Happy, Healthy and Prosperous New Year!
Here I go once again sharing with you my random gleanings of interesting (at least I think so), useful and useless tid-bits that I’ve read about during the last few months. Hope you enjoy reading this as much as I’ve enjoyed collecting.
A TRILLION HERE A TRILLION THERE
Eventually it adds up to real money. For example, according to AARP, annual health care costs add up to trillions. With the Health Care debate reaching a crescendo.
WONDER WHERE ALL GOES TO?
(In billions of dollars)
- Hospitals $721
- Physicians and clinics $489
- Prescription drugs $233
- Administration $1634
- Nursing home care $140
- Other ( dentists , medical devices and home health care ) $582
HOW DID WE GET HERE?
(In billions of dollars)
- 1960 – 28
- 1970 – 75
- 1980 – 253
- 1990 – 714
- 2000 – 1,353
- 2006 – 2,113
- 2007 – 2,241
- 2008 – 2,379
- 2009 – 2,509
- 2018 - $4.4 Trillion ( projected )
COLLEGE COSTS ON YOUR RADAR SCREEN?
From AARP, some good sites to check out.
Student aid basics www.fafsa4caster.ed.gov
Cost calculators www.collegeboard.com
Loan information www.finaid.org
529 Plan info www.savingforcollege.com
A tip from Money magazine. State treasuries contain about $33 billion in unclaimed funds, such as old dividend checks, dormant bank accounts, or refunds you forgot you were owed (or never knew about at all). To get your share; you’ve got to search for it. Start at www.unclaimed.org to check each State you’ve lived in. Also look up your name on www.missingmoney.com (not all States are covered). Cost: about $2 to get our claim form signature notarized. Average claim for those who collected in a recent year was a whopping $900. It really works; I know ‘cause I collected a little for my mom.
I’LL BET YOU DIDN’T KNOW
Rhopalic (ro-PAL-ik) is an adjective meaning “having each successive word longer by a letter or syllable.” A rhopalic verse or sentence is one that balloons -- where each word is a letter or a syllable longer. Here's a terrific example from Merriam-Webster’s Word of the Day:
"I do not know where family doctors acquired illegibly perplexing handwriting; nevertheless, extraordinary pharmaceutical intellectuality, counterbalancing indecipherability, transcendentalisms’ intercommunications' incomprehensibleness."
NOW HERE’S A BUNCH OF SCARY THOUGHTS
Some of you may know, Congress is in the midst of debating revision of the 70+ year old laws governing the standards applicable to anyone providing investment advice and I’ve been active with a group of friends actively encouraging Congress to apply fiduciary standard to anyone providing investment advice. That’s not a real popular idea with some brokerage and insurance representatives. Some of their objections seem pretty incredible to me. For example:
Bruce Maisel, Vice President and Managing Counsel of Thrivent Financial for Lutherans testified on behalf of the American Council of Life Insurers in commenting on the proposed application of a fiduciary standard to anyone providing investment advice. “We strongly oppose any requirement of acting without regard to the financial interest of the broker or investment adviser”, he said. “That could chill the ability of brokers or advisers to provide advice”. He either does not understand the concept of fiduciary duty or, scary thought, could care less about the interest of the client. Imagine! Meeting the fiduciary standard of placing the client’s interest first could kill commerce. I guess in his insurance and brokerage world Caveat Emptor reigns supreme.
And, in an Investment News, David A Genelly, an attorney representing brokerage firms said, “Extending the investment adviser’s full-blown fiduciary duty to brokers acting in non discretionary accounts – i.e. merely those who “recommend” purchases – is fraught with so much potential mischief that it undoubtedly has the plaintiff’s securities bar rubbing their already sweaty palm together with glee over prospects. A broker is a broker, and an adviser is an adviser. If brokers are now going to have the same fiduciary duties that advisers have, simply because they render some adjunct investment advice when we make recommendations, there is no telling where the liability will stop [my emphasis].” I guess if you ever receive “adjunct” investment advice you’d better take it with a grain of salt, or, better yet, maybe you should run for the exit.
