Master Financial Education

Financial and Economic Daily Commentary 2018
The  most intensive and extensive on the Web

E. 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"  

World Statistical data
Market Quotes by TradingView

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- head of the Federal Reserve

2/20: Guide to Our Active versus Passive Data

Put this in your absolutely 'must have' links

52 pages. "This publication contains two charts for each category of active managers. [One] table shows the percentage of rolling 3-year periods in which managers in various percentiles beat their benchmark by more than a certain fee hurdle.... The [second] chart displays the gross excess return for all the managers in Callan's database for specific asset class categories across the distribution spectrum, from the 10th percentile to the 90th percentile."
Callan Associates; free registration required

2/20 Poverty (Marcinko)

According to the October 2017 annual report of the Hamilton Project of the Brookings Institute, the number of Americans living in poverty declined by 13%, or 6 million people, in the two years from 2014 to 2016. That’s encouraging news.

Not so encouraging is that 40.6 million people still live under the government poverty level. This is about one out of every eight Americans. The department of Health and Human Services sets the poverty rate at $32,580 or less for a family of six and $16,020 or less for two people.

Who are those officially classified as poor? According to IPUMS, an organization associated with the University of Minnesota which integrates worldwide census data, 33% are children under age 18 and 11% are seniors over age 65. So 56% of those living in poverty are of working age, ages 18-65.

Of those who are working age, 21% are disabled, 15% are caregivers, 13% are students, and 10% are early retirees or unclassified, which leaves 41% available to work full time. This is 24% of all people who are in poverty, or about 9.8 million people.

Of that 9.8 million, 65% work part time, 25% work full time, and 10% don’t work. This means just under one million of the 40.6 million people in poverty are actually able to work but unemployed.

Something interesting was that of the 65% who work part time, two-thirds (4.3 million) choose to do so and only one-third (2.1 million) would like to work full time. If we add the one million who are unemployed and the 2.1 million part time workers who want full time employment, we have 3.1 million people in poverty who would like to work full time, but can’t find work. This is just 7.4% of all people considered to be below the poverty level.

That leads one to wonder what might change if the 4.3 million choosing to work part time actually worked full time. Might a significant portion of them pull themselves and their families out of poverty? Is it possible that many of these people choose to live in poverty? Or might some of them choose to work part time because earning more would be countered by factors like higher child care costs or losses in government benefits? While I don’t have any statistics on this, I have a hunch it is both.

Keven Winder, a life coach who blogs at, has a post from June 2017 titled "The Poverty of the Poor." He says, "The cause of poverty is not solely education, politics, or the need for jobs. It’s not mental illness, addiction, housing, or food programs," which he contends are by-products of poverty. "Poverty is deeper. Poverty is disengagement from that which powers us."

It seems to me that Winder is using "disengagement" to mean what might be described as emotional poverty. The type of emotional disengagement that helps keep people in poverty may be no different from that of a person who earns a comfortable income but chooses not to save for retirement. Or someone who loses a job but has too much false pride to take a lesser one even temporarily.

We know the cure for financial behaviors based in emotional disengagement is not more information. Those choosing to work part time and live in poverty don’t need budget figures on how earning more would increase their standard of living. The behavior goes much deeper and is emotionally entrenched.

Certainly, financial therapy might make a difference. Unfortunately, it's still unavailable for too many of those who need it the most.


"Is There a Local Culture of Corruption in the U.S.?" Free Download
Paris December 2017 Finance Meeting EUROFIDAI - AFFI

NISHANT DASS, Georgia Institute of Technology - Scheller College of Business
University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics
University of Texas at Dallas - Naveen Jindal School of Management

U.S. corporations headquartered in states with greater public corruption are prone to more unethical behavior, reflective of a state-level "culture-of-corruption". We test for state-level differences by exploiting passage of Foreign Corrupt Practices Act (FCPA) that curtailed bribery of foreign officials. Firms in corrupt states, especially firms trading with more corrupt countries, suffer greater value (Tobin's Q) and performance (ROA) decline following FCPA, indicating larger losses from restrictions on bribery. Culture-of-corruption is also manifest in greater agency problems: Firms in corrupt states are more likely to manage earnings, face securities fraud litigation and be adversely affected by state-level anti-takeover laws.

2/20: Better or Worse  It does not look good

Millennial woes Millennials in many developed countries have done scarcely better — and in many cases have fared worse — than the generation before, according to a new study. UK millennials in particular have suffered a significant decline in living standard improvements compared with the previous generation


"Factors Associated with Rural High School Students’ Financial Plans for Meeting Their College Costs" Free Download
Financial Planning Review, Vol. 10, No. 2, 2017

UI JEONG MOON, Hannam University
Vermont Agency of Education
University of Suwon - Department of Child and Family Welfare

This study aims to explore what financial plans rural high school students have for meeting their college costs, and which characteristics of rural students are associated with their different types of financial plans to pay for their education. Data were drawn from the Rural Adolescent Plans study, a longitudinal survey of 5th-12th grade students in northeast Vermont. We found that students who were academically competent were more likely to expect to win scholarships/awards and apply for government and school loans. Students who experienced financial strain were less likely to apply for government and school loans. Among students whose parents did not have a college degree, older students were less likely to plan to work while in college and receive money from parents. Those living in two-parent families were likely to plan to work; and students who had a concrete decision for college were more likely to plan to win scholarships/awards. Meanwhile, among students with college educated parents, the belief that it is important to escape from their rural area was significantly associated with plans to receive money from parents. Possible benefits and drawbacks of each type of financial plan are discussed, which can contribute to the development and evaluation of college financial education programs for socially, economically, culturally, and geographically disadvantaged students.

2/20: You gotta react to MILLIONS being dislocated

SE Asia’s immigration crackdown Tighter restrictions on foreign labour in Malaysia and Thailand are pushing out millions of Southeast Asian migrant workers, driving up wages and potentially threatening growth that depends on freedom of movement and cheap labour

2/20: Very interesting

Mixed gender benefits A data analysis on the global market for FTfm clearly demonstrates the correlation between gender diversity and sales. Funds managed by mixed gender teams attracted 6 per cent more inflows than those run solely by men or women over the past three years, highlighting the business case for increased diversity in asset management. (FT)

2/20: More concerns. 

This year’s Munich Security Conference, the pre-eminent annual gathering of defence and security policymakers, might best be summed up as “gloomy”. “At no time since the collapse of the Soviet Union has the risk of armed conflict between major powers been as high as it is today,” The high-level weekend exchange between political leaders and security officials saw public disputes between Russia and the US, Israel’s prime minister describing Iran as “the greatest threat to our world”, and US officials telling Europe’s foreign policy establishment to pay no attention to President Trump’s tweets. European leaders also gave a lukewarm response to Theresa May’s urgent appeal for a new security treaty between the EU and UK after Brexit.

If you live anywhere like this, send me a ticket so I can visit

2/19: And it has an 8% commission on a fixed index annuity. Isn't that wonderful????

xxxxx Life has just launched a new xxxxxxx Plus FIA that includes these great benefits.

