He introduced ethanol which is a boondoggle driving up food costs (40% of the corn crop is used to make ethanol) that mainly benefits farmers and ethanol producers. He appointed two conservative judges, who in a 5-4 decision (Citizen vs. United), give the nod to unlimited SuperPAC political donations. Bloomberg just reported that 70% of Romney supporting money available is from SuperPACs (vs. Obama at 14%) so if Romney wins, expect those donors to come hat in hand for favors.

His appointees like Alan Greenspan, head of the Federal Reserve, failed to see the housing and banking problems that created the worst recession since the Great Depression. When he left office, the U.S. was losing 800,000 jobs a month.

Clinton left him with a 4 year string of surpluses and he had deficits every year of his 8 years (not counting his first year in office in which the budget was passed the prior year under Clinton).

by Jeffery Sterner

The Foreclosure Complaint

If you are facing foreclosure because you haven’t been able to keep up with your mortgage payments, you should pursue a mortgage modification. At the start of the foreclosure process, the plaintiff, who is the lender or bank, files a lawsuit against you, the defendant, for failing to meet the terms of your mortgage agreement.

The purpose of the lawsuit, often called a “Foreclosure Complaint,” is for the defendant to be cut off from any interests in the property and for the title to be returned to the plaintiff. The property is sold at a public auction and the lender must be remitted of all costs involved.

When you are going through a foreclosure, you are given a notice or a summons of the Foreclosure Complaint by a sheriff or law enforcement office. This notice provides you with a period of time to either respond or reinstate your mortgage. The time period may vary from 30 to 90 days depending on the state.

Pursuing A Loan Modification

If you are in financial difficulty and cannot afford to make any payments, you should pursue a loan or mortgage modification with the lender. This is an agreement between you and the lender to change the original terms of the loan so that you may be able to afford payments and remain in the property.

In order to get a loan modification, you must be able to demonstrate that you can make payments with proper paper work, including IRS statements of your income, and that you are embarked on a realistic plan to get out of debt.

At this time, you should consider getting an experienced attorney or counselor to represent you. The advantage is that he or she will know all the foreclosure procedures involved for your state. Many attorneys require half a fee to be paid upfront and the other half paid once the foreclosure is favorably resolved.

You must be careful not to become involved with a scam artist who charges a large upfront fee for a mortgage modification. Check references on the attorney if you should hire one. The entire fee should not be more than one mortgage payment.

Your bank may be willing to work with you and modify your loan. In some cases, an adjustable rate mortgage may be changed into a fixed-rate loan with a lower interest rate but extended over a longer period.

Federal Program

The Home Affordable Modification Program was established under the Obama administration to help distressed homeowners avoid foreclosure. HAMP provides incentives to banks to modify loans of homeowners who cannot pay their mortgages. Homeowners must be able to demonstrate that they have sufficient income to make payments, under a modified plan.

The qualifications include that you have missed at least two or more mortgage payments; your mortgage is more than 31 percent of your income or you have had a financial hardship that has caused you to lose income.

Changes to HAMP now allow those whose mortgages are less than the 31 percent rule to be considered for mortgage modifications if they have significant debt outside of the mortgage. Those owning rental properties and are facing foreclosure may also qualify for HAMP.

Lenders and banks are not obligated to modify homeowner loans, nor are they obligated to use HAMP. You can and should call HUD and ask for advice from an approved counselor. Make sure you keep all paper work showing you are working on debt relief.

Jeffery Sterner writes and blogs about personal financial well-being and issues that influence it for Debt.org, America’s Debt Help Organization.

Picking the right financial advisor for your needs is one of the most important decisions you can make for your financial well-being. Finding the right advisor can be very tricky because you are forced to navigate hidden fees, potential conflicts of interest and industry jargon. Before picking an advisor there are several things to consider. You should know what you want to achieve before tackling the task of finding the right one. You should also consider what kind of help you require. Someone with modest means and straightforward financial goals will not require the degree of help required by someone with large financial assets and complex planning needs. Among the various types of paid advisors there are those who can help with budget planning and creating an overall financial plan, while others are suited to making investment recommendations. There are advisors who can handle both of these types of financial advice.

