Master Financial Education

Financial and Economic Daily Commentary 2018
The  most intensive and extensive on the Web
Knowledge makes obsolete the inequities that ignorance and prejudice justify
Errold. F. Moody Jr.

click above for bio




USA Today- "This is a high-powered personal bookmark list that spans the spectrum of the truly useful."

FORBES- "You'll find some great information."

BUSINESS WEEK: "For an Expert, Click here"  

From an adviser: It is a daily read for me. Clearly biased towards the client.
Great perspectives and links to thought provoking material. Greatly appreciated

Investor/Investing Risk of Loss: Identify, Manage and Limit Investment
Risk of Loss on Mutual Funds and ETFs

Four Phase Process that will change the investment dichotomy for 75% of Middle and Lower Income investors overall and up to 90% for 401k Investors 

Losses limited to about 12% for recessions

Patent Pending

Morality, Sexism, Ethics, Corrupt Equilibrium

Critical reference to the limited fiduciary capabilities in the planning industry (and more) and why they may/will remain as such given sophomoric DOL rules and flaccid organizational enforcement. Specific commentary to sexism and ethical and moral lapses of society impacting women. Not the standard drivel

Analysis for investors and advisers. The economic changes from the Great Recession caused major adjustments in investing. One of the major issues is the flip flop of the correlations in bond funds versus equities  coupled with a truly lower return and an increased overall risk. It will take a lot more effort to provide adequate return for those in need and the discussion will address pros and cons particularly for retirement purpose Emphasis on risk, Click for full article.  

“It’s not the Fed’s job to stop people from losing money.”

Jay Powell- President of the Federal Reserve

A Detailed Timeline of the 2008 Financial Crisis


9/18:U.S. to further slash number of refugees accepted, from 45,000 this year to 30,000 next year

 During the final year of the Obama administration, the United States took in 110,000 refugees.

Jeremy Siegel, professor of finance at the Wharton School and author of “Stocks for the Long Run,” says 5.5% is the “new normal” return for stocks after adjusting for inflation.

It incorporates a 2% dividend and 3.5% earnings per share, 2.5% of which is due to buybacks. The 5.5% real return is equivalent to a price-to-earnings ratio of 18, which is the current P/E for the S&P 500 based on future earnings (12 months forward).

EFM- note this is the real rate of return. Add 3% inflation and you have 8.5%. Seems high to me.

The stock market has completely recovered from the financial crisis, and then some. Stocks are now worth almost 60 percent more than when the crisis began in 2007, according to a inflation-adjusted measure from Moody’s Analytics. But wealthy households own the bulk of stocks. Most Americans are much more dependent on their houses. That’s why the net worth of the median household is still about 20 percent lower than it was in early 2007. When television commentators drone on about the Dow, they’re not talking about a good measure of most people’s wealth.

9/18: And a confirming of the above from the NY Times

The financial crisis didn’t just kill the dream of getting rich from your day job. It also put an end to a fundamental belief of the middle class: that owning a home was always a good idea because prices moved in only one direction — up. The bubble, while it lasted, gave millions in the middle class a sense of validation of their financial acumen, and made them feel as if they had done the Right Thing.

In theory, if you lost your job, or suffered some other kind of financial setback, you could always sell into a real estate market that was forever rising. Ever-higher home prices became a steam valve, and the “greater fool” theory substituted for any conventional measure of value.

The kindling for the fire that consumed Wall Street and nearly the entire economy was mortgages that should never have been taken out in the first place. Homeowners figured the more house the better, whether or not their income could support the monthly payment, while greedy banks and middlemen were all too happy to encourage them.

EFM- this is a thorn in Trump's many problems. What if Kavanaugh's vote is delayed. What could happen with Mueller's investigation. We still haven't had an agreement with Canada. Will Turkey cause a riff with Trump. How many Syrians will die by Russia's 'cleansing'. Maybe we will win a trade war but China needs to prove its muscles and we might even lose. 

The unemployment rate has also become less meaningful than it once was. In recent decades, the number of idle working-age adults has surged. They are not working, not looking for work, not going to school and not taking care of children. Many of them would like to work, but they can’t find a decent-paying job and have given up looking. They are not counted in the official unemployment rate.

9/17:"Illegal Drugs and Public Corruption: Crack Based Evidence from California" Free Download

USC-INET Research Paper No. 18-10

ALESSANDRO FLAMINI, University of Pavia
Email: alessandro.flamini@unipv.it
University of Edinburgh - School of Law
Email: b.jahanshahi@gmail.com
University of Cambridge - Faculty of Economics and Politics, University of Cambridge - Girton College
Email: km418@cam.ac.uk

Do illegal drugs foster public corruption? To estimate the causal effect of drugs on public corruption in California, we adopt the synthetic control method and exploit the fact that crack cocaine markets emerged asynchronously across the United States. We focus on California because crack arrived here in 1981, before reaching any other state. Our results show that public corruption more than tripled in California in the first three years following the arrival of crack cocaine. We argue that this resulted from the particular characteristics of illegal drugs: a large trade-off between profits and law enforcement, due to a cheap technology and rigid demand. Such a trade-off fosters a convergence of interests between criminals and corrupted public officials resulting in a positive causal impact of illegal drugs on corruption.

EFM- And now Marijuana is legal.

9/17: Social Security

recipients could see the largest cost-of-living increase in seven years in 2019 at 2.8%,

9/17:2008 market crash led to lower fees, more conservative investing

The stock market crash of 2008 changed the way people invest, experts say. Investors now put more money into bonds and index funds and less into actively managed funds, while fees on most investments have dropped

EFM- Curious as to what they will do with the next mess. Going with passive funds is not back but using bonds when interest rages are rising is a no no. .

9/17: Hurry, hurry! Excess money!!!

Just announced - XXXXXXX  is running a commission special!  Effective on applications received as of today, the YYYYYBBBB Index will pay an additional 1.00% commission.  This increase brings what is arguably the best accumulation product on the market into a new realm; it now is one of the best commission products on the market as well!