Income Potential:

  • An income guarantee and the opportunity for higher income through the performance multiplier.
  • The performance multiplier can create an income base up to 150 percent of the total account value, which determines the lifetime income payments.

Accumulation Potential:

  • Vesting premium bonus 8%
  • Flexibility to allocate to both no fee or fee index options offering higher potential.
  • S&P 500 monthly point-to-point (With 1.00 percent fee) cap – 2.75
  • Barclay’s Trailblazer Sectors 5 indexed uncapped, with a spread, two-year point-to-point (with 1.00 percent fee) – 130 percent participation

2/18: Asset allocation versus security selection

To get a sense for the impact of stock picking in the individual markets, let’s examine the range of mutual fund outcomes for funds focused on each region. According to Reuters’ fund screener, the 95th percentile U.S. equity fund delivered 15.5% annualized over the period, while a 5th percentile fund produced about 8.8%. Meanwhile, active international equity mutual funds’ performance ranged from 5.7% to -1.7%. Incredibly, a 95th percentile manager in the emerging markets equity space delivered just 1.7% annualized over the past 5 years, while a 5th percentile fund lost over 7% per year. The point is, while most investors, institutions, consultants and advisors spend all their time trying to pick the best stocks, or the best stock-pickers, these decisions mean very little compared to decisions about asset allocation. At the best of times for stock-pickers asset allocation and stock-picking have about the same influence on portfolio outcomes; at the worst of times, asset allocation almost completely determines success or failure. And yet, most investors embrace policy portfolios which explicitly limit deviations from strategic, long-term asset allocation targets. These same institutions then turn around and take large and regular active bets within each asset allocation sleeve by trading stocks, bonds, and managers. To our eye, these investors approach the problem exactly backwards.

Ibbotson & Kaplan (2000) recognized the universal misperception around Brinson’s analyses and set out to correct it. In their paper, “Does asset allocation explain 40,90, or 100 percent of Performance?” IK address the confusion by attempting to answer these three questions: 1. How much of the variability of returns across time is explained by policy (the question Brinson et. al. asked)? In other words, how much of a fund’s ups and downs do its policy benchmarks explain? 2. How much of the variation in returns across funds is explained by differences in policy? In other words, how much of the difference between two funds’ performance is a result of their policy differences (with the balance obviously due to active bets, either tactical or security-specific). 3. What portion of the return level is explained by policy return? In other words, what is the ratio of the policy benchmark return to the fund’s actual return?

EFM- Lots more by clicking link but remember that this is information/knowledge that I may not necessarily agree with but is necessary to understand

2/18:  Diversification /whitepaper- “The magic of diversification is that it allows investors to keep more of their money invested in higher risk assets, with commensurately higher expected returns, while lowering the overall risk of the portfolio.”

In this whitepaper you’ll discover:

  • Practical examples of how diversification allows you to own many risky assets, in an ultra low-risk package.
  • Why your portfolios need to have both “diversity” and “balance”, and how to achieve it.
  • Why most portfolios are cataclysmically under-diversified, and simple methods that lead to massive improvements.
  • The properties and character of the most diversified portfolio, and why it is designed to deliver strong, stable returns in all market conditions.

2/18:Our Institutions cannot save America:

The article explores what is happening in the U.S. with Trump's guidance. I will not say that some of his efforts have produced a benefit. But there are two elements that truly bother me. Not all lies are bad-don't tell an Alzheimers patient that her husband died years ago in a horrendous accident- it will only offer another emotional breakdown. Just 'lie' and say he will be back tomorrow and avoid another heartache, But when one is inundated by a daily barrage of twitters and direct verbal comments that are just plain wrong, one becomes tired and frustrated with lies till you just are apt to accept them as a new way of doing business. So why the comment about "If you see something, say something" is just about useless. I have tuned about most of politics since it is so pathetic and offensive. (Recognize that many senators are unwilling to offer their direct honest assessment of the actions of the president since it may/would cost them their re-election). And the saying is fraught with threats of legal backlash because it might 'infringe on the rights  on the person being 'attacked' (though that can be valid) . Actually, that is a lot of MeToo because women were subjected to all sorts of real physical, emotional and financial threats of retaliation,) However there now exists an opening to come forward with dirty linen and actually make a difference  

Secondly is the budget deficit. With the new bills that are valid to an extent, it will kick the budget can not just down the street but out into space, Our children will be saddled with a debt that can never be repaid .I have stated that I cannot accept a perpetual 3% GDP, so growth at that sustained level is absolutely unrealistic. Better stated as NOT A CHANCE.

Now, we definitely needed to thwart North Korea. But we ended up with a lot of nations- like Russia and China- in a cold war of spending billions more on weaponry because 'it is the only path to peace'.

Lastly, we should learn from the calamity of the school shooting in Florida where the youngsters are saying/demanding that the grownups should GROW UP and help them. But I tend to think that  this might get derailed at the next tweet..........and the next............and the next............

Kinda hard to believe but there it is


What is a Collective Investment Trust?

A Collective Investment Trust (CIT) is also known as a commingled or collective fund.

CITs are:

  • Increasingly used in defined benefit (pension) plans and defined contribution (401k) plans.

  • Tax-exempt, pooled investment vehicles maintained by a bank or trust company exclusively for qualified plans, including 401(k)s, as well as for certain types of government plans.

  • Subject to banking regulations, not subject to the Investment Company Act of 1940.  Less regulated. Not registered with the SEC.

  • Customization of holdings.

  • Less expensive for investors, thanks to lower marketing, overhead and compliance-related costs.  Lesser profile.

  • No trading issues. CITs only managed for those specific plans and are not available to the general public.  Market timing and other trading abuses tend to not be an issue.

  • Pension Protection Act of 2006 gave tailwind to CITs and approved them as default investment options for defined contribution plans.

  • Collective Trusts are unregistered investment vehicles, like hedge funds.  Mutual funds, by contrast, are registered investment vehicles.

  • What registration means is that an investment vehicle, like a mutual fund, is registered with the SEC/FSA, etc... and is compelled by law to disclose monthly performance and portfolios.  That is not the case with collective trusts.

  • While unregistered, collective trusts are not unregulated.  In the U.S., collective trusts are supervised by the Office of the Comptroller of the Currency (OCC).

2/18: Just how many new drugs can junkies handle?

California, Washington, Oregon, Indiana and Connecticut have statutes that can be used to temporarily take guns away from people a judge deems a threat to themselves or others. Lawmakers in 18 other states — including Florida — plus the District of Columbia have proposed similar measures.

2/18: CPI


Bond funds see $23 billion in January inflows; U.S. equity funds lose $24 billion

Investors poured $23 billion into actively managed bond funds in January while moving about $24 billion out of active U.S. equity funds.

