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Diane Girard, Magical Money Trees: It’s like a religion — you believe in it, or you don’t. I believe that not everyone can become rich. However, some of us may manage to live out our lives without losing all our savings. I plan to be one of those people because I am a wuss. I am content to watch my small jack pine survive the storm

Influencing Savings

The Center for Retirement Research has released a paper on How Do Emotions Influence Saving Behavior? by Gergana Y. Nenkov, Deborah J. MacInnis, and Maureen Morrin


Employers have moved away from traditional defined benefit pension plans to defined contribution plans such as 401(k)s.  As a result, many individuals are now required to make their own retirement saving and investment decisions, which has raised concerns about their ability and desire to handle these decisions.  Since investment choices have major implications for future financial welfare, it is important to understand how individuals make these decisions and to identify potential ways to improve the decision-making process.

Researchers have explored various factors affecting retirement saving, such as income, age, job tenure, self-control failure, financial literacy and trust.  No prior research, however, has looked at the effects of emotions on retirement savings.  This Issue in Brief examines how two different emotions – hope and hopefulness – affect 401(k) participation and asset allocation.  The first section defines the terms.  The second section describes the structure of a recent field experiment.  The third section summarizes the results, which reveal that having high hope (i.e. yearning) – for a secure retirement leads to different investment behaviors than having high hopefulness (i.e. perceived likelihood).  Furthermore, threats to hope and threats to hopefulness are found to have different effects on 401(k) participation and investment decisions. 

Read the full paper in a pdf form at the CRR at Boston College.

Securities Arbitration Clinics

The SEC's site has a page on mediation clinics available in California, Illinois, New York, and Pennsylvania:

"Investors with limited income or with small dollar claims may find it difficult or impossible to hire a lawyer. Law schools in California, Illinois, New York, and Pennsylvania have established securities arbitration/mediation clinics to provide legal representation to investors who cannot hire a lawyer to handle their claims. If you cannot hire a lawyer to represent you, you may wish to contact the clinics listed to see if they can help you."

"All of the clinics are authorized to operate by the courts in their respective states. You will be represented by law students who work under the supervision of faculty members at the school. You will have to determine if you qualify for help from a clinic: some clinics will not handle claims above a set amount or if your household income is too high. Please check directly with each clinic for information."

"Investors who live outside California, Illinois, New York, and Pennsylvania can request help from the clinics. A clinic may be willing to provide written advice about your claim and how to draft your complaint. The clinics are limited in the help they can give to out-of-state investors. Some may be unable to assist anyone outside their local area. Generally, representatives from the clinics cannot travel out of their local area to assist investors. If you live outside these states, you will have to check with each clinic to see if it can help you."

The page goes on to list the location of the law schools offering the clinics as well as client eligibility standards. Learn more about arbitration, how to find a lawyer who specializes in securities, and challenging an arbitration decision.

A Website Explaining the Swiss Banking System

Here are a few questions and answers from the Swiss Banking Association revealing the intricacies and quirks of Swiss banking:

How "secret" are Swiss banks?
In Switzerland great importance has traditionally been attached to the protection of an individual's privacy, and this has always included financial privacy. Surveys consistently show that the vast majority of the Swiss people want to maintain this protection. However, the high level of confidentiality Swiss banks offer both their domestic and foreign customers is not absolute and certainly does not shield criminals. As a matter of principle the rights to privacy can be suspended when a criminal investigation is underway. Our aim is to protect the privacy of the honest bank client while exposing criminals to the full force of the law.

How can I open an account from my home country?

First of all it must be understood that Swiss banks have very strict procedures concerning the opening of accounts, irrespective of the domicile of the customer. In line with Swiss laws governing "due diligence", the bank must verify the identity of the customer on the basis of an official document (e.g. a passport). If the Swiss bank you are interested in has a subsidiary, branch or representative office in your country you may consider contacting this office. If the bank is not represented in your country, please get in touch directly with the bank in Switzerland which will then provide you with further information.

What questions will the bank ask me?

First of all, the bank's staff will certainly ask questions to fulfil the bank's legal obligations with regard to due diligence. This will include asking for proof of your identity and also establishing the identity of the beneficial owner of the assets if you are depositing funds on behalf of someone else. The bank's staff might also ask about the origin of the funds, the nature of your professional business, your general financial situation and your usual financial transactions.
Can I open an "anonymous"account?

No. There is no such thing as an "anonymous" account in Switzerland. Under Swiss law, the bank must know who you are. Anonymous accounts at Swiss banks exist only in the imagination of thriller writers!

What about "numbered" accounts?

The procedure for opening a "numbered" account is exactly the same as for any other type of account. The bank must verify your identity and establish the identity of the beneficial owner. "Numbered" accounts are certainly not anonymous. With a "numbered" account your business within the bank is carried out not under your name but under a number or code. This is simply an internal security measure to restrict knowledge of the customer's identity to a small group of employees in the bank and apart from this a "numbered" account enjoys no additional privileges in terms of confidentiality. "Numbered" accounts should not be used for international wire transfers. According to international regulations the client's name, address and account number must be given when making international wire transfers.

Are Stocks Really Less Volatile in the Long Run?

Lubos Pastor, a finace professor at the University of Chicago's Booth School of Business and Robert Stambaugh, a finance professor at the Wharton School at Penn have released their working paper, Are Stocks Really Less Volatile in the Long Run?

We've been told that over the years by stock brokers, financial advisers and cable pundits. Now the pair of Lubos and Sambaugh are saying, in their abstract:

Conventional wisdom views stocks as less volatile over long horizons than over short horizons due to mean reversion induced by return predictability. In contrast, we find stocks are substantially more volatile over long horizons from an investor's perspective. This perspective recognizes that parameters are uncertain, even with two centuries of data, and that observable predictors imperfectly deliver the conditional expected return. We decompose return variance into five components, which include mean reversion and various uncertainties faced by the investor. Although mean reversion makes a strong negative contribution to long-horizon variance, it is more than offset by the other components. Using a predictive system, we estimate annualized 30-year variance to be nearly 1.5 times the 1-year variance.

The working paper is over 40 pages long but the authors get to the point quickly, as here on page 2:

We find that stocks are actually more volatile over long horizons. At a 30-year horizon, for example, we find return variance per year to be 21 to 53 percent higher than the variance at a 1-year horizon. This conclusion stems from the fact that we assess variance from the perspective of investors who condition on available information but realize their knowledge is limited in two key respects. First, even after observing 206 years of data (1802–2007), investors do not know the values of the parameters that govern the processes generating returns and observable “predictors” used to forecast returns. Second, investors recognize that, even if those parameter values were known, the predictors could deliver only an imperfect proxy for the conditional expected return.

If you care to wade through the subsequent 40 pages, it's downloadable at the site, depending on your geographic location.

Pew Reports on Mobile Technology

Overview of The Mobile Difference by John Horrigan

Some 39% of Americans have positive and improving attitudes about their mobile communication devices, which in turn draws them further into engagement with digital resources – on both wireless and wireline platforms.

Mobile connectivity is now a powerful differentiator among technology users. Those who plug into the information and communications world while on-the-go are notably more active in many facets of digital life than those who use wires to jack into the internet and the 14% of Americans who are off the grid entirely.

  • 8% of adults use mobile devices and broadband platforms for continual information exchange to collaborate with their social networks
  • 7% of adults actively use mobile devices and social networking tool, yet are ambivalent about all the connectivity
  • 8% of Americans find mobility lighting their information pathways, but have comparatively few tech assets at home
  • 16% of adults are active conduits of content and information for
  • 61% are anchored to stationary media; though many have broadband and cell phones, coping with access is often too much for them

Read the entire report and take the quiz, What Kind of Tech User Are You?

Is Facebook your window to your social world? Is your mobile device the last thing you put aside before shutting the light out at night? Or does the deluge of digital information leave you flat and the ring of your cell phone leave you cranky?

A sample question:

1. Some people say they feel overloaded with information these days, considering all the TV news shows, magazines, newspapers, and computer information services. Others say they like having so much information to choose from. Do you feel overloaded, or do you like having so much information available?


United States v. Bernard L. Madoff

From The United States Department of Justice, Southern District of New York

United States v. Bernard L. Madoff, 09 Cr. 213 (DC).   On March 10, 2009, a Criminal Information was filed in Manhattan federal court charging Bernard L. Madoff with eleven felony charges including securities fraud, investment adviser fraud, mail fraud, wire fraud, three counts of money laundering, false statements, perjury, false filings with the United States Securities and Exchange Commission ("SEC"), and theft from an employee benefit plan.  There is no plea agreement between the Government and the defendant.

On March 12, 2009, Madoff pleaded guilty to all eleven counts in the Information.  Madoff faces a statutory maximum sentence of 150 years’ incarceration. Madoff is also subject to mandatory restitution and faces fines up to twice the gross gain or loss derived from the offenses.  The Criminal Information also includes forfeiture allegations which would require Madoff to forfeit the proceeds of the charged crimes, as well as all property involved in the money laundering offenses and all property traceable to such property.

At the moment, we understand that the receiver will be posting information about its activities at, and the trustee will be posting information about its activities at  Investors and/or victims should consult those websites for additional information.

Information for Investors: Investors are requested to gather any documents that they have concerning their investments with Mr. Madoff and his companies, and to regularly check this website, the receiver's website, the trustee's website, and the SEC website ( for information about developments in this investigation and further instructions on how to provide information to the pertinent authorities


Social Security's Economic Recovery One-Time Payments;
IRS Information Related to the American Recovery and Reinvestment Act of 2009

"President Obama recently signed the American Recovery and Reinvestment Act of 2009.  This act provides for the one-time payment of $250 to individuals who get Supplemental Security Income (SSI) or Social Security benefits. We expect everyone who is entitled to a payment to receive it by late May 2009. No action is required on your part.  

"We are currently working on the details regarding how we will issue nearly 55 million one-time payments to our beneficiaries.  Check back periodically for more information:

IRS Information Related to the American Recovery and Reinvestment Act of 2009

"Congress has approved and the President has signed new economic recovery legislation, the American Recovery and Reinvestment Act of 2009. The IRS is implementing tax-related provisions of this new program as quickly as possible. Here are some key highlights:

COBRA: Health Insurance Continuation Subsidy. The IRS has extensive guidance for employers, including an updated Form 941, as well as information for qualifying individuals.

First-Time Homebuyer Credit Expands. Homebuyers who purchase in 2009 can get a credit of up to $8,000 with no payback requirement.

Payroll Checks Increase This Spring. The Making Work Pay Tax Credit will mean $400 to $800 for many Americans. The IRS has issued new withholding tables for employers.

$250 for Social Security Recipients, Veterans and Railroad Retirees. The Economic Recovery Payment will be paid by the Social Security Administration (see above), Department of Veterans Affairs and the Railroad Retirement Board.

Money Back for New Vehicle Purchases. Taxpayers who buy certain new vehicles in 2009 can deduct the state and local sales taxes they paid.

More information on these and other provisions of the recovery program will be available on the Web site,, as it become available.

Financial Stability Plan

Treasury Secy. Timothy Geithner released a statement concerning the basic form of the Financial Stability Plan. Aside from that brief outline, he announced a new website called, which holds a fact sheet with more details.

The core program elements include:

  • A new Capital Assistance Program to help ensure that our banking institutions have sufficient capital to withstand the challenges ahead, paired with a supervisory process to produce a more consistent and forward-looking assessment of the risks on banks' balance sheets and their potential capital needs.
  • A new Public-Private Investment Fund on an initial scale of up to $500 billion, with the potential to expand up to $1 trillion, to catalyze the removal of legacy assets from the balance sheets of financial institutions. This fund will combine public and private capital with government financing to help free up capital to support new lending.
  • A new Treasury and Federal Reserve initiative to dramatically expand – up to $1 trillion – the existing Term Asset-Backed Securities Lending Facility (TALF) in order to reduce credit spreads and restart the securitized credit markets that in recent years supported a substantial portion of lending to households, students, small businesses, and others.
  • An extension of the FDIC's Temporary Liquidity Guarantee Program to October 31, 2009.
  • A new framework of governance and oversight to help ensure that banks receiving funds are held responsible for appropriate use of those funds through stronger conditions on lending, dividends and executive compensation along with enhanced reporting to the public.

Alongside this program, the Administration will launch a comprehensive program to help address the housing crisis.

Read the fact sheet for a seven page examination of the plan.


Financial Services Hearings on Madoff

Editor's Note: After some struggling we downloaded a free new version of Real Player to play the Archived Webcast at the House Financial Services website regarding the hearings held on February 4th, 2009. The hearings and testimony took place regarding the Madoff Fraud Allegations and Financial Markets Regulation by the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises Hearing. At the screen presented to play the video I clicked on File and, when requested, inserted the URL of the video of the hearings:

The hearings are well worth your time for the lively and accusatory questioning of the SEC panel which is under restrictions in testifying due to the ongoing criminal investigation.

Panel One

* Mr. Harry Markopolos, an independent financial fraud investigator for institutional investors and others seeking forensic accounting expertise, as well as a Chartered Financial Analyst and Certified Fraud Examiner

Editor's Note: Mr. Markopolos is the author of The World's Largest Hedge Fund is a Fraud submitted to the SEC on November 5, 2007

Panel Two

* Ms. Linda Thomsen, Director, Division of Enforcement, US Securities and Exchange Commission
* Mr. Andrew J. Donohue, Director, Division of Investor Management, US Securities and Exchange Commission
* Mr. Erik Sirri, Director, Division of Trading and Markets, US Securities and Exchange Commission
* Mr. Andy Vollmer, Acting General Counsel, US Securities and Exchange Commission
* Ms. Lori A. Richards, Director, Office of Compliance Inspections and Examinations, US Securities and Exchange Commission
* Mr. Stephen Luparello, Interim Chief Executive Officer, Financial Industry Regulatory Authority
Available Member Statements: Chairman Kanjorski, Congresswoman Bachmann 

Wharton Wonders About Which Came First

From an article at Knowledge@Wharton: Half-a-Million Job Cuts: Is There a Strategy Behind the Layoffs?

