Welcome to the Friday, July 10, 2009 edition of On the Moneyed Midways, where each week, you can catch up with the best posts we found in the past week's business and money-related blog carnivals!

Can you really ever recover from the financial impact of attending college? How exactly does debt settlement work? What can you do to find out if that investement advisor you're considering hiring hasn't already pulled a Bernie Madoff? Did Al Capone really live *that* modestly? And why does Costco put so many high-dollar item goods between the entrance and where the food is?

The answer to these questions, and more, await you below!...

On the Moneyed Midways for July 10, 2009
Carnival	Post	Blog	Comments
Carnival of Debt Reduction	How Debt Settlement Works	Bargaineering	You've seen an endless number of commercials for it on TV, and heard even more on the radio, but how does debt settlement work? Jim Wang runs through the basics!
Carnival of HR	Business Agility	HR Bartender	"When customers have money to spend, they're in the driver's seat. If you want to keep them as a customer, you need to be agile…." - Sharlyn Lauby, in The Best Post of the Week, Anywhere!
Carnival of Personal Finance	How to Do a Background Check on Your Financial Advisor	Good Financial Cents	Jeff Rose provides an illustrated "how to" for doing your own detective work when checking out who you might hire to manage your money.
Carnival of Real Estate	Famous American Homes of an Era Bygone	Zillow Blog	Sarah Greenleaf provides a tour of the homes of some of America's wealthiest historical figures, including William Randolph Hearst and Al Capone!
Festival of Frugality	How Costco Primes Us to Spend More Money….	The Greenest Dollar	Heather explains that how Costco is physically organized "conditions" its customers to do a lot of spending. Absolutely essential reading!
Festival of Stocks	How Warren Buffet Gets Better Deals Than You (And How You Can Do It Too)	eMoneyLog	You might think a post about Warren Buffet from the Festival of Stocks would have to do with his rather famous ability as an investor. Instead, eMoneyLog focuses on his ability as a solid businessman.
Money Hacks Carnival	In the Long Run, College Will End Up Hurting Your Savings	Lucrative Investing	What would happen if you had two friends, both having saved for college, but one who went and the other who put their savings in the stock market instead? Jennifer McClelland answers the question in Absolutely essential reading!

Previous Editions

• OMM's Running Index for 2008
• OMM's Running Index for 2007
• The Best Blogs Found in 2006 (and our full 2006 index)!

Labels: carnival

- posted by Ironman at 9:35 AM | Permalink | |

It's been nearly two years since we first posted Part 1, but with the reckless comparison of the world's various national health care systems, we thought it was time to revisit the topic, although this time, we're going to do it mostly with pictures!

First, let's begin with the evidence that the advocates of universal health care in the United States frequently toss out to support their contentions that the cost of health care in the U.S. is excessive. The chart to the right shows the relative position of each developed nations of the world total health expenditures per capita with respect to its Gross Domestic Product per capita.

At a level of $6,194 per person in 2004, it would appear from this chart that people in the U.S. are paying way more than everyone else in the world for health care. But, as we note in the chart, can you really compare the United States, a nation of around 300 million people, to nations like Luxembourg, whose population is less than half a million?

It seems to us that there is far too much variation represented by the data point for the United States for there to be any meaningful comparison to the other, often much smaller, developed nations of the world, as represented by the members of the Organisation of Economic Co-operation and Development (OECD).

Our solution? To divide the United States up into its individual states, which themselves are often more comparable to other nations than the other nations are to the United States as a whole. We also went beyond what we had previously presented, in that we've also broken the provinces and territories of Canada and the states and territories of Australia out in a similar fashion! Breaking each of these nations sub-national components out will provide many more datapoints around which we might better map out any relationship that exists between health expenditures per capita and GDP per capita.

Before doing that however, we notice that there are some really unexpected outcomes. We find that the highest health expenditures per capita in the world aren't in the United States, but instead are found in Canada. Specifically, the province of Nunavut, which is home to 31,000 (mostly Inuit peoples) and which must literally transport all its building supplies from Canada's southern provinces given its remote Arctic Circle location. Consequently, we view Nunavut as an extreme outlier, whose health care expenditures per capita reflect extraordinarily high costs not typical elsewhere in the world.

We next find another extreme outlier, once again represented by a comparatively small population: Washington D.C. As the seat of government in the United States, the District of Columbia GDP per Capita reflects the outsize contribution of the federal government. Likewise, health expenditures per capita are also elevated.

