Tag Archives: Gainesville

The Next Hiroshima?

deathMy Comments: As a financial planner, my job is to identify existential financial threats faced by a client and attempt to remedy the potential problem before it becomes a real problem. For the record, an existential threat is something bad that might happen. The idea is to take steps to keep them far in the background so the negative consequences don’t surface. Some we can deal with and some we can’t.

In real life, these existential threats range from an asteroid hitting the earth to understanding that on the day you get married, you are now exposed to a divorce proceeding. These comments by Richard Haass appear in the context of the Iran agreement that is opposed by almost everyone in the GOP.

The threat posed by a nuclear armed Iran may not be so existential. We need to better understand the dynamics involved before resorting to a knee jerk response, conditioned by the last 7 years of visceral objection to the person sitting in the White House.

Richard Haass, August 6, 2015

The 70th anniversary of the bombings of Hiroshima and Nagasaki has understandably garnered reflection and more than a little debate. Much of the looking back has underestimated the case for the American use of nuclear weapons (to avoid what would have been a prolonged and costly invasion of Japan to end the second world war) and overlooked the subsequent utility of nuclear weapons in helping to keep the cold war cold.

Less commented on, though, is a question not of history but of the future: is the world likely to go another 70 years without nuclear weapons being used? The short and troubling answer is no. Even worse, the potential for such use has increased in recent years and seems likely to rise further. The potential for use is least among those that maintain the largest inventories of nuclear weapons and have possessed them the longest. The chance of the five formal nuclear weapon states — the US, Russia, China, Britain and France — deliberately using such weapons is minuscule.

The fact that they have robust arsenals capable of surviving a first strike by someone else and still delivering a devastating response makes the possibility of any such initial use remote.

These countries also possess intelligence capabilities that give each of them a good picture of what the others are doing, reducing the chance of miscalculation leading to catastrophe. Diplomacy and arms control arrangements further buttress stability.

Russia is the one country that gives one some pause, in part because President Vladimir Putin operates with fewer constraints than any of his predecessors since Stalin. Still, the political differences between him and the US, however real, do not rise to the level of nuclear use. More worrying is the chance of political instability developing in Russia, and the possibility that some terrorist group could gain control of one or more devices.

The greatest potential for nuclear use, though, comes from those countries that have acquired these weapons more recently. Pakistan, with a large and growing arsenal of more than 100 weapons, is arguably the most serious concern. One can all too easily imagine a conflict with India not just breaking out but also escalating. Pakistan, the weaker of the two states in conventional military terms, might be tempted to use nuclear weapons as an equaliser.

Pakistan also represents another nuclear-related concern, one that stems from its potential internal instability and lack of firm civilian oversight. It is at once a strong state, in terms of nuclear might, and a weak one, in terms of political fragility — a bad combination when it comes to seeing that nuclear weapons are not used or acquired by terrorists.

North Korea is yet another country that might use nuclear weapons. One can imagine a crisis set off by an act of aggression on the part of Pyongyang, or by a crisis that results from some form of internal collapse. A desperate leadership might turn to nuclear weapons to survive.
“These possibilities may seem like the stuff of fiction. In fact, they are anything but”.

In addition, to stave off collapse, the cash-starved government there might also be tempted to sell nuclear weapons or critical components to other countries or organisations with few if any qualms about using such weapons.

What might be the fastest growing threat to extending the nuclear peace for another 70 years, though, comes from the Middle East.

Israel already has a substantial nuc­lear arsenal. Meanwhile, the just-negotiated agreement with Iran allows the Islamic Republic to keep most of the prerequisites of a large nuclear weapons programme, and to add to its inventory of centrifuges and supplies of enriched uranium in 10 or 15 years respectively. Other countries in the region, including Saudi Arabia, the United Arab Emirates, Turkey and Egypt, may well follow suit.

We could witness a race to establish a nuclear identity. Several governments could see value in striking first, be it to prevent an adversary developing such a capability or, amid a crisis, from actually using it. Brittle governments could lose control of weapons or materials to groups such as the Islamic State of Iraq and the Levant or al-Qaeda. And terrorists could marry nuclear materials to conventional explosives and cause widespread panic and harm, even without detonating a nuclear explosion.

These and other such possibilities may seem like the stuff of fiction. In fact, they are anything but. Preventing further spread of these nuclear weapons and their use may
well turn out to be the great challenge of the 21st century. One hopes the world is up to it.

