Contents: Troubled brokers cluster in Florida and New York, LTCI unnecessary?!? Canadian housing advance slower but market is two-tier, South Florida housing is slowing, Silent Generation richest age group, printing money to fund deficit is superior solution to economic problems compared to financial repression, new Exchange Traded Managed Funds (ETMF), EU dream ebbs.

Personal Finance and Investments

In the WSJ’s “How troubled brokers cluster, often among elderly investors” Eaglesham and Barry discuss a WSJ analysis which has “identified 16 U.S. hot spots…of brokers with troubled regulatory records”. Free dinners are the primary vehicles to pitch ‘products’ like annuities and real estate; most complaints related to misleading claims associated with the ‘products’. Of the top 6 U.S. areas identified, 4 were in Florida (the other two were Long Island and Manhattan). The article notes that there locations were naturals for shady operators: high concentrations of households with >$100,000 income and as well as a higher than average proportion of these households headed by >65 year olds. As the article notes that “One tactic seen in hot spots has raised regulators’ concerns: “plate-licker” seminars to woo customers. A September Finra alert warned that free-meal pitches can involve hardball sales tactics or problems at follow-ups.” Brokers/“advisors” believe that “dinners attract clients; “ It’s called prospecting…just like you do for gold.”” (Many look on the clients as prey. As the old saying goes:  Why do you rob banks? Because that’s where the money is.)

In the WSJ’s “Long-Term-Care Insurance: What policyholders should know” Karen Damato writes that LTCI might “offer buyers some peace of mind” but “saddled some long time holders with a different kind of financial worry”. People with existing LTCI have no assurance that that they won’t face more and more rate increases in the future even if they had previous rate increases. (Does such insurance even deserve to be called “insurance”? Does LTC have the attributes of an insurable risk, i.e. is it low probability of occurrence and high financial impact? Would this not be better dealt with by saving for one’s future needs rather than insuring against a high probability event?  If interested in the subject, a couple of my old blogs on LTCI at Long-Term Care (LTCI) )

Coming at LTCI from a different angle, a new study suggests that “Maybe you don’t need Long-Term Care Insurance after all” . In it Ben Steverman reports that the new study “…by using monthly data instead of annual numbers, finds that people who go into nursing homes stay there for 30 percent less time than previously estimated. The average nursing home stay for a man was less than a year; for women, 17 months. And 45 percent of patients don’t stay more than three months. Many of those short nursing homes stays end in death.” The study indicates that LTCI can still pay off for wealthier singles (defined at $90K/yr income and $260K assets), and even wealthier couples. But the author of the study also “warns that forthcoming research will show long-term care insurance makes even less sense for married couples than it does for singles.”

Real Estate

The October 2014 Teranet-National Bank House Price Index was up 0.2% for the month and 5.4% for the year; “Without the 1.2% jump of Vancouver prices, the composite index would have been flat from the month before.” Toronto (-0.2%), Ottawa (-0.4%) were among those down for the month, while Vancouver (+1.2%) and Calgary (+0.4) were among those increasing for the month. For the past year Calgary (+9.1%), Vancouver (+6.5%) and Toronto (+6.5%) were up, while Ottawa (+0.2%) and Montreal (+1.1%) were among the laggards.

In the Globe and Mail’s “Housing price disparity growing between major centres rest of Canada” Tara Perkins reports that “The gap between how quickly home prices are growing in Toronto, Calgary and Vancouver, compared with the rest of the country, is growing…. average property values in Toronto, Calgary and Vancouver areas combined have risen by 83 per cent over the past decade, from $345,000 to $634,000, while those in the rest of the country have risen by 60 per cent, from $205,000 to $327,000… values in Toronto, Vancouver and Calgary seem to have really accelerated over the rest of the country were in the first quarter of 2009…and… the second quarter of 2013, when mortgage rate wars started to heat up, Brookfield points out”

In the Sun-Sentinel’s “South Florida home prices cool in third quarter” Paul Owers reports that in the 3^rd quarter South Florida prices have “leveled off”, with Broward County at median price of $281K or +3% increase YoY, Palm Beach County $273K median was off -1% YoY; statewide median price was $182K or up +4% YoY and sales up 8%YoY.

Pensions and Retirement Income

In Bloomberg’s “Silent Generation wins life lottery as richest US age group” Victoria Stilwell writes that the median net worth of the Silent Generation, i.e. those born during the Great Depression and currently between 69 and 86, has “climbed to near the top compared with other age groups from near the bottom just two decades ago” as a result of having “benefited from improved health, a more generous social safety net, an exit from the job market ahead of the past recession and rebounding stock and home values (and I suspect that having DB pensions might have helped the group as well, to preserve and grow their assets). Their assets have increased in real constant dollars from $131K in 1989 to current $195K. While the economy may not benefit much from the growing wealth of this group since this age group is not a big spender, the money will come in handy given the higher life expectancy of the group.

Things to Ponder

In the Financial Times’ “Printing money to fund deficit is the fastest way to raise rates” Adair Turner argues that the best approach to getting out of our current economic problems, particularly in Japan, is to “seek a swift return to higher interest rates, to remove the dangerous subsidy to high leverage”, and allow government deficits to increase and then “be financed with new money created by the central bank and added permanently to the money supply” (i.e. never to be repaid). This should lead to increased “demand without creating debts that have to be serviced”. (Very unorthodox, but who knows? It might work!)

In ETF.com’s “Alternate ETF structure takes another step forward” Paul Britt reports that the SEC announced that it has approved “exchange traded managed funds (ETMF)” after rejecting numerous applications for non-transparent actively managed ETFs. ETMFs are also not transparent, but they were approved as this proposal included a (mutual fund like) restriction to execute trades only after market close and at the then NAV. This application by Eaton Vance overcame the concern “that the lack of transparency inhibits the ability of market participants to do the work of keeping the ETF trading at fair value throughout the day”. (Still active and thus still unlikely to outperform; just another active mutual fund but will also include a trading spread. These exchange traded mutual funds will once again open access for Canadians to U.S. mutual funds; I wouldn’t bother.)

And finally, in the Bloomberg’s  “EU dream ebbs amid weak growth, Putin’s jet, 25 years after wall came down” James Neuger reviews state of the EU 25 years after Berlin Wall went down and 70-years after D-Day, and considers sources and symptoms of its fragility: Putin “redrawing the map by force”, stuttering European economy, NATO jets intercepting Russian planes, the assumption that “the liberal order is prevailing” is not unfolding as it should, and a sense of lost identity leading to a resurgence of nationalism.