The good news is, Congress seems to recognize the importance of linking investment advice to a fiduciary standard and I’m optimistic that in a month or so the financial services worlds will enter a new era of fiduciary responsibility. If you’re interested in learning more about this issue, check out the Committee for the Fiduciary Standard web site at: http://www.thefiduciarystandard.org.
Tired of having to type or speak your search request? Soon we’ll all be able to just use your phone camera - shoot a picture and press search. The video link above gives you a good idea of how it works—and how it doesn't. So far, Google Goggles works great with objects like business cards, paintings, landmarks, wine, books, and logos, but it's not yet prime time for things like food, animals, and plants. Right now Goggles is only available for Android users, but I’d expect we’ll all have a version soon.
NEW WORRIES FOR THE REALLY REALLY RICH
Private Wealth Magazine reports that a new IRS enforcement unit called Global High Wealth Industry Group has been created to scour trusts, partnerships, offshore trusts and other tax avoidance techniques used by the wealthy.
WHO SAID ATTORNEYS AREN’T FUN PEOPLE?
I found this in the ABA Journal and it’s now on my phone – Very Cool! “Lightsaber Unleashed,” available on the iPhone App Store, turns your iPhone into a Jedi light sword. “You wave it and it goes whoooooom, and it’s like fighting with Lightsabers.” And if the stars are really your thing, iPhone Life says that NASA has introduced a free IPhone app that allows you to receive real-time mission updates, view NASA’s image and video library and more.
THE STARS ARE BRIGHT
Speaking of stars, Texas has an exchange-traded fund (ETF) of its own. Scott Burns, Director of ETF analysis at Morningstar, says the fund is for investors with a soft spot for the lone star state. “It does not have a fit in portfolio allocation”, he says, “You’re paying up to invest your pride in your state”. And Texan’s response: “of
OH! THE PAIN!!
“I’ve had the experience of being on top and riding the roller coaster down again, nearly to the bottom. You know, if you economize and don’t buy new airplanes or long-range jets, or that sort of thing, you can get by on a billion or two.” - Ted Turner interview with Bloomberg News reported in Registered Rep magazine.
That’s probably good news for lots of politicians. According to Politico.com, there are 237 millionaires in the US Senate and House of Representatives. That’s 44% of all members of Congress. One percent of the public at large are millionaires.
CHICKEN WINGS? BAH HUMBUG!
You may have to cut back on the private jets but hopefully not for party time. From the American Airlines inflight magazine, a few guests to kick your party up a notch:
- Aerosmith or Timberlake at your home for a mere $1,000,000
- William Shatner at a bargain $50,000 - $100,000
- Deal or no Deal models – a real bargain at $500 - $1,000
And, for the sports minded:
- Bob Costas - $50,000+
- The entire Dallas Cowboys cheerleading squad - $50,000
FOR THOSE OF YOU ON A MORE LIMITED BUDGET
Smart Money provided some guidance on what you can do with a measly $500 in:
Aspen - 25 Kobe beef burgers with bacon, Vermont cheddar cheese, and grilled onions
Berlin - 15 servings of the signature veal tripe with truffle chanterelles and Gendarmerie
Hong Kong - 10 organic eggs comfit with truffeled oxtail gelee, and croutons. Yum!
IF IT’S TOO GOOD TO BE TRUE….
You may have read about STOLI (stranger owned life insurance); i.e., a free money offer pitched to the elderly where the promoter funds and purchases a life insurance policy on the investor. My friend Michael Nelson writes in his Iowa Savings Bank Newsletter (the publication that gave me the idea for my NewsLetter) that “Four wealthy elderly men were sued by a premium financier for 16 million dollars. They had been convinced by a promoter to each buy a 20 million dollar life insurance policy on the premise that the policies would be purchased by investors and each man would make an easy $600.000 with no need to invest anything. The temptation for a free lunch can blind clients and their advisors to horrific risk. To put it politely, this no brainer has proven to be a disaster.”