Regular Commission: 6.50% Ages 0-80 

Special Commission: 7.50% Ages 0-80

9/17: Florence threatens more than a million homes without flood insurance
Most people in the path of Florence don’t have flood insurance, and many won’t have the money to rebuild if their homes are damaged or destroyed by the storm’s onslaught of water.
Much of the damage from Florence will be caused by rainfall. The slow-moving tropical storm, which was downgraded from a Category 1 hurricane Friday, could bring flooding far beyond the North and South Carolina coastlines.
But most homes in the Carolinas don’t have federal flood insurance coverage, which is offered by FEMA. Of the 7 million homes in the two states, only about 340,000, or 5%, are covered under the federal program.
The only homeowners required to purchase the insurance are those who live in federally declared flood zones and have federally guaranteed mortgages.
Even in those areas, some homes aren’t covered. Some homeowners don’t have a mortgage, and in other cases the owners have let the flood insurance lapse and the mortgage lender doesn’t know.

EFM- considering the extent of flooding, most homeowners will not have insurance and will not have money to rebuild and the area will remain devastated by vacant lots forever.
That will probably be the issue with Houston. Buyers are now going to radically change where to buy. The value of homes will change a lot.

Abstract Much is understood about loss aversion (the tendency for losses to have greater hedonic impact than comparable gains), but open questions remain. First, there is debate about whether loss aversion is best understood as the byproduct of a single system within the brain that treats losses and gains asymmetrically or the interaction of separate deliberative and emotional systems. Second, some have questioned whether loss aversion alone is the best account for the endowment effect. Alternative accounts, based on the differential focus induced by buying versus selling, the order in which buyers and sellers consider positive and negative aspects of the good, the extent to which ownership induces liking, and the desire to avoid making a bad deal, have been proposed. Third, it is unclear whether losses are actually experienced more intensely than comparable gains, or whether people simply behave as if they were. Some have argued that loss aversion is nothing more than an affective forecasting error, while others have argued that there are many situations in which losses are actually more impactful than comparable gains. This review synthesizes the insights that behavioral researchers and neuroeconomists have contributed to each debate, and highlights potential avenues for future research.

9/17: This is an area I have touched on previously but now with Florence (and Houston) it will gather a lot of steam towards redirecting housing dollars

This scientist thinks we need to move people away from the coast

Hurricane Florence is forcing more than a million people on the US East Coast to flee from their homes. Coastal flooding and erosion is a real threat to property, the local economy, and life. Coastal populations are growing faster, but one scientist warns people should relocate away from the coasts.

Americans’ household earnings are finally stretching back to their pre-recession heights. But feeling secure and comfortable isn’t only a measure of how much money you have. It’s also a measure of how much you have compared with others.

For many, that is one reason that recent financial progress may seem overshadowed by the gains they’ve missed out on and a needling sense that they’ve lost ground.

As new research illustrates, two groups in particular have stalled: whites without a college degree, and blacks and Hispanics with one. Both are being far outpaced by college-educated whites.

9/16:     The Bigger They Are, The Harder They Fall: The Decline of the White Working Class

This essay explores the intersection of race, ethnicity and education, which we use as a proxy for class. We examine five measures of well-being between 1989 and 2016, the range spanned by the Federal Reserve’s Survey of Consumer Finances.

We document three main findings:

  • Large racial and ethnic gaps in a range of measures of well-being lessened solely because of improvements for nonwhite families without college degrees.Over time, nonwhite working class families—those without a four-year college degree—became more similar to working class non-Hispanic whites in terms of family income and wealth. This also was true of the likelihood of being a homeowner, of being married or cohabiting and of reporting good or excellent health.

    Conversely, families headed by someone with a four-year college degree who identified as non-Hispanic black or Hispanic of any race fell further behind similarly educated white families on all of those measures. More families are working class than college educated, so declining gaps are evident in the population as a whole.

  • The white working class has declined both in size and relative well-being. Uniquely among major socioeconomic groups, the white working class decreased in absolute numbers and population share in recent decades. At the same time, the five measures of well-being we tracked all deteriorated for the white working class relative to the overall population. The shares of all income earned and wealth owned by the white working class fell even faster than their population share. (See Figure 1.)
  • Neither race nor education is sufficient alone to explain the decline of the white working class. White college graduate families are doing very well, suggesting that factors related to identifying as white are not sufficient to explain the decline. Education and class also don’t provide a full explanation: Hispanic and black working class families made some progress on many measures, while the white working class regressed.

    A more plausible explanation for the decline of the white working class is their diminishing set of advantages relative to nonwhite working class families in terms of high school graduation rates, access to relatively high-paying jobs, and freedom from explicit workplace discrimination.

White Working Class Share of population, income and wealth


1.   The Shift from Active to Passive Investing : Potential Risks to Financial Stability?


Kenechukwu E. Anadu; Mathias S. Kruttli; Patrick E. McCabe; Emilio Osambela; Chae Hee Shin


The past couple of decades have seen a significant shift in assets from active to passive investment strategies. We examine the potential effects of this shift for financial stability through four different channels: (1) effects on investment funds’ liquidity transformation and redemption risks; (2) passive strategies that amplify market volatility; (3) increases in asset-management industry concentration; and (4) the effects on valuations, volatility, and comovement of assets that are included in indexes. Overall, the shift from active to passive investment strategies appears to be increasing some types of risk while diminishing others: The shift has probably reduced liquidity transformation risks, although some passive strategies amplify market volatility, and passive-fund growth is increasing asset-management industry concentration. We find mixed evidence that passive investing is contributing to the comovement of assets. Finally, we use our framework to assess how financial stability risks are likely to evolve if the shift to passive investing continues, noting that some of the repercussions of passive investing ultimately may slow its growth.