EFM- I can see some of the concern about an overvalued market. But why to bonds? As interest rates rise, the value of bond funds will go down. This does not make a lot of sense. Is it due to advisors suggesting the move? Illogical but quite possible. Remember that the market and its participants do not have to make sense. That is important to recognize when confronted by things and action that do not seem reasonable- even stupid. Such activities do NOT  have to make sense



DC record-keeper concentration

The top five defined contribution record keepers manage about 40% of all DC plans, or about 277,000 plans covering 11.2 million participants.

2/18: North Korea (Financial Times)

The louder Donald Trump shouts about the North Korean leader's instability, the more plausible his claims that a nuclear programme is a necessary insurance policy. The two presidents have traded petty insults but Philip argues that Mr Kim now has everything he wants. He has outsmarted Mr Trump at almost every turn.

There is not, however, any good ending to this stand-off and the risks of conflict remain high. North Korea could easily overplay its hand. The United States could launch a pre-emptive attack. But there are no good military options. China will not want to risk the collapse of the regime through sanctions. So for now,

2/18: Honesty/Transparecy

In Flagler County, Florida, the jail has put up a neon, blinking “vacancy” light. According to the Associated Press, Flagler County Sheriff Rick Staly has dubbed the county jail the Green Roof Inn. A sign lists the amenities at the facility—there is no privacy, group bathrooms and no meal selection. But inmates do get free transportation to court and state prisons, designer handcuffs and leg irons, color coordinated jumpsuits and shoes. Staly says it’s a warning that jail is not a “5-star hotel.”

2/18: The average interest rate for a 30-year fixed-rate mortgage is 4.38%, up from 4.32% one week ago, according to Freddie Mac. The average interest rate for a 15-year fixed-rate mortgage is 3.84%, up from 3.77%.

2/16: This surprised me

In a surprising study, everyday chemicals now rival cars as a source of air pollution

As cars become cleaner, personal-care products, paints, indoor cleaners and other chemical-containing agents are an increasingly dominant source of key emissions, scientists say.

2/16: Capital Asset Pricing Model

What is the 'Capital Asset Pricing Model - CAPM'

The capital asset pricing model (CAPM) is a model that describes the relationship between systematic risk and expected return for assets, particularly stocks. CAPM is widely used throughout finance for the pricing of risky securities, generating expected returns for assets given the risk of those assets and calculating costs of capital.

BREAKING DOWN 'Capital Asset Pricing Model - CAPM'

The formula for calculating the expected return of an asset given its risk is as follows:

Capital Asset Pricing Model (CAPM)

The general idea behind CAPM is that investors need to be compensated in two ways: time value of money and risk. The time value of money is represented by the risk-free (rf) rate in the formula and compensates the investors for placing money in any investment over a period of time. The risk-free rate is customarily the yield on government bonds like U.S. Treasuries.

Find out which online brokers offer stock valuations in our new brokerage review center. 

The other half of the CAPM formula represents risk and calculates the amount of compensation the investor needs for taking on additional risk. This is calculated by taking a risk measure (beta) that compares the returns of the asset to the market over a period of time and to the market premium (Rm-rf): the return of the market in excess of the risk-free rate. Beta reflects how risky an asset is compared to overall market risk and is a function of the volatility of the asset and the market as well as the correlation between the two. For stocks, the market is usually represented as the S&P 500 but can be represented by more robust indexes as well.

The CAPM model says that the expected return of a security or a portfolio equals the rate on a risk-free security plus a risk premium. If this expected return does not meet or beat the required return, then the investment should not be undertaken. The security market line plots the results of the CAPM for all different risks (betas).

Example of CAPM

Using the CAPM model and the following assumptions, we can compute the expected return for a stock:

The risk-free rate is 2% and the beta (risk measure) of a stock is 2. The expected market return over the period is 10%, so that means that the market risk premium is 8% (10% - 2%) after subtracting the risk-free rate from the expected market return. Plugging in the preceding values into the CAPM formula above, we get an expected return of 18% for the stock:

18% = 2% + 2 x (10%-2%)


 Forward-Thinking Employers Are Managing Healthcare Spending With Self-Insurance, Leaner Plan Options, Stronger Program Engagement And Pharmacy Benefit Carve-Outs
Gallagher data highlights cost-shifting alternatives
By Bruce Shutan / Employee Benefit Adviser
Forward-thinking employers are managing healthcare spending with self-insurance, leaner plan options, stronger program engagement and pharmacy benefit carve-outs, suggests a recent analysis of selected data from Gallagher’s 2017 Benefits Strategy & Benchmarking Survey of 4,226 organizations. Respondents whose group health plan practices were closely studied and tied to talent management include 1,192 midsize firms and 315 large employers.
Brokers and advisers that serve middle-market clients will notice a more strategic approach trickling downstream in lieu of cost-shifting strategies. Midsize employers considered best in class were more inclined to invest in employee wellness (63% vs. 54%) and disease management (45% vs. 31 %) than others of comparable size. Key measures of success include program participation, engagement and satisfaction.
They also were less likely to increase deductibles, copays or coinsurance overall (41% vs. 55%). The same was true in terms of raising employee contributions to health plan premiums (43% vs. 57%). Between low unemployment and a growing economy, more attention is being paid to the impact these moves have on top talent.
In addition, large groups are leveraging their scale to keep a tighter lid on their financial outlay. As many as 62% of the companies examined spent less than $10,000 per eligible employee on benefits vs. 42% of their overall peers.
Gallagher’s recent analyses of its benchmarking data show that a “competitive advantage can be gained by employers who leverage and optimize their compensation and benefit approaches,” according to Ziebell. He describes their top three objectives as attracting and retaining talent, growing revenue and containing operating costs.

Health Savings Accounts Are Picking Up Serious Steam
For employees enrolled in a high-deductible health plan (HDHP), health savings accounts (HSAs) can be a real game-changer.
One on level, HSAs allow for the contribution of pre-tax dollars to pay for qualified health care expenses throughout the year, providing a cost-effective way for employees to manage their out-of-pocket responsibilities.
And on another level, HSAs are a powerful long-term savings vehicle, due to the fact that all funds can roll over from year to year and accumulate tax-free interest. They can essentially act like a 401(k) plan to save for health care costs in retirement, with the added benefit that withdrawals are tax-free – for qualified medical expenses – at any time.
Based on data from the Benefitfocus 2018 State of Employee Benefits report, employees are catching on to these benefits in a big way.
Participation in HSAs among eligible HDHP subscribers soared by more than 60 percent year over year – from roughly 50 percent in 2017 to 81 percent in 2018 – with dramatic increases observed across every age group. Millennials were especially eager to adopt, nearly doubling their HSA enrollment rate from last year.

Healthcare Spending Accelerating, 19.7% of Economy by 2026
Marcia Frellick / Medscape
By 2026, healthcare is projected to make up 19.7% of the US economy, up from 17.9% in 2016, according to a report released today by the Office of the Actuary at the Centers for Medicare & Medicaid Services (CMS).
Spending is projected to be $5.7 trillion by 2026, up from $3.5 trillion now. CMS projects that federal, state, and local governments will be financing 47% of that spending, up from 45% in 2016, partly related to the aging of the population.
The report, published online in Health Affairs by Gigi Cuckler, an economist in the Office of the Actuary in Baltimore, Maryland, and colleagues projects an average annual growth rate in health spending of 5.5% through 2026, which would outpace average projected growth in gross domestic product (GDP) by 1 percentage point. GDP is expected to grow 4.5% per year in that period.

