Bob Carlson

October 5, 2015

The Latest on Statins

Filed under: Health — Bob @ 5:20 pm

Statins to reduce cholesterol probably are the most-prescribed drug in the U.S., but some people have side effects and others don’t want to take them. This article describes a test in addition to basic cholesterol tests that can tell if you really need a statin or if you might want to take more aggressive moves to prevent heart disease.

If the recommendation about taking statins is based on figuring out your risks, then assessing your risk takes on great importance. People with higher risk benefit more from statins. People at low risk of a heart attack or stroke have less to gain.

In our study, published this afternoon in the Journal of the American College of Cardiology, we wondered if a simple test that determines the presence of calcium in the arteries of your heart might be helpful in figuring out patients’ risk. This test is commonly used to detect calcium in the coronary arteries, letting the patient know that they have hardening of the arteries in their heart.

The Only Mortgage Banker to be Punished

Filed under: Financial crisis — Bob @ 12:20 pm

None of the bankers behind the mortgage and housing crisis faced criminal charges, and only a few faced civil suits from the government. Most of those suits were settled. This articles updates the story of the only mortgage banker to be sued by the government and found liable at trial. She owes a $1 million fine to the government. She’s appealing her case now.

While jurors pinned liability on Mairone and her employer, Countrywide acquirer Bank of America Corp., they, too, questioned why she was the only individual named in U.S. Attorney Preet Bharara’s complaint. Angelo Mozilo, Countrywide’s chief executive officer, settled out of court despite billions in mortgage-related losses. And Mairone’s supervisor, subprime-mortgage unit CEO Greg Lumsden, wasn’t sued.

“Rebecca was part of a group of mid-level and senior managers that made every decision together,” Lumsden said in an interview. “There’d be no value created for anyone there to do anything that wasn’t ethical or right.”

Tips on Making Wealth Last Generations

Filed under: Estate Planning,Helping Grandkids — Bob @ 8:11 am

Not long ago, wealthy people didn’t do much to introduce their offspring to money and how to manage it. That resulted in a lot of problems for both the children and the wealth. This article explains steps many of today’s wealthy are taking today to try to ensure their children do better with money and that the family wealth lasts longer than it has for previous generous. At the top of the list is having their financial advisors teach the kids about money.

This is the most gilded age since the Gilded Age, with 5 percent of American households controlling 63 percent of the country’s wealth. Decades of stagnant income growth for the middle class contrasts with family dynasties such as the Waltons of Wal-Mart, wealthier than the poorest 40 percent of households combined. Some $59 trillion—the largest intergenerational transfer of wealth in U.S. history—will flow down from estates through 2061, according to Boston College’s Center on Wealth and Philanthropy.

None of that’s made the rich any less anxious, at least when it comes to keeping their money. The number of family offices for the ultrawealthy has doubled since 1998, branching into areas far beyond portfolio and tax planning. The advisory firms reach deep into their clients’ family lives, aiming to prevent squabbles among heirs and head off early signs of wastrelism.

October 2, 2015

Cash Is King

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

When other assets are losing value, cash is the best investment and big winner. That’s happening so far in 2015. Don’t bet it will last long. Central banks don’t like the situations, because the economy doesn’t do well when people decide the only thing to invest in is cash. They want to see most assets have returns higher than cash. This post has a brief discussion and shows how few times cash is the top performer for a calendar year. Drop out the disastrous economy from 1966-1982 and it hardly ever happens. On the other hand, perhaps we’re in a similar period and cash will outperform other assets more often than usual.

Many of those years involved much higher interest rates, thus higher yields on both cash and bonds, especially in the 1970s and early-1980s. It’s a little different this time around because interest rates are so low. The true outliers are when both stocks and bonds are negative during the same year, something that’s only happened on three separate occasions during this time frame. With low rates it’s certainly a possibility this year.

Challenges Investors Face

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

It’s been difficult to invest well the last few years. Central banks have been the greatest force, manipulating and misleading markets. The always-interesting Ben Hunt has an essay on the challenges to investors in this environment. He makes several good points in the essay, and it is worth wading through. Here’s one of the key points:

The biggest challenge of our investing lives is not finding ways to process more information, or even finding ways to process information more effectively. Our biggest challenge is finding the courage to focus on what matters, to admit that more or quicker information will not help our investment decisions, to recognize that our investment discipline suffers mightily at the hands of the impediment of dullness. Because let’s be honest… the Golden Age of the Central Banker is a really, really dull time for a stock-picking investor. I’m not saying that the markets themselves are dull or that market price action is boring. On the contrary, this joint is jumping. I’m saying that stock pickers are being dealt one dull, low conviction hand after another by global Central Banks, even though they’re forced to sit inside a glitzy casino with lots of lights and sounds and exciting gambling action happening all around them. We have little edge in a Reg-FD public market. We have at best unknowable odds and at worst a negatively skewed risk/reward asymmetry in a market where policy shocks abound. And yet we find ways to convince ourselves that we have both edge and odds, making the same concentrated equity bets we made back in happier times when idiosyncratic company fundamentals and catalysts were actually attached to a company’s stock price. Builders build. Drillers drill. Stock pickers pick stocks. We can’t help ourselves, even if the deck is stacked against us here in the only game in town.