Asset management ; Passive investing ; Index investing ; Indexing ; Mutual fund ; Exchange-traded fund ; Leveraged and inverse exchange-traded products ; Financial stability ; Systemic risk ; Market volatility ; Inclusion effects ; Daily rebalancing


G10 G11 G20 G23 G32 L1





9/14: Considering what I am hearing and seeing about the potential devastation from Florence, the cleanup et al could take a point (or more) away from the GDP.

In the field of psychology, the Dunning–Kruger effect is a cognitive bias in which people of low ability have illusory superiority and mistakenly assess their cognitive ability as greater than it is.

The cognitive bias of illusory superiority comes from the inability of low-ability people to recognize their lack of ability; without the self-awareness of metacognition, low-ability people cannot objectively evaluate their actual competence or incompetence.


On the other hand, people of high ability incorrectly assume that tasks that are easy for them are also easy for other people. And so, are (doctors) especially guilty of this effect?

Although adequate self-esteem is essential for psychological health, people with high but fragile self-esteem have been shown to exhibit defensive, often aggressive behavior when their self-esteem is threatened. (EFM- does that ring a bell???) We measured physician narcissism (as a proxy for high but fragile self-esteem) and used a subtle manipulation to examine how physicians who varied in levels of narcissism responded to an ego threat. We found that physicians high in narcissism, as compared with those lower in narcissism, were more likely to respond to ego threat by attempting to bolster their self-image. Concerned about self-image, physicians in this situation may be insufficiently receptive to new information and instead attempt to justify initial opinions

narcissism is predictive of aggressiveness and hostility under conditions of ego threat (see Bushman & Baumeister, 1998), we hypothesize that physicians characterized by high levels of narcissism will respond to a manipulation that induces self-doubt in a defensive, exaggeratedly self-confident fashion

Our findings describe a different, but potentially related phenomenon: the ways that subtle events that shake a physician’s confidence (e.g., a new piece of evidence in a complex diagnostic dilemma) may fail to be appropriately incorporated because of the threat that they may pose to a physician’s ego. Numerous clinical instances abound in which physicians must navigate uncertainty, such as when to refer a patient for a second opinion, when to pursue an additional test, or when to change the course of treatment,implicitly or explicitly acknowledging a prior decision. In each case, physicians must manage potential threats to their own self-esteem and common   pitfalls of clinical reasoning (Redelmeier, 2005) while serving the interests of their patients. Our findings raise the question of whether, in these settings,
some physicians manage threats to their self-esteem by reacting with greater     confidence than is appropriate, given the available clinical evidence.

9/14: No deal Brexit

Mark Carney, Bank of England governor, has delivered a “chilling” warning to Theresa May’s cabinet that a no-deal Brexit could lead to economic chaos, including a property crash that could see house prices fall by a third. Mr Carney told ministers that in the scenario of a disorderly Brexit, the BoE would not be able to avert a crisis by cutting interest rates — as it did after the 2016 referendum vote — and that inflation and unemployment would rise.

EFM- Could this lead to an international instability and a worldwide recession? Quite possibly since emerging market are stumbling.Russia does definitely have economic problems and though I read a lot on China, I just don't know would happen with them.

Trump preparing for Hurricane Florence

As part of our coverage of the legacy of the financial crisis, we also looked at why the policymakers who saved the financial system were never forgiven, and how, despite many changes, the banking industry remains largely the same.

 financial services research division presented US consumers aged 18+ with a list of commonly used financial and investment terms to gauge a public level of understanding. Respondents self-evaluated how thoroughly they understand the given terms. For some of the terms, a working and ongoing understanding of the concept is important to routine saving and investing.

EFM- the one that bothers me is the expense ratio. It's real easy to teach but I don't know if the 53% have ever attended an investment class run by someone who knows what they are doing.

9/13: Asians

government data showed that the foreign-born population in the U.S. had reached its highest share since 1910, with Asians representing the largest group.


Novelist who wrote about ‘How to Murder Your Husband’ charged with murdering her husband

Don't hire hit men or lovers, she wrote in a blog post before police allege she killed her chef husband with a gun.

EFM- Nice to leave clues. Hope she wasn't a breeder.

Any fool can criticize, condemn and complain—and most fools do.
But it takes character and self-control to be understanding and forgiving.

Dale Carnegie

three factors that could explain the decline in widows’ poverty: 1) women’s rising levels of education; 2) their increased attachment to the labor force; and 3) increasing marital “selection” – i.e., the notion that while marriage used to be equally distributed, it is becoming less common among those with lower socioeconomic status.  The project explores what share of the decline in poverty can be explained by these factors and also projects the role of these factors in the future.

The paper found that:

  • The rise in education and labor force participation explain most of the decline in widows’ average poverty rate from 20 percent in 1994 to 13 percent in 2014.
  • So far, marital selection has not been a driving force in the decline in widows’ poverty.
  • The projections suggest that widows’ poverty will continue to fall over the next 15 years.
  • In the future, up to half of this reduction could be explained by the increasing selection of women into marriage.

The policy implications of the findings are:

  • While the projected decline in widows’ poverty may allow policymakers to shift some of their focus to more vulnerable groups, widows will remain poorer than married women.
  • Considering the effect on widows of any change that would bring fiscal balance to the Social Security program will continue to be important

9/12:   In the tropical Pacific, Super Typhoon Mangkhut is the most intense tropical cyclone in the world, packing 173 mph winds.

 Barely two weeks ago, Hawaii set a state record for all-time storm total rainfall — an astonishing 52.02 inches from Hurricane Lane.

EFM- I cannot fathom 52 inches of rain. By the sounds of it tonight, there might be over 40" of rain in the Carolinas. The slow storm will make up a lower wind by dumping massive amounts of rain

9/12: The GOP's “tax reform 2.0" aims to make permanent the tax cuts for individuals that President Trump signed into law in December 2017, including the law's temporary reductions in individual filers’ rates, a doubling of the Child Tax Credit, and cuts to the estate tax paid by a small fraction of the wealthiest families.9/12:

this was wrong from the get go. This will/could add more than $2 trillion to the federal deficit over a decade.The average American worker does not get that much- it is the wealthier that do well. But nobody does well with another 2 trillion to our debt; Our debt will break us by 2030. Climate change will not be attacked  now and the long wait until it does will lead our world into chaos (2050).