Performing a regression analysis using ZunZun's 2-D Function Finder, we do however find that the relationship that exists between health expenditures per capita and GDP per capita is not linear. The curve shown in the chart represents that for a Weibull distribution, with an R-squared value of 0.5487. However, that represents the influence of the two components, Canada's Nunavut province and Washington D.C. in the United States, to the overall relationship. What might happen if we omit these two extreme outliers from our dataset?

Our final chart reveals that a much stronger relationship exists - one based on the NIST Rat42 distribution, which is similar to a logistic or sigmoid "S"-shaped distribution. We also find that the determination coefficient, R-squared, grows higher in value to 0.6124, indicating a much better correlation between the national and sub-national units. We also see evidence that the law of diminishing returns applies to health care expenditures. Instead of seeing such expenditures go up without end as income increases, represented by GDP per capita, we instead confirm that there's very little additional spending once income rises beyond a particular point.

We also note the relative positions of the various nations with respect to the curve defining the basic correlation between health expenditures and GDP per capita. What we find is that those nations whose national health care systems constrain their costs of operation through rationing mechanisms (making certain kinds of health care less available) tend to fall to the right of and below the level that would otherwise be indicated by their level of GDP per capita. The more extreme nations in this regard include Japan, Italy, New Zealand, Norway, Spain and the United Kingdom.

Both Canada and Australia utilize similar constraints on the availability of various types of health care, which accounts for the presence of many of their provinces and states in this zone.

Data Sources

The data sources from which we obtained the values presented in the charts are below. All data was accessed on 7 July 2009:

[1] U.S. Personal Health Care Expenditures by State of Residence, 2004 - This is why we looked just at 2004 and not more recent years. The United States' government has not updated this information since 2007, which then was only current through 2004. This is why we're not presenting more recent data, even though nearly current state, provincial and territorial data is available for both Canada and Australia for more recent years.

[2] U.S. Census Population Estimates by State, 2004 - Excel spreadsheet with data for multiple years. We used this data to convert each state's GDP data to GDP per capita.

[3] U.S. Bureau of Economic Analysis GDP by State, 2004, All Industry Total - This data is available through an online database.

[4] National Health Expenditures Aggregate, Per Capita Amounts, Percent Distribution and Average Annual Percent Growth, by Source of Funds: Selected Calendar Years 1960-2007 - We used these figures to correlate the recorded data for 2004 with that the OECD provides in [5] for the U.S in that year. The national data also accounts for elements not given by the personal health expenditure data by state provided by [1], so this data was also used to adjust each state's per capita health expenditures by applying a consistent multiplier to each state's data, which equally distributes these national level expenditures among the separate states.

[5] OECD Health Data, 2009 - Excel spreadsheet with a wealth of various health care system measures for OECD countries beginning in the 1960s.

[6] GDP-PPP per Capita, 2004 - Nationmaster presents the OECD's Gross Domestic Product data for its member nations for 2004, adjusted to account for Purchasing Power Parity.

[7] Health Expenditure Australia, 2004-05 - we excerpted data for the 2003-04 and 2004-05 fiscal years from Table 9, which presented the Average Health Expenditure per Person, in Current Prices, by State and Territory, from 1996-97 through 2004-05. Since Australia's fiscal year runs from July 1 through June 30, we equally weighted the data in the table to determine just a value for 2004, which we then adjusted to correlate with the OECD's per capita health care figure, the latter process was similar to that we did for U.S. data.

[8] Australian National Accounts State Accounts (5220.0) - Here, we extracted GDP by state data from Table 4, which presented Australia Gross State Product per Capita, Current Prices, 2003-04 and 2004-05. We handled the fiscal year data similarly to what we described above.

[9] Canada National Health Expenditure Trends, 1975 to 2008 - We extracted and adapted the data from Table 4, which gave the Provincial/Territorial Government-Sector Health Expenditure, by Province/Territory and Canada, 1975-2008 - Current Dollars, which is Table B.4.2 in the actual report.). We once again correlated the national level data with the OECD data to determine the provincial and territorial health care expenditure figures.

[10] Canada Gross Domestic Product, Expenditure-Based, by Province and Territory - We correlated the Canadian GDP figure with the OECD data to determine the provincial and territorial GDP figures.

[11] Canada Population by Year, by Province and Territory - We used this data to convert the provincial GDP figures into GDP per capita.