Federal economists: 7 million more uninsured in a decade after Obamacare individual mandate repeal
by Kimberly Leonard / The Washingtn Examiner
The repeal of Obamacare's fine on people who are uninsured will result in 3.3 million more people not having healthcare coverage by 2020, according to a new federal analysis, clashing with other government economists about the expected impact.
The latest findings from the nonpartisan Office of the Actuary, which is part of the Centers for Medicare and Medicaid Services, projects the number of uninsured will rise to 8.3 million by 2026, absent the passage of any other healthcare law.
These figures are lower than those projected by another nonpartisan government agency. Last year, the Congressional Budget Office forecast 7 million people would become uninsured by 2020 and that the number would grow to 13 million people by 2026 as a result of the repeal of the individual mandate.
The Obamacare fine will go to zero beginning in 2019, a provision that was included in the Republican-passed tax bill signed into law in December by President Trump. Health insurers have warned that without a replacement for the mandate, more companies would leave the Obamacare exchanges, where people can buy tax-subsidized coverage, or premiums would become more expensive. The intent of the provision was to bring in customers who otherwise would choose to go uninsured, many of whom are healthier and rarely use medical coverage.

Make sure you read the bottom line

2/16:The Sharpe Ratio Defined 

Most people with a financial background can quickly comprehend how the Sharpe ratio is calculated and what it represents. The ratio describes how much excess return you are receiving for the extra volatility that you endure for holding a riskier asset. Remember, you always need to be properly compensated for the additional risk you take for not holding a risk-free asset.

We will give you a better understanding of how this ratio works, starting with its formula:

S (x) = (rx - Rf) / StdDev (x)


  • X is the investment
  • rx is the average rate of return of X
  • Rf is the best available rate of return of a risk-free security (i.e. T-bills)
  • StdDev(x) is the standard deviation of rx

Return (rx)
The returns measured can be of any frequency (i.e. daily, weekly, monthly or annually), as long as they are normally distributed. Herein lies the underlying weakness of the ratio – not all asset returns are normally distributed.

Kurtosis, fatter tails and higher peaks, or skewness on the distribution can be problematic for the ratio, as standard deviation doesn't have the same effectiveness when these problems exist. Sometimes it can be downright dangerous to use this formula when returns are not normally distributed.

Risk-Free Rate of Return (rf )
The risk-free rate of return is used to see if you are being properly compensated for the additional risk you are taking on with the asset. Traditionally, the risk-free rate of return is the shortest-dated government T-bill (i.e. U.S. T-Bill). While this type of security will have the least volatility, some would argue that the risk-free security used should match the duration of the investment it is being compared against.

For example, equities are the longest duration asset available, so shouldn't they be compared with the longest duration risk-free asset available – government issued inflation-protected securities (IPS)?

Using a long-dated IPS would certainly result in a different value for the ratio, because in a normal interest-rate environment, IPS should have a higher real return than T-bills.

For instance, the Barclays U.S. Treasury Inflation-Protected Securities 1-10 Year Index has returned 3.3% for the period ending Sept. 30, 2017, while the S&P 500 Index returned 7.4% over the same timeframe. Although it can be argued that investors are being fairly compensated for the risk of choosing equities over bonds in this period, the bond index's Sharpe ratio of 1.16% versus 0.38% for the equity index would indicate equities are the riskier asset.

Standard Deviation (StdDev(x))
Now that we have calculated the excess return from subtracting the risk-free rate of return from the return of the risky asset, we need to divide this by the standard deviation of the risky asset being measured. As mentioned above, the higher the number, the better the investment looks from a risk/return perspective.

How the returns are distributed is the Achilles heel of the Sharpe ratio. Bell curves do not take big moves in the market into account. As Benoit Mandelbrot and Nassim Nicholas Taleb note in "How The Finance Gurus Get Risk All Wrong" (Fortune, 2005), bell curves were adopted for mathematical convenience, not realism.

However, unless the standard deviation is very large, leverage may not affect the ratio. Both the numerator (return) and denominator (standard deviation) could be doubled with no problems. Only if the standard deviation gets too high do we start to see problems. For example, a stock that is leveraged 10-to-1 could easily see a price drop of 10%, which would translate to a 100% drop in the original capital and an early margin call.

The Sharpe Ratio and Risk

Understanding the relationship between the Sharpe ratio and risk often comes down to measuring standard deviation, which is also commonly referred to as the total risk. The square of standard deviation is the variance, as defined by Nobel Laureate Harry Markowitz, who is arguably best known as the pioneer of Modern Portfolio Theory. (For further reading, see Understanding Volatility Measurements.)

So why did Sharpe choose the standard deviation to adjust excess returns for risk and why should we care? We know that Markowitz defined variance, a measure of statistical dispersion or an indication of how far away it is from the expected value, as something undesirable to investors. The square root of variance, or standard deviation, has the same unit form as the data series being analyzed and is such more commonly used to measure risk.

The following example illustrates why investors should care about variance:

An investor has a choice of three portfolios, all with expected returns of 10% for the next 10 years. The average returns in the table below indicates the stated expectation. The returns achieved for the investment horizon is indicated by annualized returns, which takes compounding into account. As the data table and the chart clearly illustrates below, the standard deviation takes returns away from the expected return. If there is no risk – zero standard deviation – your returns will equal your expected returns.

Expected Average Returns
Year Portfolio A Portfolio B Portfolio C
Year 1 10.00% 9.00% 2.00%
Year 2 10.00% 15.00% -2.00%
Year 3 10.00% 23.00% 18.00%
Year 4 10.00% 10.00% 12.00%
Year 5 10.00% 11.00% 15.00%
Year 6 10.00% 8.00% 2.00%
Year 7 10.00% 7.00% 7.00%
Year 8 10.00% 6.00% 21.00%
Year 9 10.00% 6.00% 8.00%
Year 10 10.00% 5.00% 17.00%
Average Returns 10.00% 10.00% 10.00%
Annualized Returns 10.00% 9.88% 9.75%
Standard Deviation 0.00% 5.44% 7.80%

Using the Sharpe Ratio

The Sharpe ratio is a measure of return that is often used to compare the performance of investment managers by making an adjustment for risk.

For example, if investment manager A generates a return of 15% while investment manager B generates a return of 12%, it would appear that manager A is a better performer. However, if manager A, who produced the 15% return, took much larger risks than manager B, it may actually be the case that manager B has a better risk-adjusted return.

To continue with the example, say that the risk free-rate is 5%, and manager A's portfolio has a standard deviation of 8%, while manager B's portfolio has a standard deviation of 5%. The Sharpe ratio for manager A would be 1.25, while manager B's ratio would be 1.4, which is better than that of manager A. Based on these calculations, manager B was able to generate a higher return on a risk-adjusted basis.