"Nevertheless, the track record of companies that have gone through job cuts is terrible. 'Virtually all studies show a decline in performance associated with layoffs,' Cappelli [Peter Cappelli, director of the Center for Human Resources at Wharton] notes. 'But the caveat is that layoffs are a proxy for the fact that companies which decide to do them are already in trouble. It is hard to sort the effect of the layoffs, per se, from the proxy effect.'"

"This means that, for many of the companies which have announced or will soon announce layoffs, the current economic crisis is not necessarily the cause of their problems; it is simply what has exposed them. As intuitive as that argument may be, experts say that managers within the companies as well as analysts, investors and policymakers outside the business face the risk of putting too much, or even all, of the blame on the current economic crisis, rather than looking at deeper causes."

"Jay Anand, professor of management and human resources at Ohio State University, says challenging times like the present make differences between companies stand out in bold relief. 'Looking at the strategic implications, not every company is feeling the impact [of the crisis] in the same way. Some companies have better buffers in place, better capabilities to withstand the pressures, better demand or loyalty for their products, cost structures that are a little more flexible, supply chains that are a little more adaptable, and so on.'"

Read the rest of the Knowledge@Wharton article.


Elizabeth Warren ... see our reference in Women of Note


PEW Report on Generations Online in 2009

Pew Report  | Sydney Jones Susannah Fox

"Over half of the adult internet population is between 18 and 44 years old. But larger percentages of older generations are online now than in the past, and they are doing more activities online, according to surveys taken from 2006-2008.

"Contrary to the image of Generation Y as the "Net Generation," internet users in their 20s do not dominate every aspect of online life. Generation X is the most likely group to bank, shop, and look for health information online. Boomers are just as likely as Generation Y to make travel reservations online. And even Silent Generation internet users are competitive when it comes to email (although teens might point out that this is proof that email is for old people).

"The biggest increase in internet use since 2005 can be seen in the 70-75 year-old age group. While just over one-fourth (26%) of 70-75 year olds were online in 2005, 45% of that age group is currently online. Much as we watch demographic and age groups move up in “degrees of access” on our “thermometers,” we can probably expect to see these bars become more level as time goes on."

"Older generations use the internet as a tool for research, shopping and banking. Compared with teens and Generation Y, older generations use the internet less for socializing and entertainment and more as a tool for information searches, emailing, and buying products. In particular, older internet users are significantly more likely than younger generations to look online for health information. Health questions drive internet users age 73 and older to the internet just as frequently as they drive Generation Y users, outpacing teens by a significant margin. Researching health information is the third most popular online activity with the most senior age group, after email and online search."

"Internet users ages 33-72 are also significantly more likely than younger users to look online for religious information and they are more likely to visit government websites in search of information."

View PDF of Report


Status of Efforts to Address Transparency and Accountability Issues

As of January 23, 2009, Treasury had disbursed about $293.7 billion of the $700 billion in program funds. Most of the funds (about $194.2 billion) went to purchase preferred shares of 317 financial institutions under the Capital Purchase Program (CPP) — Treasury’s primary vehicle under TARP for stabilizing financial markets. GAO’s previous report emphasized the lack of monitoring and reporting for CPP investments and recommended stronger measures for ensuring that participating institutions use the funds to meet the program’s purpose and comply with CPP requirements on, for example, executive compensation and dividend payments. In response to our recommendation, Treasury developed plans to survey the largest twenty institutions monthly to monitor lending and other activities and analyze quarterly monitoring data (call reports) for all institutions. While the monthly survey is a step toward greater transparency and accountability for the largest institutions, we continue to believe that additional action is needed to better ensure that all participating institutions are accountable for their use of program funds.

Treasury has continued to develop a system for detecting noncompliance with key requirements of the program but has not yet finalized its plans. Further, Treasury has made limited progress in formatting articulating and communicating an overall strategy for TARP, continuing to respond to institution- and industry-specific needs by, for example, making further capital purchases and offering loans to the automobile industry. In addition, it has not yet developed a strategic approach to explain how its various programs work together to fulfill TARP’s purposes or how it will use the remaining TARP funds. While GAO does not question the need for swift responses in the current economic environment, the lack of a clearly articulated vision has complicated Treasury’s ability to effectively communicate to Congress, the financial markets, and the public on the benefits of TARP and has limited its ability to identify personnel needs.

Read the rest of the highlights of the report, another in a series of oversight reports

Finally, Equality for Lily Ledbetter

I sign this bill not just in her honor, but in the honor of those who came before -- women like my grandmother, who worked in a bank all her life, and even after she hit that glass ceiling, kept getting up and giving her best every day, without complaint, because she wanted something better for me and my sister

— President Barback Obama, Jan. 29, 2009

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,


    This Act may be cited as the `Lilly Ledbetter Fair Pay Act of 2009'.


    Congress finds the following:

      (1) The Supreme Court in Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007), significantly impairs statutory protections against discrimination in compensation that Congress established and that have been bedrock principles of American law for decades. The Ledbetter decision undermines those statutory protections by unduly restricting the time period in which victims of discrimination can challenge and recover for discriminatory compensation decisions or other practices, contrary to the intent of Congress.

      (2) The limitation imposed by the Court on the filing of discriminatory compensation claims ignores the reality of wage discrimination and is at odds with the robust application of the civil rights laws that Congress intended.

      (3) With regard to any charge of discrimination under any law, nothing in this Act is intended to preclude or limit an aggrieved person's right to introduce evidence of an unlawful employment practice that has occurred outside the time for filing a charge of discrimination.

      (4) Nothing in this Act is intended to change current law treatment of when pension distributions are considered paid.


    Section 706(e) of the Civil Rights Act of 1964 (42 U.S.C. 2000e-5(e)) is amended by adding at the end the following:

    `(3)(A) For purposes of this section, an unlawful employment practice occurs, with respect to discrimination in compensation in violation of this title, when a discriminatory compensation decision or other practice is adopted, when an individual becomes subject to a discriminatory compensation decision or other practice, or when an individual is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits, or other compensation is paid, resulting in whole or in part from such a decision or other practice.

    `(B) In addition to any relief authorized by section 1977A of the Revised Statutes (42 U.S.C. 1981a), liability may accrue and an aggrieved person may obtain relief as provided in subsection (g)(1), including recovery of back pay for up to two years preceding the filing of the charge, where the unlawful employment practices that have occurred during the charge filing period are similar or related to unlawful employment practices with regard to discrimination in compensation that occurred outside the time for filing a charge.'.


    Section 7(d) of the Age Discrimination in Employment Act of 1967 (29 U.S.C. 626(d)) is amended--

      (1) in the first sentence--

        (A) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively; and

        (B) by striking `(d)' and inserting `(d)(1)';

      (2) in the third sentence, by striking `Upon' and inserting the following:

    `(2) Upon'; and

      (3) by adding at the end the following:

    `(3) For purposes of this section, an unlawful practice occurs, with respect to discrimination in compensation in violation of this Act, when a discriminatory compensation decision or other practice is adopted, when a person becomes subject to a discriminatory compensation decision or other practice, or when a person is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits, or other compensation is paid, resulting in whole or in part from such a decision or other practice.'.

Read the rest of the bill at the Library of Congress

The Swedish Model for the Banking Crisis

The following paragraphs are excerpted from an 2007 article, Financial Crises: the Swedish experience, from the Sveriges Riksbank. The Riksbank is "Sweden’s central bank and a public authority under the Riksdag, the Swedish parliament.  The Riksbank is responsible for conducting monetary policy, the objective of which is to maintain a low and stable level of inflation. The Bank also has the task of ensuring that payments in the economy can be made safely and efficiently."

"In September 1992 the [Swedish] Government and the Opposition jointly announced a general guarantee for the obligations of the whole of the banking system. This broad political consensus was, I believe, of vital importance and made the prompt handling of the financial crisis possible.

"The bank guarantee provided protection from losses for all creditors except shareholders. The Government's mandate from Parliament was not restricted to a specific sum and its hands were also very free in other respects. This necessitated close co-operation with the political opposition in the actual management of the banking problems.

"The decision was of course troublesome and far-reaching. Besides involving difficult considerations having to do, for example, with the cost to the public sector, it raised such questions as the risk of moral hazard. However, the political system concluded that in the event of widespread failures in the banking system, the Swedish economy would suffer major repercussions. There was simply no choice. One way of limiting moral hazard problems was to engage in tough negotiations with the banks that needed support and to enforce the principle that losses were to be covered in the first place with the capital provided by shareholders.

"A separate authority, the Bank Support Authority, was set up to administer the bank guarantee and manage the banks that landed in a crisis and faced problems with solvency, though the crucial decisions about the provision of support were ultimately a matter for the Government.

"It was up to the central bank to supply liquidity on a relatively large scale at normal interest and repayment terms but not to solve problems of bank solvency. Collateral was not required for the loans to banks, neither intraday nor overnight. The banking system was free to obtain unlimited liquidity by drawing on its accounts with the central bank.

"The bank guarantee meant that the solvency of the central bank was not at risk. In order to offset the loss of credit lines in foreign currency to Swedish banks, during the height of the crisis the Riksbank also lent large amounts in foreign currency. Thus, the central bank assumed the role of provider of liquidity, not only in domestic currency but also in foreign currency.

"Banks applying for support had their assets valued by the Bank Support Authority, using uniform criteria. The banks were then divided into categories, depending on whether they were judged to have only temporary problems as opposed to no prospect of becoming viable. Knowledge of the appropriate procedures was built up by degrees, not least with the assistance of people with experience of banking problems in other countries.

"The Swedish Bank Support Authority chose to disclose expected loan losses and to assign realistic values to real estate and other assets. This method was consistent with other basic principles for the bank support, such as the need to restore confidence.

"Since the acute crisis had been triggered by difficulties in obtaining international finance, great pains were taken to give a transparent picture of how the crisis was being managed so as to gain the confidence of Sweden's creditors. This applied both to the account of the magnitude of the banking problems and to the content of the bank guarantee. Various informative projects were arranged for this purpose throughout the world. In Sweden, too, considerable efforts were made to legitimise the measures and their costs.

"The banking problems did arouse a lively debate in Swedish society but the work could still be done in broad political consensus, which was a great advantage. The bank guarantee was terminated in 1996 and replaced with a deposit guarantee that is financed entirely by the banks.

"With regard to macroeconomic policy, the following could be said. In the early stage of the crisis, the automatic stabilisers in the government budget probably helped to lessen the contraction of GDP. This meant that business profits and household disposable income were sustained relatively well. But it also entailed, after a while, a massive increase in the budget deficit and this in turn generated new problems, which of course had to be tackled when the acute crisis was over.

"Furthermore, monetary conditions were given a stimulatory turn. That also helped to stabilise both the economy and the banking system. Lower market rates eased the fall in asset prices, lightened the burden of servicing private sector debt and mitigated the negative impact on the financial system."

White House Site's Agenda on Seniors & Social Security

Social Security

President Obama and Vice President Biden are committed to ensuring Social Security is solvent and viable for the American people, now and in the future. Obama and Biden will be honest with the American people about the long-term solvency of Social Security and the ways we can address the shortfall. They will protect Social Security benefits for current and future beneficiaries alike, and they do not believe it is necessary or fair to hardworking seniors to raise the retirement age. Obama and Biden are strongly opposed to privatizing Social Security. As part of a bipartisan plan that would be phased in over many years, they will ask those making over $250,000 to contribute a bit more to Social Security to keep it sound. Obama does not support uncapping the full payroll tax 12.4 percent rate. Instead, he and Joe Biden are considering plans that will ask those making over $250,000 to pay in the range of 2 to 4 percent more in total (combined employer and employee).

Strengthen Retirement Savings

  • Reform Corporate Bankruptcy Laws to Protect Workers and Retirees: Current bankruptcy laws protect banks before workers. Obama and Biden will protect pensions by putting promises to workers higher on the list of debts that companies cannot shed; ensuring that the bankruptcy courts do not demand more sacrifice from workers than executives; telling companies that they cannot issue executive bonuses while cutting worker pensions; increasing the amount of unpaid wages and benefits workers can claim in court; and limiting the circumstances under which retiree benefits can be reduced.
  • Require Full Disclosure of Company Pension Investments: Obama and Biden will ensure that all employees who have company pensions receive detailed annual disclosures about their pension fund's investments. This will provide retirees important resources to make their pension fund more secure.
  • Eliminate Income Taxes for Seniors Making Less Than $50,000: Obama and Biden will eliminate all income taxation of seniors making less than $50,000 per year. This will provide an immediate tax cut averaging $1,400 to 7 million seniors and relieve millions from the burden of filing tax returns.
  • Create Automatic Workplace Pensions: The Obama-Biden retirement security plan will automatically enroll workers in a workplace pension plan. Under their plan, employers who do not currently offer a retirement plan will be required to enroll their employees in a direct-deposit IRA account that is compatible with existing direct-deposit payroll systems. Employees may opt-out if they choose. Experts estimate that this program will increase the savings participation rate for low and middle-income workers from its current 15 percent level to around 80 percent.
  • Expand Retirement Savings Incentives for Working Families: Obama and Biden will ensure savings incentives are fair to all workers by creating a generous savings match for low and middle-income Americans. Their plan will match 50 percent of the first $1,000 of savings for families that earn less than $75,000. The savings match will be automatically deposited into designated personal accounts. Over 80 percent of these savings incentives will go to new savers.
  • Prevent Age Discrimination: Obama and Biden will fight job discrimination for aging employees by strengthening the Age Discrimination in Employment Act and empowering the Equal Employment Opportunity Commission to prevent all forms of discrimination.