Labels: health care

- posted by Ironman at 1:40 PM | Permalink | |

Stock prices, we find, behave as though they are driven by a combination of signal and noise. The signal is provided by the fundamental elements that underlie stock prices, namely changes in the expected future growth rate of trailing year dividends per share with respect to initial conditions set by previous stock prices. And though we would estimate that signal controls the direction and level of stock prices around 70% of the time, noise is always present and affects the level of stock prices the remainder of the time.

Noise is what we observe behind the recent decline in stock prices, which we've seen plunge from a level for the S&P 500 of 923.33 on 1 July 2009 to the closing value of 881.03 on 7 July 2009.

During that time, we've observed just one event that has reduced what investors would expect for the future level of dividends, which came as timber and forest products producer Weyerhaeuser slashed their dividend by 80%, from 25 cents per share to just 5 cents per share.

Even with that change, using the math that describes how stock prices work with the dividend futures available through 8 July 2009, we find that we would still place our target range for the S&P 500 in the near term between 925 and 945.

Digging deeper into the bear cave, we considered the possibility that the recent decline in stock prices might be the result of investors shifting their focus from the dividends per share expected at the end of the year (given by the dividend futures for the first quarter of 2010 - dividend futures contracts for the fourth quarter of 2009 ends on 20 December 2009.) Shifting that focus toward the farther future produces much higher projections for stock values, shifting it backward to the nearer term produces much lower projections for stock values than where they've actually gone, so we're ruling out a change in investor focus as a factor at this time.

We next wondered if investors were instead altering the level from which they base stock prices. We've found that typically, investors base the future level of stock prices upon the average level of stock prices of a year ago and the change over that time, but we have observed changes in that frame of reference, which sets the initial level from which changes in stock prices are determined in our methods.

That also failed to produce changes of the magnitude that we have observed in the past week, so we will rule out, for now, this factor as a potential cause.

That leaves just one other factor that can generate the changes in stock prices that we've observed in the past week: noise.

For our math, the effects of noise are incorporated into the amplification factor that we use to correlate changes in the expected future growth rate of trailing year dividends per share with changes in the growth rate of stock prices. Since 2001, we've observed that this amplification factor has generally run between a level of 7.0 and 11.0 and, for our recent stock price projections, between 7.0 and 9.0.

To reach the level of stock prices that we observe for 7 July 2009, combined with the changes in the signal-driven components of our stock price math, this factor would need to drop to a level of 1.0.

What this result tells us is that the current market action is likely the result of speculative noise - investors would appear to be anticipating rather significant cuts to corporate dividends per share, but are doing so with as yet little evidence to support that speculation.

The question is what's driving that speculation?

Inside the Noise

To answer that question, we need to go within the S&P 500, to find out which of the index' sectors are pulling the index downward.

We used StockCharts Sector SPDR PerfChart, which allows us to compare the S&P 500's various sectors against the baseline performance of the S&P 500 as a whole. Doing that, we created the following chart in looking back over the previous 30 days of market activity:

Here, we see that Energy stocks have dived lower, as the price of oil has fallen with speculation of lower economic growth in the world, we see that Materials and Industrials stocks have likewise dipped for the same reason, while Technology stocks have contributed to the decline by having pulled back from recent increases.

The question that remains to be answered is whether this speculation, if it does come to pass, will materialize in a lower expected growth rate of dividends per share that will provide the fundamental basis for lower stock prices. The thing about noise is that while we might be able to identify some sources and their duration, we cannot do so for other sources, such as those that now appear to be driving the market.

Perhaps the nicest thing about the theory of stock prices that we've developed is that it tells us when it works and when it doesn't!

We'll close this post with our chart showing the spread between what investors expect for where trailing year dividends per share will bottom and the farthest quarter into the future for which our source for dividend futures data provides data:

Note to Roubini: investors have not been expecting a V-shaped recovery for quite some time. As Barry Ritholtz might put it, they're expecting "less bad...."

Labels: chaos, SP 500, stock market

- posted by Ironman at 9:09 AM | Permalink | |

If African-American teenagers are any indication, half of the entire black population of the United States has chronic Vitamin D deficiency. These individuals then make up nearly 3 out of 5, or 57.2%, of all those who have Vitamin D deficiency in the United States.

Here's how we know. Earlier this year, the findings of a study conducted by New York City's Weill Cornell Medical College researchers Sandy Saintonage, Heejung Bang and Linda M. Gerber were published in Pediatrics: Implications of a New Definition of Vitamin D Deficiency in a Multiracial US Adolescent Populatuion: The National Health and Nutrition Examination Survey III in March 2009.

