Tag Archives: Gainesville

Medical Identity Theft Rising Fast

rolling-diceMy Comments: If ever there was a 21st century crime, this is it. We’ve all read about what happened to Target Stores and others where customer information was stolen. What we don’t often think about in this context are our own medical records, scattered across the health care landscape which we inhabit.

I’ve been aware of it’s significance since becoming aligned with a firm in Duval County called Caduceus Consulting. They’ve developed a professional liability policy that provides legal help for any physician or dentist exposed to a cyber threat. You can find an overview of it here:

The threat is real, and it can be expensive to remedy. Even if you only suspect a breach, EVERY possible patient whose name and records are in your records must be notified and advised. For the owners of a medical practice, to which law firm do you turn for help? Who has the technical undestanding and skills to help make the problem go away? Can you make it go away? How many thousands of dollars will it cost?

To the extent you are a physician or dentist in Florida, I have a very low cost solution to mitigate this threat to your future financial security.

Feb 25, 2015 | By Dan Cook

Medical identify theft increased by nearly 22 percent in 2014 compared to 2013. And this tough-to-contain realm of fraud will likely continue to grow due to conditions that have created fertile ground for this particular crime.

That’s one major takeaway from the fifth annual study of medical identity fraud released by the Ponemon Institute and the Medical Identity Theft Alliance, nonprofits dedicated to investigating the causes and ramifications of medical identify theft and finding ways to counter its spread.

The report does not take into account the Anthem hack, in which as many as 80 million consumers had their personal data stolen.

“Medical identity theft is costly and complex to resolve,” the groups’ study concludes. The study attempts to estimate that cost and outlines the reasons for its stubborn persistence.

Among the major outcomes of this study:
• Health care providers are not doing enough to secure patients’ medical records;
• Health care providers don’t respond in a consistent or timely manner when fraud is suspected or has occurred;
• Medical identify theft victims frequently don’t learn that their ID has been stolen until three months following the theft;
• Once they find out, it often takes months — and an average of 200 hours — to resolve a case;
• The cost to resolve the average incident is $13,500, a cost often paid by the victim;
• Many victims either don’t know who to report theft to, or are afraid to report it for a variety of reasons;
• Many victims report their identify was stolen by someone they knew, most likely a relative;
• Consumers and health care organizations believe the Patient Protection and Affordable Care Act has made medical identify theft more common due to insecure insurance websites;
• Theft generally occurs to access medical services and products, not to steal a patient’s identity for more general purposes.

The study’s authors said that, while such theft can’t be prevented, there are steps that can be taken to reduce its spread. They include:
• Monitoring of credit reports and billing statements for evidence of theft;
• Check in periodically with the primary care physician to ensure accuracy of medical records;
• When a consumer suspects identity theft, one should contact a professional identity protection provider for follow-up;
• Education of insured individuals about the risks of sharing medical identity information even with close relatives;
• Health care and other organizations that are responsible for securing patient information should have systems in place to authenticate all patients seeking services.

The full study, which is chock-a-block with details about this growing threat, can be found here

Which Trust to Use?

will with clockMy Comments: First, a DISCLAIMER: I am NOT an attorney and it would be best if no one accuses me of practicing law without a license. There’s an ongoing issue about this in Florida right now.

But I do get asked questions about trusts and it helps to have a little basic knowledge. I also know several qualified attorneys whose names I will share if asked. This is to help you get started if you have questions. Know too that the rules about step-up in basis may be invalidated soon.

by Ingrid Case / FEB 5, 2015

Trusts, which can range from simple to extremely complex, are a standard tool in the anti-estate-tax arsenal.

There is just one firm rule: If the trust benefits a spouse, “you must cause the trust to be included in the second spouse’s estate, for estate- tax purposes,” says Samuel Donaldson, a professor of law at Georgia State University. “There may be a lot of gain inside the trust. Because it’s subject to estate tax, it gets the step-up in basis. If it’s not included in the second spouse’s estate, the assets would have the same basis as at the first spouse’s death.”