One in three girls in India is a child's bride

There are now at least three million people in Idlib. Half of this population is displaced from other areas in Syria, and nearly a quarter of a million were displaced this year. People are living in overcrowded camps, in dire need of food, water and health care, with no electricity, no running water and no sewerage system.

EFM- The Russians and the government want to clear out the insurgence. Thousands will die. But the U.S. simply says do not use gas. Apparently killing them in 'normal' fashion will pass muster but the gas is a no no.

Ah, civilization has passed a milestone

Occam's razor (or Ockham's razor) is a principle from philosophy. Suppose there exist two explanations for an occurrence. In this case the simpler one is usually better. Another way of saying it is that the more assumptions you have to make, the more unlikely an explanation.

9/11: And she is absolutely right


Christine Lagarde has warned the escalating US-China trade war could deliver a “shock” to already struggling emerging markets, raising the prospect that a crisis ripping through Argentina and Turkey could spread across the developing world.

In an interview with the Financial Times, the IMF managing director cited the “uncertainty [and] lack of confidence already produced by the threats against trade, even before it materialises”, as one of the main dangers facing the developing world.

9/11: Oil:`

In today’s newsletter, we will take a quick look at some of the critical figures and data in the energy markets this week. 

We will then look at some of the key market movers early this week before providing you with the latest analysis of the top news events taking place in the global energy complex over the past few days. We hope you enjoy.

Trader Alert: Oil markets are set to become much tighter in the next couple of months, and more and more analysts are now expecting a major oil price rally in November as a direct result of sanctions on Iran. Our researchers have identified a number of unique opportunities in energy markets. Find out how to profit from the next oil price shock.

Chart of the Week

-    Hurricane Florence is barreling towards the east coast, aiming at North and South Carolina. The EIA has a
mapping tool that allows for adding layers to see various pieces of energy infrastructure that may be affected by the storm. 

-    At the time of this writing, Hurricane Florence was a Category 4 storm, and it is possible it could strengthen to a Category 5 before it makes landfall. 

-    The storm could be devastating, but from an oil market perspective, there is little in the storm’s path that would reverberate more broadly – no major oil refineries, no upstream production. As a result, there shouldn’t be any supply-side issues, other than localized fuel problems at the retail end during the storm. 

-    If anything, the storm could cut into demand as millions of people put everything on hold.


Monsoonal rains devastate Southern India, triggering $4B in losses

By Danielle Ling

Kerala state experienced the worst flooding since 1924, leaving over 500 people dead or missing.

EFM: Climate change?  What about Florence? Worst to hit in almost 30 years. The outer banks will be devastated. Will they rebuild? How much will the Federal Government pay out to rebuild in that area that will get clobbered again?

9/11: If they get Trump to do this- I am all for it.


The U.S. may impose sanctions on Chinese officials over the treatment of Muslims. It would be a rare rebuke of Beijing’s human rights record.

Monday, September 10, 2018 5:12 PM EST

Until now, President Trump largely has resisted punishing China for its human rights record, or even accusing it of widespread violations. If approved, the penalties would fuel an already bitter standoff with Beijing over trade and pressure on North Korea’s nuclear program.

9/10: Americans Say Life Insurance Discounts Would Motivate Them to Stay Healthy

Survey: Majority of consumers likely to maintain weight level and get regular check-ups if offered premium discounts

Insurance discounts can be a powerful incentive for Americans to maintain healthier lifestyles, according to a new survey. Nine out of ten consumers (92%) would be motivated to maintain a specific weight level and four out of five (81%) say they would be more likely to have an annual check-up if offered a life insurance discount or incentive.

EFM- I know everyone likes a discount but I do not know how it would be applied. Term insurance is cheapest and if a company offered a discount, it would lower overall company returns which tend to be low anyway (though some would disagree). Do they put a list price on it and give a discount if you pay cash???

With other policies- which are very hard to discern- they could leave out a rider, reduce coverage, etc. etc.

The bottom line is I think they have to look for other incentives. One way- which might be tough to prove- is if they lost x weight, the could get a better rate. However they already do it for stopping smoking.

9/10:Trade Conflicts and Rising Interest Rates Weigh on Business Executives’ View of U.S. Economy

Almost half of respondents say they would see an unfavorable impact on their business from tougher trade policies by U.S.

For the second quarter in a row, business executives are reining in their optimism about the U.S. economy, in part because of the potential impact of trade and tariff policies and rising interest rates, according to the third-quarter AICPA Economic Outlook Survey, which polls chief executive officers, chief financial officers, controllers and other certified public accountants in U.S. companies who hold executive and senior management accounting roles.

EFM- Trade war DOES hurt many small businesses since the need lower cost products  (directly or as used to make their stuff) from China et al in order to stay in business. Higher interest rates will be needed to keep inflation in check. It should rise due to full employment and people being willing to buy more.

Researchers asked participants to identify three of the most common and important warning lights in a vehicle: a tire pressure warning light, a coolant temperature warning light, and an oil pressure warning light.

The most shocking statistic found that 73% of Americans don’t know what their oil pressure warning light means.

The study also found that 40% risk engine failure because they don’t understand their coolant temperature warning light.

The coolant warning light notifies the driver that the coolant temperature is higher than normal, meaning the engine is near overheating. Driving with this warning sign on for an extended period of time is extremely dangerous, and could wind up costing drivershundreds if not thousands of dollars in repairs.

When it comes to tire pressure warnings, the study found that 30% unknowingly risk driving at an unsafe tire pressure.