The writer is president of the Council on Foreign Relations

Gamma-ray Rain From 3C 279

Gamma-raysMy Thoughts: An example of our insignificance in the universe; here is a short (1.10 mins) video that portrays a shower of gamma rays from a galaxy far, far away. The video was posted on a web site I often visit sponsored by NASA. Every day there is new image or video that reflects something about the cosmos and our observations of it. (Astronomy Picture of the Day or APOD)

Our daily concerns about politics and investments and economics are both real and imagined. However, in the context of the data that this video represents, and its source mega zillions of miles away, our concerns and worries are profoundly irrelevant.

The explanation from the NASA site reads as follows: If gamma-rays were raindrops, a flare from a supermassive black hole might look like this. Not so gently falling on the Fermi Gamma-ray Space Telescope, from June 14 to June 16, the gamma-ray photons, with energies up to 50 billion electron volts, originated in active galaxy 3C 279 some 5 billion light-years away. Each gamma-ray “drop” is an expanding circle in the timelapse visualization, the color and maximum size determined by the gamma-ray’s measured energy. Starting with a background drizzle, the sudden downpour that then trails off is the intense, high energy flare. The creative and calming presentation of the historically bright flare covers a 5 degree wide region of the gamma-ray sky centered on 3C 279.

Staring Into An Abyss

deathMy Comments: Greece is the focus for many of us whose professional interest is the management of money, both for ourselves and our clients. I’ve said the crisis has the potential to be calamitous, not just for Europe, but for the rest of the world too.

Here, Scott Minerd suggests we step back a bit and stop being apocalyptic.

July 06, 2015 Commentary by Scott Minerd, Guggenheim Partners

In the wake of the results of Sunday’s Greek referendum, there fundamentally remain three possible outcomes. The first is as follows: Greece remains in the European Union (EU) and the eurozone while remaining in arrears on its payments to the IMF and defaulting or falling into arrears on its next payment to the European Central Bank, which is due on July 20, and the Troika begins to work out a restructuring of Greek debt.

The likelihood that the ECB will extend more liquidity to Greek banks seems remote under any circumstances. The ECB could call loans made under Emergency Liquidity Assistance to Greek banks or just maintain those loans. Either way the ultimate outcome will be the same – Greek banks will run out of euros sometime this week and the whole of the Greek banking system faces insolvency.

The second option is the same as the first except that Greece or the EU decide that Greece should leave the eurozone. I don’t see this as being much different than the first except that it increases questions about the long term viability of the euro. I think that question exists regardless, but it obviously raises the severity of the issue in the near term.

The third option would be like the second, but would include Greece exiting the EU. I think this is very unlikely unless Russia or China (or both) were to suddenly provide some kind of lifeline to Greece. This could be devastating to the EU and the NATO Alliance. I believe this is a low probability outcome. We will not know which path policymakers will follow until later in the week and then maybe longer. Nevertheless, markets will have to deal with the uncertainties created by the outcome of the referendum and have not fully priced for the risk of this event. If we had a “YES” vote I think equity markets would have rallied and bonds would have generally sold off. That tells me that some of this risk has been baked into prices.

A replay of last Monday is quite likely, which means a classic risk-off trade with a rally in German bunds and Treasury notes and bonds. Bonds of European periphery governments like Spain and Italy are likely to sell off again. The euro should come under pressure, while the dollar advances and global equity markets experience another sell off.

How long will this go on and how protracted will this risk-off period be? That is the real question. A number of years ago, the contagion threat posed by “Grexit” is a lot different than today. Since then, most banks outside of Greece have been purged of their Greek credit exposures, which now look immaterial relative to bank capital.

Of course, exposures are material in official institutions, but still small in absolute terms at less than 2 percent of annual European GDP. Questions still loom as to undefined derivative exposure throughout the financial system. Compared to the resources and tools available to the global central bankers (particularly the ECB) and the relative preparedness in contrast to the days when Lehman Brothers failed, I do not believe we are on the brink of a systemic collapse as we were in 2008.

But there remains at least one black swan event that deeply concerns me and should not be ignored. If other countries in Europe which have engaged in austerity should view the Greek outcome as a win, then political pressures may build and the survival of the euro, which one commentator referred to Sunday night as “hanging by a thread”, may itself be drawn into question. The warning signs of that outcome would be to see German bund prices decline in the wake of bad news. While I assess this risk as low, keeping an eye on bund prices as a barometer for survival is still important.