Plan on interviewing several candidates and check out their qualifications at the Financial Industry Regulatory Authority database. Another option is to check the public disclosure site provided by the Security and Exchange Commission. Another good option is to ask friends and family for their recommendations, but never put your trust in an advisor simply on that basis. Credentials are important but do not always indicate the competence of the advisor. There are a myriad of credentials floating around that many advisors use to impress their clients. The only credentials that really matter are the ones that designate the planners as a Certified Financial Analyst or Certified Financial Planner. These designations are only given to advisors who have passed stringent tests.

Pay attention to the fee structure charged by the advisor. Make sure to ask advisors what kind of compensation they receive. Many advisors and brokers sell products that are commission based and this fact will tend to color their advice. If using this type of pay structure be sure to ask the advisor to sign a document that requires them to accept fiduciary duty for your account. Doing this puts them under legal duty to place your interests before theirs. A better option is to choose a financial planner that charges flat fees for services rendered. Some advisors are paid hourly, while others are paid on a percentage of your assets. It is still important to make sure that there are no hidden charges and the only fees they take are actually from you. Anyone interested in more financial information may wish to visit simplyfinance.co.uk and see what they have to offer.

Taxes are often considered a necessary evil. The topic evokes strong emotions. How we perceive taxes and how we feel about paying them are complex issues. For investors, two significant situations to avoid when it comes to taxes are:

• Focusing solely on how much of an investment gain could be lost to taxes
• Worrying so much about taxes that it adversely affects decision making

Eating Up Gains

Many (if not most) investors focus on the pretax value of their investments, even though they can only spend after-tax dollars. To see why this is so important, consider the 1993 study done by two Stanford University economics professors. They examined 62 stock mutual funds before and after taxes for the period 1963–1992. They found that each dollar invested would have grown to $21.89 in a tax-deferred account, but only $9.87 in a taxable account (for high-income investors).

Many fund companies offer tax-managed counterparts, which strive both to minimize fund distributions and to maximize the percentage of distributions that will be in the form of long-term capital gains (which are currently taxed at lower rates than short-term gains or ordinary income).

Avoiding Taxes, Creating Other Problems

Such tax issues may leave some investors saying, “I’ll just avoid paying taxes at all costs.” However, avoiding tax bills could end up being a bad decision. For this, let’s look at a hypothetical example.

In August 2004, an investor bought 200 shares of Google at $100 per share. This $20,000 investment was 5 percent of his total portfolio of $400,000, which was split evenly between stocks and bonds (meaning $200,000 in each). The stock skyrocketed, as Google crossed $700 about three years later. His stake in Google, now worth $140,000, represented about 25 percent of his portfolio, which had grown to $600,000. This also meant his stock allocation had jumped from 50 percent to 70 percent.

While seeing such an increase in the portfolio was a welcome sight, it also meant the investor’s allocation had drifted far from where he started, meaning he was now taking on much more risk than before. However, rebalancing the portfolio would mean paying the tax bill on his appreciated shares. Assuming a federal and state tax rate of 20 percent, there would be $24,000 in taxes on the $120,000 gain. That bill was too much for the investor to swallow, so he decided against rebalancing.

By January 2009, Google fell to $300, leaving his investment sitting at $60,000. Had he sold at the peak, the investor would have had net cash of $116,000 (the stock’s $140,000 minus the $24,000 tax bill). Selling at $300 meant his tax bill dropped to just $8,000, leaving him with $52,000 net cash. He still saw a solid profit from his investment, but avoiding the $24,000 tax bill cost him $64,000.