9/10: From last week









S&P 500












*Bond Index




10-Year Treasury Yield




*Source: Bonds represented by the Bloomberg Barclays US Aggregate Bond TR USD. This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results

9/10: A very good idea since this next downturn could be quite severe

Fed weighs capital buffer requirements

Federal Reserve officials are debating the merits of requiring US banks to hold additional capital while the economy is good so they will have funds available if the economy sours. Some say the tool isn't needed, while others say it will help the Fed avoid having to raise interest rates aggressively.

9/10:Summers: Stress test conclusion "comically absurd"

Summers (Rob Kim/Getty Images)

The Federal Reserve's conclusion from the latest stress test that no major bank holding company "would have any capital deficiency" during a deep recession "is a comically absurd conclusion," former US Treasury Secretary Lawrence Summers says. "The fact that that assertion continues to be made has to undercut whatever credibility one would otherwise attach to the very substantial efforts that have been made to strengthen financial regulation," he says.

EFM: You do not have to accept all of Summer's arguments, but you have to read his comments and digest the focus he addresses. He is that good

9/10: Stop breathing and think better

They find that a 1 microgram per cubic meter increase in average exposure to fine particulate matter over a decade increases the probability of being diagnosed with dementia by 1.3 percentage points. This is equivalent to the elevated risk of dementia associated with a female aging from 74 to 77 or around one-third of the elevated risk associated with having diabetes. The results suggest that the EPA’s 1997 standard on the maximum allowable concentration of particulate matter saved 140,000 people from living with dementia, yielding $163 billion in benefits under moderate assumptions about the value of the quantity and quality of life. The authors show that the effect of particulate matter on dementia persists even at levels below the EPA’s current regulatory threshold, suggesting that further regulation would yield additional benefits.

9/9: Nonlinear

Antifragile: Things That Gain from Disorder: “Complex systems are full of interdependencies — hard to detect — and nonlinear responses. ‘Nonlinear’ means that when you double the dose of, say, a medication, or when you double the number of employees in a factory, you don’t get twice the initial effect, but rather a lot more or a lot less.”

The stock market is a complex system where in the short term there are few if any interdependencies between decisions and outcomes. In the short run stock prices are driven by thousands of random variables. Stock market participants have different risk tolerances and emotional aptitudes, and diverse time horizons ranging from milliseconds (for high-speed traders) to years (for long-term investors).


In other words, predicting where a stock price will be in a day, a month or even a year is not much different from prognosticating whether the ball on a roulette wheel will land on red or black. In the longer run, however, good decisions should pay off because fundamentals will shine through — just as was the case with buying Microsoft in 1992 and not buying GoPro in 2014. But in the short run there is no correlation between good decisions and results. None!

Whenever you look at your portfolio, think of the Microsoft and GoPro examples above. The performance of your stocks in the short run tells you absolutely nothing about what you own or about the quality of your decisions. You may own a portfolio of Microsofts, and its value is still going down because at this juncture the market doesn’t care about Microsofts. Or maybe you stuffed your retirement fund with overpriced fads that may not be around a year from now. But in the longer run, which always lies out there past the short run, time discovers truth, as Seneca said.

EFM- whether you are a short term or long term investor, you still do not want to lose a big chunk of money. Losing 50% of your monies 3 to 4 times every 30 years due to a recession is absolute folly. Many people never regained their past losses

Japan, the world's third-largest economy after the US and China, is a major trading partner for the US, with automobile imports particularly important.

Major Japanese brands like Toyota and Honda send more than 8 million cars to the US each year, and manufacture close to 4 million within the US. Last year, more than $40 billion of Japanese autos entered the country.

Trump has previously lamented that imported vehicles are a threat to national security

EFM- Toyota includes a North Korean under every hood.

9/9: Want to fall asleep in two minutes. This is used by the military

"The US Navy Pre-Flight School developed a scientific method to fall asleep day or night, in any conditions, in under two minutes. "After six weeks of practice, 96 percent of pilots could fall asleep in two minutes or less. Even after drinking coffee, with machine gunfire being played in the background."

first step is to blank your mind. To do this, it's recommended you relax all of the muscles in your face. Then, drop your shoulders and relax your arms. Breathe out and relax your chest, and then also relax your legs, all in that sequence.

For the next 10 seconds, you'll then want to clear your mind of everything. Either imagine you're lying in a pitch-black room on a comfy couch or, if you're struggling, saying the words "don't think" over and over again can supposedly help.

Most people following the debate could be forgiven for thinking this is solely a conversation about the help offered to the poor. This is not the case. An increasing share of spending on the safety net goes to families above the poverty line. Low-income and even middle-income families are also more reliant on means-tested transfers than in the past.

you go through various phases of sleep, which form part of multiple cycles. When you engage in rapid eye movement (REM) sleep, you dream, and perhaps sleep-walk or talk, but this only makes up a small portion of your presumably nocturnal activities

Something that falls away immediately after just one less night of sleep is those all-important cognitive reasoning and retention functions. From grammatical reasoning and spatial planning to memory recall activities, our abilities begin to drop off to varying degrees.

It appears that there’s far less activity going on in the frontal and parietal lobes, which deal with problem-solving and decision making. As noted by a landmark 2017 review on the subject, your visual cortical regions also show an increasingly reduced signal over time during visual working memory tasks. Reaction times and learning also fall by the wayside.

The brain’s reward system is also shown to be sensitive to SD, which can cause changes in how a person seeks out risks, sensations, and takes impulsive actions. Essentially, the more SD you experience, the more of a clumsy fool you’re likely to become

The chart shows obesity rates for older children leveling off as the rate for children ages 2 to 5 soars. (Chart: CDC)

Here’s what happened the overall percentages of adults ages 20 and older who fit into the three major weight categories included in the new adult weight data update, between the 2013-2014 survey wave and the 2015-2016 wave:

Overweight (BMI from 25 kg/m2 to just under 30 kg/m2): Fell to 31.6%, from 32.5%.

Obese (BMI from 30 kg/m2 to just under 40 kg/m2): Increased to 39.6%, from 37.7%.