Read the rest of the page at the site


The Career Wage Gap Over a Lifetime

The Center for American Progress Foundation has released a report on the career wage gap that includes an interactive map detailing geographically, the wage disparities. Here are some of the findings:

  • Women may lose $434,000 in income, on average, due to the career wage gap.
  • Women at all education levels lose significant amounts of income due to the career wage gap, but women with the most education lose the most in earnings.
  • Women with a college degree or higher lose $713,000 over a 40-year period versus a $270,000 loss for women who did not finish high school.
  • Women in all occupations suffer from the career wage gap, but the gap ranges widely from one occupation to the next, with the widest gap in finance and management and the smallest gap in construction and maintenance.
  • Women lose hundreds of thousands of dollars from the career wage gap no matter where they live.
  • The gap exceeds $300,000 in 15 states, $400,000 in 22 states, and $500,000 in 11 states.
  • Read the entire report at the Center for American Progress as well as the interactive map.

    Editor's Note

    See Theater and Film section for the play, The Voysey Inheritance, and how it relates to Bernard Madoff's Ponzi scheme.

    An Addictive Site

    We read about this site in a Walter Mossberg review and found we ourselves looking at the Best of the PGA video (adventures with an alligator and bee swarm), just one of a number of video compilations. VideoSurf is a search mechanism for visual moments:

    "With over 10 billion (and rapidly growing!) visual moments indexed from videos found across the web, VideoSurf allows consumers to visually navigate through their results to easily find the specific scenes, people or moments they most want to see. "

    There's now a 'character' search that allows you to find athletes, celebrities, comedians, models, musicians, newsmakers and just about 'everyone.' If you want to search for a particular character on a TV show, or in a musical video or movie, that's possible. A further explanation:

    • Search Your Results by Character (a.k.a. the top row of pictures that appears on the search result pages). Clicking on any of the characters will allow you to re-sort your results to show only videos that feature the person you selected. It's a new kind of search and discovery tool that allows you to see who the most important characters are based on the frequency and duration of their appearances within the videos returned for your search. The easy way to see what this feature is all about is to try it out! Do a search on "Stand-up Comedy" or "What's Hot" and start clicking images to see who's important and how the results change.
    • Visual Summaries of Videos (a.k.a. the video frames that appear to the right of the large thumbnail on the search result page, and above the video itself on the video page). Our computer vision algorithms compile the Visual Summary by recognizing the most visually unique (and therefore interesting) moments in the video. You can think of it like a movie trailer, showing you all of the most memorable people (click on "Show Only Faces" to see just the characters) and scenes from the video. The Visual Summary is great for making sure you get to the right video from the search result page (because you can see exactly what it's about before you click), and also for allowing you to skip directly to the moments you want to watch (for many videos, clicking on any frame will take you to that exact moment in the video).
    We'd advise going to the FAQs for full explanations and directions.


    NBER: The Past and Future of the Age Discrimination in Employment Act

    The National Bureau of Economic Research released the above-cited working paper on Aging and Health:

    "The author closes by touching on two issues related to the ADEA (The Age Discrimination in Employment Act of 1967) and the employment of older individuals that are likely to become more important in the future. The first concerns the high health care costs of older workers, which can be a deterrent to their continued employment. One option that may be worth considering is changing EEOC rules to make it easier for employers to cover Medicare-eligible workers under a combination of their own group health plan and Medicare, even if that might entail differences in benefits for older and younger workers. The second concerns work-limiting disabilities, which rise with age. Workers with disabilities may file a charge with the EEOC under either the ADEA or the Americans with Disabilities Act (ADA). The ADA offers greater protection, and this could make employers reluctant to hire older workers. The interaction between the ADA and the ADEA is a fruitful area for future research.

    "In conclusion, the author notes 'the coming decades will witness sizeable increases in the share of the population aged 65 and over, an age range in which many workers leave their long-term career jobs and move into part-time or short-term jobs. As a consequence, potential problems stemming from age discrimination in hiring may become more important than they have been in past decades. The evidence on both the enforcement and effectiveness of the ADEA is troublesome in this regard, because it suggests the ADEA may be relatively ineffective with regard to hiring of older workers. There may be limitations on how effectively the regulatory and legal system addresses discrimination in hiring, and it would be useful to consider whether this effectiveness can be increased.' "


    See Women of Note for a brief sketch of Chairwoman of the oversight panel monitoring TARP (Troubled Assets Relief Program), Elizabeth Warren.

    Putting a Name to What You're Trying to Avoid

    We've heard it for weeks now and finally, we thought we should add it to our economic term definitions. NPR has created a page entitled The Language Of Economic Misfortune:

    "'Pushing On A String'

    "Definition: The futility of trying to trying to move something by approaching it the wrong way.

    "Example: On NPR's News & Notes, *Sean Masaki Flynn, author of Economics for Dummies, explained the expression to Farai Chideya this way: If you try to move something, you might tie string to it and then you pull the other end, but if you push at the string nothing happens. And so right now, the Federal Reserve has the following nasty problem: … Even though the Fed is trying to push all this money at the banks, the banks aren't turning around and making loans out in the wider economy.

    "It is a problem so complicated and widespread, Flynn says, it elicits another colorful term: 'liquidity trap.'

    It must be pointed out that the term is attributed to famed economist John Maynard Keynes.

    (*We noticed that Sean on his home page refers to Noise-Trader Risk, another interesting term. We could go on forever with uncovering these terms, dear reader.)

    Consumer Reports Blog about Money and Shopping

    Tightwad Tod is the name of a feature launched in October 2008 as part of the CU money and shopping blog. It was started in response to the US economic crisis. The main blog describes itself as having money reporters, editors, and testers quickly reporting on new developments and trends.

    Recent entries included Best Buys for Super Zoom Digital Cameras, 11 ways to strike gold on Black Friday and Find the value in your holiday purchases.

    Opt-Out Mortgages

    The Brookings Institution has released a paper, An Opt-Out Home Mortgage System, proposed by Hamilton Project. Some paragraphs from the policy brief:

    "In a new discussion paper for The Hamilton Project, Michael S. Barr of the University of Michigan, Sendhil Mullainathan of Harvard, and Eldar Shafir of Princeton propose a different approach to improving mortgage markets based on insights from the burgeoning field of behavioral economics. This new approach applies the findings of psychology to people’s behavior in the marketplace. Whereas traditional neoclassical economics assumes perfectly rational decisionmakers who weigh costs and benefits to maximize their individual welfare, evidence suggests that individuals often behave against their own self-interest in predictable ways. Applying these insights to the mortgage market, the authors propose a new “opt-out” mortgage system. Under their proposal, borrowers would be offered a standard mortgage (or small set of standard mortgages) with sound underwriting and straightforward terms. They would receive one of the standard options unless they affirmatively opted out in favor of another package. The authors expect mortgage lenders to try to entice borrowers to choose mortgages outside this set, and propose that opting out would require heightened disclosure to borrowers and additional legal exposure for lenders. They argue that establishing standard mortgages in this way would mean that borrowers would be more likely to receive appropriate loans without blocking beneficial financial innovation."

    Read the rest of the policy brief at the Brookings site.

    Banking Crisis Links

    The Senate Banking Committee that is holding hearings regarding the Treasury Department's proposed bail-out for the banking crisis has useful links on its website They include committee documents and financial regulators as well as a link to the House Committee on Financial Services where you can sign up for email updates.

    Don't forget Thomas, a service of the Library of Congress, which provides information about:

    Gender and the Wage Gap

    The Government Accountability Office issued a new report on Women's Earnings:

    Federal Agencies Should Better Monitor Their Performance in Enforcing Anti-Discrimination Laws

    The GAO found (in part) that the "EEOC [The Equal Employment Opportunity Commission] does not monitor gender pay enforcement efforts under another statute that covers multiple discrimination topics and under which more than half of gender pay charges are filed. As a result, EEOC does not make complete use of available information to help identify trends related to gender pay cases, set agency priorities, or understand how its gender pay enforcement efforts are contributing to overall performance goals relative to other efforts. EEOC

    What GAO Recommends
    GAO recommends that EEOC and OFCCP monitor performance of their enforcement efforts related to gender pay and that OFCCP ensure its planned new data system uses reliable data, measure performance of its outreach efforts, evaluate the mathematical model used to target contractors, provide links between pertinent guidance, and devise a unique violation code to track any non-compliance with the self-evaluation requirement. EEOC agreed with GAO’s recommendation; Labor neither agreed nor disagreed; and both provided additional perspective on their enforcement efforts.

    Income: The 1990s vs The 2000s

    The Economic Policy Institute issues an unwelcome, but not surprising, Snapshot by Jared Bernstein: Compared to 1990s, middle-class working families lose ground in the 2000s

    "The economy expanded over the 2000s, and working families were highly productive, as output per hour rose 18% from 2000 to 2007. But despite their contributions to the economy's growth, middle-income, working-age households — those headed by someone less than 65—lost ground over these years. Their median income, after adjusting for inflation, fell $2,000 between 2000 and 2007, from about $58,500 to $56,500 (2007 dollars).

    "The trend was very different in the 1990s. After declining in the recession (and the jobless recovery that followed), the median income of working-age households reversed course and rose consistently up through 2000. In fact, over the 1990s (1989-2000) median income was up almost 10%, or about $5,200. Had this 10% growth rate prevailed in the 2000s, the median income of working-age households would have gone up $3,600 instead of falling $2,000."


    "Unlike most Digital Immigrants, Digital Natives live much of their lives online, without distinguishing between the online and the offline. Instead of thinking of their digital identity and their real-space identity as separate things, they just have an identity (with representations in two, or three, or more different spaces). They are joined by a set of common practices, including the amount of time they spend using digital technologies, their tendency to multitask, their tendency to express themselves and relate to one another in ways mediated by digital technologies, and their pattern of using the technologies to access and use information and create new knowledge and art forms. For these young people, new digital technologies — computers, cell phones, Sidekicks — are primary mediators of human-to-human connections. They have created a 24/7 network that blends the human with the technical to a degree we haven’t experienced before, and it is transforming human relationships in fundamental ways. They feel as comfortable in online spaces as they do in offline ones. They don’t think of their hybrid lives as anything remarkable. Digital Natives haven’t known anything but a life connected to one another, and to the world of bits, in this manner.

    "Digital Natives are constantly connected. They have plenty of friends, in real space and in the virtual worlds — indeed, a growing collection of friends they keep a count of, often for the rest of the world to see, in their online social network sites. Even as they sleep, connections are made online, in the background; they wake up to find them each day. Sometimes, these connections are to people the Digital Native would never have had a chance to meet in the offline world. Through social network sites, Digital Natives connect with and IM and share photos with friends all over the world. They may also collaborate creatively or politically in ways that would have been impossible thirty years ago. But in the course of this relentless connectivity, the very nature of relationships — even what it means to “befriend” someone — is changing. Online friendships are based on many of the same things as traditional friendships — shared interests, frequent interaction — but they nonetheless have a very different tenor: They are often fleeting; they are easy to enter into and easy to leave, without so much as a goodbye; and they are also perhaps enduring in ways we have yet to understand.

    "Digital Natives don’t just experience friendship differently from their parents; they also relate to information differently. Consider the way Digital Natives experience music. Not so long ago, teenagers would go to a friend’s house to listen to a new record. Or music could signal a shared intimacy: A teenage girl would give her new boyfriend a mixed tape, with song names carefully written onto the cassette lining, to signal her growing affection. Not everything has changed: Digital Natives still listen to copious amounts of music. And they still share lots of music. But the experience is far less likely than before to take place in physical space, with friends hanging out together to listen to a stereo system. The network lets them share music that they each, then, can hear through headphones, walking down the street or in their dorm rooms, mediated by an iPod or the iTunes Music System on their hard drive. The mixed tape has given way to the playlist, shared with friends and strangers alike through social networks online. A generation has come to expect music to be digitally formatted, often free for the taking, and endlessly shareable and portable."

    Read the entire excerpt at the site. Born Digital is an initiative of the Digital Natives project, an interdisciplinary collaboration of the Berkman Center for Internet & Society at Harvard University and the Research Center for Information Law at the University of St. Gallen. The aim of the Digital Natives project is to understand and support young people as they grow up in a digital age.

    Who Do You Know and Where Did You Go To School?

    A report from the National Bureau of Economic Research entitled, School Ties and Mutual Fund Success, suggests that " 'Who you know' " — often touted as the key to career success — also may be a big part of investing success, at least for the professionals who manage mutual funds."

    "These university connections are not only common in the investment world, they're also profitable, the authors conclude. Managers tend to place bigger bets on companies with board members who share the same college or university affiliation. And, their holdings of such 'connected' companies outperform their holdings of 'non-connected' stocks by up to 8.4 percent a year.

    "Managers earned those outsized returns largely around news events, such as mergers, that boosted the stock price, the study finds. That finding suggests 'social networks may be an important mechanism for information flow into asset prices,' the authors conclude.

    "Of course, it's a matter of endless debate, even among academics who have investigated the issue, whether portfolio managers really do earn higher-than-normal returns. In the few studies that have found a positive link, the higher returns have been related to above-average SAT scores of the managers' undergraduate institutions or the geographical proximity of the companies they invest in. Other research has shown that managers tend to make similar portfolio choices if they live in the same city or have similar educational backgrounds. This study suggests not only that such educational institution links exist, but also that they give fund managers an informational advantage over other investors.

    Read the rest of the release about the paper at the NBER site:


    The Housing 'Crash'

    The Impact of the Housing Crash on Family Wealth is a new report from the Center for Economic and Policy Research.

    What follows is the press release that accompanied the report:

    The study, “The Impact of the Housing Crash on Family Wealth,” analyzed the wealth holdings of families in all age cohorts in 2004 and projected the wealth of these families in 2009. The findings are presented by income quintile under three scenarios- real house prices remain at current levels, real house prices fall by an additional 10 percent, or real house prices fall by an additional 20 percent. In all three scenarios, the vast majority of these families will have little or no housing wealth in 2009.