Taxes are possibly the largest single expense that investors incur, even greater than management fees or commissions. Therefore, ignoring the impact of taxes is one of the biggest mistakes you can make.

However, it is also possible to become so concerned with taxes that you deviate from a prudent investment strategy to avoid the pain of paying them. You would be wise to remember that the only thing worse than having to pay taxes is not having to pay them.

Jeff Griswold, CPWA jeff@meritwealth.com

Bill Summers, CPA, CFP, MST bill@meritwealth.com

Clients & Investors hate uncertainty.

While most of us understand that only legends in their own mind have perfect clarity as to the future, when presented with conditions that create a heightened sense of uncertainty, investors, even many with well-designed plans that anticipate that crises and bear markets will occur with a high degree of frequency, react, letting their emotions and stomachs take over.  And stomachs don’t make good decisions.  Fear, and eventually panic, tends to set in.

Unfortunately, we cannot remove the uncertainty that may have your stomach rumbling. While it seems to be an all-too-human need to believe that there is someone who can protect us from bear markets, the evidence from academic research demonstrates that no such person exists.  All crystal balls are cloudy, including our own.  So, you won’t hear any predictions about markets from Merit Wealth Management.

Instead, the purpose of this email is to provide some perspective on what has been happening, and to prevent you from committing costly errors — failing to differentiate information from insights you can use to outperform the market and engaging in what I call “stage one-thinking.”

Let’s begin by acknowledging that we have a crisis with the potential to do significant financial damage. The focus of investors is now on Greece with it’s about $500 billion of debt outstanding, and an unsustainable debt-to-GDP ratio of over 160 percent and growing. Thus, the only questions up until yesterday are were when will Greece default,  how big the haircuts will be, will the process be orderly, and will it be contained to just Greece.  Even with the EU delivery hopeful news to the markets in the form of a bailout package yesterday, the Greek credit crisis looms large.  I have yet to learn how this new “deal” is not simply adding further leverage to an already debt laden economy.

The fear is that there will be a contagion that will spread to Portugal, Ireland, Spain and even Italy. To show how dangerous this potential situation is, it has been said that while Greece is perhaps too big to let fail, Italy is too big to save.  The market is very concerned that a default on Greek and other sovereign debt will lead to another Lehman Brothers-type crisis, resulting in not only a financial crisis, but a global recession like the one of 2008.  And while U.S. banks were forced to recapitalize during the 2008 crisis, European banks did not take such actions to shore up their balance sheets.  Thus, they are not in as good a shape as U.S. banks for handling defaults. (Note that U.S. banks have relatively little exposure to European sovereign debts.)

If, when, and how this situation gets resolved is what investors are concerned about. Investors know the great difficulty the U.S. faced in coming up with a solution to our crisis, which we eventually did — and we only have one government and two parties trying to reach agreement.  Europe has 27 governments and central banks that must agree before a solution can be implemented.  And different countries have different concerns, within countries different parties have different views, and European countries typically have more political parties they have to get to agree than we do.  The uncertainty created while they debate the situation is what is causing the market trouble.

Let’s return now to the mistake I mentioned earlier: Investors confusing information with insights that can be used to outperform the market.  The point I want to make is this.  The wrong way to think about all the bad news is to believe that prices must go lower. The right way to think about all the bad news is to understand that prices are where they are because of the bad news.  In other words, if the news was bad, but not quite so bad, prices would actually be higher. In addition, low current valuations mean that future expected (though not guaranteed) returns are high.

So before investors sell, they should ask themselves: “Does it make sense to buy when valuations are high because things look safe, and expected returns are low? And does it make sense to sell when things look dark and valuations are low and expected returns are high?”  That doesn’t seem very rational.  Yet, that is exactly the behavior of most investors.

Consider the following.

