Bob Carlson

March 27, 2015

Projecting Lifetime Medical Costs

Filed under: Health,Medical Insurance — Bob @ 5:16 pm

Be sure you’re sitting down when you read this. HealthView Insights, a provider of medical care data, prepared an estimate of retirement medical expenses for some model couples. It says it reviewed a large amount of data, especially actual cost data from 50 million health care cases to derive the numbers. Here’s the bottom line:

The average lifetime retirement health care premium costs for a 65-year-old healthy couple retiring this year and covered by Medicare Parts B, D, and a supplemental insurance policy will be $266,589. (It is assumed in this report that Medicare subscribers paid Medicare taxes while employed, and therefore will not be responsible for Medicare Part A premiums.) If we were to include the couple’s total health care (dental, vision, co-pays, and all out-of-pockets), their costs would rise to $394,954. For a 55-year-old couple retiring in 10 years, total lifetime health care costs would be $463,849.

10 Things About Longer Retirements

Filed under: Retirement - General — Bob @ 12:20 pm

BlackRock published an interesting graphic of 10 things you should know about living longer in retirement. It makes some interesting points, such as that people who had their kids late might be collecting Social Security when their kids are younger than 18, and that could make the kids eligible to receive Social Security benefits as well.

Fixing DNA

Filed under: Health — Bob @ 8:20 am

Apparently scientists believe they are close to finishing development of techniques that can change human DNA to prevent diseases and perhaps make other changes. It’s known as gene editing. You can find an overview of it here and some interesting discussion here and here. There are quite a few ethical and legal issues that haven’t even been considered as yet, but scientists apparently believe the techniques are almost ready to use.

A scientific stampede commenced, and in just the past two years, researchers have performed hundreds of experiments on CRISPR. Their results hint that the technique may fundamentally change both medicine and agriculture.

Some scientists have repaired defective DNA in mice, for example, curing them of genetic disorders. Plant scientists have used CRISPR to edit genes in crops, raising hopes that they can engineer a better food supply. Some researchers are trying to rewrite the genomes of elephants, with the ultimate goal of re-creating a woolly mammoth. Writing last year in the journal Reproductive Biology and Endocrinology, Motoko Araki and Tetsuya Ishii of Hokkaido University in Japan predicted that doctors will be able to use CRISPR to alter the genes of human embryos “in the immediate future.”

March 26, 2015

Profitless Profits

Filed under: Economy,Investing — Bob @ 5:20 pm

Share buybacks by publicly-held companies are all the rage, but are they a good idea? The Harvard Business Review published an article highly critical of share buybacks in 2014 and recently named it the publication’s article of the year. You can find a summary of the article with a link to the original here.

Lazonick’s article explained with quantitative detail why buybacks are an economic, social and moral disaster.

The article revealed for instance that share buybacks weren’t done for the most part when stock prices were low: astonishingly, most of the big purchases came when the stock price was high. Why? “Because stock-based instruments make up the majority of executives’ pay, and buybacks drive up short-term stock prices.” These firms are engaged, the article said, in “what is effectively stock-price manipulation.” In September 2014, The Economist called them the “corporate cocaine.”

The Stall in the Stock Market

Filed under: Investing — Bob @ 1:36 pm

Investors have been wondering when the U.S. stock indexes finally will have a correction. It hasn’t happened yet, but stocks have stalled recently after hitting new highs in February. By one measure, stocks have had their worst streak since 1994. Despite all the bad market periods since then, the recent period has been the longest streak market indexes have gone without post at least two consecutive days of gains.

Wednesday’s losses, the worst for the Nasdaq since April, were spurred by selloffs in semiconductor and biotechnology companies. The Philadelphia Stock Exchange Semiconductor Index dropped 4.6 percent, the most since October amid decreases of more than 2.9 percent in Nvidia Corp., Micron Technology Inc., Broadcom Corp. and Intel Corp.

The first quarter’s best performing stocks are the ones falling the most now. Biogen Inc. and First Solar Inc., which surged more than 35 percent in 2015 through last Friday’s trading, slipped more than 3.8 percent. The iShares Nasdaq Biotechnology ETF, which increased 21 percent year-to-date through Friday, fell 4.1 percent.

Changes Proposed in Veterans’ Aid & Attendance

Filed under: Long-Term Care — Bob @ 8:15 am

The Aid & Attendance benefit is a long-term care benefit for veterans and their surviving spouses. Like Medicaid, it requires you to largely spend down or give away your assets before the care is needed. The Veterans’ Administration proposed new rules recently that would further restrict the benefit in much the same way that Medicaid rules for long-term care were tightened a few years ago. Details are described here.

The proposed rules on “Net Worth, Asset Transfers, and Income Exclusions For Needs-Based Benefits” would establish a new combined net worth and income limit of $ 119,220, impose a 36-month look-back period on asset transfers (like Medicaid’s Congressionally-mandated five-year look-back period), and a penalty period of up to 10 years related to gifts. There’s a new tougher definition of medical expenses deductible from income, and a proposed IRS matching program.

