this paper investigates the relationship between portfolio diversification and concentration using a genetic algorithm.To quantify diversification, we use the Portfolio Diversification Index (PDI). In the case of concentration, we introduce a new quantification method. Concentration is quantified as complexity of the correlation matrix. The proposed method quantifies the level of dependency (or redundancy) between stocks in a portfolio. By contrasting the two methods it is shown that the optimal number of stocks that optimizes diversification depends on both number of stocks and average correlation. Our result shows that, for a given universe, there is a set of Pareto optimal portfolios each containing a different number of stocks that simultaneously maximizes diversification and minimizes concentration. The preferred portfolio among the Pareto set will depend on the preference of the investor. Our result also suggests that an ideal condition for the optimal number of stocks is when the variance reduction as a result of adding a stock is off-set by the the variance contribution of complexity.


Information Theory, Diversification, Genetic Algorithm, Portfolio optimization, Principal Component Analysis, Simulation methods, Maximum Diversification Index


4/10: Estimating the Relationship Between Skill and Overconfidence *

Abstract The Dunning–Kruger effect states that low performers vastly overestimate their performance while high performers more accurately assess their performance. Researchers usually interpret this empirical pattern as evidence that the low skilled are vastly overconfident while the high skilled are more accurate in assessing their skill. However, measurement error alone can lead to a negative relationship between performance and overestimation, even if skill and overconfidence are unrelated. To clarify the role of measurement error, we restate the Dunning–Kruger effect in terms of skill and overconfidence. We show that we can correct for bias caused by measurement error with an instrumental variable approach that uses a second performance as instrument. We then estimate the Dunning–Kruger effect in the context of the exam grade predictions of economics students, using their grade point average as an instrument for their exam grade. Our results show that the unskilled are more overconfident than the skilled. However, as we predict in our methodological discussion, this relationship is significantly weaker than ordinary least squares estimates suggest.

4/10 Roubini : Syria Strike Has ‘Wag the Dog’ Element

8 minute video on national and global economics. Very very few economists can hold a candle to Roubini. The guy can handle almost any question on any country. (Y)ea he is that good. Certainly warrants 8 minutes of your existence.

Cat improvisation

4/10:  near-zero interest rates — accompanied by a lackluster recovery — may become a common occurrence.


Nominal interest rates may remain substantially below the averages of the last half-century, as central bank’s inflation objectives lie below the average level of inflation and estimates of the real interest rate likely to prevail over the long run fall notably short of the average real interest rate experienced over this period. Persistently low nominal interest rates may lead to more frequent and costly episodes at the effective lower bound (ELB) on nominal interest rates. We revisit the frequency and potential costs of such episodes in a low interest-rate world in a dynamic-stochastic-general-equilibrium (DSGE) model and large-scale econometric model, the FRB/US model. A number of conclusions emerge. First, monetary policy strategies based on traditional simple policy rules lead to poor economic performance when the equilibrium real interest rate is low, with economic activity and inflation more volatile and systematically falling short of desirable levels. Moreover, the frequency and length of ELB episodes under such policy approaches is estimated to be significantly higher than in previous studies. Second, a risk-adjustment to a simple rule in which monetary policymakers are more accommodative, on average, than prescribed by the rule ensures that inflation averages its 2 percent objective – and requires that policymakers systematically seek inflation near 3 percent when the ELB is not binding. Third, commitment strategies in which monetary accommodation is not removed until either inflation or economic activity overshoot their long-run objectives are very effective in both the DSGE and FRB/US model. Finally, raising the inflation target above 2 percent can mitigate the deterioration in economic performance; the desirability of such an approach ultimately hinges on the economic costs of inflation averaging more than 2 percent and assessments of the feasibility of commitment strategies.


4/9: Retirees Don’t Touch Home Equity
A hefty share of older U.S. homeowners are even better off: 41 percent between ages 65-74, and 63 percent over 74, have paid off their mortgages and own their homes free and clear.


Is Home Equity an Underutilized Retirement Asset?

4/9: Reverse Mortgages As a Source of Retirement Income

the reverse mortgage is calculated only on the first $636,150 value of the home,”

At least one of the borrowers has to be 62 or older, and it must be their primary residence,. It needs to be a single family home, or a Federal Housing Authority-approved condominium, townhome or mobile home, Klein says.

In addition, if the borrower has an existing balance, they must use whatever amount that is from the reverse mortgage to pay it off completely, Pfau says. For example, “If I still have a $100,000 mortgage, and the reverse mortgage gives me $300,000, I would have to pay that off immediately and be left with $200,000,”

Furthermore, the borrower must maintain the property in good order and keep up with their real estate taxes and insurance,

Generally speaking, the value the bank will allow a person to borrow against their home is 50% at age 62, after closing costs, Klein says. At age 62, the exact loan to value percentage is 52.4%, Klein notes. As people age, that rises: at age 72, it is 59.1%; at age 82, 67.4%; and at age 90, 75%. The reason for that is, “the older the borrower is, the lower their life expectancy.”

4/9: Stock flows

4/9:ROUBINI -- The Economic Challenges created by Globalization

10 minute video loaded with exceptional insight. It includes some commentary on the inability of, effectively, untrained  workers and how technology will take over a lot of unskilled labor. .By 2030 the unemployment rate could go up several levels with no offset. Those with no high school education will be forever lost. .

4/9: Optimism?

Riding a strong economy, but looking for bubbles The U.S. economy has been on the rise, with strong jobs growth pushing unemployment down to 4.7% as of February 2017. Yet other key indicators like GDP growth, personal income and spending have languished in what has become the longest, slowest recovery on record. The stock market meanwhile has been on a tear, with the S&P 500 up 6% since year-end and more than 11% since the presidential election. Against this backdrop, RIAs have been upbeat about the economy and the markets. About half of them (54%) were either somewhat optimistic or very optimistic and more than two-thirds (69%) were optimistic about the U.S. market. The advisers we spoke to were also cautiously optimistic

It has some interesting facts, etc. but once you have the Syria and Russian backlash, where are we now??  I do not dismiss that the market might have muddled along but to suggest buoyancy at then and certainly now  is just plain wrongheaded.

And will Korea set off more missiles (probably). Did the US and China really have a good meeting of the minds (unknown)


4/9: Fidelity Plans on cutting advisers out

While fiduciary advisers generally assist with fund selection as well as ongoing investment monitoring and due diligence, observers explained that point-in-time fiduciary status would only cover an initial recommendation (true), leaving a 401(k) plan sponsor with responsibility for ongoing monitoring (true).

The Guardian Study of Financial and Emotional Confidence

4/9: Fed expects more interest-rate hikes, minutes show

The members of the Federal Open Market Committee expect to raise interest rates two more times this year and three times in 2018, the minutes for the committee's March meeting show. The minutes, released Wednesday, also show that all but one member agreed on hiking the federal funds rate by 25 basis points to the 0.75% to 1% range.

4/9: Employment addition at a low of 98,000.

That is the net number of positions U.S. employers added to payrolls in March, according to the monthly survey from the Bureau of Labor Statistics. Analysts had expected around 175,000 new positions. Big difference.