A new study from Strategy Analytics reported in PC Today suggests that people are using Bluetooth headsets much less often than just a year ago. The survey found that among US headset owners, 26% currently report using them daily compared to 43% last year. I hope that means I’ll be less likely to be sitting next to someone on my next flight who seems to think everyone within 10 rows is anxious to participate in his phone conversation.
AN EXCELLET IDEA
If you’re one of the zillion people like me who uses an iPhone, you can set a pass code on your IPhone or iPod touch to keep your data secure. To do this, go to settings > general > pass code lock and enter a four-number pass code. (Please make it a little more challenging than “1234”) and set the “Erase Data” option. When set, this option wipes out your storage memory clean after 10 consecutive failed attempts to enter the pass code.
THE STATE OF THE ECONOMY IS SO BAD THAT …
A little gallows humor making the email rounds:
- I got a pre-declined credit card in the mail.
- I ordered a burger at McDonald's and the kid behind the counter asked, "Can you afford fries with that?"
- CEO's are now playing miniature golf.
- If the bank returns your check marked “Insufficient Funds," you call them and ask if they meant you or them.
- McDonald's is selling the 1/4 ouncer.
- Motel Six won't leave the light on anymore.
BUT LOOKING BACK WHERE WE WERE A CENTURY AGO MADE ME FEEL BETTER
- Average life expectancy was 47 years.
- Fuel for the Model T car was sold only in drug stores and the maximum speed limit in most cities was 10 mph.
- Only 14 percent of the homes had a bathtub and only 8 percent of the homes had a telephone.
- The tallest structure in the world was the Eiffel Tower.
- More than 95% of all births took place at home.
- Only 6% of all Americans had graduated from high school and 90% percent of all doctors had no college education.
- Crossword puzzles, canned beer, and iced tea hadn't been invented yet.
ANOTHER GOODIE FROM THE IOWA SAVINGS BANK NEWSLETTER
“I got another invitation to a free dinner where out of town financial wizards will save my life. Usually, the common language in the invitations is somewhat vague and the real lies are saved for strictly verbal presentation. In this case, the invite badly reads ‘earn returns with the performance of the stock market, but avoid the risk of losing it’. Because equity indexed annuity contracts ignore dividend streams ( an essential part of any stock market return) and the insurer controls future crediting, a promise to match market returns is just a lie. A little Googling revealed that the presenters had been operating a mortgage brokerage business at the same West Des Moines office listed – certainly this is the background and experience you’d look for in a trusted financial and estate planning advisor. Guess they ran out of sheep to shear in the independent mortgage brokerage business.”
WISE WORDS FROM A WISE FRIEND
Don Philips, Morningstar managing director and a long time friend wrote the following in his Phillips Curve column in a recent Morning Star Advisor. As always, Don’s comments are worth repeating.
There are two very different types of people in finance. In an FPA session, the presenter acknowledged market timing’s bad reputation before launching his pitch as to why advisors should embrace it. He neglected to mention why timing has a bad rep – quite simply, no firm has ever produced a credible track record in a real world mutual fund setting using market-timing as a primary investment tool, despite numerous attempts. Remember the Lowry Market Timing Fund? FlexFund, Muirfield? There’s a reason you don’t. Sure, there are timing schemes that look good on paper, but if timing hasn’t been deployed effectively in a mutual fund, why should any advisor think he can do it with his client’s money? Today’s headlines say asset allocation and 401(k) plans failed. The numbers say they worked. The question isn’t which path will prove right, its how much damage will be done to advisors and clients who abandon years of training and accumulated wisdom and succumb to hyperbole. As ever, don’t confuse headlines with real investment insight.”
At that same conference I gave a talk titled “Modern Portfolio Theory - RIP?” My conclusion, absolutely not!
Obviously I agree with Don.
MORE COLLEGE STUFF
A Miami Today article highlighted a fascinating new site developed by a local entrepreneur - www.YOUniversityTV.com. It provides virtual visits to many colleges and universities around the country. The clips feature students and faculty talking about campus life and programs offered. Tours include the common
areas, student unions, dorms and other points of interest. Check it out, it’s impressive.