For some insight: a ratio of 1 or better is considered good; 2 or better is very good; and 3 or better is considered excellent.

The Bottom Line

Risk and reward must be evaluated together when considering investment choices; this is the focal point presented in Modern Portfolio Theory. In a common definition of risk, the standard deviation or variance takes rewards away from the investor. As such, the risk must always be addressed along with the reward when you are looking to choose your investments. The Sharpe ratio can help you determine the investment choice that will deliver the highest returns while considering risk.

EFM- the punchline: risk is the major issue in investing. But what happens when one does NOT have to worry about the risk in the future since it can be contained and voided during times of extreme stress (recession)?  The answer is simple- look for the highest returns in a solid fund and then follow the Patent Pending advice. (The marketing of the Risk of Los will start soon and I will keep you posted)

Investing in any asset has risks that can be minimized by using financial tools to determine expected returns. The capital asset pricing model (CAPM) is one of these tools. This model calculates the required rate of return for an asset using the expected return on both the market and a risk-free asset, and the asset's correlation or sensitivity to the market.

Some of the problems inherent in the model are its assumptions, which include: no transaction costs, no taxes, investors who can borrow and lend at the risk-free rate and investors who are rational and risk averse. Obviously these assumptions are not fully applicable to real-world investing. Despite this, CAPM is useful as one of several tools in estimating the return expected on an investment. 

The unrealistic assumptions of CAPM have led to the creation of several expanded models that include additional factors and the relaxing of several assumptions used in CAPM. International CAPM (ICAPM) uses the same inputs as the CAPM but also takes into account other variables that influence the return on assets on a global basis. As a result, ICAPM is far more useful than CAPM in practice. However, despite relaxing some assumptions, ICAPM does have limitations that impact its practicality. 

One of the biggest worries for parents of children with special needs is what will happen when the parents are gone. Who will care for their children and will they have enough money, not just to survive but to enjoy life?

This worry is compounded by the financial restrictions levied by the Medicaid program, which often is the only type of health insurance for which their children qualify. To keep the special needs child within the income limitations, parents may think that they need to disinherit that child or bequeath his inheritance to a sibling. Both of these options are problematic.

Disinheriting a child would leave her only the bare necessities of food, housing and clothing provided through government benefits. Making a sibling her guardian puts an undue burden on your other children, who may be unable to fulfil those obligations if they face a financial crisis such as a divorce.

However, there is another way. Putting assets into a Special Needs or Supplemental Needs Trust allows your child to preserve assets to improve quality of life without disqualifying him from Social Security Income or Medicaid.

Parents should be aware that funds from the trust cannot be distributed directly to the disabled beneficiary. Instead, it must be disbursed to third parties who provide goods and services to the disabled beneficiary.

These trusts are flexible and can be customized to provide funding for the type of care that you would have provided if you were still alive. An attorney who specializes in special needs planning can help you set up a Special Needs Trust to supplement your loved one’s public benefits.

The Special Needs Trust can be used for a variety of life-enhancing expenditures such as:

  • Annual check-ups at an independent medical facility
  • Attendance at religious services
  • Supplemental education and tutoring
  • Out-of-pocket medical and dental expenses
  • Transportation (including purchase of a vehicle)
  • Maintenance of vehicles
  • Purchase materials for a hobby or recreation activity
  • Funds for trips or vacations
  • Funds for entertainment such as movies, shows or ballgames
  • Purchase of goods and services that add pleasure and quality to life: computers, videos, furniture, or electronics
  • Athletic training or competitions
  • Special dietary needs
  • Personal care attendant or escort

Special Needs Trusts are a critical component of your estate planning if you have disabled beneficiaries for whom you wish to provide after your passing. An estate planning attorney can help you create the trust that best fits your family’s needs.

You may need a pooled special needs trust. In a pooled special needs trust, the assets of a group of beneficiaries are pooled together and managed by a non-profit organization for the benefit of the beneficiaries. Your loved one has his own sub-account so that his funds are used only for him. This setup works well if there are no family members available to act as a trustee or the level of assets is not large enough to justify the complexity of establishing a stand-alone trust.

Alternately, you can establish a stand-alone trust funded with a separate asset like a life insurance policy. Other family members or friends may contribute to the trust as well.

If you have a child with special needs you cannot delay planning for her future. Procrastinating could have major consequences from which she may not recover, but making a plan now can give you peace of mind.

Nothing like a Blatz

This paper explores how an environment of persistent low returns influences saving, investing, and retirement behaviors, as compared to what in the past had been thought of as more “normal” financial conditions. Our calibrated lifecycle dynamic model with realistic tax, minimum distribution, and Social Security benefit rules produces results that agree with observed saving, work, and claiming age behavior of U.S. households. In particular, our model generates a large peak at the earliest claiming age at 62, as in the data. Also in line with the evidence, our baseline results show a smaller second peak at the (system-defined) Full Retirement Age of 66. In the context of a zero return environment, we show that workers will optimally devote more of their savings to non-retirement accounts and less to 401(k) accounts, since the relative appeal of investing in taxable versus tax-qualified retirement accounts is lower in a low return setting. Finally, we show that people claim Social Security benefits later in a low interest rate environment.

2/15: It happens all over

Tata steelworkers at Port Talbot claimed that in the autumn of last year they were lured by allegedly unscrupulous advisers into cashing in their pensions with the company, with the money then being moved into little-known investment funds that levy high charges. Experts said workers were victims of bad advice about their pensions. Members of Tata’s pension scheme have “been exploited for cynical personal gain by dubious financial advisers”, said the Commons work and pensions select committee

 members of the scheme “were shamelessly bamboozled into signing up to ongoing adviser fees and unsuitable funds characterised by high investment risk, high management charges and punitive exit fees”.

Workers could choose between joining a new, less attractive company pension scheme, moving to a special fund for collapsed companies, or cashing in their retirement pots and investing the money elsewhere.

FREE FOOD seminars

drummed up business from Tata workers by offering “obligation-free” advice sessions on their pension options. Mr Howells wooed workers at the meetings held in hotels and pubs around Swansea by offering them a free meal of sausage and chips.

investors faced estimated ongoing annual fees of 2.51 per cent, calculated on the value of their pension pots. The equivalent figure for the 5Alpha Adventurous fund is 2.12 per cent. Most significantly, workers who want to take cash from their investments in the first year after putting them in the funds are hit with a 5 per cent exit

So where were the regulators????
questions arise as to whether the regulator could have acted sooner, because concerns about Active Wealth and investments being put into the 5Alpha funds had surfaced previously.

EFM- anything with free food is suspect. But it is amazing how people are lured into fraudulent- or at least unsatisfactory ,investments.

millennials aged 18 to 24 had socked less than $1,000 away in their savings account, with nearly 50% of the participants having no savings at all

Words fail me
Anyone have a clue what the stuff is???