Trust options include, but are certainly not limited to:
Credit shelter trust: If, between the first spouse’s death and the second, the estate is likely to grow beyond what the portability will shelter, Donaldson suggests that members of a couple leave everything outright to the surviving spouse, but put a provision in the will saying that disclaimed assets must pass into a credit shelter trust. “Which to choose depends on the assets, the expected appreciation between the two deaths, the consumption habits of the surviving spouse, and the estate-tax exemption in place at the second spouse’s death,” Donaldson says.

Clayton QTIP trust: Clients who want to leave assets in trust for the surviving spouse (and potentially other beneficiaries) should use a Clayton QTIP trust, Donaldson suggests. “It’s just like an ordinary QTIP, but to the extent that you do not make a QTIP election on the assets sitting inside the trust, the unelected assets pour over automatically into a credit shelter trust,” he says.

Spousal limited access trust: This irrevocable trust lets clients use their gifting exemption while still retaining access to the gifted assets. Spouses each create an irrevocable trust and contribute assets up to their exemptions. Each spouse is the beneficiary of the other spouse’s SLAT; spouses can also name additional beneficiaries. No estate taxes are due on the trust assets at the death of either spouse. “You can withdraw assets on a limited basis, and you have control over how assets are invested. The spouse can access the trust if they are otherwise out of money — it’s the spare gas tank. If the spouse doesn’t need it, the beneficiaries get it,” says Charles Bennett Sachs, principal at Private Wealth Counsel in Miami.

Irrevocable life insurance trust: Inside or outside a trust, life insurance can help beneficiaries pay estate taxes. When the death benefit is paid to a trust instead of an estate or individual, it stays outside the estate’s taxable value. Transfer an existing policy to a trust at least three years before the donor dies, however, or the IRS will consider the death benefit part of the taxable estate.

Charitable remainder trusts: “Assets can pay to a client for life, to children for life, and to grandchildren for a period of time, and then go to charity,” Munro says.

Irrevocable trusts: These can serve as vehicles for transferring a business to the next generation. Bruce Brinkman, a planner at Allen, Gibbs & Houlik in Wichita, Kan., cites as an example some clients whose estate is worth close to $30 million and who have a $6 million estate-tax liability. They want to move a company they own out of their estate now, before it appreciates further. To minimize estate tax, Brinkman recommends that they gift about half the company to an irrevocable trust, with the three adult children as beneficiaries. Appreciation and distributions will happen outside the estate and will not be subject to income tax — and the trust can use the distributions to buy the other half of the company over 10 to 15 years.

7 Quick Points On Europe

europeMy Comments: My purpose with this post is to confuse you. Yes, that’s right, to confuse you. That’s because even though I claim to be a financial professional of almost 40 years duration, I’m confused. And I don’t want to feel alone.

This came across my inbox inside a newsfeed I look at daily which suggests it’s not that esoteric. The title itself lends it credibilty. That’s because most of us are interested in making our money grow and that Europe’s financial state over the next several months is critical. But it may just be an example of an economist talking to himself.

It’s not too long so I ask you to read it and let me know, if you can, just what it means. Thanks.

Ben Hunt, Epsilon Theory / Jan. 28, 2015

#1) Here are the most relevant recent notes for an Epsilon Theory perspective on the underlying political and market risks in Europe: “The Red King” (July 14, 2014) and “Now There’s Something You Don’t See Every Day, Chauncey” (Dec. 16, 2014).

#2) Markets reacted positively to last Thursday’s announcement because Draghi doubled the amount of QE that he leaked to the press on Wednesday. Financial media pegged QE at 600 billion euros on Wednesday and 1.2 trillion euros on Thursday. Once again, Draghi played the Narrative game like a maestro.