    “This extraordinary destruction of wealth will have tremendous implications for millions of families,” said report co-author Dean Baker. “Coupled with a very low personal savings rate, this means that many people, especially those near retirement will only have Social Security and Medicare to rely on once they leave the workforce.”

    The report projects that if house prices stay the same through 2009, the median household headed by a person between the ages of 45 and 54, those in their prime earning years, will have 24.7 percent less wealth than did the median household in this age group in 2004. These households will have accumulated just $113,268 in net worth in 2009, barely $15,000 more than their counterparts in 1989, whose net worth totaled $97,600.

    If real house prices fall 10 percent, the median household in the 45 to 54 cohort will see a 34.6 percent loss in wealth compared with the median in 2004 while families in the 18 to 34 cohort will lose of 67.6 percent. If prices fall by 20 percent, the most pessimistic scenario, families in the 55-64 cohort will experience a loss of 49.6 percent of their wealth compared to the same cohort in 2004.

    This analysis should also prompt serious re-examination of policy proposals to cut Social Security and Medicare for near retirees. Baker commented, “policies that perhaps could have been justified at the peak of the housing bubble make much less sense now that tens of millions of near-retirees have just seen most of their wealth disappear.”

    The full report may be read online.

    Feeling Gloomy

    Pew has released the results of a survey, Baby Boomers: The Gloomiest Generation by D'Vera Cohn, Senior Writer, Pew Social & Demographic Trends Project
    June 25, 2008

    The Pew survey was conducted by telephone from January 24 through February 19, 2008 among a randomly selected nationally representative sample of 2,413 adults. Baby boomers are defined as adults ages 43-62 at the time the survey was taken.

    What follows are some paragraphs from that survey:

    Worried About Money

    The latest Pew survey finds that the boomers' glum assessments about their lives overall are matched by relatively high levels of anxiety about their personal finances. Some 55% say it is likely that their incomes will not keep up with the cost of living over the next year. That majority makes them the exception among all adults. Only four-in-ten younger Americans (44%) or older ones (43%) have that concern.

    The anomaly here is that boomers are in their peak earning years. As a group, they enjoy higher median household incomes than do younger or older adults, according to the Census Bureau's 2006 American Community Survey. Americans ages 45 to 64 — roughly the same age range as the boomers — have a median household income of nearly $60,000. That compares with about $53,000 for adults ages 25 to 44, and about $30,000 for those ages 65 and older.

    In the Pew survey, boomers also are more likely than younger or older adults to own stocks or bonds, and to have retirement accounts.

    Even so, boomers are more anxious than other Americans that they will have to cut household spending in the coming year because money is tight. Nearly three-in-ten boomers (28%) say it is very likely they will have to do so, compared with 22% of younger adults and 18% of older ones.

    Read the entire release about the survey.

    Perhaps an explanation for that gloom is well justified by the current report released from the Center for Economic and Policy Research: Baby Boomers Face Massive Loss of Retirement Wealth Due to Housing Market Meltdown:

    "A new report from the Center for Economic and Policy Research (CEPR) shows that, due to the collapse of the housing bubble, the vast majority of near retirees have accumulated little or no wealth. This means that they will be almost completely reliant on Social Security and Medicare to support them in their retirement years.

    "The study, The Housing Crash and the Retirement Prospects of Late Baby Boomers, analyzed the wealth holdings of families headed by people between the ages of 45 and 54 in 2004 and projected the wealth of these families in 2009. The findings are presented by income quintile under three scenarios — real house prices remain at current levels, real house prices fall by 10 percent, or real house prices fall by 20 percent. In all three scenarios, the vast majority of these families will have little or no housing wealth in 2009.

    " 'This extraordinary destruction of wealth will have tremendous implications for millions of families as they enter retirement,' said report co-author Dean Baker. 'Coupled with a very low personal savings rate, this means that many people will only have Social Security and Medicare to rely on in their retirement."

    "The report projects that if house prices were to stay the same through 2009, the median household would have 24.7 percent less wealth than the median household in this age group in 2004. If real house prices fall 10 percent, the median household would see a 34.6 percent loss in wealth compared with the median in 2004 and a 45.6 percent falloff if prices fall by 20 percent."

    Daughter Track

    The following paragraph is from WordSpy:

    [Felice N.] Schwartz (1989)[hyperlink] introduced the term "mommy track" to refer to an alternative career path that allows a mother flexible or reduced work hours, but at the same time tends to slow or block advancement. A newly coined phrase, the "daughter track", refers to a late-in-life version of the mommy track where women are leaving their jobs to care for their aging parents.
    — Elizabeth F. Cabrera, "Opting out and opting in," Career Development International, January 1, 2007

    The following paragraph is from Arlie Russell Hochschild's paper, Love and Gold, included in the book, For Women, Power and Justice: A Global Perspective:

    Vicky is part of a global care chain: a series of personal links between people across the globe based on the paid or unpaid work of caring. A typical global care chain might work something like this: An older daughter from a poor family in a Third World country cares for her siblings (the first link in the chain) while her mother works as a nanny caring for the children of a nanny migrating to a First World country (the second link) who, in turn, cares for the child of a family in a rich country (the final link). Each kind of chain expresses an invisible ecology of care, one care worker depending on another and so on. A global care chain might start in a poor country and end in a rich one, or it might link rural and urban areas within the same poor country. More complex versions start in one poor country and extend to another slightly less poor country and then link to a rich country.

    Such global care chains are now on the rise. For some time now, promising and highly trained professionals have been moving from ill-equipped hospitals, impoverished schools, antiquated banks, and other beleaguered workplaces of the Third World to better opportunities and higher pay in the First World. As rich nations become richer and poor nations become poorer, this one-way flow of talent and training continuously widens the gap between the two.

    This is the brain drain. But now in addition a parallel, more hidden and wrenching trend is growing, as women who normally care for the young, the old, and the sick in their own poor countries move to care for the young, the old, and the sick in rich countries, whether as maids and nannies or as day-care and nursing-home aides. It is a care drain.

    The movement of female care workers from south to north is not altogether new. What is new is the scope and speed of it. The causes are many. One is the growing split between the global rich and poor. Since the 1940s, the gap between north and south has widened. In 1960, for example, the nations of the north were twenty times richer than those of the south.

    . . .

    But if First World middle-class women are building careers that are molded according to the old male model, by putting in long hours at demanding jobs, their nannies and other domestic workers suffer a greatly exaggerated version of the same thing. Two women working for pay is not a bad idea. But two working mothers giving their all to work is a good idea gone haywire. In the end, both First and Third World women are small players in a larger economic game whose rules they have not written.

    Read the rest of Emeritus Prof. Hochschild's paper at Berkeley's Sociology's site

    A Daring Experiment

    From the Harvard and Business Education for Women, 1937 - 1970.

    "In 1937, five young women arrived at Radcliffe College to begin what Harvard Business School Professor Fritz Roethlisberger called “the first daring experiment in ‘practical education’ for women” — a one-year, certificate-earning personnel program."

    A Giant Step, The Training Course in Personnel Administration, 1937 - 1945

    "From the outset, the Radcliffe Training Course program focused on “the understanding and treatment of human problems in any employment situation,”with the goal of training graduates for work in human resources departments. Faculty and curricula in economics, sociology, guidance, and educational psychology were drawn from the Harvard Business School, other Harvard graduate schools, and Simmons College. In addition to case method coursework in the classroom, the program also included fieldwork: six-week apprenticeships at sponsor companies across the Northeast, with experiences ranging from working the production line to performing administrative tasks."

    Continue on to the section Broadened Horizons, The Management Training Program, 1946-1955 and subsequent sections including oral histories.

    Caller Complaints

    We've all gotten those phone calls, usually after you've returned home from work and impatient to sit down to dinner. Unwelcome? An understatement, but our sympathy for those who work in this industry sometimes exceeds our annoyance.

    From the Librarians' Internet Index:

    This website allows users to submit and view phone numbers of telemarketers. It notes that "[u]nlike government reporting websites, these reports are publicly published for the world to see." Search, or browse by area codes, most searched numbers, and recently filed complaints. The submission form has a place to submit the caller name (if known), caller type (such as debt collector), and complaint details.
    LII Item:

    College 529 Plans Rated

    Morningstar has released their rankings of The Best and Worst of 529 College Savings Plans. Click on their 529 home page and click on the name of the plan of your choice.

    The College Savings Plan Network website has a common questions page, answering What’s the difference between a 529 prepaid tuition program and a 529 savings program? as well as:

    Q. How do I open a 529 plan? 
    A. 529 plans are available by contacting the state which administers the program. This CSPN Web site offers links to plan web sites and toll-free numbers to contact the state plans. Most states offer residents the opportunity to invest in the plan directly though the state. These plans are often called “Direct Sold” and are typically offered at lower fees and without sales commissions. For those looking for professional advice on how to invest in a 529, “Advisor Sold” programs are offered by many of the state plans. Advisor Sold programs offer professional investment advice and service with standard sales commissions applying.

    Perhaps most importantly, if when you look at Morningstar's rankings,

    Q. Can a savings / investment account be rolled over to another 529 program?
    A. Yes. The account owner can choose to move funds from one state’s 529 plan to another states’ plan one time within a 12-month period for the same beneficiary.


    Financial Market Turmoil and the Federal Reserve: The Plot Thickens

    What's past is prologue; what to come, in yours and my discharge.
    Shakespeare, The Tempest, Act 2, Scene 1

    A little more than a year ago, I began to recount a story — already long-in-the-making — of the transformation of financial institutions driven by abundant liquidity in global financial markets. In those early chapters, one could not help but worry about the inherent risks to financial markets and the economy when the gloss of confidence wears thin, causing me to wonder aloud: "What happens when liquidity falters?" Let me briefly try to recount this tale over the last few quarters before offering some rough plot lines from which the balance of the story can be divined.

    The sleepy complacency of a bygone era seemed rudely interrupted by a liquidity shock last August. A global margin call on virtually all leveraged positions began. As you know, the Federal Reserve found it necessary to begin to exercise its monetary muscles in unprecedented ways. The seasons darkened, and the plot thickened. New structured products and old financial institutions evidenced increasing signs of weakness. Some central banks, including the Federal Reserve, helped supply liquidity to where it was most in need. Financial market turmoil, partly as a result, was periodically placed in abeyance. Casualties of the liquidity contraction nonetheless appeared; some remained in the narrative for awhile, others were removed with great dispatch.

    The narrative continued to morph through the first quarter of 2008. Central banks, while generally more comfortable remaining behind the scenes, took center stage with new tools and policy prescriptions. The script was rewritten so that product innovation flowed, but this time from the public authorities. Many private market participants receded to the shadows of the stage, some anxiously anticipating intermission.

    We skip ahead to the Epilogue:

    Some believe the story of the current market turmoil began in August, and will end when the housing market stabilizes. But, in my view, the narrative actually began in a seemingly more benign time with underpinnings more fundamental than the value of the housing stock. Financial institutions and other market participants grew increasingly dependent on the extraordinary liquidity around them. When liquidity faltered, the weaknesses of the existing architecture abruptly revealed itself. A metaphor, perhaps, is instructive: Fish don't know they are wet. And they don't learn unless their memories are long or the water is gone. A new financial architecture, born of the forces of creative destruction, is early in the process of construction with the aid of the Federal Reserve and other public authorities. But for the new paradigmatic architecture to be enduring, market-supplied liquidity must come to predominate. To that end, I remain confident that financial institutions and financial markets will evolve to meet these challenges.

    Read the entire speech by Fed Reserve Governor Kevin Warsh at the New York University School of Law Global Economic Policy Forum, April 14, 2008


    Household Wealth & Retirees

    The Federal Reserve released a paper that, although chock full of graphs, formulas and jargon unfamiliar to the average retiree, does come to some encouraging conclusions:

    "As the baby boomers begin to retire, a great deal remains unknown about the evolution of wealth toward the end of life. In this paper, we develop a new measure of household resources that converts total financial, nonfinancial, and annuitized assets into an expected annual amount of wealth per person. We use this measure, which we call "annualized comprehensive wealth," to investigate spend-down behavior among older households in the Health and Retirement Study. Our analysis indicates that, in (real) dollar terms, the median household's wealth declines more slowly than its remaining life expectancy, so that real annualized wealth actually tends to rise with age over retirement. Comparing the estimated age profiles for annualized wealth with profiles simulated from several different life cycle models, we find that a model that takes into account uncertain longevity, uncertain medical expenses, and (for higher-income retirees) intended bequests lines up best with the HRS data."

    "It is reasonably well known that retirees in the bottom quintile of the income distribution (conditional on their age and marital status) rely almost exclusively on DB pension benefits, Social Security benefits, and other government transfers to finance spending. Although these sources do not constitute a high level of comprehensive wealth, their annuity-like payout scheme means that they can finance a more or less constant path of outlays through retirement. While annuity-like benefits are also an important source of wealth for retirees in the middle- and upper-income groups, these retirees also tend to have significant financial and nonfinancial wealth. A new finding from our analysis is that, for the median retiree in the middle- and upper-income groups, annualized comprehensive wealth tends to rise over retirement. One might have expected wealth balances to fall roughly in line with declining longevity in retirement — after all, this is the trajectory that would be predicted by the simplest life cycle model of consumption."

    Here are additional paragraphs of some interest:

    Baseline life cycle model

    Panel (a) in Figure A-1 shows the simulation results for the baseline life cycle model specification, in which all retirees know they will live exactly to their life expectancy, do not face random medical expense shocks, and do not value leaving bequests. One thing that stands out in that panel is the abrupt decline in income at age 82. The decline, smoother versions of which we will see in all of our simulations, is due to the fact that households receive less Social Security income when one of the members dies. Apart from income, the figure reproduces the familiar results of the standard life-cycle model. Wealth declines steadily through retirement, and consumption lies almost entirely on top of annualized wealth at all ages. This is a reflection of the central hypothesis of the standard life-cycle model: in the absence of bequests or income uncertainty, households will optimally consume their permanent income, which in this case is exactly equal to annualized wealth. In order to explain the upward-sloping annualized wealth profiles observed in the data, we will have to consider departures from the baseline model. We begin by considering the role of uncertain longevity.