Embrace the Fear

Filed under: Asset Allocation,Investing — Bob @ 8:22 am

Fear in the markets has increased after a long period of complacency. This post argues that is a good thing and investors should view it as an opportunity that will increase their returns. Fearful, bearish investors often lead to above average returns.

For the better part of the past year and a half, greed has been the dominant emotional state amongst investors. The “wall of worry” that had persisted throughout the early years of the bull market was torn down. In its place: greed and the strongest emotion of all, the fear of missing out.

As I wrote last December, investors had gone “all-in” on U.S. equities and were exceedingly optimistic about future returns. In the past, this has led to below average future returns which is indeed what we have seen through the first nine months of 2015.

October 1, 2015

Housing Price Updates

Filed under: Housing — Bob @ 5:20 pm

Here’s a good review of the state of the residential real estate market. It has the advantage of using measures that tell you a lot more than simply the recent changes in prices or sales. It looks at the price-to-rent ratio and the inflation-adjusted home prices. It’s a good perspective, because we’re about 10 years after the peak of home prices in most areas of the country. By most of these measures, prices are back to about where they were in 2003 or so. Even so, one Fed bank president says recent price action is making him worry about bubbles and imbalances. An important point is that after strong rises in 2013 and into 2014, increases in home prices have slowed.

Case-Shiller, CoreLogic and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $276,000 today adjusted for inflation (38%).  That is why the second graph below is important – this shows ”real” prices (adjusted for inflation).

It has been almost ten years since the bubble peak.  In the Case-Shiller release this morning, the National Index was reported as being 7.0% below the bubble peak.   However, in real terms, the National index is still about 21% below the bubble peak.

Convincing Kids to Eat Vegetables–Works for Adults, too

Filed under: Health — Bob @ 12:20 pm

Academics study how to reduce waste of school lunches and also how to convince kids to eat healthier meals. They believe they stumbled onto a strategy that works. It’s not all that novel, and it will work for adults, too, who want to eat healthier. The key tip is to limit or eliminate the unhealthy things available to eat. Kids eat more healthy vegetables when they aren’t paired on the plate with things that aren’t healthy but that they find tasty.

The notion that food pairings can significantly affect the attractiveness of certain foods isn’t new. Traci Mann, who teaches psychology at the University of Minnesota and has been studying eating habits, self-control and dieting for more than 20 years, believes that it can, in fact, be crucial. One of the simplest ways to eat better is to make it easier to eat better. That involves a strategy Mann calls “get alone with a vegetable,” which is similar in that it shows how important context can be. She described the strategy earlier this year:

Normally, vegetables will lose the competition that they’re in — the competition with all the other delicious food on your plate. Vegetables might not lose that battle for everyone, but they do for most of us.

This strategy puts vegetables in a competition they can win, by pitting vegetables against no food at all. To do that, you just eat your vegetable first, before any of the other food is there. Eat them before other food is on your plate, or even at your table. And that way, you get them when you’re hungriest and unable to pick something else instead.

Growing the Family Business

Filed under: Estate Planning — Bob @ 8:20 am

Forbes has a good profile of Cox Enterprises, the large, family-owned cable and communications company. The article explains how Cox was able to grow over the last few decades while other family-owned media companies struggled. While the success can be attributed to specific business moves, the moves were the result of applying time-honored principles and a philosophy that began with the company’s founder.

The problem lay in the Cox governing principles: business conducted with modesty, soft-spoken conservatism and a humble acknowledgment of limits. “You can’t get a swelled head,” Kennedy says. The edict apparently applies to statues, too. The offending sculpture will be removed.

Kennedy, currently the company’s chairman, has long chosen to exemplify this down-home thinking himself–in small ways (he drives a Prius) and in larger ones (he almost never talks to the media, FORBES being his first interview in over a decade). He is nearly invisible to outsiders, especially after a recent cancer battle. “Create noise, and then it’s a good time for people to take shots at you,” says Kennedy, 67, raspy-voiced. “We’ve purposely kept a very guarded shell around us. I think it’s served us well.”

September 30, 2015

The Money Game

Filed under: Investing — Bob @ 5:32 pm

One of the better investments published on investments, money, and markets was The Money Game by “Adam Smith”, a pseudonymous author. It was detailed, funny, and had lots of good insights. It’s been out of print for a while. This post reproduces some highlights from the book.

“Under the loose and unregarded law of this country a stock company can, and often does, no doubt, sell bonds and pay a dividend that never has been and never will be earned. The purpose is, of course, apparent. But the poor, heedless little lamb, for whom the snare was laid, counts it ‘a dividend-paying stock,’ and, to the extent of his hard-earned and limited means, buys it, simply because it seems cheap.”

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