#3) This is NOT open-ended QE. Sorry, but the Narrative game doesn’t work like this. If you mention a target date (September 2016), then that becomes the Schelling focal point, no matter how much you try to walk that back by saying it’s open-ended.

#4) Risk-sharing, or the lack thereof, matters. Draghi won approval of a doubled QE target by minimizing the mutualization of QE risk among EU countries. 80% of the bond-buying will be done by national central banks, and Germany will only buy German government bonds, France will only buy French bonds, etc. That’s important for two reasons. First, if Italy or Spain goes off the rails, then the Bundesbank’s balance sheet isn’t immediately crippled.

Second, this is why German bonds are rallying just as hard (harder, really) than periphery bonds. It’s also why US bonds are rallying so hard, because you can’t maintain a huge spread between the only risk-free rates left in the world.

#5) Market complacency on Greece is a mistake. Not because Greece itself is a huge systemic threat, but because the same political dynamics in Greece are coming soon to Italy. Greece is Bear Stearns. Italy is Lehman.

#6) In tail-risk trades as in comedy, timing is everything. Even if you think that it’s an attractively asymmetric risk/reward profile to bet on a Euro crisis (and I do), this is a heavily negative carry trade. If you don’t know what the phrase “negative carry trade” means, then please don’t make this bet. If you do know what it means, then you know that you either have to play a lot of hands to make the odds work out for you (and the nature of systemic crises makes that impossible) or you have to be spot-on with your timing.

#7) In a fundamentals-driven market you need to look at fund flows; in a Narrative-driven market you need to look at Narrative flows. With Draghi’s announcement last Thursday, there is no longer a marginal provider of market-supportive monetary policy Narrative. Or to put this in game theoretic terms, the 2nd derivative of the Narrative of Central Bank Omnipotence just flipped negative. We’ve shifted from an accelerating Narrative flow to a decelerating Narrative flow, and that inflection point in profoundly important in game-playing. The long grey slide of the Entropic Ending begins.

The Good News Behind GDP’s Decline

Bruegel-village-sceneMy Comments: For almost four years now, I’ve posted ideas and comments that related to the economy, to investing, sometimes to politics, sometimes just weird stuff. The idea was to give me an outlet where I could be free to share ideas that I thought might be helpful to friends and clients and whomever happened across my posts.

This post and the next are an attempt to help anyone get a better handle on what is happening to the economy, and to a lesser extent, how you should prepare to have your money invested going forward. The next big thing we can look forward to is a rise in interest rates.

Commentary by Scott Minerd, February 05, 2015

As the U.S. economy maintains its momentum and with the euro zone showing signs of improvement, all eyes are now on the Fed’s next move on rates.

On Friday, it was announced that U.S. gross domestic product rose an annualized 2.6 percent in the fourth quarter—a marked slowdown from the 5 percent growth we witnessed in the third quarter of 2014. But what the market took to be bad news was actually a sign of economic strength.

Falling net exports subtracted a full percentage point from GDP growth. But net exports—exports minus imports—only looked relatively weak because consumer demand for imports was so strong, growing at an annualized rate of 8.9 percent quarter over quarter. In fact, this past December, U.S. companies imported $48.8 billion worth of consumer goods, an all-time record figure.

In the fourth quarter, household consumption was the main driver of GDP growth, up by over 4 percent. This is a positive sign for the U.S. economy, particularly when considering that nearly 70 percent of economic activity in the United States stems from private consumption.

Durable goods orders, which fell by 3.4 percent in December, also rattled investors when the number was released last week. Durable goods orders is the one data set I actively ignore—it is one of the most volatile economic indicators and is often revised significantly from one month to the next. Taken in isolation, a one-month drop in durable goods orders does nothing to support the thesis of a weaker economy.

Fluctuation just means some big order came through or some big order didn’t come through, and it should not move markets. That investors latched onto the weak durable good numbers is, I believe, as misguided as their take on the GDP print. Economic fundamentals in the United States remain sound.