    Effect of uncertain longevity

    Panel (b) displays average life-cycle profiles for households facing uncertain longevity. Annualized wealth and consumption now rise gradually until almost age 80 and then fall rapidly until they equal retirement income around age 95. From the value function in equation (7), we can see that survival probabilities act like the discount factor to depress the growth rate of consumption. Individuals recognize that they may not live to enjoy future consumption, so they spend more today. This discounting effect accounts for the rapid spend-down past age 80, but what, then, explains the upward sloping profiles earlier in retirement?

    The increase in average consumption and annualized wealth is due to the fact that some spouses die earlier than anticipated. Early in retirement, households prepare to finance consumption for both members over their expected lifespans. Some households will live longer than expected and risk exhausting their resources. Others will experience an early death, and the surviving spouses will find themselves with a sudden increase in total resources per person, which translates into an increase in both annualized wealth and consumption.

    The entire paper, The Trajectory of Wealth in Retirement, can be found at the Fed site.


    Doris O'Brien, The Check is in the Mall: Some economic gurus suggest we boost the economy by spending our rebates only on American-made goods!  Have these "experts"  looked at the labels in their closets lately?   Or at the appliances in their kitchens?  Or the electronic goodies they find indispensable? 

    HTG Investment Advisors, Organizing Your Financial Records: What are my reasons for keeping records? Tax preparation and protection in the event of an audit probably come to mind immediately. But being able to access or recreate your information in the case of disaster should also be a consideration

    Prepare Your Applications

    You still have time to Enter Google's Lunar X Prize competition if you can gin up your application by December 31, 2010:

    The Google Lunar X PRIZE is a $30 million international competition to safely land a robot on the surface of the Moon, travel 500 meters over the lunar surface, and send images and data back to the Earth. Teams must be at least 90% privately funded and must be registered to compete by December 31, 2010. The first team to land on the Moon and complete the mission objectives will be awarded $20 million; the full first prize is available until December 31, 2012. After that date, the first prize will drop to $15 million. The second team to do so will be awarded $5 million. Another $5 million will awarded in bonus prizes. The final deadline for winning the prize is December 31, 2014.

    Sharpen those keyboards and enter.

    In the meantime, learn who your competition is: The Google Lunar X PRIZE teams come from all walks of life with varied sets of experiences and ideas. Each has a unique plan for getting to the lunar surface. Get to know all of our competitors by following their blogs, watching the latest videos, or participating on their forums, and cheer them on to the Moon!

    Economic Discontent Deepens As Inflation Concerns Rise

    The Pew Research Center for the People & the Press released the following study which we excerpt:

    Public views of the US economy, already quite negative, have plummeted since January. Just 17% currently rate the nation's economy as excellent or good, down from 26% last month. The percentage of Americans rating the economy as "poor" has increased even more dramatically, from 28% to 45% in one month.

    Moreover, there has been a modest rise in the proportion of Americans who view their own finances negatively, though personal financial ratings continue to be more positive than opinions of the overall economy. A majority of Americans (53%) now say their financial situation is only fair or poor, up from 49% in January.

    Fully 58% of the public says that their incomes are falling behind the rising cost of living. This compares with just 44% who expressed this view in September 2007. And the impact of the real estate slump is becoming apparent to American homeowners. The percentage of homeowners reporting that their home has increased in value during the past few years has fallen from 84% in October 2006 to 67% currently.

    The latest national survey by the Pew Research Center for the People & the Press, conducted Jan. 30-Feb. 2 among 1,502 adults, finds that several factors are driving the public's economic pessimism, including concerns about the availability of jobs as well as problems in the housing market. However, rising prices — for gasoline or energy, healthcare, or overall inflation — are mentioned most frequently as the nation's biggest economic problem.

    Overall, 24% cite concern over prices — with the cost of energy and healthcare mentioned most frequently — as the most important problem facing the country. By comparison, 18% volunteer jobs as the nation's biggest economic problem, while 13% cite housing — including 6% who specifically cite the sub-prime mortgage crisis.

    The general sense that prices have risen rapidly in recent years is much more prevalent now than at the beginning of the Bush administration. Overall, 79% of the public says that over the past five years prices have risen "a lot;" in June 2001, 63% said that prices had increased a great deal over the previous five years.

    People's personal financial concerns are more varied, and differ considerably along socioeconomic lines. The leading personal financial concerns of the poorest Americans are healthcare costs, jobs, and simply not having enough money to get by. By contrast, the leading concern among wealthy people is retirement and Social Security.

    Predictive Trader

    Intrade, one of the prediction trading sites, gathers information on a particular subject (such as Academy Awards, the outcome of O.J. Simpson's Las Vegas robbery case and search engine rankings) and provides that data to customers:

    "Our trading service allows members to transact in the most innovative, transparent and exciting way on political, financial, current and similar event futures. Intrade members trade directly with each other."

    When you trade on Intrade you are pitting your wits against other members of Intrade. Intrade provides the platform whereby members can trade between themselves.

    Here are some FAQ answers on Intrade:

    What is the role of Intrade? Intrade is an exchange that facilitates the matching of orders from its customers. Intrade ensures that trading profits and losses are transferred between customers in a timely manner and allows customers to close out positions by trading with any other customer. Intrade does not enter into trades on the exchange.

    What is exchange trading? Exchange trading allows members to trade on contracts against other members.

    How does Intrade make money? By taking a small commission on matched trades. There is no charge for entering an order; there is only a charge when you get a matched trade.

    How are the fees calculated? Intrade trading exchange has been modeled around an exchange and clearing house together. To calculate your fees for any trade, multiply the number of lots you traded by $0.05

    Issues to trade on:

    Democratic Primaries
    Republican Primaries
    2008 General Election


    The US Economy will go into Recession during 2008

    Happiness And Health: Lessons — And Questions — For Public Policy

    "Throughout the centuries, human happiness and its causes have been a central concern to clerics, philosophers, psychologists, and therapists of various kinds. Given the subject matter, some might be surprised to see economists dipping their toes into these waters, viewing them as Johnny-come-latelys or even as gatecrashers — economics, after all, is sometimes known as the "dismal science." But economists have their own rich tradition in this area, and their discipline is, in fact, rooted in "moral science," in which happiness plays a central role. Moreover, as "queen of the social sciences," economics brings with it insights from myriad aspects of social life and a vast array of mathematical tools for exploring relationships between self-reported happiness and just about anything else one can think of."

    "By bringing economic and psychological principles to bear, 'happiness economists' have produced a substantial body of evidence that health is a consistent determinant of self-reported happiness — one that transcends national boundaries, belief systems, and the highly subjective nature of happiness. The fruits of their labors include 'happiness equations,' in which health is among the handful of measurable variables that account for observed variability in human happiness. Even more compelling, Carol Graham informs us, is the observation that health correlates more strongly with happiness than any other variable included — even income — in countries throughout the world. Happiness surveys, Graham shows us, are powerful tools that members of the health policy community can use to gain fresh perspectives on the public’s health behavior and to develop policy worldwide."

    Carol Graham ( ) is a senior fellow in the Economic Studies Program at the Brookings Institution. The entire report is available at the Health Affairs journal

    The Fed Chairman's January Update

    Having read through the Fed Chairman Ben Bernanke's most recent speech to the Women in Housing and Finance, the following are some paragraphs that cap his remarks and relate to future actions:

    Monetary policy has responded proactively to evolving conditions. As you know, the Committee cut its target for the federal funds rate by 50 basis points at its September meeting and by 25 basis points each at the October and December meetings. In total, therefore, we have brought the funds rate down by a percentage point from its level just before financial strains emerged. The Federal Reserve took these actions to help offset the restraint imposed by the tightening of credit conditions and the weakening of the housing market. However, in light of recent changes in the outlook for and the risks to growth, additional policy easing may well be necessary. The Committee will, of course, be carefully evaluating incoming information bearing on the economic outlook. Based on that evaluation, and consistent with our dual mandate, we stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks.

    Financial and economic conditions can change quickly. Consequently, the Committee must remain exceptionally alert and flexible, prepared to act in a decisive and timely manner and, in particular, to counter any adverse dynamics that might threaten economic or financial stability.

    Read the entire speech, Financial Markets, the Economic Outlook, and Monetary Policy

    A New Profile of the Boomer

    The MetLife Mature Market Institute has issued a new report, Study of Boomers: Ready to Launch; The “Average” 62-Year Old Boomer (Born January 1, 1946 - December 31, 1946)

    To profile the average 62-year-old boomer is to study the contrasts between popular imagery and private lifestyle. In the past decade, especially, the baby boomer demographic has fired up the imaginations of marketers and the media with its huge numbers (almost 77 million total), and the social fabric both rendered and created during its turbulent youth. The truth and the imagery may be at odds, however. 

    Some highlights of this cohort from the report:

    The average member of the 1946 birth group…
    …has an annual income of $71,400.
    …has a household net worth, excluding home value,
    of $257,800.
    …has an average of six financial products/plans including 401(k)/403(b), IRA, health insurance, life insurance and CD/savings accounts.

    If they do not already have investments such as stocks, bonds, annuities, or long-term care insurance they have few plans to purchase these in the next 12 months.

    They have received or expect to receive some inheritance from their parents – typically in the range of $113,000
    to $210,000.

    Their home is currently worth $297,900.

    They are aware that at age 62 they are eligible for a reverse mortgage, but typically are not planning to use a reverse mortgage for funding in their retirement. Should they use a reverse mortgage they would use the money to support their own aging and long-term care needs and pay down debt.

    They do not have a professional financial advisor.

    They own their home.
    They do not plan to move from their current residence, although a sizable portion of their friends say they might at some point in the future.

    They did not attend the Woodstock music festival in 1969.
    They like the term “baby boomer” to describe themselves.
    They feel they have done a good job of providing for their own basic needs, their spouse’s and children’s needs, as well as their parents’ needs.
    They feel they have done a good job of contributing to their community and to society.
    They feel they have done a good job of ensuring a steady stream of income for their future, and in planning to live their early retirement years to the fullest.

    At the same time, they feel that they have done only a poor to fair job of saving and investing for their own future, saving and investing for their children’s future, and ensuring coverage for their own long-term care costs.

    They do not view themselves as being “old” until they are age 77 years and 10 months.

    They were politically conservative in their 20s and remain so today. In fact, a good number of their formerly liberal friends admit to becoming more politically conservative as they’ve aged. Some of their conservative friends admit the opposite, becoming more liberal as they’ve gotten older.
    The words that describe the worst thing about turning 62 are “getting older” and having “more health problems.”
    The words that describe the best thing about turning 62 are “freedom,” “retirement,” and “not having to work.”

    They’ve decided to take their Social Security benefits earlier than full benefit eligibility and certainly by age 65. They are doing so primarily for financial reasons like providing immediate income for retirement, along with some skepticism about the viability of the Social Security system thrown in for good measure. A sizable portion of their friends will be applying for benefits as early as age 62.

    They plan to be fully retired by age 66 years and 4 months.
    They feel that having a personal financial arrangement that guarantees a steady source of income for life is more important than spending more during their early retirement years and potentially not meeting their future financial needs.
    They like the word “retirement” to define their next life transition.

    Read the rest of the MetLife Mature Market Institute report highlights at the

    Federal Reserve Consumer Help

    "If you have a problem with a bank or other financial institution, contact the Federal Reserve for help." The situation and instruction as framed couldn't be simpler. After the Fed lays out the following procedures (Can I file a complaint? How do I file a complaint? What will the Federal Reserve do? What won't the Federal reserve do?, it then posits a series of questions a consumer might ask:

    "Can a bank really..." Post withdrawals from my account from the largest dollar amount to the smallest just to get more overdraft fees? Keep adding new fees to my account? Refuse to cash my check? Call me at work about not making a loan payment? Not give me back my checks?

    "How do I... " Get answers to other questions? Get a loan or deposit account from the Federal Reserve Bank? Spot a fraud or scam? Prevent my bank from foreclosing on my home loan? File a complaint? Know if my bank is safe?

    Contact a Federal Reserve customer service representative today.

          Federal Reserve Consumer Help
          PO Box 1200
          Minneapolis, MN 55480

          888-851-1920 (Phone)
          877-766-8533 (TTY)


    Protecting Social Security's beneficiaries

    From The Economic Policy Institute; Agenda for Shared Prosperity:

    "Inducing retirement savings through tax incentives is much less efficient and effective than simply providing benefits directly. Inducing behavior through the use of the federal income tax code is a poorly targeted approach, providing tax breaks for behavior that would have occurred without the incentive and failing to get benefits where they are most needed. Moreover, trying to induce the proper behavior requires substantial regulation and enforcement.

    "The current system of private pensions includes substantial government intervention. This governmental presence includes (1) an annual tax subsidy for private plans of over $110 billion a year, the largest in the income tax code, (2) the Employee Benefits Security Administration at the Department of Labor with its reporting and disclosure requirements, enforcement responsibilities, and reams of regulations, (3) the Employee Benefits Plans Office at the Internal Revenue Service with its cumbersome nondiscrimination rules and other complicated reams of regulations, and (4) the Pension Benefit Guaranty Corporation with its 2006 deficit of $18.8 billion and its projected exposure of $73 billion as a result of “new probable terminations.” Despite all of this government involvement, employer-sponsored plans have never covered more than about half the workforce and the benefits of private-sector plans go disproportionately to top executives and other highly compensated employees. Moreover, the courts are constantly clogged with lengthy, expensive litigation involving these plans. Further, the administrative costs, in many cases, are extremely high. Within the last year, for example, 10 class action lawsuits have been filed against major corporations, challenging, as excessive, the fee structure that is used by most 401(k) plans in the country.