Home prices are at an all-time high in more than half of 112 metropolitan areas with a population of 200, 000, according to Attom Data Solutions U.S. Home Sales Report. On top of that, most U.S. wages were flat until just recently and mortgage rates are on the rise

2/15: Japan’s longest growth spurt since 1989
Japan’s economy has recorded eight consecutive quarters of economic growth — its longest streak for 28 years — despite the pace of expansion slowing in the final three months of 2017 to annualised growth of 0.5 per cent.

EFM- I gave up on Japan in the early 90s. I kept saying that a country that had been doing so well would bounce right back. And I kept saying it because I could not believe they could screw up so badly. Finally I gave up. So are they finally on the right track? Maybe but after 28 years......................But if we hit another recession, it might take another 28 years. 

2/15: Drugs

The scourge of crystal meth, with its exploding labs and ruinous effect on teeth and skin, has been all but forgotten amid national concern over the opioid crisis. But 12 years after Congress took aggressive action to curtail it, meth has returned with a vengeance.

When the ingredients became difficult to come by in the United States, Mexican drug cartels stepped in. Now fighting meth often means seizing large quantities of ready-made product in highway stops.

The cartels have inundated the market with so much pure, low-cost meth that dealers have more of it than they know what to do with. Under pressure from traffickers to unload large quantities, law enforcement officials say, dealers are even offering meth to customers on credit. In Portland, the drug has made inroads in black neighborhoods, something experienced narcotics investigators say was unheard-of five years ago.

“I have been involved with meth for the last 25 years. A wholesale plummet of price per pound, combined with a huge increase of purity, tells me they have perfected the production or manufacturing of methamphetamine,” 

“They have figured out the chemical reactions to get the best bang for their bucks.”

Nearly 100 percent pure and about $5 a hit, the new meth is all the more difficult for users to resist. “We’re seeing a lot of longtime addicts who used crack cocaine switch to meth,” said Branden Combs, a Portland officer assigned to the street crimes unit. “You ask them about it, and they’ll say: ‘Hey, it’s half the price, and it’s good quality.’”

2/15: Indexed annuity


1-Year Fixed Interest


1-Year Point-to-Point Cap


1-Year Point-to-Point Part


1-Year Monthly Avg Cap


1-Year Monthly Avg Part


1-Year Monthly Cap


2-Year Monthly Avg Cap


2/15: Economy and Markets

Martin Wolf argues in his column that the return of fear and some uncertainty to markets is therefore a good thing. Markets did experience a bout of turbulence last week, yet the real changes were relatively small. Still Martin thinks it could get worse for four reasons. The current environment of expensive equities and bonds, low interest rates, low inflation and low yields is remarkable. It "takes no imagination", he says, to visualise yields (long-term interest rates) "jumping massively". (EFM- I just can't see that happening......)

Second, the financial system remains fragile while indebtedness continues to rise. Largely thanks to the crisis, government debt has risen from 58 per cent of world output to 87 per cent. (EFM- A massive problem and getting worse under Trump) Third, a global economic recovery is underway - putting a rise in wages and inflation on the cards. And that could easily lead to fiscal tightening. Finally, we can not forget the great global uncertainty that is Donald Trump. Betting against what the US president will, or will not do, is unwise. He could still easily destablise expansion of the markets. (Very true and he has mired the country in so many levels of lies that I just don't know how worse it might get  Not that some of his policies are not valid- I just cannot stand the lies day after day after day..........)

2/14: SEC examinations

The Office of Compliance Inspections and Examinations said that examiners “will continue to prioritize our commitment to protect retail investors, including seniors and those saving for retirement,” focusing a close eye on products and services offered to retail investors, and the disclosures investors receive about those investments.

Well some of it will work. But with all the prospectuses I he read, risk is only stated that you could lose money and maybe all of it (that is essentially zero with mutual fund allocation. You would have to be a complete moron to devise a portfolio that could go to zero). But what people really need to know is how much could they lose n a recessionary climate. That's what risk is all about. Without that clarification, it is just sophomoric gibberish 

In Alabama, Louisiana and other states, it is  illegal to chain your alligator to a fire hydrant.
Excellent law- it should be passed in all 50 states

The promise of target date funds is that they help protect older beneficiaries from losses, but as you can see this protection is not adequate in the typical TDF. Most importantly, 75 million Baby Boomers are currently in the Risk Zone that spans the transition from working life to retirement. Losses in the Risk Zone are not recovered; they’re paid for with reduced standards of living. Some confuse this warning with market timing, but it is quite different.

Risk management is not timing

Many confuse risk management with timing, but timing has little to do with investor vulnerability and everything to do with market outlook. In the current market run-up, where U.S. stocks have earned more than 250%, there is great demand for crystal balls that will tell us when to get out of harm’s way, but that’s not risk management. Risk management is called “Tactical” asset allocation, while timing is called “Strategic.” The idea is that risk management is independent of market outlook and designed to protect when investors are most vulnerable, whereas timing is short term and all about market forecasts.

Sometimes risk management is easy

Age Risk

Risk management and timing are both usually very hard, and require different skill sets, but there is a time in every investor’s life when risk management is easy and obvious, although most don’t see it. It’s a time when a special kind of risk is at its highest and that risk could ruin our lifestyles for the rest of our lives. Unless we feel extraordinarily lucky we really should move to safety during the Risk Zone that spans the transition from working life to retirement when Sequence of Return Risk peaks. Baby Boomers have $30 trillion in the Risk Zone. At this stage in their lives they should be protecting their savings and figuring out how to make them last a lifetime.

Win by not losing

The arithmetic of financial losses is complex and emotional, so an example will help. In 2008, the 2010 SMART Target Date Fund Index lost 5% while the industry lost 25%. As a result, SMART investors were wealthier than other TDF investors for the next 6 years, when the riskier Industry funds caught up. But – and this is the important point – when the next crash happens, the whole scenario will reset, and SMART will shine again.

Investors win by not losing. It’s a safer course.


EFM- the point the author makes is that the Safe TDF had a much lower loss. True but its return prior to was not all that great. Obviously the standard TDF was worse. My point is this- go almost all the way to growth. Such a deal up to the start of the recessionary climate. Phase three of my work above simply shows a growth focus that is reduced so that the amount of losses would be about 12%. So you made MUCH more money than the safe funds or standard ETFs and yet your loss was about 12% versus the 57% loss (2008) and you had pretty much a 0% risk account at that point and an opportunity to get back in with a whole new economy and asset allocation still focused on growth rather than the safe funds- and certainly not the standard TDFs.


A whopping 84 percent of all stocks owned by Americans belong to the wealthiest 10 percent of households. And that includes everyone’s stakes in pension plans, 401(k)’s and individual retirement accounts, as well as trust funds, mutual funds and college savings programs like 529 plans.

“For the vast majority of Americans, fluctuations in the stock market have relatively little effect on their wealth, or well-being, for that matter,”

Roughly half of all households don’t have a cent invested in stocks, whether through a 401(k) account or shares in General Electric. That leaves half the population with some exposure to financial market whims, but as Mr. Boshara said, “some exposure can be 100 bucks.”