The economic environment in Europe is also showing signs of improvement, and I expect this trend to continue throughout the year. Loan growth is picking up, quantitative easing starts in March, and while the latest Greek tragedy plays out in Athens, I expect European policymakers will be diligent in not allowing Greece to write off any of its debt for fear such an occurrence may inspire others, such as Spain or Portugal, to demand the same.

As the global economy gains strength and U.S. economic data continues to improve, investors are now likely to focus on the Federal Reserve’s next move. In an interview with Bloomberg last week, James Bullard, president of the St. Louis Fed, expressed his view that investors are wrong to expect the Federal Reserve to postpone an interest-rate increase beyond midyear, citing the decline in unemployment levels and the underlying momentum in the U.S. economy.

Bullard is a policymaker I hold in high regard and, judging by his comments, market chatter of interest rates hikes being postponed into 2016 now appears overdone. In all likelihood, given policymakers’ concern that the economy will overheat if they leave rates too low for too long, I think that a rise in rates somewhere between September and December is a fair estimate.

Import Growth Is a Good Sign for the U.S. Economy
Though fourth-quarter GDP came in below expectations at 2.6 percent, much of the apparent weakness was due to falling net exports, which subtracted a full percentage point from the growth figure. But net exports fell because imports grew at a faster rate, a sign of strong domestic demand. In other words, the same factors that are leading to a healthy growth rate in consumption, such as an improving labor market and increased consumer confidence, are also causing higher demand for imports.

The bottom line is that the U.S. economy is doing very well and looks set to continue this momentum.

Military Retirement Faces Shake-up

FT 11FEB13My Comments: I did not serve in the military; I failed my draft physical way back in 1959. They gave me a 1-Y classification that said ‘only in case of national emergency’. I don’t think I was upset since by then I was a freshman at the University of Florida and VietNam was looming on the horizon.

All the same, I’m sensitive to those who did, especially all the millions who served and survived and spent years in the effort. And as someone now of an age when retirement is normal and expected, making sure the benefits for those who worked long hours for all of us is financially secure is important.

Here’s a short glimpse into what is going on. As a financial planner of many years, this makes sense to me.

Jan 28, 2015 | By Marlene Y. Satter

A long-awaited report on the military’s compensation system will include proposals for sweeping changes in how retirement is approached, the Military Times reported Wednesday.

The newspaper, citing anonymous sources familiar with the report, said its provisions will include a phase-out of the current system, which allows service members to collect a benefit immediately upon retirement after 20 years.

A hybrid system is set to be proposed as a replacement, one which will incorporate a smaller defined benefit plan, lump-sum payments and more cash-based benefits.

In addition, the new system would incorporate a 401(k)-type investment account as a significant portion of a service member’s retirement benefit.

The new plan would automatically enroll service members in the government’s Thrift Savings Plan, with service members being responsible for managing their own accounts.

Money in the TSP is not accessible without penalty until the participant turns 59½. Troops would be required to serve a minimum period of time before they are eligible for full ownership of the account, and the government would likely contribute a percentage of basic pay that could vary based on years of service and deployment status.

In addition to the 401(k)-type benefit, there would also continue to be a DB component to the plan, but the coming proposal is expected to make it more modest than at present and restrict its availability until age 60 or perhaps even later.

Such proposed changes not only would have to be approved by Congress, but would affect only new recruits. Currently serving military personnel would be grandfathered into the existing system.

The Military Times said companion proposals to change the health benefits offered by the military are also expected, although they would likely affect troops presently serving — should such proposals manage to pass Congress.

Social Security: 5 Facts You Must Know

retirement_roadMy Comments: With the GOP now controlling the House and Senate, there is increased talk about threats to the Social Security system. After all, this is a socialist program, designed to help the financially weakest among us.