On March 9, 2009, the S&P 500 closed at 676. By the close of May 2, 2011, it had more than doubled to 1361. And that doesn’t count the return from dividends. How were investors reacting during the greatest bull market since the 1930s? They were withdrawing hundreds of billions of dollars from equity mutual funds. That is why it has been said that bear markets are the mechanism by which wealth is transferred from those without plans, or the discipline to stick to plans if they exist, to those with plans and the discipline to adhere to them. Those who stuck to their plans in 2008-2010, simply rebalancing, were able to buy at low prices, when expected returns were high, and then sell (at much higher prices) when markets had recovered, taking precious chips off the table.  In addition, the gains for some were so great that they were able to lower their equity allocation and still be likely to achieve their life and financial goals.

As was noted earlier, we don’t have a clear crystal ball as to the outcome of this or any other crisis.  It’s certainly possible that this could drag on for months without a solution, in which case risk premiums would likely expand, creating the potential for a repeat of 2008 in terms of the depths of a bear market.  It’s also possible that we could quickly get agreement on a broad solution, including recapitalizing the banks.  That would restore confidence, risk premiums would likely contract sharply, and all the losses could be quickly erased.  There is simply no way to know what scenario will play out.

I would now like you to consider the following situation: You have back pain. You visit two doctors. Each reviews the MRI. The first states that she’s seen many similar cases and that it’s hard to say exactly what is wrong, as it’s hard to predict what will work for any one person.  She suggests you try Treatment “A” first, and then go on from there.  The second doctor states that he knows exactly what is wrong and what to do.  Which doctor do you choose?  Almost always people will choose the latter.  Yet, that might very well be the wrong choice.

While we want certainty, it rarely exists.  And it certainly doesn’t exist in the investment world where so much of returns are explained by unforecastable events such as Mideast revolutions, Japanese earthquakes and tsunamis and the attack on the World Trade Center buildings.  Remember this example the next time someone tells you they know what is going to happen to the market.  Also remember that the academic research on forecasting clearly demonstrates that as much as we would like to believe there are those who can predict the future, prognosticating is the occupation of charlatans.

Returning to the current situation, before drawing any conclusions as to what, if any, actions you should take, let’s provide some perspective on the situation, beginning with why this crisis is different from the 2008 crisis.  The 2008 crisis was a financial crisis that led to a “seizing up” of the financial markets and eventually to a severe recession.  For the U.S. at least, today’s crisis is not even an economic crisis, let alone a financially driven one. U.S. banks are in much stronger shape today, having been forced to raise huge amounts of capital as part of the government’s “bail out” program.  Our economy is not contracting, though growth has slowed though the latest quarter showed some uptick.  Corporate balance sheets are exceptionally strong, with companies sitting on the largest amount of cash reserves in history.  And companies have experienced strong growth in earnings, despite the tepid rate of economic growth.

A good indicator of how different things are now than in 2008 is that with one-month Libor, the rate at which banks lend to each other, currently at around just 0.25 percent, and one-month Treasury bills yielding 0.00 percent, the spread between one-month Libor and one-month Treasury bills (or TED spread) is just 0.25 percent.  This spread is an indicator of the confidence banks have in lending to each other, and thus a good indicator of confidence in the financial system.  To differentiate the current situation from the 2008 crisis, at the height of the crisis the Libor spread reached about 4.5 percent, indicating a large amount of stress in the financial system.  The capital markets had seized up, with banks having to turn to the Federal Reserve to get funding, and the commercial paper market had virtually shut down. The situation was so desperate that the government had to provide guarantees on money market funds.

We don’t see any such signs of liquidity problems today, even after the downgrade of the U.S. government’s credit rating. The interbank market is functioning well, the commercial paper market is functioning, the repo market is functioning well, and the bond market is functioning well.  The difference in conditions helps to highlight that the problem we have today is not an economic one, at least not in the U.S., but a political one.  The market just needs to be convinced that our elected officials will take the necessary steps to prevent the crisis from becoming an economic one.  The Simpson-Bowles commission provided the blueprint on how to accomplish that objective.  It is the uncertainty about the political will to act that has helped fuel the bear market, not an economic crisis.