“It’s too bad such a small percentage of the population has any real or meaningful ownership stake in equities, given their historic and current growth,”

“If you look at where the money is really held, it’s among the top 10 percent  “And if you break it down by age, race and education and parental education, you’ll see the disparities are even larger.” Parents who lack a four-year degree and, later on, their children are much less likely to have a direct stake in the stock market than college graduates; blacks and Hispanics are much less likely than whites.

For 9 out of 10 households, even a shift in value of 10 percent — enough to qualify as a “market correction” — would “at most, have a 1 or 2 percent impact on their wealth holdings,” Mr. Wolff said.

If anything, foreign multinational and other investors would feel more of a pinch, since they own 35 percent of all United States corporate stock, up from 10 percent in 1982. That share of the pie exceeds the single slice owned by taxable American shareholders, defined benefit plans, defined contribution plans, or nonprofit institutions, t

Don’t confuse the Dow with the economy.

The stock market and the underlying economy are distinct. The two interact, but they do not proceed in lock step or even respond to each other in predictable ways. Certainly, market instability can undermine both consumer and business confidence and restrain spending and investment. And market bubbles, swelled by overextended borrowing, can explode, wreaking losses and stalling growth.

 investors may be worried that growth is too strong.

This might seem like a strange concern, after a decade of slow-but-steady economic expansion coming out of the recession.

But global growth — along with a shred of evidence that Americans are starting to get wage increases — started a broad sell-off that spread around the world. Since then, prices have been all over the place.


Here’s how the logic goes:

• The strong economy stokes fears that inflation is picking up.

• Fears about inflation drive worries the Federal Reserve could raise interest rates faster than indicated.

• The worries about the Fed fuel a long-held view that rising rates kill bull markets, partly because companies tend to grow more slowly when money becomes more expensive to borrow.

• That daisy chain of anxiety lead to a simple conclusion: Sell.

This may not be why investors may be panicky. Markets can be driven by perception as much as anything else, and the specter of the status quo being disrupted can rattle investors.

 markets have been plagued by volatility, and how long it will last remains to be seen.

Violent moves in financial markets can ultimately affect the economy — especially if they persist.

Here’s one way how:

• Steep market declines can wipe out portions of people’s savings and retirement accounts.

 Bond yields can rise as investors demand higher returns to stay ahead of inflation.

• Higher yields translate into higher borrowing costs for companies and individuals.

• And with higher borrowing costs, companies invest less in their business and people buy fewer things.

• Less spending and investment undermines economic growth.

EFM=- a good chunk of that money was for the U.S.

There are a number of takes on telling the person with Alzheimer’s disease (AD) the truth. I would propose a couple of things to keep in mind:

2/13: Notice the difference in rates for 2 companies. It's the commissions paid

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EFM- Trump has flipped on reducing the debt. Medicare and Medicaid suffer greatly. But here is something that the journalists haven't addressed-death. When you take away coverage for the poor and needy in regards to health care in their later years, you are simply going to see a higher death rate. Add in the opiods and obesity and the age at death will go backwards. Actually it already has


2/12: Cancer

2/12: Hard to believe. Or maybe just a sign of the times?.

CNN Exclusive: California launches investigation following stunning admission by Aetna medical director
Story by Wayne Drash, CNN
(CNN)California's insurance commissioner has launched an investigation into Aetna after learning a former medical director for the insurer admitted under oath he never looked at patients' records when deciding whether to approve or deny care.
California Insurance Commissioner Dave Jones expressed outrage after CNN showed him a transcript of the testimony and said his office is looking into how widespread the practice is within Aetna.

2/12: This deficit spending will ultimately bring a massive unsustainable debt that will crush the U.S. The supposed increase in GDP will not occur. This will result in (probably) more recessions and those that do occur will be similar to 2008.

The fiscal year 2019 budget was rendered pretty much obsolete last week when Congress adopted a sweeping deal to keep the government funded until March 23 while setting spending levels for the next two years. It gooses spending on the military and domestic programs by $500 billion over two years and ushers in the return of trillion-dollar deficits as soon as next year. 

President Trump endorsed the compromise. But White House budget director Mick Mulvaney -- a former fiscal hawk while a South Carolina congressman -- told CBS News’s “Face the Nation” on Sunday the deficit-financed fiscal stimulus the package will deliver is a “very dangerous idea” that he would have opposed if he were still in Congress. And he said in an appearance on "Fox News Sunday" that interest rates could "spike" as a result. (true)

The administration’s own budget forecasts 3 percent growth every year for the next decade in part by relying on some rosy — and outdated — assumptions about the nation’s borrowing costs despite yawning deficits.

2/12: Report: Millions in arbitration awards go unpaid

Between 2012 and 2016, investment firms did not pay investors who won arbitration awards in up to 30% of cases, according to a Financial Industry Regulatory Authority report. More than $50 million was unpaid in 2012, dropping to $14 million in 2016, the report noted. 

This will increase under fiduciary rules because more sales of debatable products will occur by less than ethical advisers. Or you can actually have an ethical adviser but since there are no actual standards- just sophomoric statements that one must be a fiduciary- many may breach a duty that can be shown in arbitration.

2/12: Old people


6 Powerful Ways To Help Seniors Avoid Isolation

It can be difficult for seniors to maintain their social lives as they age, especially if they live alone. This is a great resource for supporting them to stay active socially.


Home Modifications Increase Senior Safety

This is a given - it’s important for our elders to make sure their homes are a safe environment.


16 Chair Exercises for Seniors & How to Get Started

This is great - it’s got exercises for people of all abilities, and even includes helpful videos.


9 Essential Mobile Device Apps for Senior Citizens

I appreciate that this explains the kinds of apps seniors should have on their mobile devices rather than listing specific apps (which may or may not stick around).


Building The Ultimate Reading Nook For Your Home: A Guide For Bookworms

My mother loves to read and hosts a monthly book club - she actually referred me to this great resource. (Actually, it’s been a great way for her and my dad to avoid feelings of isolation!)

2/11: The police were called on us because my son was having a bad hair day.

EFM- this speaks volumes about our society. None of it really good

2/11:"Exchange Traded Funds 101 for Economists" Fee Download

CEPR Discussion Paper No. DP12629

MARTIN LETTAU, University of California - Haas School of Business, Centre for Economic Policy Research (CEPR), National Bureau of Economic Research (NBER)
BlackRock, Inc.

Exchange-traded funds (ETFs) represent one of the most important financial innovations in decades. An ETF is an investment vehicle that trades intraday and seeks to replicate the performance of a specific index. In recent years ETFs have grown substantially in assets, diversity, and market significance. This growth reflects the rise in passive asset management where investors seek to track a benchmark index rather than outperform the market as a whole. As a consequence, there is increased attention by investors, regulators, and academics seeking to assess and understand the implications of this rapid growth. This article explains the key drivers of ETF growth and their implications for economists and policy makers.