I’ve long maintained that small tweaks, similar to what Congress has already done some 20-25 years ago, will allow the system to remain viable for the next 50 years. By then it is anyone’s guess how long people will be living and expecting to receive benefits.

If you are not yet signed into the system and receiving SSA benefits, get in touch with me. I have access to sophisticated software that will be help you optimize your benefits. As the author says below, Social Security is a complicated program, one that gives you a choice of 97 months during which you can choose to sign up. The difference between the worst and best month can be hundreds of thousands of dollars to you and your family.

By: Jordan DiPietro

Social Security is a complicated program, yet you cannot afford to NOT know everything you should about your benefits. Even knowing this, it can be hard to find the information you need in order to make the most informed decisions for you and your family.

In the following TOP 5 list below, The Motley Fool’s Financial Planning Team reveals five essential, but little known facts, about the Social Security Program and how it will affect millions of Americans. Although most people expect Social Security to be there for them when they retire, they could be wrong – and by then it might be too late.

Number 5: Social Security Is Massive
In 2014, over 59 million Americans will receive Social Security. Among them are:
• 40.9 million retired workers and their dependents
• 10.8 million disabled workers and their dependents
• 6.2 million people receiving survivors benefits

Number 4: The Elderly Could Not Survive Without This Program
Many elderly Americans heavily rely on Social Security; it’s the major income source for most older Americans. In fact, Social Security benefits account for 38% of the U.S. elderly population’s income. Even more important, half of married couples and three quarters of singles receive at least half their retirement income from Social Security.

Number 3: The Workforce Is Having to Support More Retirees

Demographics are not in our favor as fewer workers support more retirees. In 1950 there were 16 workers per Social Security recipient. In 1960 there were 5 workers per recipient. By the year 2033, only 2.1 workers will support one retiree.

Number 2: The Numbers Just Don’t Add Up
Social Security relies on its trust fund in order to cover shortfalls between tax revenue it receives from workers and benefits it pays. The trust fund is projected to run out of money in 2033. Once that happens, retirees can only expect to receive about 75% of the benefits they would have received.

Number 1: The #1 Way to Increase Your Benefits

Every year you wait between full retirement age and age 70 before claiming Social Security benefits boosts the amount you receive by 8%. Those who wait until the age 70 maximum will get 32% more in benefits than those who take them at 66, and 76% more than those who take early benefits at 62. If you can afford to delay benefits until age 70 and if you live past age 82, you will receive more in lifetime income from Social Security than if you had waited until full retirement age.

The Stock Market Is Overvalued, No Matter How You Measure It

My Comments: Some of you will think I’m an alarmist. And perhaps I am. But the signals that have been present for some 18 months are getting louder, much louder.

I’ve not included all the charts that appeared with this article as there are too many of them and they are all negative. Here’s a link to the article itself: http://goo.gl/tIiQgQ  You should know I don’t have the talent to do this on my own.

Perhaps I’ll find some good news to share with all of you later this week. I hope so, because it’s on us to be prepared and avoid the inevitable mess.

Summary
• The US stock market remains overvalued relative to the broader economy.
• We have reached the limits of monetary policy, and it is now time for fiscal policy makers to act.
• Over indebtedness continues to be the problem and de-leveraging the solution.

“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.” – Charles Mackay, Author, Extraordinary Popular Delusions and the Madness of Crowds

I believe investors would be wise to exert caution at this time in the economic cycle. We have seen the (NYSEARCA:SPY) market rally some 187.74% from the 2009 lows, and market levels are now overvalued by virtually every metric. In my previous piece “5 Themes for 2015″, I articulated the likelihood that indexers will be outperformed by stock pickers this year. This is because I believe the market is extremely overvalued on the whole, and investors need to be selective about what they own. There are parts of the market that remain undervalued as I have previously highlighted. But on the whole, stock indexes are overvalued when viewed using many different measurement methods as seen in the chart above:

Yes…This Is a Stock Market Bubble
Any who contends that we are not in the midst of a stock market bubble is ignoring the truth of the economic and historical financial data we have available. Many believe that the market can continue to push higher, and indeed we may see additional advancement in equity indexes, on account of capital coming in from overseas and investors continuing to search for yield in a low yield world. Ultimately, I believe this will only make the ending of this market cycle that much more severe.