There is also other good news which you should not lose sight of:

First, the Japanese economy has recovered faster than expected, and is now growing, eliminating the headwinds that slowed economic growth around the world earlier in the year. Japan is the third largest economy in the world, so this matters.

Second, while economic growth has slowed somewhat in the emerging markets like China and India, growth is still strong, with China still experiencing  double digit growth. (On a somewhat amusing note, one of the sure things I heard from investors at the beginning of the year was that the place to be with equity investments was China. During the first three quarters, S&P’s China ETF, GXC, lost about 25 percent, underperforming every major equity asset class.)

Third, oil prices are down considerably since the April highs. That not only acts like a tax cut, but it will also help to dampen inflation.

Fourth, while inflation did accelerate a bit earlier in the year, with the CPI approaching a 4 percent rate for the prior 12 months, the core rate (which excludes food and energy) was increasing at a more moderate pace. And the core is a more accurate predictor of future inflation than the overall rate. And with oil prices having fallen, the CPI is now more likely to increase at a modest rate, allowing the Fed to continue its policy of extreme ease for an extended period.

Fifth, defying the experts, such as PIMCO’s Bill Gross (otherwise known as the bond king), interest rates are much lower. For example, the 10-year Treasury, which peaked at 3.75 percent in February, is now 1.5 percent lower. And that has helped lower the 30-year and 15-year mortgage rates to near record lows.

Sixth, despite the predictions of many doomsayers, the downgrading of the Treasury’s credit rating did not lead to a rise in rates, nor the abandonment of the dollar as the safe haven currency.

Seventh, the municipal bond debacle infamously forecasted by Meredith Whitney has not occurred.  In fact, defaults are running at a lower level this year than last.  And for the fourth consecutive year, actions have been taken to reduce state and municipal deficits by over $100 billion.  Some states have even seen their ratings upgraded.

Eighth, valuations are at reasonable, if not historically relatively low, levels.  The current forecast for 2011 earnings for the S&P 500 is about $95.  At today’s levels that is a P/E of about 11, well below the historical average.  Historically, when the P/E was in the range of 11-12, the next 10 years averaged a return of more than 14 percent, or 40 percent above the historical average of just under 10 percent.  And we should consider valuations not just in absolute terms, but in relative terms as well.  The historical return of 10 percent for the S&P 500 is about 6 percent above the return on one-month Treasury bills of 3.8 percent. Today, we have lower-than-average valuations and a way-below-average risk-free rate.  The equity risk premium looks large, at least in an ex-ante sense.

Here are some other metrics that show that valuations are at modest, if not historically cheap, levels, levels that forecast high expected returns.  Using DFA funds, the P/E of the emerging markets is now about 12 and the dividend yield is 2.5 percent, 60 basis points higher than the yield on 10-year Treasuries.  The P/E on international small-cap value stocks is now just 9.4, with a dividend yield of 2.8 percent, and the P/E of international small-cap stocks is 11.6 with a dividend yield of 2.8 percent.

So all is not doom and gloom.

I’d now like to turn back to the second of the two costly mistakes I mentioned at the beginning that far too many investors make — they limit their thinking to “stage one.” Let me explain.  When there are crises, investors focus on the negative news and fail to consider the likelihood, if not certainty, that governments and central banks will act to try to resolve the crises and restore their economies to a healthy state.  Those who engage in “stage two” thinking understand that crises lead to actions to counter the problem. (In fact, it often takes crises like our budget crisis to get governments to act.)