Regardless, the reaction of central banks will be vigilance. The trusty printing press stands ready to inflate asset prices and swell liquidity as needed. Don’t expect preemptive action. Central bankers will wait to see if and how much actual action is needed. There will be an attempt at the illusion that money printing will not be immediately undertaken to avoid the appearance of creating moral hazard. But, if anything was learned by the Lehman event, moral hazard exists and it is alive and well. Every effort will be made to stem any crisis in the wake of the Greek referendum.

For those who are ready to declare the failure of the great European experiment and view Greece as the beginning of the endgame for the euro, they might be advised to wait.

The Greek referendum will likely cause yet another round of innovation and recommitment by European policymakers to the success of a unified continent. In the days ahead, pro-growth policies will likely be expanded around the continent. For example, just last week Prime Minister Mariano Rajoy of Spain announced an acceleration of tax cuts while increasing projected economic growth to 3.3 percent for 2015, a growth rate which may end up greater than that of the United States. Expect more of these announcements in the coming days.

Countries at the core of Europe are deeply invested in the success of the eurozone. The idea that Greece may exit will be enough for policymakers to double down in the days ahead. While many see Grexit as the beginning of the end, it may end up ushering in a new beginning for Europe. Let’s face it, many believe Greece should never have been allowed entry into the eurozone in the first place. Few would make that statement for Italy, Spain, Portugal, or Ireland. Nevertheless, the eurozone is a political creature whose fate will ultimately be decided through political means. That’s why policy makers will move quickly to offer largess to shore up the currency union.

While risks loom, it would be premature to throw in the towel on Europe especially as it is beginning to turn the corner. The wild card event may be that after an initial bout of euro-skeptic turbulence, things in Europe will get better, not worse.

Which Asset Allocation Mix Outperforms?

retirement-exit-2My Comments: Here are two charts, associated with the authors comments, that show very clearly that good financial planning for retirement is as much a matter of luck as it is skill. The first chart has numbers that reflect 45 years, which seems like a long time, until you remember that so many of us now live to be 100.

I’ve talked before about how interest rates have been declining slowly for the past 25 years. Soon (another variable), they will start trending upward. A 45 year average taken 10 years from now may show a very different number.

Creating the right mix of investments is, in my opinion, less of a challenge than is having the discipline to find a rational solution and stick with it. While “hope” is not a very good investment strategy, you can only hope to make good decisions, to find someone who will help you as a fiduciary, unless you’re prepared to go it alone, and live your life as well as you can.

It would be nice if there was a magic bullet, but there isn’t one.

by Craig L. Israelsen JUN 1, 2015

Over the past several decades, the number of investable asset classes has increased significantly, changing the world of portfolio management dramatically.

The challenge of asset allocation now is no longer having too few ingredients to consider but rather selecting among an ever increasing array of sector-specific mutual funds and exotic ETFs.

Choosing an asset allocation model for your clients’ portfolios is not so much about picking the right one — there’s no way to know which model will be right in advance of future performance — as it is about selecting a prudent one. Being prudent and thoughtful is certainly something an advisor can — and must — do in order to meet a fiduciary duty.
Toward that end, I reviewed a series of asset allocation models over the past 45 years, from 1970 through the end of 2014, to see how they fared.

Reviewing the historical performance of various core asset allocation models delivers a useful analysis of the relative merits of different allocations. The analysis should better equip advisors to evaluate a wide variety of investment models — particularly in the online investment advisory space, where new robo advisors are promoting models designed to appeal to a wide audience.

COMPARING MODELS
By definition, an asset allocation model must include more than one asset class. In this analysis, I have identified three asset allocation models: a 50% cash/50% bond model, a 60% stock/40% bond model and a seven-asset model. Two single asset classes (cash and large-cap U.S. stock) are also evaluated to serve as bookend benchmarks.

The first portfolio option shown in the “Asset Allocation Spectrum” chart below is a 100% cash model, composed completely of 90-day U.S. Treasury bills. As cash is viewed as the risk-free asset class in modern portfolio theory — inflation risks notwithstanding — we will use its returns and volatility as the base for comparison.
Ass-Alloc-Spectrum
The 45-year annualized return for cash was 5.11%, with a standard deviation of annual returns of 3.45%. The average 10-year annualized rolling return was 5.64% over the 36 rolling 10-year periods between 1970 and 2014.