    "Notwithstanding our mental image of a stool with three equal legs, the Social Security leg is vastly sturdier and better built than the other two. Social Security is fully portable. It covers virtually the entire work force, including those most difficult to reach, such as part-time, seasonal, and household employees. The program is fairer to those with less discretionary income: as described earlier in this paper, it has a progressive benefit formula, which provides larger proportionate benefits (though smaller in dollar amount) to low-income workers, part-time workers, and those with gaps in their working record due to unemployment, time caring for family members, or other reasons. Its benefits are fully backed by the federal government, which, unlike private employers, can raise taxes and will never go out of business. Social Security spreads risk much more widely. And Social Security has much lower administrative costs than the other two legs.

    "The three-legged stool metaphor, with the mind’s eye picturing three equal legs, channels thinking towards the necessity of strengthening and reinforcing each leg — after all, how else is the stool to remain upright? But of course, the goal is not to stabilize a stool. To help us untangle the retirement security challenge, it is helpful to clear one’s mind completely of the image of a three-legged stool. When one returns to first principles, and thinks about the problem with fresh eyes, free from the metaphor’s stifling grip, the solution becomes clear.

    "The nation’s goal, since the enactment of Social Security, has been to permit every American worker to retire with a secure source of income that adequately replaces pre-retirement wages. Social Security meets the goal perfectly, except that its benefits are inadequate. Once Social Security is projected to be in long-range balance, policy makers should increase its benefits in a prudent, careful manner. Raising Social Security’s benefits is the fairest, simplest, most secure, most effective, and most efficient way to ensure that all Americans can enjoy a secure and adequate retirement following a lifetime of labor."

    Read the entire paper by Nancy J. Altman, Protecting Social Security's beneficiaries

    Protecting Senior Investors

    Report of Examinations of Securities Firms Providing 'Free Lunch' Sales Seminars

    Highlights from the Report:

    The Securities and Exchange Commission securities regulators released a joint report summarizing the results of their examinations of 'free lunch' investment seminars. The year-long examination was conducted by the SEC, the Financial Industry Regulatory Authority (FINRA) and state securities regulators (members of NASAA, the North American Securities Administrators Association). The regulators scrutinized 110 securities firms and branch offices that sponsor sales seminars and offer a free lunch to entice attendees.

    The report's key findings include:

    * 100% of the "seminars" were instead sales presentations.

    While many sales seminars were advertised as "educational," "workshops," and "nothing will be sold," they were intended to result in the attendees' opening new accounts and, ultimately, in the sales of investment products, if not at the seminar itself, then in follow-up contacts with the attendees.

    * 59% reflected weak supervisory practices by firms.

    While some exams found effective supervisory practices, many examinations found indications that firms had poorly supervised these sales seminars, including failure to review seminar presentations or materials as required.

    * 50% featured exaggerated or misleading advertising claims.

    Examples included "Immediately add $100,000 to your net worth," "How to receive a 13.3% return," and "How $100K can pay 1 Million Dollars to Your Heirs."

    * 23% involved possibly unsuitable recommendations.

    In 25 of the 110 examinations, examiners found indications that unsuitable recommendations were made, for example, a risky investment recommended to an investor with a "conservative" investment objective, or an illiquid investment recommended to an investor with a short-term need for cash.

    * 13% appeared to be fraudulent and have been referred to the most appropriate regulator for possible enforcement or disciplinary action.

    Examiners found indications of possible fraudulent practices in 14 examinations that involved apparent serious misrepresentations of risk and return, possible liquidation of accounts without the customer's knowledge or consent, and possible sales of fictitious investments.

    Read the rest of the highlights release at the SEC site  

    Retirement Study

    The average value of Americans' 401(k) plans will be substantially higher in real terms by the year 2040 even if stock market returns fall short of their historical values, according to new research by a team of economists from MIT, Harvard and Dartmouth.

    In a study published this week in the online early edition of the Proceedings of the National Academy of Sciences, James Poterba of MIT, Steven Venti of Dartmouth College and David Wise of Harvard University looked at how changes in types of pension plans and in demographic structure will affect the wealth of future retirees.

    They found that if the average return on stocks for the next 35 years is three percentage points below its historical value, then the average value of 401(k) plan balances would increase from $29,700 in 2000 to $269,000 by 2040. If equity returns continue at their historical level, the average plan balance in 2040 would be even greater: $452,000 by 2040. All dollar values are measured in constant 2000 prices. The findings challenge some bearish projections that retirement assets will drop in value in coming decades as baby-boomers cash out their holdings. The team accounted for the discrepancy by noting that their research takes into effect the continuation of pension plan shifts away from traditional defined benefit plans toward 401(k) plans — a trend that has been under way for some 30 years.

    In short, because most current retirees who have assets in 401(k) plans were covered by these plans for only a fraction of their working careers, the balances at retirement for future retirees are likely to be substantially greater than those of current retirees.

    This is true even if the trend toward a growing fraction of the workforce covered by 401(k) plans slows or stops, said Poterba, head of MIT's economics department and the Mitsui Professor of Economics.

    "The key touchstone here is that if in fact people are in these 401(k) retirement plans for three or four decades, they will have a lot more chance to build up their assets than the current crop of retirees — many of whom have only been investing in 401(k) plans for part of their careers," Poterba said.

    The paper uses data on historical participation rates in, and contribution rates to, 401(k) plans to project the future evolution of 401(k) balances for retirement-aged households.

    Poterba noted several important caveats to the research, chief of which was the difficulty of trying to make accurate projections of what will happen more than three decades from now.

    He also said certain demographic groups may cash out their 401(k) plans prior to retirement, meaning they will not benefit from the projected large increase in their nest eggs.

    The work was funded by the Social Security Administration, the National Institute of Aging and the National Science Foundation and the above release is from MIT's news office.

    Here are a few paragraphs from the authors' paper:

    The rise of 401(k) plans and the decline of defined benefit plans will have an important effect on the wealth of future retirees. Changing demographic structure also will affect the aggregate stock of retirement wealth. We project the stock of assets held in retirement plans and the average retirement saving of retirees through 2040. Our projections show large increases in wealth at retirement, especially if the returns on corporate equities are comparable with historical returns. Retirement wealth will grow, however, even if equity returns fall substantially below their historical level.

    Over the past 30 years, there has been a fundamental change in the way Americans save for retirement. In the late 1970s, employer-provided and managed defined benefit (DB) plans were the primary means of saving for retirement in the United States. In 1980, 92% of private retirement saving contributions went to employer-based plans; 64% of these contributions were to DB plans. In recent years, more than three-quarters of private pension contributions have been to ‘‘self-directed’’ retirement
    plans, in which individual participants decide how much to
    contribute, how to invest plan assets, and how and when to
    withdraw money from the plan. The 401(k) plans, named after a section of the Internal Revenue Code, are the most popular type of self-directed private retirement plan. DB plans have remained an important form of retirement saving for federal, state, and local government employees, although, even for those workers, self-directed plans are becoming increasingly important.

    The baby boom generation is now approaching retirement, and Americans are living longer after retirement. There is growing interest in understanding how changing pension structure and an aging population will affect the retirement saving of the cohorts that reach retirement in the coming decades. We examine this question by analyzing how the increase in saving through 401(k)-like plans and the reduction in saving through DB plans may change the total accumulation of retirement saving. We demonstrate that the 401(k) accumulations of current retirees are a poor guide to the potential 401(k) accumulations of future retirees, because the former have typically spent only a fraction of their working career as a 401(k) plan participant. The projections developed in this article are a key input to studying how demographic change ultimately may affect asset returns.


    HTG Investment Advisors: Is your house a good investment as well as a home? Utilizing home equity for retirement income can be problematic. A number of factors have to be considered

    What the GAO Found:
    Federal Policies Offer Mixed Signals about When to Retire

    Federal policies offer incentives to retire both earlier and later than Social Security’s full retirement age depending on a worker’s circumstances. The availability of reduced Social Security benefits at age 62 provides an incentive to retire well before the program’s age requirement for full retirement benefits; however, the gradual increase in this age from 65 to 67 provides an incentive to wait in order to secure full benefits. The elimination of the Social Security earnings test in 2000 for those at or above their full retirement age also provides an incentive to work. Medicare’s eligibility age of 65 continues to provide a strong incentive for those without retiree health insurance to wait until then to retire, but it can also be an incentive to retire before the full retirement age. Meanwhile, federal tax policy creates incentives to retire earlier, albeit indirectly, by setting broad parameters for the ages at which retirement funds can be withdrawn from pensions without tax penalties.

    Nearly half of workers report being fully retired before turning age 63 and start drawing Social Security benefits at the earliest opportunity—age 62. Early evidence, however, suggests small changes in this pattern. Traditionally, some workers started benefits when they reached age 65. Recently, workers with full retirement ages after they turned 65 waited until those ages to start benefits. Also, following the elimination of the earnings test, some indications are emerging of increased workforce participation among people at or above full retirement age.

    GAO’s analysis indicates that retiree health insurance and pension plans are strongly associated with when workers retire. After controlling for other influences such as income, GAO found that those with retiree health insurance were substantially more likely to retire before the Medicare eligibility age of 65 than those without. GAO also found that men with defined benefit plans were more likely to retire early (before age 62) than those without, and men and women with defined contribution plans were less likely to do so.

    Read the entire report at the GAO site

    Bridging the Trust Divide: The Financial Advisor-Client Relationship

    From the Wharton School and State Street Global Advisors:

    "When it comes to selecting a financial advisor, trust is key. Although that might sound elementary, the results of a recent survey conducted by Knowledge@Wharton and State Street Global Advisors (SSgA) show that many advisors are failing to cultivate trust through careful communication of the value of their services, sensitivity to client needs, and competence in discussing rates and other potentially awkward topics. In fact, according to the survey, there is a serious gap between how well clients think their advisors are doing and the advisors' much higher opinion of their own performance."

    "In this special report, Knowledge@Wharton and SSgA look at the qualities that underlie strong advisor-client relationships. Industry experts and Wharton faculty weigh in on how trust is eroded, how expertise, ethics and empathy factor in, and what can be done to tackle sticky issues like transparency in fees. The report also includes a discussion of the SSgA-Knowledge@Wharton survey results and a follow-up focus group on investors' attitudes about advisors."

    Here are a few paragraphs from the introduction:

    At one time, financial advice usually came folded into another service, sometimes in the form of suggestions from a tax accountant, more frequently in the form of stock tips offered by a broker-dealer. Often, it was good advice. At times, however, it was conflicted, because moving particular products sometimes took precedence over doing what was right for the client.

    Over the last 15 years, that model has changed. First, advances in technology and regulatory reforms led to the rise of discount brokers, making it difficult for the old- fashioned stockbroker to sustain the same fee structure. Later, partly in response to that assault, the financial services industry looked to develop a more stable and less cyclical revenue stream. This fit in neatly with consumer concerns about conflicts of interest, and has led to a new paradigm in financial advice — the movement toward offering consultative services instead of product pushes and straightforward fee structures rather than complex or opaque ones.

    In this report, State Street and Knowledge@Wharton look at how financial advisors are negotiating the boundaries of this evolving relationship. Specifically, the report examines how advisors can:

    1. Strengthen relationships by engendering trust;
    2. Best communicate the value they bring to their clients
    given how clients generally perceive value; and
    3. Successfully discuss fees with clients.

    Read the report in: PDF Format

    Where are the Shareholder's Mansions?

    CEOs' home purchases, stock sales and subsequent company performance

    Arizona State University
    New York University — Stern School of Business

    March 2007

    Purchasing a home represents a significant economic decision, involving aspects of both investment and consumption. The buyer generally adjusts his portfolio, often taking on secured debt and liquidating assets to pay the acquisition cost. Thereafter, the homeowner enjoys benefits related to the size, comfort, and location of the property. Affluent persons sometimes acquire impressive homes as signals of their personal wealth, power and importance, an age- old behavior labeled “conspicuous consumption” by sociologist Thorstein Veblen.

    We study real estate purchases of major company CEOs, compiling a database of the principal residences of nearly every top executive in the Standard & Poor’s 500 index of major US companies.

    We test whether CEOs’ decisions about the size, cost, and financing of their homes contains information useful for forecasting future performance their companies, and we find patterns with strong statistical and economic significance. When a CEO buys a home, future company performance is inversely related to the CEO’s liquidation of company shares and options as a source of financing for the transaction, even though these stock sales are often small relative to the CEO’s total holdings in his firm. We also find that, regardless of the source of finance, future company performance deteriorates when CEOs acquire extremely large or costly mansions and estates.

    According to an ancient saying, “A man’s home is his castle.” This adage might apply especially well to American CEOs, many of whom are known for having enormous wealth and imperial personalities. The Hearst Castle, built in California by newspaper magnate William Randolph Hearst between 1919 and 1947, is probably the most celebrated home of a US business leader, but it is hardly the only one. Mansions built by J.P. Morgan, Andrew Carnegie, and Henry Clay Frick remain landmarks today in New York City, all having been converted to service as museums. In modern times, Microsoft Chairman Bill Gates received notoriety for constructing a 66,000 square foot home in Washington State, part of an estate valued at $140 million, while Mittal Steel (India) founder Lakshmi Mittal paid $128 million in 2004 for a London townhouse with a 20 car garage near Kensington Palace, the largest amount ever paid worldwide for an existing single family home. Conversely, Berkshire Hathaway CEO Warren Buffett is famous for having lived since 1958 in a house he bought for $31,500 in an ordinary neighborhood of Omaha, Nebraska. When he was the richest man in the world in the early 1970s, industrialist Howard Hughes lived a secret residence that became the subject of constant press speculation.

    Read the rest of the paper (depending on where you live) from the Social Science Research Network

    "It's from the I.R.S."