The new gifting rules and penalties for making gifts (all gifts in the look-back period are presumed to have been made to qualify for benefits) are strict. There’s no allowance to give away money to your church, or say for a wedding gift to a grandchild. For a veteran who gave away $50,000, he would get a 28-month penalty. That is, he wouldn’t qualify for benefits for 28 months. A widow would be penalized for 44 months.

March 25, 2015

Worries Over Vanguard

Filed under: Asset Allocation,Investing — Bob @ 5:20 pm

The fund indexing giant Vanguard is raising concerns. I’ve heard people express the concerns in the past, but only in the context of something to worry about far in the future, maybe even for the next generation or so. But the steady flow of funds from active management to indexing, and to Vanguard in particular, has brought the worries to the front. Here’s one article from Forbes discussing the issue, and another from Morningstar. Other people aren’t worried and in fact believe that having so much money in index funds will make active investing easier for those who practice it.

Now, says Grant, the masses may be taking their love affair with passive investing too far. They are thereby creating opportunities for active managers to find mispriced securities, beat the market and make both themselves and their clients rich.

Balderdash, answers Bogle, who remains, 40 years after Vanguard’s founding, the world’s most passionate crusader for passive investing. Indexed funds, he says, can be kept up with minute portfolio adjustments, so they reduce not just management fees but the drag of bid/ask spreads, trading commissions and taxes.

Inflation Warning?

Filed under: Economy — Bob @ 12:20 pm

It’s possible that the U.S. no longer has to worry about deflation and in the next year or two the Fed might be more concerned about damping down inflation. Those are reasonable conclusions from recent inflation reports. It’s also important, because in the Fed’s latest statement it said that it probably won’t raise interest rates until is confident inflation will move above 2%. Here is one report and here is another arguing that we’ve turned the corner on inflation and it should be a worry again.

There are other factors to consider before worrying too much about inflation. The effects of the oil price (and general commodity) declines are still working through the system. There also are global factors and the strong dollar that put downward pressure on prices. Most important is the low wage growth in the U.S. The major driver of U.S. price inflation right now are rents and how they influence the CPI. They distort the final number and in the current environment make inflation appear higher than it really is.

There have been scattered signs that inflation has bottomed out elsewhere, as well. In the eurozone, the 12-month inflation rate rose from minus 0.6% in January to minus 0.3% in February, while core inflation ticked up ever so slightly to 0.7% from 0.6%. (Britain is an exception: both headline and core inflation came in lower than expected in February.) Anecdotal evidence is also piling up. As my colleague Josh Zumbrun has noted, the Billion Prices Project at the Massachusetts Institute of Technology, which skims the Internet every day for up to date pricing information, is signaling a turn.

To be sure, these are tentative signs. Still, they are consistent with some of the fundamentals as well.

What Are You Talking About?

Filed under: Retirement - General — Bob @ 8:20 am

More and more I seem to be listening to people who are talking quite authoritatively but really don’t know what they’re talking about. This is a natural human phenomenon. Most people are overconfident in their knowledge and abilities. It’s also what makes so many people poor investors. We all need to recognize the potential for this trait, adopt some humility, and carefully check facts before acting or speaking. Here are some interesting details.

“Whenever we’re talking to other people, we just have to assume that whatever they’re asking us is reasonable — because what if we questioned everything that was asked of us? That would make conversation very hard,” Dunning says. “But the other thing that we’re finding is that people don’t necessarily exactly know what they know versus what they don’t know; they infer what they know versus what they don’t know from, let’s say, pre-existing notions they have about themselves.”

In other words, if someone thinks they’re a news junkie, they’re much more likely to think the things they’re saying about people in the news are true. Fancy yourself a politico? You’ll probably say you’ve heard of senators that don’t exist.

March 24, 2015

Myopia and Its Surprising Potential Cause

Filed under: Health — Bob @ 5:19 pm

Myopia, or poor distance vision, is becoming prevalent around the world. Some eye doctors are saying that it is the equivalent of an epidemic around the world. For many years, the need for corrective lenses to improve distance vision was blamed on reading and similar work. But that theory hasn’t held up, and this article explains why a surprising new theory is blamed for myopia.

Researchers have consistently documented a strong association between measures of education and the prevalence of myopia. In the 1990s, for example, they found that teenage boys in Israel who attended schools known as Yeshivas (where they spent their days studying religious texts) had much higher rates of myopia than did students who spent less time at their books4. On a biological level, it seemed plausible that sustained close work could alter growth of the eyeball as it tries to accommodate the incoming light and focus close-up images squarely on the retina.

Attractive though the idea was, it did not hold up. In the early 2000s, when researchers started to look at specific behaviours, such as books read per week or hours spent reading or using a computer, none seemed to be a major contributor to myopia risk5. But another factor did. In 2007, Donald Mutti and his colleagues at the Ohio State University College of Optometry in Columbus reported the results of a study that tracked more than 500 eight- and nine-year-olds in California who started out with healthy vision6. The team examined how the children spent their days, and “sort of as an afterthought at the time, we asked about sports and outdoorsy stuff”, says Mutti.

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