From there I looked at progressively more complex allocation models.

The first is a very simple one: 50% cash/50% U.S. aggregate bonds, rebalanced at the start of each year. Compared with 100% cash, this 50/50 allocation improved performance 143 basis points while only increasing volatility by 70 bps — a performance-to-risk trade-off of two to one. The average 10-year rolling return was just shy of 7%.

Next, I looked at a classic balanced fund: 60% large-cap U.S. stock and 40% U.S. bonds, rebalanced at the start of each year. Performance, as expected, was boosted significantly to 9.82%; the average rolling 10-year return also rose, to 10.35%. But there was a concomitant increase in volatility, with the standard deviation rising to 11.28%.

The third model used seven asset classes — large-cap U.S. stock, small-cap U.S. stock, non-U.S. developed-market stock, real estate, commodities, U.S. bonds and cash — in equal proportions, rebalanced annually.

The average annualized return was 10.12%, with a standard deviation of annual returns of 10.18% — a rare one-to-one return-to-risk trade-off. The average 10-year rolling return was 10.88%, 53 bps higher than the 60/40 model.

The final investment asset was 100% large-cap U.S. stock. As anticipated, it had a higher level of return — an annualized 10.48%, with average 10-year rolling return at 11.21% — but not by much. Meanwhile, with a standard deviation of 17.43%, volatility was far higher than both the 60/40 model and the seven-asset model.

MAKING THE PORTFOLIO LASTRetirement-Survival
The second part of this analysis compares three allocation models when used in a retirement portfolio — which is very sensitive to timing of returns, particularly large losses. (For that reason, I didn’t include a retirement portfolio consisting of 100% large-cap U.S. stock, as that approach is not prudent.)

The retirement portfolio was simulated over 21 rolling 25-year periods starting in 1970. The first 25-year period was 1970 to 1994, then 1971 to 1995, etc. A total of $455,741 was withdrawn during each rolling 25-year period. The ending balance after each 25-year period is shown in the “Retirement Survival” chart below.

This analysis assumed an initial nest egg balance of $250,000 — quite comfortable back in 1970, although fairly modest now — with an initial withdrawal rate of 5% (or $12,500 in year one) and an annual cost of living adjustment of 3%. Thus, the second-year withdrawal was 3% larger (or $12,875), and so on each year.

As a baseline, I included a retirement portfolio consisting of 100% cash, which fared reasonably well during the early periods (1970s and 1980s). Beginning with the 25 years starting in 1982, however, interest rates began a steady decline downward and an all-cash retirement portfolio began to crumble.

In fact, during the last two 25-year periods, the all-cash portfolio failed to last the full 25 years; hence the zero balance. An all-cash portfolio would also have been unable to keep up with inflation. The median ending account balance for an all-cash retirement portfolio was $332,615.

A 50% cash/50% bond retirement portfolio was a considerable improvement, surviving in every one of the 25-year periods, with median ending account balances of just over $570,000. However, in recent 25-year periods, the ending balance was far below that median figure.

The classic 60/40 stock/bond retirement portfolio has served retirees well over the past 45 years. The median ending balance for the 60/40 portfolio was in excess of $1.5 million. In fact, over one buoyant period — from 1975 to 1999 — this portfolio finished with an ending account balance of $3.9 million.

During that same 25-year period, an all-cash retirement portfolio ended with a balance of $391,702, and a 50% cash/50% bond portfolio finished the 25-year period with a balance of $611,308.

The superior approach, however — with a median ending balance of over $2.1 million — is the model using seven different asset classes.
RISING RATES

I found it particularly interesting that, during the inflationary periods of the 1970s, the seven-asset model had considerably better performance as a retirement portfolio — finishing with a balance of $2,086,863 for the 1970 to 1994 period, while the 60/40 model ended up at $1,090,081. The pattern recurs in the first four 25-year periods.

Why that’s worth considering: Over the past 33 years — after the U.S. economy began to decline in 1982 — U.S. bonds have enjoyed an era of unusual prosperity. The average annualized return of U.S. bonds was 8.39% from 1982 to 2014.

But during the 34 years from 1948 to 1981, when interest rates were rising in the U.S. economy, bonds produced an average annualized return of 3.83%.