    The Library of Congress is hosting an exhibit, "Like mothers, taxes are often misunderstood, but seldom forgotten.'' Lord Bramwell, 19th Century English jurist" Cartoon America. One of the artists cited is:

    Etta Hulme, one of the few female practitioners of the craft of editorial cartooning, twists the well known plot of men stranded on a desert island unearthing buried treasure, into an ironic reminder that income taxes are due. Etta Hulme earned her fine arts degree at the University of Texas at Austin and immediately headed for Disney Studios in California, where she worked in the animation division for two years before returning to Texas. She began her cartooning career in 1954 at Austin's Texas Observer and has been with the Fort Worth Star-Telegram since 1972.

    The cartoon can be seen at:

    A few quotations from the IRS site itself might take the sting out the process:

    "Like mothers, taxes are often misunderstood, but seldom forgotten.'' — Lord Bramwell, 19th Century English jurist

    "Next to being shot at and missed, nothing is really quite as satisfying as an income tax refund.” — F. J. Raymond, humorist

    A tax loophole is "something that benefits the other guy. If it benefits you, it is tax reform.'' 
    — Russell B. Long, US Senator

    Another source for taxing quotes is the Tax Analysts:

    The more you create, the less you earn.
    The less you earn, the more you’re given,
    The less you lead, the more you’re driven,
    The more destroyed, the more they feed,
    The more you pay, the more they need,
    The more you earn, the less you keep,
    And now I lay me down to sleep.
    I pray the Lord my soul to take,
    If the tax-collector hasn’t got it before I wake.
    — Ogden Nash

    If, from the more wretched parts of the old world,
    we look at those which are in an advanced stage of
    improvement, we still find the greedy hand of government
    thrusting itself into every corner and crevice of
    industry, and grasping the spoil of the multitude. Invention
    is continually exercised, to furnish new pretenses
    for revenues and taxation. It watches prosperity as
    its prey and permits none to escape without tribute.
    — Thomas Paine

    Taxes are the sinews of the State.
    — Marcus Tullius Cicero

    ’Tis pleasant to observe, how free the present Age is
    in laying taxes on the next.
    — Jonathan Swift


    HTG Investment Advisors: Retirement Planning and Magical Thinking — Without a doubt, there is a “disconnect” between the reality of pre-retirees’ financial situations and their perception of what it takes to retire

    Who is Benjamin Graham?

    Wikipedia gives a succinct biography of Mr. Graham:

    "Benjamin Graham (May 8, 1894September 21, 1976) was an influential economist and professional investor who is today often called the "Father of Value Investing" and the "Dean of Wall Street." He is perhaps best known today from frequent references made to him by billionaire investor Warren Buffett, who studied under Graham at Columbia University, and was his only pupil to receive an A+. Other well known students of Graham include William J. Ruane, Irving Kahn, Walter J. Schloss, and Charles Brandes. Buffett, who credits Graham as grounding him with a sound intellectual investment framework, described him as the second most influential person in his life after his own father. In fact, Graham had such an overwhelming influence over his students that two of them, Buffett and Kahn, named their sons after him."

    Fortunately, Wiley Publishing, has reprinted ten 'rare' lectures of Graham's, from the book The Rediscovered Benjamin Graham: Selected Writings of the Wall Street Legend, by Janet Lowe. Although these are from over half a century ago, many of the companies referenced will be familiar to senior women.

    An excerpt from Lecture Number One:

    "One way of expressing the principle of continuity in concrete terms would be as follows: When you look at the stock market as a whole, you will find from experience that after it has advanced a good deal it not only goes down -- that is obvious -- but it goes down to levels substantially below earlier high levels. Hence it has always been possible to buy stocks at lower prices than the highest of previous moves, not of the current move. That means, in short, that the investor who says he does not wish to buy securities at high levels, because they don't appeal to him on a historical basis or on an analytical basis, can point to past experience to warrant the assumption that he will have an opportunity to buy them at lower prices — not only lower than current high prices, but lower than previous high levels. In sum, therefore, you can take previous high levels, if you wish, as a measure of the danger point in the stock market for investors, and I think you will find that past experience would bear you out using this as a practical guide. Thus, if you look at this chart of the Dow Jones Industrial Average, you can see there has never been a time in which the price level has broken out, in a once-for-all or permanent way, from its past area of fluctuations. That is the thing I have been trying to point out in the last few minutes."

    Two Provisos From Mr. Graham's Lecture No. 5

    "A thing I would like to warn you against is spending a lot of time on over-detailed analyses of the company’s and the industry’s position, including counting the last bathtub that has been or will be produced; because you get yourself into the feeling that, since you have studied this thing so long and gathered together so may figures, your estimates are bound to be highly accurate. But they won’t be. They are only very rough estimates, and I think I could have given, and probably you could have given me, these estimates in American Radiator in half an hour, without spending perhaps the days, or even weeks, of studying the industry."

    " I want to say finally on this question that an elaborate forecasting technique has been developed in recent years on the amount of dollar business and physical volumes that would be done in various industries at certain levels of employment, or certain levels of gross national product. The Committee for Economic Development has gotten out studies of that kind which gives you estimates of the industry totals under full employment conditions, and the same has been done by the Department of Commerce. Those of you who want to go into that aspect of analysis should start pretty much with these forecasts, and accept them or reflect them as far as your own judgment is concerned. If you accept them, then build your forecast of the individual company’s sales in relation to the industry totals which you are starting with. You may make three different estimates, — as is now done sometimes — based upon full employment, moderate unemployment, and considerable employment; and make your estimate of sales accordingly. That is the new technique, and I think you will find it interesting as applied to security analysis."


    The Women's Institute for a Secure Retirement recently held a symposium on Drafting the Blueprint for Women's Retirement Security. Some of the points raised Social Security and pension concerns:

    88 percent of retirement-age women receive Social Security

    Most women receive benefits at least in part based on their spouse’s record. About 38 percent of women receive benefits solely on their own work record

    Social Security represents an average of 53 percent of total income for unmarried women over 65, versus 38 percent of total income for unmarried men and 33 percent of total income for married couples of the same age

    Some SS proposals targeted to enhance or protect benefits for women:

    Changes to spousal benefits — including earnings sharing between spouses, reduction in spousal benefits/increase to survivor’s benefits, and reduction of the 10-year marriage requirement for divorced spouses

    Changes in benefit computation — including dependent care credits, and shortening the computation period used to calculate retirement benefits

    Establish minimum benefit — indexed to poverty level or percentage of poverty level

    Other Social Security reform proposals may weaken benefits for women:

    Changes in benefit computation--would extend the benefit computation period from 35 to 38 or more years, which would lower average benefits for most workers, especially those with fewer years of work history

    Individual accounts §

    New risks include investment risk, longevity risks, and lack of spousal protections§

    Possible benefits include potential higher returns, and inheritability/ownership§

    Women’s tendency to invest more conservatively than men can have both positive and negative effects on income in retirement

    Pension Income for Women:

    Roughly half of all workers have access to retirement programs through their employer

    Currently retired women are less likely than retired men to have a significant portion of their income from non-Social Security pensions §

    In 2003, 29 percent of women and 45 percent of men age 65 and older had pension income

    In 2004, 54 percent of full-time working women participated in employer-sponsored pensions, versus 53 percent of men; however, women average lower benefits due to lower average earnings and years of work

    Gaming and Learning

    When I told a contributor to this site, that women of all ages actually played online games, she was incredulous. The average adult woman plays games 7.4 hours per week. Forty-two percent of online game players are female. Research from America Online (AOL) has found that females over 40 years old spend the most time per week playing online games at 9.1 hours, which accounts for 41 percent of their connection time. Comparatively, teens spend 7.4 hours per week playing games, while females under 40 log 6.2 hours.

    And games do not have to be violent, sex-laden and numbing.

    The American Federation of Scientists features two games on their site, one of which can be downloaded now and one in prototype about to be released.

    Discover Babylon: The game is divided into three periods of Mesopotamian history: The Uruk Period (3300-3000 BC) when writing was first developing; the Ur III period (2100-2000 BC), a time of great cities and central organization; and the Neo-Assyrian period (1000-600 BC), a time of empires.

    The game incorporates artifacts found in the Walters Art Gallery in Baltimore and ancient texts in the online data-sets of the Cuneiform Digital Library Initiative. Players will interact with fictional characters and real objects from the three historic periods and the present day in order to solve a series of challenges. In the process, the player will absorb historical information and became more familiar with museum and library resources. The project in its entirety exposes the player to three historical periods in addition to an accurate modern day replication of the Walters Art Museum.  While exploring the museum the players gain insight behind the scenes and learn about the objects they will see once they travel back in time.  The full version includes the Walters Art Museum, Uruk and Ur, while kiosk version depicts Kalhu.

    Continue the description at the Discover Babylon site.

    Immune Attack is a first person strategy PC video game that teaches immunological principles through entertaining game play. The protagonist, a teenaged prodigy with a unique condition in which the immune system is “present, yet non-functional”, must pilot a microscopic nanobot to save his own life. He must teach his semi-functional immune system to fight off diseases and bacterial/viral infections by programming individual cell types. This programming is accomplished through the successful completion of various educational minigames, each of which teach a central immunology principle and, once completed, confer added ability to the selected cell type.

    Immune Attack is not yet available for download. When it does become available, the Federation will send out an e-mail to all those who have expressed interest in the game. To add your name to this e-mail list, please send your contact information to

    Other games to investigate are at Yahoo Games and Big Fish Games

    Defining Business Terms

    Three terms used in media sources caught our attention: pretexting (as in the Hewlett-Packard board spying instance), the fear gague in predicting volatility in the stock market and the 'smart pig.'

    The FTC refers to pretexting in a release dealing with the agency's testimony on the sale of consumers’ phone records. The subtitle of the article at the FTC sit says it all: An Entire Industry of Companies That Sell Phone Records Has Developed, Testimony Notes.

    “Companies that engage in pretexting – the practice of obtaining personal information, such as telephone records, under false pretenses – not only violate the law, but they undermine consumers’ confidence in the marketplace and in the security of their sensitive data.”

    “While pretexting to acquire telephone records has recently become more prevalent, the practice of pretexting is not new,” the testimony states. “The Commission has a history of combating pretexting.” The first FTC law enforcement action targeting operators who used false pretenses to gather financial information occurred in 1999. The company offered to provide consumers’ financial records for a fee. The agency alleged the company’s employees obtained the records from financial institutions by posing as the consumer whose records it was seeking. The Commission charged that the practice was unfair and deceptive and violated the FTC Act, the testimony says."

    Following passage of the Gramm Leach Bliley Act (GLBA), which specifically prohibits pretexting of customer data from financial institutions, the agency launched Operation Detect Pretext in 2001. “Operation Detect Pretext combined a broad monitoring program, the widespread dissemination of industry warning notices, consumer education, and aggressive law enforcement.” It followed up the first phase of Operation Detect Pretext with a trio of law enforcement actions against information brokers. “Because the anti-pretexting provisions of the GLBA provide for criminal penalties, the Commission also may refer pretexters to the US Department of Justice for criminal prosecution, as appropriate. One such individual recently pled guilty to one count of pretexting under the GLBA,” the testimony states.

    According to the testimony, an entire industry of companies offering to provide purchasers with the cellular and land line phone records of third parties has developed. The testimony notes that the agency could bring law enforcement actions against telephone record pretexters for deceptive or unfair practices under Section 5 of the FTC Act and that the FTC is currently investigating companies that appear to be engaged in telephone pretexting.

    The Chicago Board Options Exchange volatility index, or VIA, is also called the investor fear gauge. Here's a FAQ series that explains that term and why the index is a bellweather:

    "Why is the VIX called the "investor fear gauge"?
    VIX is based on real-time option prices, which reflect investors' consensus view of future expected stock market volatility. During periods of financial stress, which are often accompanied by steep market declines, option prices — and VIX — tend to rise. The greater the fear, the higher the VIX level. As investor fear subsides, option prices tend to decline, which in turn causes VIX to decline. It is important to note, however, that past performance does not necessarily indicate future results."

    Apparently (according to the Wall Street Journal), the fear gauge had risen "sparked by a Labor Department report showing that unit-labor costs rose by more than expected, raising the specter of inflation, explained Jay Suskind, director of trading at Ryan, Beck & Co."

    Just what is a 'smart pig' and how is it used? If you've been following the BP Prudhoe Bay pipeline woes in Alaska, you may have read about the smart pig they're using to detect oil pipecorrosion. No, not the pink, curly-tailed creatures, but a robot:

    "Smart Pigs are inspection vehicles that move inside a pipe line pushed along by the flowing material. They have been in commercial use since 1965, primarily for the detection of wall thinning caused by ordinary corrosion. Until recently other types of defects — cracks, coating disbondment, dents and gouges were not detectable with pigs. The industry is demanding smart pigs that could pass along multidiameter pipelines and bends, that could detect the precise location of any problem, and that does not interfere with or need the flowing material to still be operational."

    All that you'd ever want to know about these critters can be read at the Emerging Construction Technologies site.

    Pension Reform & A Scorecard

    The Pension Protection Act of 2006 has been signed into law by President Bush. Here is a summary of its provisions:

    Amends the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code to establish new minimum funding standards for single-employer and multiemployer defined benefit pension plans.

    Extends interest rate rules for the funding standard account that require the use of a rate based on long-term investment grade corporate bonds rather than 30-year Treasury securities. Amends the interest rate calculation for lump sum distributions.

    Requires single-employer plans that are fully-funded to pay variable-rate premiums to the Pension Benefit Guaranty Corporation (PBGC) . Sets forth alternative funding rules for commercial passenger airline defined benefit plans.

    Sets forth requirements related to funding notices that must be provided by defined benefit plans.

    Allows fiduciary advisers of a plan to give investment advice to participants or beneficiaries if certain requirements are met.

    Sets forth rules that govern whether plans fail to meet requirements that prohibit age discrimination in defined benefit pension plans.

    Increases deduction limits for single-employer and multiemployer plans. Makes permanent provisions from the Economic Growth and Tax Relief Reconciliation Act of 2001 related to individual retirement accounts and pensions. Allows annuity contracts and life insurance contracts to include long-term care insurance contracts. Amends provisions governing the benefits of tax court judges.

