Monthly Archives: May 2010

Does Staying Healthy Reduce Your Lifetime Health Care Costs?"

Medical and long-term care costs represent a substantial uninsured risk for most retired households. A recent brief from the Center for Retirement Research at Boston College reported new findings on average lifetime health care costs at selected ages and on the distribution of those costs. This brief explores the relationship between health care costs and health status. It considers whether current good health is a predictor of low health care costs over one’s remaining lifetime. If so, healthy households could set aside less for health care expenditures than the unhealthy, and households that stay healthy could release for general consumption money that they had previously set aside for health care costs.

Their main finding is that although the current health care costs of healthy retirees are lower than those of the unhealthy, the healthy actually face higher total health care costs over their remaining lifetime. To illustrate, the expected present value of lifetime health care costs for a couple turning 65 in 2009 in which one or both spouses suffer from a chronic disease is $220,000, including insurance premiums and the cost of nursing home care, and 5 percent can expect to spend more than $465,000. The comparable numbers for couples free of chronic disease are substantially higher, at $260,000 and $570,000, respectively. This brief explains this somewhat counterintuitive finding.

For full brief

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It’s probably not good to be European right now

We know that often a picture is worth a thousand words and  folks in the US wonder why the Greek sovereign debt is a big deal. Well look at this graphic from an article in the NY Times and see how much of each of the PIIG country debt is owed to whom.

Japanese Yen

The yen is the zero-yielding currency of a country whose demography is the worst in human history. Its population is set to fall by 50% by 2050— the equivalent of two waves of Black Death in slow motion. By 2100, the whole nation will resemble its Cabinets—average age over 65. This could, in theory, be a time of bliss and harmony, because Japanese have traditionally venerated the aged, who are assumed to be wise. However, it will not be an economy that could service today’s level of debts, let alone the stratospheric heights of the future. Soon the birth rate will be exceeded by the berth rate for desirable storage slots of ancestral ashes. Anyone with a yen for long-term Japanese bonds?
from Don Coxe
THE COXE STRATEGY JOURNAL
A Slow Boat to China

Investment Update #2 Regarding Recent Market Volatility

The past few weeks have been challenging for market participants, as uncertainty has led to high market volatility and increasing investor anxiety. Doubts have grown about the ability of the Greek government to pay its debts, and fears of contagion to other debt-laden countries in peripheral Europe have escalated as well. To add further fuel to the fire, the Dow Jones Industrial Average plunged nearly 1,000 points intra-day on May 6 before recovering significantly, ending the day down just over 300 points. This drop was significant, but it appears the 1,000-point intra-day sell-off may be linked to a single trading error or issues with automated trading systems.
The commentary provides an update on recent market volatility.

Update on Greek Sovereign Debt Crisis

Update on Greek Sovereign Debt Crisis
May 7, 2010
In the past few weeks, concerns about whether or not Greece will default on payments related to its sovereign debt have reached a fever pitch. Jittery markets were further racked by the chaos that occurred yesterday afternoon.

The Dow Jones Industrial Average plunged nearly 1,000 points before recovering significantly, ending the day down just over 300 points. While a 300-point drop is significant, the massive 1,000-point intra-day sell off is thought to be linked in large part to a singular trading error.

Although the euro-zone nations and the International Monetary Fund have pledged significant aid, investors are increasingly worried that other nations with significant debt burdens versus gross domestic product could soon face similar troubles.

The following commentary link provides an update on the likely effects on the Greek sovereign debt crisis.
An Update on the Greek Sovereign Debt Crisis: Putting the “Jitters” in Context

The Return of Fear

We all know a picture is worth a thousand words and  most people never heard of the VIX until about two years ago.
The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. Since its introduction in 1993, VIX has been considered by many to be the world’s premier barometer of investor sentiment and market volatility.

Todays market (Thursday May 6th 2010)  “cliff event” is clear in the CBOE’s VIX index chart to the left:
 

To see the volatility in context look at this 5 year chart to the left.