When interest rates eventually do rise, the performance tailwind for U.S. bonds that has been fostered by declining interest rates could turn into a stiff headwind. An asset allocation model that has a large commitment to U.S. bonds (such as the classic 60/40 portfolio) may be at risk — because if interest rates rise, bond returns will likely be far lower than over the past three decades.

This suggests that a more broadly diversified portfolio is prudent — both in the accumulation years and in the retirement years.

Craig L. Israelsen, a Financial Planning contributing writer in Springville, Utah, is an executive in residence in the personal financial planning program at the Woodbury School of Business at Utah Valley University. He is also the developer of the 7Twelve portfolio.

America Could Have Been One Giant Sweden — Instead It Looks a Lot Like the Soviet Union

My Comments: This is a long, uncomfortable article that predicts how the world might evolve economically and politically over the next several decades.

My generation will have passed on soon, but regardless of your political stripes today, it will be different. If you want to take back America, or at least preserve what we have, you had better get in touch with your socialist side. Either that, or kiss your basic freedoms goodbye. Life simply does not stand still; never has and never will.

By John Feffer / May 26, 2015

Imagine an alternative universe in which the two major Cold War superpowers evolved into the United Soviet Socialist States. The conjoined entity, linked perhaps by a new Bering Straits land bridge, combines the optimal features of capitalism and collectivism. From Siberia to Sioux City, we’d all be living in one giant Sweden. It sounds like either the paranoid nightmare of a John Bircher or the wildly optimistic dream of Vermont socialist Bernie Sanders.

Back in the 1960s and 1970s, however, this was a rather conventional view, at least among influential thinkers like economist John Kenneth Galbraith who predicted that the United States and the Soviet Union would converge at some point in the future with the market tempered by planning and planning invigorated by the market. Like many an academic notion, it didn’t come to pass. The United States veered off in the direction of Reaganomics. And the Soviet Union eventually collapsed. So much for “convergence theory,” which like EST or cold fusion went the way of most crackpot ideas.

Or did it? Take another look at our world in 2015 and tell me if, somehow we haven’t backed our way through the looking glass into that very alternative universe — with a twist. The planet currently seems to be on the cusp of a decidedly unharmonic convergence.

Consider what’s happening in Russia, where an elected autocrat presides over a free market shaped by a powerful state apparatus. Similarly, China’s mash-up of market Leninism offers a one-from-column-A-and-one-from-Column-B combination platter. Both countries are also rife with crime, corruption, growing inequality, and militarism. Think of them as the un-Swedens.

Nor do such hybrids live only in the East. Hungary, a member of the European Union and a key post-Communist adherent to liberalism, has been heading off in an altogether different direction since its ruling Fidesz party took over in 2010. Last July, its prime minister, Viktor Orban, declared that he no longer looks to the West for guidance.

To survive in an ever more competitive global economy, Orban is seeking inspiration from various hybrid powers, the other un-Swedens of our planet: Turkey, Singapore, and both Russia and China. Touting the renationalization of former state assets and stricter controls on foreign investment, he has promised to remake Hungary into an “illiberal state” that both challenges laissez-faire principles and concentrates power in the leader and his party.

The United States is not exactly immune from such trends. The state has also become quite illiberal here as its reach and power have been expanded in striking ways. As it happens, however, America’s Gosplan, our state planning committee, comes with a different name: the military-industrial-homeland-security complex. Washington presides over a planet-spanning surveillance system that would have been the envy of the Communist apparatchiks of the previous century, even as it has imposed a global economic template on other countries that enables enormous corporate entities to elbow aside local competition. If the American tradition of liberalism and democracy was once all about “the little guy” — the rights of the individual, the success of small business — the United States has gone big in the worst possible way.
CONTINUE-READING

Yellen’s problem with US felons

My Comments: We are a nation of approximately 316 million people, of which roughly 30% are “youth dependent” and 20% are “elderly dependent”. This leads me to assume that roughly half of us are capable of employment of some kind.

The next assumption is that if the employable number of people is about 158 million, and of those, 13 million have a criminal record, about 8% of the workforce has a red flag somewhere in the system.

Some of these people have limited education and work related skills. A common observation of prison populations is that few of them know how to walk and chew gum at the same time. That’s probably unfair, but I didn’t put them there.