The study sought to determine the extent of Vitamin D deficiency nationally in the United States' population of adolescents given the then proposed increase in the determination threshold of Vitamin D deficiency. At the time of the study, the level of deficiency was defined as an individual's serum 25-hydroxyvitamin D level begin below 11 nanograms per milliliter (ng/mL), which recently has been increased to include serum levels of up to 20 ng/mL as the new standard.

The study used data from the National Health and Nutrition Examination Survey III, which looked at a cross-sectional nationally representative sample of 2955 individuals between the ages of 12 and 19, and which ran in the years from 1988 to 1994, taking into account their sociodemographic characteristics. Doing that, the study's authors found that the incidence of Vitamin D deficiency increased from 2% of the sample population under the old standard to 14%, or 414 out of the sample population of 2,955 with the new, higher standard.

For black teenagers however, the increase in the incidence of Vitamin D deficiency is more significant. Under the old standard, some 11% of the sample population would have been counted as being deficient in Vitamin D under the old standard. Under the new standard, that figure increases to 50% of the sample population.

Since the source data for the study considers those Age 12-19, we extracted the size of the black population within the survey sample by first finding the percentage of blacks within the entire U.S. population. Since the survey ran from 1988 through 1994, we found that value by backing out the birth years of those who would have been 19 years old in 1988, the first year of the survey, and 12 years old in 1994, the final year of the survey. This gave us a range of birth years for the sample population of 1969 through 1982.

We next utilized the CDC's records of the number of live, registered births in the United States by race for these years. From 1969 through 1982, there were 47,831,224 live births registered in the U.S., of which, 7,654,595 were counted as being black (according to the race of the child before 1980 and the race of the mother after 1980). That works out to be 16.00%. While black mortality is generally higher than than for whites, especially in the first year of life, we've previously found that there's just a 1% difference between those who reach ages between 1 and 20 for the black and white populations, so we used the 16% of the population figure for our calculations.

With that percentage, we can now estimate how many of the sample population of 2,955 were black. Multiplying this figure by 16%, we find that 473 members of the surveyed sample were black. 50% of this figure was counted as having Vitamin D deficiency according to the new standard, which works out to be 236 individuals.

Going back to the sample population, we find that 14% of the 2,955 individuals Age 12-19 were counted as having Vitamin D deficiency, which works out to be 414 individuals. We therefore find that the 236 black individuals with Vitamin D deficiency represent 57.2% of all those with Vitamin D deficiency in the United States.

The study also found that non-Hispanic blacks were 20 times more likely than their non-Hispanic white peers to have Vitamin D deficiency. Dividing 236 by 20 and rounding to the nearest whole number, that means that there were 12 whites counted as having Vitamin D deficiency, or 2.9% of the entire sample population.

The remaining 165 individuals counted as having Vitamin D deficiency represent 40% of those with the condition. The authors' other observations will be unsurprising to long-time Political Calculations readers. Here are a selection of study author Linda Gerber's comments from the Lempert Report on 27 April 2009 (emphasis ours):

"While previous guidelines were based on the prevention of rickets, scientists have found that higher serum levels of vitamin D are necessary to achieve optimal bone mineralization throughout the lifespan," says Dr. Linda Gerber, co-author of the study and Professor of Public Health and Medicine at Cornell.

...

"Generally, milk had been the primary source of dietary vitamin D among children. Among adolescents milk consumption has been replaced by soft drinks, juice, and other beverages that are not fortified with vitamin D. Further, many teens from ethnic populations are lactose intolerant and avoid milk. Though there are other nutritional sources of vitamin D, many teens are eating foods that are low in nutritional value," says Gerber.

Helping overweight teens achieve proper vitamin D levels presents a unique challenge. Vitamin D is fat soluble, so deficiency in this population may be magnified if the vitamin is hiding in body fat, limiting bioavailability. Oral doses approaching the upper limit of 2000 IU/day may be necessary for this group, says Gerber. And appropriate nutrition should be a longer-term goal.

...

"New evidence suggests that vitamin D deficiency may be associated with risk factors for many chronic diseases such as high blood pressure. Therefore, by studying the adolescent population, we may be able to prevent the progression to some of these," she says.

Follow the links below for more of what we've had to say on the topic:

Blacks Living Longer Than Whites

The post that started the whole thing! We were surprised to find that blacks over the age of 80 had longer remaining life expectancies than whites of the same ages in the U.S. We also used the opportunity to ridicule some pretty blatant rent-seeking behavior on the part of researchers seeking funding for their work.