    Requires defined contribution plans holding publicly traded securities to provide employees with: (1) the opportunity to divest employer securities; and (2) at least three investment options other than employer securities. Allows employers to automatically enroll employees in defined benefit plans.

    Sets forth provisions governing the division of pension benefits upon divorce.

    Authorizes the Secretary of the Treasury to establish or change the Employee Plans Compliance Resolution System and any other employee plans correction policies.

    Prohibits reduction of unemployment compensation as a result of pension rollovers.

    More can be read at Thomas, the Library of Congress site named for another US President.

    The Retirement Security Project released a scorecard on the Pension Protection Act:

    The new law includes several key provisions that will make it easier for middle-and low-income workers to save for retirement but falls short in some key areas.

    One of the biggest strengths of the law is the removal of a number of barriers to adoption of automatic 401(k) features.  In addition, the law added provisions to make it easier to save and to save more as income increases and with investments that help ensure financial security in retirement.

    Research shows that automatic enrollment, one of these features, substantially boosts the rate of plan participation — sometimes to levels as high as 95 percent — with particularly dramatic increases for lower-income workers, minorities, and women.

    Dr. Peter Orszag, Director of the Retirement Security Project said, “We estimate that automatic enrollment, when fully phased in, could generate $10 to $15 billion of additional contributions to 401(k) plans each year.”   “Those additional contributions will bolster retirement security for millions of workers,” Orszag added.

    In fact, The Retirement Security Project estimates auto enrolling an employee at age 29 instead the current average age of 41 would equal nearly $130,000 in additional retirement savings.  Today among those nearing retirement the median total balance is only $73,000. With auto enrollment, most American workers will save in 12 years nearly twice the median total balance today.

    Another key point in the law is encouraging automatic escalation of employee contributions to their 401(k).  “Growing retirement savings in this country means getting more people to participate in their retirements plans, but also have their rate of savings grow as their income grows and as they get older,” Orszag noted.

    RSP’s scorecard shows that Congress has more work to do to make the Saver’s Credit available to more lower-income households.

    It's possible to view the entire scorecard in an pdf version at the Retirement Security Project site.

    Baby Boomer Retirement and The Market

    Dire predictions about how the crush of baby boomer retirements and their withdrawals from funds would impact markets have been afloat for a while. The Government Accountability Office produced a report,
    Retirement of Baby Boomers Is Unlikely to Precipitate Dramatic Decline in Market Returns, but Broader Risks Threaten Retirement Security, to confront and examine these concerns:

    Why GAO Did This Study
    The first wave of baby boomers (born between 1946 and 1964) will become eligible for Social Security early retirement benefits in 2008. In addition to concerns about how the boomers’ retirement will strain the nation’s retirement and health systems, concerns also have been raised about the possibility for boomers to sell off large amounts of financial assets in retirement, with relatively fewer younger US workers available to purchase these assets. Some have suggested that such a sell-off could precipitate a market “meltdown,” a sharp and sudden decline in asset prices, or reduce long-term rates of return. In view of such concerns, we have examined (1) whether the retirement of the baby boomers is likely to precipitate a dramatic drop in financial asset prices; (2) what researchers and financial industry participants expect the effect of the boomer retirement to have on financial markets; and (3) what role rates of return will play in providing retirement income in the future. We have prepared this report under the Comptroller General’s authority to conduct evaluations on his own initiative as part of the continued effort to assist Congress in addressing these issues.

    Our analysis of national survey and other data suggests that retiring boomers are not likely to sell financial assets in such a way as to cause a sharp and sudden decline in financial asset prices. A large majority of boomers have few financial assets to sell. The small minority who own most assets held by this generation will likely need to sell few assets in retirement. Also, most current retirees spend down their assets slowly, with many continuing to accumulate assets. If boomers behave the same way, a rapid and large sell off of financial assets appears unlikely. Other factors that may reduce the odds of a sharp and sudden drop in asset prices include the increase in life expectancy that will spread asset sales over a longer period and the expectation of many boomers to work past traditional retirement ages.

    A wide range of academic studies have predicted that the boomers’ retirement will have a small negative effect, if any, on rates of return on assets. Similarly, financial industry representatives did not expect the boomers’ retirement to have a big impact on the financial markets, in part because of the globalization of the markets. Our statistical analysis shows that macroeconomic and financial factors, such as dividends and industrial production, explained much more of the variation in stock returns from 1948 to 2004 than did shifts in the US population’s age structure, suggesting that demographics may have a small effect on stock returns relative to the broader economy.

    While the boomers’ retirement is not likely to cause a sharp and sudden decline in asset prices, the retirement security of boomers and others will likely depend more on individual savings and returns on such savings. This is due, in part, to the decline in traditional pensions that provide guaranteed retirement income and the rise in account-based defined contribution plans. Also, fiscal uncertainties surrounding Social Security and rising health care costs will ultimately place more personal responsibility for retirement saving on individuals. Given the need for individuals to save and manage their savings, financial literacy will play an important role in helping boomers and future generations achieve a secure retirement.

    The entire report may be read online.

    Health and Job Loss for Those Over 50

    Researchers from the Department of Epidemiology and Public Health at Yale University School of Medicine studied the effect of recurrent involuntary job loss on the depressive symptoms of older US workers.

    Here is an abstract of what they found:

    The objective of this study was to assess whether recurrent involuntary job loss among US workers nearing retirement resulted in increasingly less severe changes in depressive symptoms with successive job losses.

    With data drawn from the US Health and Retirement Survey (HRS), we used repeated measures longitudinal analysis to investigate the effect of recurrent job loss on follow-up depressive symptoms, measured up to 2 years following job loss. Study participants include 617 individuals, aged 51-61 years at the 1992 study baseline, who had at least one job loss between 1990 and 2000. Our primary outcome variable was a continuous measure of depressive symptoms, constructed from the 8-item Center for Epidemiologic Studies-Depression (CES-D) battery administered at every HRS wave. A second, dichotomous outcome, derived from the continuous measure, measured clinically relevant depressive symptoms. The exposure (recurrent job loss) was defined by binary dummy variables representing two and three/four job losses. All job losses were the result of either plant closing or layoff.

    Our main finding indicates that, after relevant covariates are controlled, compared to one job loss, two job losses result in a modest increase in the level depressive symptoms (not significant) at two-year follow-up. Three or more job losses result, on average, in a decline in depressive symptoms to a level near pre-displacement assessment (not significant). Somewhat in contrast, two job losses were found to be associated with increased risk of clinically relevant depressive symptoms.

    The principal finding confirms our hypothesis that, among US workers nearing retirement, repeated exposure to job separation results in diminished effects on mental health. Adaptation to the job loss stressor may underlie the observed response, although other explanations, including macroeconomic developments, are possible.

    A newsletter published by the Association of Schools of Public Health about the study includes some additional facts from the study:

    "Involuntary job loss near retirement more than doubles the risk of heart attack and stroke, researchers at the Yale School of Public Health (YSPH) report in a national study published in Occupational and Environmental Medicine."

    The researchers used 10 years of data from the nationally representative Health and Retirement Survey in their research. Starting with a sample of employed individuals, they identified 582 workers who were either laid off or left jobless because of a business closing. The study compared their risk of heart attack and stroke to a group that included 3,719 workers who remained employed. In considering the effect of job loss, the researchers also took into account other risk factors such as smoking, high blood pressure, obesity and depressive symptoms.

    "Job loss is associated with a range of stressful outcomes, including loss of pay and non-wage benefits, limited access to medical care, and severance of identification and work-based social support," said Dr. [William T.] Gallo. "Older individuals could be at increased risk for stress after being let go from work. We know that workers over 50 may have difficulty finding new positions, which frequently offer lower compensation than the pre-separation job did. This can obviously affect their later pension amount."

    Dr. Gallo said that physicians who treat individuals who lose jobs as they approach retirement should consider the loss of employment a credible risk factor for adverse vascular health changes. Similarly, policy makers should also be aware of the risks of job loss, so that intervention programs can be implemented to ease the multiple burdens of unemployment.

    Co-author Dr. Elizabeth Bradley, associate professor of public health in HPA said, "We do a lot of downsizing in our country and older individuals are often affected. We need to recognize not only the economic consequences, but also the health consequences."

    Coin, Conscience and Cartoons

    The Baker Library of the Harvard Business School has made available online selections from an 1986 exhibition catalog:

    "In 1986, Baker Library issued an exhibition catalog titled Coin and Conscience: Popular Views of Money, Credit and Speculation: Sixteenth through Nineteenth Centuries. Catalog of an Exhibition of Prints from the Arnold and S. Bleichroeder Collection, Kress Library of Business and Economics, written by Ruth Rogers, then curator of the Kress Library at Baker Library. The images selected by Ms. Rogers for inclusion in the catalog represent the major thematic divisions of the Bleichroeder Collection, while also displaying its geographic and stylistic diversity. The publication provides introductory text, detailed descriptive information about seventy prints from the collection, an artist index, and a bibliography for further study.

    "New technology has made it possible to now bring the content of this popular publication to the Web, with the added benefit of digital access to all seventy items described in the catalog.

    "There are over one thousand woodcuts, engravings, etchings, and lithographs in the Bleichroeder Collection. It has been divided into the following general categories: views of stock exchanges, banks, mints, and treasuries; portraits of bankers, statesmen, and financiers; political and personal satires; national finance and taxation; images of money lenders, avarice, corruption, poverty, charity, and anti-Semitism; and a large number of prints on speculation and credit. Although many prominent artists are represented in the collection — Breughel, Goltzius, Rembrandt, Hogarth, and Gillray, to name a few — its subject orientation offers a unique dimension to researchers, who would otherwise have access to print catalogs only by artist or school. For social and economic historians, these prints communicate a sense of popular attitudes with an intensity that the printed word lacks.

    "From such treasures, seventy prints were selected. They represent the major thematic divisions of the collection, while also displaying geographic and stylistic diversity.

    "The early allegories and emblematic prints on the pursuit of riches are visually the most complex. They are mainly by Dutch and Flemish artists, since Amsterdam and Antwerp were then the leading centers of northern European finance and commerce. As the cities prospered, individuals increasingly turned to new and profitable trades, or became middlemen for the growing number of foreign merchants and financiers who came there to transact business. Money had to be loaned at interest to meet the credit demands of international trade. To secure these loans, various negotiable instruments were created, such as promissory notes and bonds."

    Other historical collections at the Baker include the cartoon library from the Wall Street Journal from the 1950s through the end of the last century and into the 2000s. The collection is aptly titled, The Funny Side of the Street. More than 200 cartoons were donated "to the library by Charles Preston. Mr. Preston is the founder and editor of the cartoon feature in The Wall Street Journal, which has appeared in the paper under the heading 'Pepper...and Salt' since June 6, 1950."

    " ' Pepper ... and Salt' is unique among newspaper cartoons in that it isn't drawn by one cartoonist. Charles Preston receives about 1,000 submissions a week for three available slots, though a stable of thirty or so provides the lion's share of the cartoons.

    "But he has always welcomed submissions from amateurs. Over the years, he has published cartoons by, among others, a dermatologist from Texas, a dentist from Brooklyn and a judge from Kansas. Some of the country's most famous cartoonists —including Mort Walker, Chon Day, Lee Lorenz and Mike Twohy — have also appeared [in the WSJ].

    We can all use some financial humor now and then, can't we?

    Keeping Track of Class Action Suits

    We usually receive one of those class action lawsuit letters during a year and then either misplace them, fail to fill them out or just lose interest. This site should be helpful in keeping those suits we might have an interest in more clearly in sight.

    Securities Class Action Clearinghouse ( The Securities Class Action Clearinghouse provides detailed information relating to the prosecution, defense, and settlement of federal class action securities fraud litigation. The Clearinghouse maintains an Index of Filings of 2379 issuers that have been named in federal class action securities fraud lawsuits since passage of the Private Securities Litigation Reform Act of 1995. The Clearinghouse also contains copies of more than 13,600 complaints, briefs, filings, and other litigation-related materials filed in these cases.

    "The Stanford Clearinghouse offers investors, policymakers, scholars, judges, lawyers and the media a powerful research tool that provides a detailed look into the workings of federal securities fraud class action litigation."

    "By digitizing and linking the full text of complaints, motions, dockets, judicial opinions, and other major class action filings, together with summaries and analyses of those lawsuits into a single website with its own full-text search engine, the Stanford Clearinghouse offers information that is substantially more detailed and timely than can be found on other services, which generally limit their databases to judicial decisions. By accessing this site, each user can form his or her own opinion as to whether litigation is with or without merit, whether too few or too many companies are being sued, and whether recoveries are too small or too large."

    Links: Unclaimed Property

    Our daughter pointed out a little known link that relates to discovering unclaimed property. In many cases these are abandoned or not fully recovered monies in bank accounts.

    The National Association of Unclaimed Property Administrators "consists of state officials charged with the responsibility of collecting and reuniting lost owners with their unclaimed property."

    "This site was developed by state unclaimed property experts to assist you - free of charge - in your efforts to search for funds that may belong to you or your relatives." Select the Find Property link on the left side of the page.

    "If you have questions about unclaimed property, we invite you to go to the other sections of our site using the navigation links at the side and top of the page. Among the topics you can explore: what is unclaimed property, how it becomes abandoned, information about finders, and links to other useful websites."

    Indeed, we found $47 in an account my parents had in Florida. Not a fortune, to be sure, but we are aware that in many instances, there are literally thousands of dollars that are waiting for individuals, non-profits and companies.

    Here is the link:

    In the case of my parents, the monies were discovered at the state of Florida's site, In order to reclaim the monies we will have to produce court orders, death certificates or other documents to verify we were the executrix of my parent's estates. Other documents would have to be submitted depending on whether the account was opened by you or another relative.


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