ANTIDOTE FOR HUBRIS
- If you are one in a million in China - there are 1,300 people just like you. China will soon be the number one English speaking country in the world.
- The 25% of India’s population with the highest IQ is greater than the total population in the United States. Translation - India has more honor kids than USA has kids.
THE PRESENT AIN’T WHAT IT USED TO BE
- The amount of technical information is doubling every 2 years. For students starting a four year technical degree this means that half of what they learn in their first year will be outdated in their third year of study.
- The top 10 jobs in 2010 did not exist in 2004 and we are currently preparing students for jobs that don’t exist yet using technologies that have not been invented yet in order to solve problems that we don’t yet know they are problems.
- The U.S. Department of Labor estimates that today’s graduate will have 10 – 14 jobs by the age of 38; 1 in 4 workers has been with their current employer less than a year; 1 in 2 has been there less than two years; 1 in out of 8 couples that married last year met online.
- If MySpace were a country it would be the 5th largest between Indonesia and Brazil.
- There are 31 billion searches on Google every month; In 2006 this number was 2.7 billion.
- The first commercial text message was sent in December 1992. Today the number of text messages sent and received exceeds the number of population on the planet. No wonder I can’t catch up!
- Years it took to reach a market of 50 million:
- Radio 38 years; TV 13 years;
- Internet 4 years; IPod 3 years; Facebook 2 years
- The number of internet devices in 1984 was 1,000; in 1992 - 1 million by 2008 – 1 billion.
- There are about 540,000 words in the English language. About 5x as many as to Shakespeare time. It is estimated that a weeks worth of New York Times contains more information than a person came across in its lifetime in the 18th century.
- It is estimated that 4 Exabyte’s of information were generated in 2009. That is more than in the previous 5000 years.
- By 2013 a computer will be built that exceeds the computational capabilities of the human brain and predictions are that by 2049 a $1000 computer will exceed the computational capabilities of the entire human species.
I picked up all of this handy info from a You Tube show lasting a few minutes that concluded: “During the course of this presentation”
- 67 babies were born in the US
- 274 babies were born in China
- 395 babies were born in India
- And 694,000 songs were downloaded illegally
Imagine what happened while you were reading my NewsLetter!
FOR YOU NEWS JUNKIES
More iPod stuff. You can watch breaking news on your phone with ICast. It aggregates online content streams video clips. This app provides up to the minute newscasts from major media outlets, including Associated Press, CBC, and The Wall Street Journal Online. I read about it in Laptop Magazine and it’s now on my phone.
DEENA’s TOP 10
For the last few weeks I’ve been pretending to be a nurse and keeping Deena (my wife, partner and besherter) company while she recovers from knee replacement surgery (and she’s doing great). Next month look for her in the National Hockey League). Her biggest complaint is boredom, so she developed these Top 10 reasons why you know you are ready to go back to work:
10) You can recite the daily CNN Headlines from memory;
9) Going out for dinner means taking your pain pills prior to eating from the meal tray;
8) You've developed a crush on the Geico Gecko;
7) You find Judge Judy's voice comforting;
6) You and the postman are on a first name basis;
5) You've seen every episode of Law and Order from the past 19 years - in just 2 marathon weekends;
4) You set your alarm for 2AM so you don't miss the Diamonique closeout sale on QVC;
3) You actually listen to the telemarketer's spiel and ask in-depth questions;
2) You've traced your family back to the statues on Easter Island;
1) And, the number one reason you know you are ready to go back to work: Amazon just gave you an award for making so many orders this past 2 weeks that you paid their electric bill for January.
MORE WISE THOUGHTS
We’re all a bit less panicked then we were back in March of last year; however, market risk has not disappeared. One day, sooner or later, we’ll once again face very scary times so I thought I’d end this issue with the advice of a few good men, offered during the depths of the Great Recession.