Severely obese (BMI of 40 kg/m2 or higher): Held steady at 7.7%.

For both adult men and adult women, the changes in the percentage who were either overweight or severely obese were within the margin of error. That means that, from the standpoint of someone interested in statistics, the male and female overweight rate and severe obesity rate were about the same in both the 2013-2014 and 2015-2016 survey waves.

Similarly, for adult women, the obesity rate hovered around 41% in both survey waves.

For adult men, the obesity rate increased by a substantial amount: to 37.9%, from 35%.

CDC charts show that U.S. adult obesity rates increased gradually between the 1960-1962 wave and the 1976-1980 wave for both men and women; increased rapidly from the 1976-1980 wave to the 2003-2004; and has been moving up and down, but generally upward, since the 2003-2004 wave.

In the update on children, tables show that the percentage of all children ages 2 to 19 who were classified as overweight, obese or severely obese held steady at about 40%.

The percentage of children ages 12 to 19 classified as obese held steady at about 21%.

The percentage of children ages 6 to 11 classified as obese stood at 18.4% in the 2015-2016 survey wave. The change between the 2013-2014 and the 2015-2016 wave was within the margin of error.

The percentage of children ages 2 to 5 classified as obese jumped to 13.9%, from 9.4%. That increase was far larger than the margin of error, which was 1.3% for 2013-2014 and 1.1% for 2015-2016.

For boys ages 2 to 5, the obesity rate increased to 14.3%, from 8.8%.

For girls in that age group, the obesity rate increased to 13.5%, from 10%.

CDC analysts did not discuss the reasons behind the increase in the obesity rate for children ages 2 to 5.

The 2018 Evolution Revolution report says 82% of discretionary accounts are owned by people who fall into the non-high-net-worth category. The report also noted an "increase in the number of advisers reporting charging fixed fees`

9/9:Life Insurance And The Familial Risk

Younger workers and women are more likely to be worried about life insurance, less likely to understand its financial benefits

Employee benefits provider Unum (NYSE: UNM) finds that nearly half (45 percent) of 25-34-year-olds reported feeling stressed or worried when thinking about life insurance, compared to just 29 percent of those 35-49.

9/9: OIL

Greetings from London. 

Oil prices look set to see their largest weekly decrease since July as an unexpected build in gasoline inventories pointed towards the end of driving season and a fall in demand

Friday, September 7th, 2018

Oil prices are set for their largest weekly loss since July, due to fears of emerging market contagion and some bearish data from the EIA. 

Mixed EIA report, oil prices fall. Crude oil prices fell sharply this week after the EIA revealed a surprising build in gasoline inventories, suggesting that peak summer driving season has come to a close and could usher in a softer period of demand. The news overshadowed a strong decline in crude oil inventories. 

Saudi Arabia ramps up oil shipments to United States. Saudi oil exports to the U.S. jumped above 1 million barrels per day last week (four-week average) for the first time since 2017, according to EIA data. Shipments are also up 250,000 bpd compared to May, perhaps an indication that Saudi Arabia is responding to
political pressure from the American lawmakers. 

Transocean buying Ocean Rig for $2.7 billion. Transocean (NYSE: RIG) announced a move to take over Ocean Rig (NASDAQ: ORIG), a rival offshore drilling contractor, for $2.7 billion. The deal will give Transocean twice as many deepwater rigs and drillships as its nearest competitor, according to the
Houston Chronicle. The acquisition is also a sign of the faith that Transocean has in the growth of the offshore drilling sector (more below), which has lagged onshore shale, for instance. "Adding Ocean Rig's premium assets to our industry-leading fleet ... better positions us to capitalize on what, we believe, is an imminent recovery in the ultra-deepwater market," Transocean President and Chief Executive Jeremy Thigpen said.

Offshore activity shows signs of rebound. A recent report from IHS Markit projects that global demand for mobile offshore drilling rigs will
increase by 13 percent through 2020 as the oil industry steps up offshore exploration. IHS says there will be demand for an average of 521 rigs in 2020 up from 453 this year.  

Baker Hughes selected for offshore Saudi fields. Saudi Aramco
awarded Baker Hughes a major services contract to help boost production at the Marjan oil field. Saudi Arabia is aiming to boost production capacity by 1 million barrels per day by 2023 at a handful of offshore fields in order to offset declines from mature fields.  

Midstream giants team up for new Permian pipeline. Energy Transfer Partners (NYSE: ETP), Magellan Midstream Partners (NYSE: MMP), Delek Group, (TLV: DLEKG) and MPLX (NYSE: MPLX) have
decided to jointly fund the “Permian Gulf Coast Pipeline,” another major conduit that will connect the Permian to the Gulf Coast. The target in-service date is mid-2020. The announcement adds yet another pipeline to the mix – there are already several projects in the works to expand midstream capacity from West Texas.

Schlumberger, Halliburton warn of Permian slowdown. The CEOs of Schlumberger (NYSE: SLB) and Halliburton (NYSE: HAL)
admitted this week at an industry conference that they are seeing activity in the Permian slowdown. Pipeline constraints have not yet curtailed production growth, but the oilfield service companies, who are on the frontlines and have a good vantage point on drilling activity, have already felt the impact. “These challenges will likely have a dampening effect on production growth, wellhead prices and investment levels in the coming year,” Schlumberger’s CEO Paal Kibsgaard said at the Barclays conference in New York. Also, Kibsgaard said that the assumption that Permian production will grow at a 1.5-mb/d annual rate is “starting to be called into question.”

Mexico’s President to build country’s largest oil refinery. Mexican president-elect Andres Manuel Lopez Obrador (AMLO) offered more details on his plans to build a new oil refinery. “It will be a refinery that will produce 400,000 barrels per day of gasoline with an approximate cost of $8 billion that we want to build in three years,” Lopez Obrador told a group of business leaders, according to
Reuters. Meanwhile, Bloomberg reports that AMLO may not suspend future oil auctions after all. 