Erasing the Gap in Racial Life Expectancies

We revisited the life expectancy figures between blacks and whites and took a closer look at the underlying data, which allowed us to reject racism as an explanation for what we observed. We also began asking "why this, but not this?" in comparing not just the survivorship of the black and white populations of the United States, but urban vs rural blacks, immigrant vs native-born blacks, and the effect of older vs younger mothers for African American infant mortality.

The Disproportionate Killers

You can't address racial disparities in life expectancies unless you know what chronic health conditions disproportionately affect the black population of the United States compared to other racial or ethic groups.

African Blessings, African Curses

Chronic diseases often have a very strong genetic or heredity component in determining who is vulnerable to them. In this post, we explored the idea that what doesn't kill you either softens you up for what will or makes you more vulnerable to other health hazards in comparing the black population of the United States to sub-Saharan Africans who share much the same genetic anthropology, while also discovering very recent research whose results potentially explain why all peoples of African descent are more vulnerable to the things that disproportionately kill African Americans.

A Seemingly Simple Solution

Does a chronic vitamin deficiency explain why the disparities between black and white life expectancies in the U.S.? We explore this possibility and why it may not as easy to address as you might think on first glance, as well as how individual African Americans might do so successfully.

Labels: health

- posted by Ironman at 9:46 AM | Permalink | |

Kate Kashman of The Paycheck Chronicles blog recently used Bankrate.com's tool to find out how long it would take to pay off $5,710 of credit card debt if she only made the minimum payment for it.

The answer? 303 months (or 25 years and 3 months), assuming that the minimum payment made was one percent of the balance (including interest).

The thing is though that since Kate ran her numbers, a number of the biggest credit card issuers have significantly increased their minimum requireed payments. In response to political pressure from regulators at the government's Office of the Comptroller of the Currency, many large lending institutions have doubled their required minimum payments, with many going from minimum payments based on 2% of the outstanding balance to 4%.

That may impact your cash flow a bit today, but what about paying off your credit card at the new, higher levels? Do you have any idea how long it will take to pay your credit card off now? (Assuming, that is, you don't go right back out and start charging it back up again.)

We here at Political Calculations don't know either, but at least we have the tool to do the math for you! Enter your data in the fields below, including the information from your credit card issuer outlining what their minimum payment percentage and their minimum fixed payment amount (usually, the greater of the two applies), and we'll tell you just how long you'll be in "credit indentured servitude" (for the record, we stop the calculations at 100 years, which we justify by assuming that the debt is fully paid by your heirs in settling your estate....)

Running the default values, with the minimum interest rate or minimum payment amount set at 2.0% and $25.00 respectively, we find that it would take 14.6 years to pay off this credit card debt at the old minimum payment levels, requiring $8,215.56 in payments over that time. If we double these amounts to 4.0% and $50.00, we find that reduces the duration of the payments to 6.1 years, with total payments summing to $6,723.97.

So while a borrower making minimum payments today will have their cash flow pinched, there is a beneficial tradeoff in that they would pay off their debt some 8.5 years earlier, assuming they don't charge it right back up in the meantime.

Psst!... Want the Code?

Hey buddy! Yeah, you! C'mere a minute....

Have we got a deal for you. Right now, for a limited time only, we're *giving* away the code for this tool!

What's the catch? There isn't any. We just ask that you keep the "Code created with the assistance of Political Calculations" text and link with the tool and inform your readers if you modify anything other than the default form values.

So here's how you do it. The text box below contains the standalone web page code for the tool in this post. Copy and paste it into your preferred text editor (such as Notepad, etc.) and save it on your web server or PC with a ".html" extension.

If you want it on your blog, you'll need to copy and paste everything that appears between (and including) the "<SCRIPT LANGUAGE="JavaScript">" and the "</SCRIPT>" tags into the Head section of your blog's template. Then copy and paste everything that appears between (but not including) the "<BODY>" and "</BODY>" HTML tags into a regular blog post.

You'll also notice that the <BODY> code doesn't have any line breaks - this is to accommodate those bloggers whose blogging platforms automatically insert them, and who would therefore see a jumble of blank lines around the form table.

Ready for the code? Here it is....

Good luck!

Labels: debt management, personal finance, tool

- posted by Ironman at 11:06 AM | Permalink | |