First is an excerpt from a column by Money magazine Senior Editor Walter Updegrave, a consistently credible journalist.
“At times like these, it’s natural to want to do something – anything – to stem the bleeding. Just about any move has to be better than staying in stocks, right? Wrong. Switching your 401(k) into bonds or cash my make you feel better today. But by allowing fear to dictate your investing strategy, you are undermining your chances for a comfortable retirement. Shift the urge to flee stocks, step back and assess this situation coolly. Despite the steady drum beat of bad news, the U.S. economy isn’t going to disintegrate. Yes, we’re likely in or entering a recession. When we’ll come out of it, frankly no one knows. Recessions typically last about 10 months, but the length and severity of this one depends a lot on how well the various rescue measures work and when the housing market recovers. But we will rebound from this crisis, just as we recovered from previous recessions. When that happens, stocks will still offer you the best shot in the longterm.”
Next, let me introduce Richard Bradley, Editor in Chief, Worth Magazine, answering the question, “Where are the Wise Men?”
“That was the question I pondered in recent weeks as the financial crisis exploded and the stock market tanked. Surely, as in past national crisis, the country’s most sage men and women would rise to the occasion. Who would be our Dean Acheson or Averill Harriman or George Kennan? Or even Lee Iacocca?
This fall marked the end of an era in which Wall Street titans made enormous fortunes and strode above American culture as if stepping from mountain peak to mountain peak. Their wealth contributed to city and state budgets, fueled the growth of philanthropy and fostered an ancillary economy that ranged from private aviation to shoeshine parlors.
But the influence of the hedge fund kings and banking chiefs wasn’t wholly a function of their riches. The great fortunes of the last decade stemmed from the idea that the titans of Wall Street constituted a superior class, a race of (almost entirely) men who knew far more than the rest of us possibly could about the intricacies of finance, or derivatives and credit swaps and CDO’s and CMBS’s and all the other pieces of jargon that they turned out not to understand so very well after all. Still, until it all fell apart, we believed them. Because if they didn’t know what they were doing, how could they be making such vast fortunes?
So when the credit crisis hit and the markets collapsed, I wondered: Who’ll be the guy to take responsibility, to admit mistakes, to explain to the public what went wrong and why it wouldn’t happen again? Who’ll write the op-eds, take out the advertisements, appear on talk shows, and give interviews to the print media? Because if no one is willing to play that role, how will Americans regain confidence in the financial industry? I don’t have the answer to those questions yet, because the titans of Wall Street have fallen quiet. Not all of them: Warren Buffet has certainly done his best to restore the public’s faith in capitalism. But the generation of supremely confident financiers who’ve been making eight- and nine-figure salaries in recent years? The hedge fund maestros who’ve put their name on museums and hospitals and libraries all across the country? Barely a peep….
As painful as current events are, capitalism will survive; the country will survive. This is not the end of prosperity. But what, I wonder, will happen to those titans of Wall Street?”
And a last wise word to the wise, again from Money (December 2008)
“Peering into the future is tricky in the best of times. But even tough predictions always turn out to be flawed – it’s impossible for even the smartest experts to nail this stuff perfectly – you cannot build a future without guessing first what challenges you’ll face on the way there. History is your best guide. It has taught us that recessions tend to push inflation lower; that stocks usually recover before the economy does; and that jobs recover later. Most of all, history shows us that downturns don’t last forever – and that it’s when people are most disheartened that rebounds begin”.
Well, that’s it for this NewsLetter. I hope you’ve enjoyed. If it was a new experience for you and you’d like to know a little more about the idea behind the publication, take a look at http://www.evensky.com/827362.pdf for a copy of the first issue. Also, if you have trouble sleeping one evening and need some reading material, you can find all of the back issues at http://www.evensky.com/default.asp?P=332288. Finally, if there is anyone you would like us to add to the NewsLetter mailing list, please send their email address to Martina at firstname.lastname@example.org.
Harold Evensky, CFP®, AIF®
(c) Evensky & Katz