Chevron downgraded. Bank of America Merrill Lynch
downgraded Chevron’s (NYSE: CVX) to “neutral” from “buy” because the bank says that the renewal on several of Chevron’s key projects in Asia may be harder to obtain than some think. Specifically, BofAML cited Chevron’s “emerging uncertainties around spending and PSC [production sharing contract] renewals [and] a more selective sector view that acknowledges the tailwind from the commodity as largely played out.” Several “key production sharing contracts” expire in 2021-2023.

Chevron launches predictive maintenance campaign. Chevron (NYSE: CVX) announced the beginning of a predictive maintenance campaign, equipping refineries and oil fields with sensors, cloud computing, data analytics and a variety of other technologies often referred to as “predictive analytics,” that promise to precisely predict when assets need maintenance and head off problems before they arise. These suite of new technologies could potentially save oil companies millions of dollars. “In the past, we had to figure out how equipment was performing,” Chevron’s Chief Information Officer Bill Braun told
the Wall Street Journal. “In the future, the equipment will tell us how it’s performing. This represents a big shift.”

Tesla sued for misleading investors. Prominent short-seller Andrew Left has
sued Tesla (NASDAQ: TSLA) and Elon Musk for misleading investors when Musk announced his decision to take Tesla private, only to abandon the plan. Left argues the scheme was intended to “burn” investors. 

OPEC wants to finalize cooperative agreement in December. OPEC and its non-OPEC partners, often collectively referred to as OPEC+,
hope to formalize a cooperative agreement at the next meeting in December. The move would be a way of institutionalizing the ongoing production cut agreement that began in early 2017, and provide a framework for indefinite cooperation. 

ExxonMobil moves ahead on petrochemical project in China. Despite U.S.-China trade tensions, ExxonMobil (NYSE: XOM) has
decided to go ahead with a multibillion-dollar petrochemical project and gas import terminal in southern China. 

Saudi Aramco considers $1 billion venture fund. Saudi Aramco is reportedly considering a $1 billion venture-capital fund to invest in international technology firms, according to
the Wall Street Journal. The move would be another major initiative to diversify the Saudi economy.

Thanks for reading and we’ll see you next week. 

Best Regards,

Tom Kool
Editor, Oilprice.com

P.S. –  In this week’s Inside Opportunities, Martin Tillier examines an oil major that he believes is currently trading at a huge discount. Find out why Martin sees such potential here by signing up for your free trial of the Oil & Energy Insider

9/9: Trump threatens tariffs on $267 billion in Chinese goods, expanding the trade war to all Chinese imports entering the U.S.

EFM- No agreement will mean a lot of small businesses will get hurt if the cost of supplies, et al is too high and they cannot pass the higher costs to consumers

9/9: `Retirees: Use Online IRS Withholding Calculator to Avoid Unexpected Taxes on Pensions

"With tax reform bringing major changes for the year ahead, the [IRS] today urged retirees to make sure they are paying in enough tax during the year by using the Withholding Calculator, available on IRS.gov.... The Tax Cuts and Jobs Act, enacted in December 2017, changed the way tax is calculated for most taxpayers including retirees.... For retirees who receive a monthly pension or annuity check, this may mean changing the amount of federal income tax they have withheld. The easiest way to do that is to use the Withholding Calculator. Though primarily designed for employees who receive wages, this useful online tool can also be helpful to those who receive pension or annuity payments on a regular schedule, usually monthly or quarterly."

9/9:Protective Measures

The Importance of Life Insurance for Financial Security

Despite the improved economy, employees still have significant financial concerns. From student loan debt to caregiving responsibilities, coupled with stagnate wages, today’s workforce faces many financial issues that cause stress and loss of productivity throughout the workday

EFM- Just stating a risk which demands that workers need to recognize: disability insurance. Tougher contract and expensive  compared life insurance but more necessary.

9/9: Obama's Speech
I wanted McCain to win against Obama. That said, no matter what I felt subsequently, Obama's speech on Friday was uplifting and Presidential. If you have not heard it, go find it. It's not democrat or republican. It is about civility and decency.

This will keep you busy for a year. Though `most are dated

9/7: Exercise: 27.5% of people across the globe do not meet the WHO’s physical activity guidelines of 75 minutes of vigorous exercise or 150 minutes of moderate exercise per week.

The researchers found huge geographic variations in activity levels, ranging from just 5.5% of people failing to meet guidelines in Uganda to 67% in Kuwait. Those countries were part of a larger trend: High-income nations tended to have lower exercise adherence than low-income countries, in part because work and transportation is largely sedentary in developed areas, while activity is built into the daily lives of people in less-industrialized countries. During the study period, high-income Western nations saw physical inactivity rates increase from almost 31% to almost 37%, while rates remained stable, around 16%, in low-income countries.

9/7: Consumers `and money

Consumers are $13 Trillion in debt. and37% of American workers aren’t saving for retirement. The median American household who have savings has $5200.00 saved, but is $16,000.00 in debt.
14% of Americans are living below poverty level (less than $24,600.00 per year for a family of 4). The average household credit card debt is more than

I am a high school teacher and I know all of our seniors are required to take Economics for a semester. They really learn NOTHING of any value and I didn’t `really learn anything when I was in high school 12 years ago`

9/7: Hearing

According to the Hearing Loss Association of America, one in three individuals at the age of 65 will suffer from hearing loss. Hearing loss is identified as the third most prevalent chronic disability among older adults, behind arthritis and hypertension, and affects over 36 million Americans.