Faced with crises, governments typically enact stimulative fiscal policies, and central banks implement stimulative monetary policies.  Those policies often take time to produce results, but markets are forward looking.  That means that well-designed policies will typically lead to the financial markets recovering well before the economies recover.  This is why the stock market is one of the government’s nine components of the index of leading economic indicators. The failure to think beyond stage one and look to stage two causes panicked selling and the resulting sell-low/buy-high outcomes most investors experience. And because it often takes a crisis to get the action, and the more severe the crisis the more likely you will get action and the stronger the measures are likely to be, the more likely it is that if investors limit themselves to stage one thinking, the more likely it is they will sell just before the markets begin to recover.

There is one other critical point we need to cover regarding stage-one thinking. Those who decide to sell until the “green light” comes back on, indicating that it is once again safe to invest in stocks, don’t understand that there is never a green light when it comes to equity investing.  It is never safe to invest.  There is always a high degree of risk.  I consider it one of my primary jobs to educate clients on the various types of risk and through many discussions, determine their own tolerance and need for risk.

If you had sold in March of 2009, when would have it been safe to again invest in stocks? The unemployment rate continued to rise and stay at very high levels, we had a series of mid-East revolutions, North Korea launched an attack on South Korea, our budget deficit problems have not been solved in any way, the U.S’s credit rating was downgraded, oil soared from below 50 to well over 100, we had the PIGS crisis, we had a flash crash, housing prices continued to fall, hundreds of banks failed and let’s not forget Meredith Whitney’s dire forecast for municipal bonds.  There never was a green light, which was why most investors missed the rally.  And there never is a green light.  So if you decide to sell, you must have a plan to get back in.  But there is really no effective way to design such a plan, because history is likely to repeat itself, and you will be trapped in a vicious circle of buying high and selling low.

Let’s try to summarize. First, it is important to recognize that there are no clear crystal balls.  Second, investing is always a risky proposition.  We have experienced a negative market return almost 30 percent of the years.  And over the last 38 years, we have experienced close to 20 serious crises, almost one every two years.  That type of volatility explains why stocks have historically been priced to provide a large risk premium.  We also must recognize that just as there are no clear crystal balls, there are no guarantees that crises, this one or future ones, will be resolved favorably.  In other words, while most of the time it is darkest just before dawn, it might be that it is darkest just before the proverbial “stuff hits the fan.”  That is the nature of risk, it must exist or there would be no risk premiums.  And we must accept that risk or we doom ourselves to seeing our net worth’s fall in real terms after taxes and inflation, year after year.

There are very few investors who can avoid all risks and still achieve their life and financial goals.  And the evidence against trying to time the market is that efforts are highly unlikely to prove successful.  That means that the strategy most likely to allow you to achieve your goals is to abandon hope of trying to time the market, and instead focus on the things you can control: the amount of risk you take, diversifying the risks you take as much as possible, and keeping costs low and tax efficiency high.  In other words, while the advice to stay the course, keeping your head while others around you are losing theirs, may not seem to be the most satisfying of answers, we believe, because the evidence demonstrates that it’s the right one.  The last thing investors should do in response to a crisis, or any period of volatility and uncertainty is to let their stomachs take over.

Before closing, I would like to discuss one other issue: diversification.  Today, I hear many people saying the U.S. is the safest place to invest.  That is probably a result of the S&P 500 Index outperforming the MSCI EAFE and MSCI Emerging Markets Indexes.  However, the proper perspective is that this crisis demonstrates that international diversification is important.  All one has to do is to think about the issue from the perspective of a European. If one of them had chosen to limit investments to the countries of the European Monetary Union, they would certainly be regretting it today.

In conclusion, the key to successful investing is to understand what Napoleon knew — most battles are won in the preparatory stage.  For investors that means having a plan that incorporates the certainty that they will have to face many crises over their investment careers.  Therefore, it’s critical to not take more risk than you have the ability, willingness or need to take.  If your stomach is roiling now, check to see if you are able to lower your equity allocation and still be able to achieve your goals.  And if you find that is not the case, then you should at least consider lowering your goals, spending less now (saving more so don’t have to take as much risk), or planning on working longer.