I continue to believe that the macro-economic situation points investors to the Long-Term Zero Coupon U.S. Treasury market as a stable port in the deflationary storm. The marginal gains that may be had from any potential upside in equity markets pale in comparison to the enormous draw down that I believe will eventually occur.

It’s Different This Time
Investors continue to articulate the old adage “It’s different this time.” They are right, in the sense that we are in unknown waters with the Federal Reserve’s extraordinary monetary policy, but the lessons of financial history have a way of repeating themselves, and reminding us it is not, in fact, different this time.

The Federal Reserve has expanded the balance sheet to over $4 trillion, and yet we continue to see lack luster velocity and inflation below the Fed’s target rate, illustrating the strength of deflationary forces. The US is in danger of entering into a Japanese-style deflationary trap where there is no escape from QE, and higher GDP growth rates continue to elude us, necessitating more QE. This cycle in danger of continuing for some time, until we realize that debt is the problem and deleveraging is the only solution, painful as it may be.

Future stock market returns will likely be in the low single digits as a result of this QE influenced market rally, which we can see in the P/E 10 at 26.52. The Fed’s extraordinary monetary policy has proven disastrous to savers, and has created a stock market built primarily on financial engineering and excess liquidity in the banking system, demonstrating that economic policy and investment policy are not always aligned.

I believe that caution is warranted, as it is completely plausible to see a significant downward move in the market at a magnitude larger than any one sees coming. Most down trends come with little warning, and investors are left asking “What happened?” Current equity market valuations are not supported by the economic data. The US has only 2.5% GDP growth in the first three quarters of 2014, there is subdued wage growth, and bubbles in lending fueling consumer spending, and excess leverage, fueling stock speculation. With equity markets at all time highs and Main Street continuing to suffer, the bond market continues to predict the coming storm.

With No Wage Growth, Debt Takes the Place of Income
The United States economy has not shown a change in the real median household income for nearly twenty years.

The economy continues to show a lack of true wage growth. Feeling the lack of income growth, consumers are resorting to adding additional debt to their balance sheets, reversing a healthy period of deleveraging after the financial crisis. Consumption today, financed by debt, means lower consumption in the future. Positive economic growth cannot be fueled by mounting debt burdens.

Globally, debt levels have reached unsustainable levels in both the public and private spheres. In a previous piece, I talked about the deleterious role over indebtedness can play in stifling economic growth. Moving forward, I see these trends playing out over a long time horizon that will likely leave the Fed on hold in raising rates, and will see the long-term US treasury yields continue to ratchet lower. Velocity continues to remain weak, as do wages, the PCE, and other measures of economic health. Perceived strength in the employment situation is really driven by decreases in the labor force participation rate. The economy is hardly healthy, despite the continued rise in equity prices to lofty levels.

The put created by excessive QE has driven margin debt to an all time high and created the same environment that was the catalyst for the financial crisis, over indebtedness.

Conclusion
The solutions to the challenges we face are not easy, and the responsibility does not rest solely with the Federal Reserve. I believe we have reached the limits of what can be achieved through monetary policy. The toxic effects of over indebtedness continue to plague real GDP growth, thus it is now time for fiscal policy makers to work together for the good of the country, and to put the nation on sound financial ground.

Given this reality and the case I made here, I continue to hold a portfolio predominantly composed of the US Dollar, (NYSEARCA:ZROZ) 30-Year Zero Coupon US Treasury Bonds and Swaps, and a focused group of select, undervalued equity securities. I believe this portfolio strategy can continue to outperform benchmarks in this slow-growth world that will characterize the global economy for some time.