9/7: Talk about bad care!!!!`

"Long-Term Care Hospitals: A Case Study in Waste" Free Download
NBER Working Paper No. w24946

LIRAN EINAV, Stanford University - Department of Economics, National Bureau of Economic Research (NBER)
Email: leinav@stanford.edu
Massachusetts Institute of Technology (MIT) - Department of Economics, National Bureau of Economic Research (NBER)
Email: afink@mit.edu
University of Chicago Booth School of Business, National Bureau of Economic Research (NBER)
Email: Neale.Mahoney@gmail.com

There is substantial waste in U.S. healthcare, but little consensus on how to identify or combat it. We identify one specific source of waste: long-term care hospitals (LTCHs). These post-acute care facilities began as a regulatory carve-out for a few dozen specialty hospitals, but have expanded into an industry with over 400 hospitals and $5.4 billion in annual Medicare spending in 2014. We use the entry of LTCHs into local hospital markets and an event study design to estimate LTCHs’ impact. We find that most LTCH patients would have counterfactually received care at Skilled Nursing Facilities (SNFs) – post-acute care facilities that provide medically similar care to LTCHs but are paid significantly less – and that substitution to LTCHs leaves patients unaffected or worse off on all measurable dimensions. Our results imply that Medicare could save about $4.6 billion per year – with no harm to patients – by not allowing for discharge to LTCHs.


Study: Those with less in IRAs more likely to withdraw more than RMD

A study from the Employee Benefit Research Institute shows that the less money people have in an individual retirement account, the more likely they are to take more than their required minimum distribution once they reach age 70½. According to the report,``````


Wills Without Signatures" Free Download
Boston University Law Review, Vol. 99, 2019

DAVID HORTON, University of California, Davis - School of Law
Email: dohorton@ucdavis.edu

We think of an unsigned “will” as an oxymoron. Since 1837, the Wills Act has required testators in Anglo-American legal systems to memorialize their last wishes in a signed writing. But recently, several American states have adopted an Australian innovation called harmless error, which validates a botched attempt to make a will if there is strong evidence that a testator intended it to be valid. Thus, in these jurisdictions, the testator’s signature is no longer mandatory. Meanwhile, decedents have started making wills in formats that do not permit “wet” signatures, such as e-mails, text messages and word processing files. These trends raise the same question: when, if ever, can a testator assent to a will through her words or conduct? This Article explores the topic of wills with missing or unorthodox signatures. It begins by analyzing a neglected body of precedent on point that spans centuries and countries. First, before the Wills Act, testators could bequeath personal property in unsigned writings. Accordingly, ecclesiastical courts in England and early American judges routinely decided whether a decedent had approved of an unexecuted dispositive instrument. Second, and more recently, dozens of Australian courts have considered whether to apply harmless error to unsigned and electronic wills. These cases, which have reached wildly different conclusions, vividly illustrate the costs and benefits of relaxing the signature requirement. The Article then draws insights from the unsigned will jurisprudence to propose a partial exception to the signature mandate. Traditional law treats the absence of a signature as conclusive proof that a decedent lost her nerve or changed her mind. However, the unsigned will cases reveal that the true culprit is often the fact that a person passed away or lost mental capacity shortly before she could put pen to paper. Accordingly, under what the Article calls the “momentum theory,” courts should enforce written expressions of dispositive wishes when there is clear and convincing evidence that a testator was on the verge of executing a will that memorialized them. This safe harbor for testators whose estate planning efforts were interrupted by forces outside of their control would improve outcomes in several common (or soon-to-be common) kinds of disputes, including those involving notes for future wills, drafts that the testator never read, and digital documents.

9/6: Asset Protection for the Business Owner

9/6:More Than 40 Percent of Americans Don’t Have Any Form of Life Insurance

Negative connotations of mortality prevent many from seeing other benefits of ownership

EFM- Newly married couples should have it. If children are involved, it is mandatory. 10 and 20 year term is very cheap for younger people. The kicker is what is generally not identified- disability insurance. This is definitely more expensive and the contracts can be tough to follow. But the odds of a serious disability is far greater than dying.  And the financial nightmare for the family is much greater since the amount of coverage is limited.

9/6:Looks great!!!!!!

EFM- Yes, it looks great until you look at the start date. A short term movement in this market is not unprecedented, and without an extended period of time (at least three years) you don't bother if you are an 'average' American worker


"Asset Pricing and the Propagation of Financial Shocks"

     ECB Working Paper No. 2150


  Contact:  IVAN JACCARD

              European Central Bank (ECB) -

              Directorate General Research

    Email:  ivan.jaccard@ecb.int

Auth-Page:  https://ssrn.com/author=737337


Full Text:  https://ssrn.com/abstract=3183689


ABSTRACT: This study augments the neoclassical growth model with a mechanism that creates a novel transmission channel through which financial shocks propagate to the real economy. By affecting agents’ ability to finance consumption expenditures, ` My main finding is that this mechanism provides a potential explanation for the co-movement observed during the 2007-2009 financial crisis in the eurozone.

My results also suggest that these shocks are a plausible source of aggregate risk that could explain business cycle fluctuations as well as standard asset pricing puzzles. Finally, introducing this transmission mechanism into the neoclassical growth model increases the welfare cost of business cycle fluctuations by several orders of magnitude.



"Insolvency after the 2005 Bankruptcy Reform" Fee Download
NBER Working Paper No. w24934

STEFANIA ALBANESI, University of Pittsburgh
Email: stefania.albanesi@gmail.com
Boston College

The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) is the most important reform of personal bankruptcy in the United States in recent years. This legislation overhauled eligibility requirements and increased monetary costs of filing for bankruptcy. Using administrative credit file data from a nationally representative panel, we quantify the effects of the reform on bankruptcy, insolvency, and foreclosure, we explore the mechanism generating these responses and examine the consequences for households. We find that the reform caused a 50% permanent drop in Chapter 7 filings, a 25% permanent rise in insolvency, but had no effect on Chapter 13 filings. Exploiting the cross-district variation in filing costs resulting from the reform, we show that these responses are driven by liquidity constraints associated with the higher monetary cost of filing for bankruptcy. We show that insolvency is associated with worse outcomes than bankruptcy, in terms of access to credit and credit scores, suggesting that BAPCPA may have removed an important form of relief for financially distressed borrowers.```

``9/5: `