All this means that if you are going to work toward keeping the level of unemployment down and limiting the amount of money thrown at people not now in the work force, we might be better off spending money on the development of employable skills and reducing the penalty for smoking pot. Unless you like building new prisons and make money by managing them.

Edward Luce | February 22, 2015

Some 13m Americans with a criminal record weigh on unemployment rate

When we think of crowded US prisons, we do not usually turn to economists — still less central bankers. Yet America’s steep rate of incarceration must be high on the list of what keeps Janet Yellen up at night.

Markets will be waiting to pounce on the US Federal Reserve chair’s slightest nuance in her congressional testimony this week. Will the central bank lift rates in June or September? The key to her thinking lies in the US labour force participation rate. If it improves, the Fed can keep rates at zero without fear of wage inflation. If it stays put, Ms Yellen may have to end the party far sooner.

Much has been made of the sharp fall in US unemployment in the past few months; it is now at just 5.7 per cent. But if the same number of Americans were active in the labour force today as at the start of the recession in 2007, the jobless rate would be almost 10 per cent. The labour force participation rate — the basis for calculating joblessness — has fallen to 62.8 per cent of adults today from a peak of 67.3 per in 2000.

Some of this fall is the result of changing demographics. The baby boomers are starting to retire. Some of it comes from the expansion of the US disability benefit, which pays millions more people to stay out of work than it used to.

What is often overlooked, however, is the starring role of the US criminal justice system. Critics of America’s willingness to hand out criminal records think of it as a social blight. It is also a crime against the economy. The numbers are staggering. At 2.3m, the US prison population is the highest in the world — close to the combined numbers of people locked up by China and Russia, and more than 10 times those of France, Germany and the UK combined. Think of it as a democratic gulag. It is almost double where it was in 1991. That means the US has millions more ex-convicts than it used to, the large majority of whom are routinely screened out by employers.

But the taint of a criminal past affects a far larger pool of people than felons, who number about 13m. Almost one in three adult Americans, about 75m people, are included on the Federal Bureau of Investigation’s criminal database. Details for roughly half those names are incomplete. To enter the FBI’s list, you need not have been convicted in a court — merely arrested at one time or another.

Most employers carry out background searches on job applicants and screen out those with criminal records. Among those whose applications would instantly be deleted is Bill Gates, the founder of Microsoft, because of a 1977 arrest for a traffic violation. So too would that of George Clooney. He was arrested in 2012 for demonstrating outside the Sudanese embassy in Washington.

During the 1990s the US achieved close to full employment. This coincided with a shift to zero tolerance policing. About half of US states still have a “three strikes and you’re out” automatic jailing rule. But for most employers one strike is enough — and there is a good chance it was misreported. Persuading the FBI to expurgate your record, or amend it, is virtually impossible. That bouncing cheque that you wrote to your landlord in 1997 will probably show up as a “misdemeanour” until your dying day. Names are kept on the FBI’s database for 110 years. Among the
millions defined by labour statistics as “discouraged”, or who have stopped looking for work altogether, a high share had their discouragement thrust upon them.

What can Ms Yellen do about it? Not much directly. A year ago she tried to highlight the stigma of long-term unemployment — employers’ reluctance to hire people who had been out of work a long time. Two of those she cited had criminal records. She was pilloried for having failed to disclose that detail — yet her examples were on the money. She could also demand that questions about criminal records be included in the monthly labour force survey, and in surveys of employer attitudes. The US government gathers a lot of detail about households. It should add criminal records to its questionnaires.

She ought also to give a pat on the back to the Ban the Box movement, which persuades employers to remove questions about criminal records from screening forms. The information is disclosed at a later stage in the interview process, by which time companies are likelier to see your plus points. Ban the Box has been adopted by a few big companies, including Walmart, the retailer, which last week announced it would raise hourly wages. Ms Yellen should also give a thumbs up to the Redeem Act — a bill sponsored by Cory Booker, the Democratic senator, and Rand Paul, the Republican senator. The law would allow Americans to expunge non-violent crimes from the records. She might also try to shame the FBI into maintaining accurate data.

None of these steps alone would expand the US labour market in time to alter the Fed’s calculations. But together they would help lower a big structural barrier to US growth. Ending the three strikes rule would have a more lasting impact. It would also make America fairer. Ms Yellen has the biggest economic bully pulpit in the world. She should spell out the hidden costs of America’s tendency to criminalise.

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