Before closing, I offer these words of wisdom.  It’s critical to remember that once something bad has happened, and we know the outcome, it’s too late to act because markets have already done so.  You have already taken the risks and incurred the loss.  Any reaction at this point is likely to be an overreaction, caused by panicked selling.

And finally, I would like to note what I consider to be an amusing irony. While most investors revere Warren Buffett, they ignore virtually all of his advice, including his advice to ignore all market forecasts and his advice to not try and time the market, but if you do you should buy when others are panicking and sell when others are getting greedy.

Jeff Griswold is a Certified Private Wealth Advisor^SM and owner of Merit Wealth Management, LLC.  He can be reached at Jeff@MeritWealth.com, (888) 516-3748 or at www.MERITWEALTH.com.

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However, the Great Depression was largely caused by the Fed’s reduction of the money supply. Bernanke, Milton Freidman, and many economists (including me) support this view. Bernanke is one of the leading scholars who studied and wrote about the causes of the Great Depression.

He recognized this money supply issue and took great pains during the recession to expand the money supply by flooding the banking system with dollars such as with QE1 & 2 in which the government bonds were purchased by the Fed. The idea was to give the banks plenty of money to loan to consumers and business.

Critics pounce on this for political purposes. House Speaker Boehner warned Bernanke not to introduce QE3. What the Speaker doesn’t seem to realize is that the money sits in the banks and the circulating money supply is mostly unchanged.

One of the main reasons that the U.S. is in better shape economically than Europe is that the Fed has a dual mandate of fighting inflation and keeping unemployment low. The European Central Bank, by contrast, is mainly concerned with fighting inflation. Thus the ECB hasn’t been as accommodating in spurring economic growth with a looser money supply. Most countries in Europe are either in a recession or near one.

The benefits of the Bernanke approach are obvious. Interest rates are low and banks have money to lend, which they don’t always do. The dollar is weak for a variety of reasons, but low interest rates are a key factor. The weak dollar encourages exports and is one reason that U.S. manufacturing has expanded for 25 consecutive months.

The concern about near term rampant inflation from loose monetary policy is misplaced because labor represents 70% of the CPI. With unemployment at 9.1% and under-employment much greater, inflation is not likely to ignite soon. In addition, when it does start to occur, the Fed can reduce the money supply, which will slow growth and inflation. Right now, deflation, recession, and high unemployment are of much greater concern than inflation (which has averaged less than one percent for the past three years). Given a choice, most Americans would opt for a job with higher inflation than be unemployed with low inflation.

My conclusion is that Chairman Bernanke has done a first rate job under conditions no Federal Reserve chairman or current politician since 1940 has ever experienced. The danger is that misguided politicians will curtail the Fed’s supposed “inflation policies” and ensure a recession will occur.

An example of choices is when choosing whether or not to wear a helmet when doing dangerous work and some leisure activities such as alpine skiing/snowboarding, mountain biking, and skateboarding. A study of eight major Norwegian alpine ski resorts concluded that wearing a helmet reduced head injuries by 60% (Journal of American Medical Association). Speaking of head injuries, you may wish to consider wearing slip proof shoes. Just recently, I got up early in the morning and took one of those cartoon-like banana peel tumbles on cat vomit.

Sex is another area worth mentioning. The negative economic (and social) effects from contracting sexually transmitted diseases like HIV, hepatitis B, and to a lesser degree, herpes, can be sizable. Even curable venereal diseases like gonorrhea can have substantial economic effects if passed on to a mate and the mate takes legal action. Some venereal diseases, like HPV, can cause sterility and great emotional strain for those wanting children.

However, sex has a strongly positive side for willing participants. It improves brain function, reduces anxiety by releasing oxytocin, improves sleep patterns, burns considerable calories (except for the fast finishers), uses a lot of muscles, reduces heart attack and prostate risk, and bolsters the immune system since it causes an increase in immunoglobulin A.