2/11: Not a good omen

The UK construction industry ended 2017 with its most sustained fall in quarterly output for more than five years, as businesses’ reluctance to commit to new projects more than offset record levels of housebuilding. Output in the three months to December fell by 0.7 per cent, the third consecutive quarter of declines and the longest period of such declines since the third quarter of 2012.

2/11: retirement outlay goes DOWN as we age

Examining data from the U.S. Department of Labor’s annual Consumer Expenditure Survey, Bernicke noticed that retirees spent significantly less than people who were still working, and that older retirees spent less than younger retirees. The drop in retiree spending was present in all basic categories — food, shelter, clothing, transportation and entertainment — except healthcare, which was somewhat higher for older retirees.

The reduction in spending does not seem to be the result of historical circumstances, such as having lived through the Great Depression, since it is evident across generations. As seen in the chart above, people aged 55 to 64 (born between 1932 and 1941) spent a little more than $55,000 per year in 1996. Twenty years later, they were spending $38,691.

Now, consider a younger generation. In 1996, those aged 45 to 54 (born between 1942 and 1951) spent an average of $65,111 per year. By the time they had retired in 2016, they were spending just $50,873, suggesting that regardless of the generation, personal expenditures decline in retirement.

2/11:The budget deficits will kill us sooner or later.

Off-Budget Games   (John Mauldin)

Politicians like to talk about managing the federal budget the way you manage a family budget. This rhetoric makes for good sound bites but ignores an obvious reality: The federal government isn’t like your family. It has exponentially greater powers and responsibilities and is a sprawling behemoth to boot. The same budgetary principles don’t always apply.

For one, you can’t set your home budget and then add additional expenses without changing your budget parameters. The government can do so, and it does. These are the so-called “off-budget expenditures” you may have heard about. They don’t affect the official deficit that is discussed in the press. They do affect the amount of cash the government needs. Where does it get that cash? It borrows it by issuing Treasury paper.

Off-budget expenditures pay for a variety of programs: Social Security, the US Postal Service, and Fannie Mae and Freddie Mac are among the more familiar ones. But the category also includes things like disaster relief spending, some military spending, and unfunded liabilities that turn into actual costs. Federal student loan guarantees sometimes force the government to disburse cash. That’s an off-budget outlay.

Off-budget outlays have risen in part because they include Social Security benefits, and the Baby Boomer generation is retiring. But the other categories mentioned above have grown as well, and they are increasingly problematic.


"The Impact of High School Financial Education on Financial Knowledge and Choices: Evidence from a Randomized Trial in Spain" Fee Download
CEPR Discussion Paper No. DP12632

OLYMPIA BOVER, Banco de España - Research Department, Centre for Economic Policy Research (CEPR)
Banco de España - Research Department
Banco de España - Research Department

We conducted a randomized controlled trial where 3,000 9th grade students coming from 78 high schools received a financial education course at different points of the year. Right after the treatment, test performance increased by 16% of one standard deviation, treated youths were more likely to become involved in financial matters at home and showed more patience in hypothetical saving choices. In an incentivized saving task conducted three months after, treated students made more patient choices than a control group of 10th graders. Within randomization strata, the main impacts are also statistically significant in public schools, which over-represent disadvantaged students.

EFM- The issue revolves around 'right after....' Previous studies in the U.S, shows that any time lag yields 0 results and that the instruction is worthless.  If you don't use it you lose it

While the death of anyone you are close to will be difficult, for grandparents coping with the loss of a grandchild, navigating the dark and unique road of grief may be decidedly more complex. Grandparents who are grieving the death of a grandchild are often “neglected mourners,” taking a back seat to the primary mourners – the parents and siblings of the child who died. When it comes to offering empathy and support, grandparents are often forgotten or are too focused on “staying strong” for their loved ones to process their own feelings.

A Grandparent’s Grief is Unique

According to Dr. Alan Wolfelt, renowned author, educator and grief counselor, when a grandparent experiences the death of a grandchild, they are faced with a unique grieving process, mourning the death on many levels.

Wolfelt explains, “when a grandchild dies, grandparents grieve twice. They mourn the loss of the child, and they feel the pain of their own child’s suffering.”

Grandparents are in the extraordinary position of playing two roles: that of mourner and protector. Dr. Wolfelt continues, “a parent’s love for a child is perhaps the strongest of all human bonds. For the parents of the child who died, the pain of grief may seem intolerable. For the grandparents, watching their own child suffer so and feeling powerless to take away the hurt can feel almost as intolerable.”

Grandparents who live at a distance and did not have close or frequent contact with their grandchild might also experience additional feelings of guilt and regret, or mourn the loss of a relationship they never had the opportunity to embrace.

The Search for Meaning

For people coping with the death of a loved one, the search to find meaning in such a tragedy is a normal and necessary part of the grieving process. This is no different for grandparents who have lost a grandchild. Dr. Wolfelt explains that grandparents – many of whom have already lived long, rich lives – may struggle with feelings of guilt.

It is not uncommon for grandparents to consider questions such as “why couldn’t it have been me, instead?” or “how could God let this happen?”

Searching for meaning in the death of a grandchild may naturally lead to more fundamental considerations, including:

  • How you will carry on living with this devastating loss in your life
  • The meaning and purpose of life
  • Your philosophy on life
  • Your religious and spiritual values

Talking to a trusted friend or professional – perhaps someone outside of the family unit – will allow you to express your feelings and help to relieve the heavy burden weighing on your heart.

How to Support Someone Who is Coping with the Loss of a Grandchild

Dr. Wolflet suggests considering the following tips when supporting a grandparent who has lost a grandchild:

  1. Avoid cliché’s: Words, particularly clichés, can be extremely painful for a grieving grandparent because they diminish the very real and very painful loss of a unique child.
  2. Be aware of holidays and other significant days: Visit the grandparent, write a note or simply give them a quick phone call during these times. Your ongoing support will be appreciated and healing.
  3. Be compassionate: Give the grandparent permission to express their feelings without fear of criticism. Don’t instruct, or set expectations about how they should respond. Never say, “I know how you feel.” You don’t.
  4. Listen with your heart: Listen attentively and try to understand. Don’t worry so much about what you will say, rather concentrate on the words that are being shared with you.
  5. Offer practical help: Preparing food and washing clothes are just a few of the practical ways of showing you care.

Whether you are coping with the loss of a grandchild or supporting someone who is, always be kind and don’t assume unrealistic expectations. There is no timeline for how long grief should last. Dr. Wolfelt suggests taking a one-day-at-a-time approach.

After all, “grief is not an enemy to be vanquished, but a necessity to be experienced as a result of having loved.”

If you had to go through the loss of a grandchild, what tips do you have for other grandparents working through this difficult experience?

Related Articles:

Coping with the Loss of a Grandchild posted by 

Nice Try

The total assets of the largest 1,000 U.S. retirement plans reached a record $10.326 trillion as of Sept. 30, up 10% from a year earlier, thanks in part to outstanding market returns, Pensions & Investments' annual survey found.