Some interesting findings have come from the University of Chicago whose researchers surveyed 3,005 men and women between the ages of 57 and 85. Their results verify that people should practice safe sex and keep their mind in good shape. The findings  include:

*Having had a sexually transmitted disease (STD) increases a person’s chance of finding sex unpleasant or painful by 4-5 fold.

*Both sexes reported that mental health issues affected their interest in sex.

*For men, relationship troubles also contributed to a lack of interest in sex and the inability to achieve orgasm.

* Hispanic women and black men were twice as lightly to have sexual difficulties than the others.

*Drinking alcohol daily improved a women’s interest in and pleasure from sex. Men were not affected.

It may seem strange to tackle teen sex in a consumer finance book but pregnancy and sexually transmitted diseases (STD) are important economic issues for both the parents and the children. Teen pregnancy may radically affect both the parents and a child’s (especially the girl) decision to attend college and may negatively affect their ability to sustain long term relationships because of the added economic and emotional concerns at such an early age. It very likely will affect the grandparents financially as well.

The latest information from government surveys is that 63% of high school seniors have had sex, a dramatic increase from my high school days, and four out of ten parents of girls don’t know about it. Eight out of ten prime time shows contain sexual content and teens from 12-17 years of age who watch a lot of sexually explicit TV are twice as likely to get pregnant or get someone pregnant. This information is from a three year study of 3,000 children aged 12-17 years.

It is important for parents to discuss their values, pay attention to what their children are watching on TV, monitor their friends and activities, and discuss STDs with their children. These conversations should begin early and not wait until the child is a teenager. Finally, research from the National Longitudinal Study of Adolescent Health and Johns Hopkins Bloomberg School of Public Health and published in Pediatrics has shown that sexual abstinence pledge signers do not have any less sex, fewer sexual partners, or start having sex at a later age than non-signers. Furthermore, it appears to actually have a negative consequence in that the signers are less likely to use any form of birth control or condoms to prevent disease or pregnancies.

The government sponsored sites will end in “.gov;” those affiliated with educational institutions will end in “.edu;” and those with a non-profit affiliation will generally be designated “.org.” Sites that are financed by the pharmaceutical industry (except possibly those reporting medical trial results, dosing information, or symptoms) or whose primary function is to sell you something would seem to be among the less reliable. I would also be leery of sites that want information from you, are not updated regularly, rely on testimonials or offer miracle cures, are likely to sell your browsing history or personal information, or dangle some offer to get quick action or a promotional offer of non-traditional free medications.

AARP has a variety of free publications on exercise, staying healthy, and most importantly about brand name and generic drugs for many common conditions including acid reflux, insomnia, type 2 diabetes, chronic pain, osteoarthritis, high cholesterol, nausea and vomiting, dementia and Alzheimer’s, menopause, urinary incontinence, and allergic rhinitis. The booklets, which are updated every six months, contain price comparisons, and are free and easy to order at aarp.org/healthorderform. AARP also publishes the AARP Health Guide which provides authoritative information from the world’s largest medical library, the National Library of Medicine at the National Institutes of Health. The book can be obtained and some other medical questions answered at aarp.org/healthguide.

Although some people don’t like Wikipedia, I have found much useful information there on a wide variety of topics.

You can sometimes obtain cheaper fares by booking with a regional
carrier in a foreign country. Go to azworldairports.com and look at the arrivals and departures to see what airlines serve your destination city. You can find airlines that serve a region at Kls2.com, but the first web site focuses on which airlines serve your preferred airport. Then go to those carriers’ website. You can also check out specialized travel websites like Zuji.com for Asia and Opodo.com for Europe.
Because of computer operator errors, some airlines have unintentionally offered amazing deals. Some honor them; some don’t. One option is to file a small claims court action against a defaulting airline. The results in court are mixed, but likely will favor the airlines because most state laws protect businesses when such mistakes are made (The Wall Street Journal).