Quotulatiousness

May 10, 2013

Early signs of “rejuvenation therapy”?

Filed under: Health, Science — Tags: , , — Nicholas Russon @ 08:41

An interesting report from the Harvard Gazette on some research into a possibility of reducing some of the effects of aging, specifically aging of the heart:

Two Harvard Stem Cell Institute (HSCI) researchers — a stem cell biologist and a practicing cardiologist at Brigham and Women’s Hospital — have identified a protein in the blood of mice and humans that may prove to be the first effective treatment for the form of age-related heart failure that affects millions of Americans.

When the protein, called GDF-11, was injected into old mice, which develop thickened heart walls in a manner similar to aging humans, the hearts were reduced in size and thickness, resembling the healthy hearts of younger mice.

Even more important than the implications for the treatment of diastolic heart failure, the finding by Richard T. Lee, a Harvard Medical School professor at the hospital, and Amy Wagers, a professor in Harvard’s Department of Stem Cell and Regenerative Biology, ultimately may rewrite our understanding of aging.

Research of this type may be very important as the baby boomer generation enters retirement age … not necessarily to extend total lifespan, but to increase the chances for healthy activity longer into our existing lifespan. Few of us would want to live to 100 if the last 20 years are pain-wracked, immobile, and inactive … but being able to live that long and managing to keep doing the things we like to do for most of that time? That’d be much more appealing to many of us.

April 25, 2013

What we “know” as opposed to what is actually true

Filed under: Business, Football, Health, Law — Tags: , , , , — Nicholas Russon @ 13:36

We all know the NFL is in serious trouble as more evidence comes out about the relationship between playing professional football and brain damage in later life. But what we know may not be true:

Dr. Everett Lehman, part of a team of government scientists who studied mortality rates for NFL retirees at the behest of the players’ union, discovered that the pros live longer than their male counterparts outside of the NFL. The scientists looked at more than 3,000 pension-vested NFL retirees and expected 625 deaths. They found only 334. “There has been this perception over a number of years of people dying at 55 on the average,” Dr. Lehman told me. “It’s just based on a faulty understanding of statistics.”

The scientists also learned that, contrary to conventional wisdom, NFL players commit suicide at a dramatically lower rate than the general male population. The suicides of Junior Seau, Dave Duerson, and Andre Waters don’t represent a trend but outliers that attract massive attention, and thereby massively distort the public’s perception. More typical was the death of Pat Summerall, who passed away quietly last week at 82 after a productive post-career career.

Indeed, a 2009 study by University of Michigan researchers reported that NFL retirees are far more likely to own a home, possess a college degree, and enjoy health insurance than their peers who never played in the league. The myth of the broke and broken-down athlete is just that: a myth. A few surely struggle after competition ceases; most apply their competitive natures to new endeavors.

It’s true that skill-position players on rosters for five or more years in the NFL faced elevated levels of Alzheimer’s, Lou Gehrig’s, and Parkinson’s disease deaths. But some perspective is in order. Of the 3,439 retired athletes studied by Lehman’s group, less than a dozen succumbed to deaths directly attributable to these neurodegenerative killers. Had Parkinson’s killed one rather than the two retirees it did kill, for example, its rate would have been lower among players than among the general population.

It’s quite possible the NFL is concerned (and ensuring that it is seen to be concerned) primarily because of the need to address public perceptions, rather than as a defensive move against future or ongoing legal challenges.

March 24, 2013

The domestic economy of Cyprus is slowing to a stop

Filed under: Economics, Europe — Tags: , , , , — Nicholas Russon @ 10:09

In the Telegraph, Colin Freeman looks at how the banking crisis is impacting ordinary Cypriots and retired EU citizens in Cyprus:

Last weekend, the small Mediterranean island was plunged into the epicentre of the eurozone crisis when Brussels finance chiefs, led by Germany, demanded a levy of up to ten per cent of savers’ deposits in return for a 10bn euro bail-out of the country’s ailing banks. The move left many of Cyprus’s 60,000-strong British community facing heavy losses on retirement nest eggs — and as the week rolled on, that looked like being just the least of their worries.

On Thursday, unhappy at the Cypriot parliament’s rejection of the deal, Europe’s Central Bank then threatened to cut financial life support for the island altogether, a move that would have led to its banking sector collapsing, and savers losing not just a percentage of their money, but all of it. It was only thanks to a last-minute agreement hammered out on Friday night, which is expected to restructure the country’s banks and restrict the levy to deposits of more than 100,000 euros, that all-out chaos was averted. For now, anyway.

[. . .]

Since last weekend, when all of Cyprus’s banks were shut to stop a run on withdrawals, work has ground to a halt, as the repair man has been unable to buy in the materials he needs from suppliers, who are all now demanding cash. The job symbolises the malaise of the wider Cypriot economy, built on shaky foundations, and now in a state of paralysis, with thousands of shops, businesses and restaurants unable to operate properly because of the financial uncertainty.

“None of my food and drink suppliers are taking bank payments any more,” said Yiota Vrasida, 43, who owns a café in the winding streets of the capital, Nicosia. “We can keep going until this weekend, but that is about it.”

[. . .]

“Nobody will want to leave so much as 10 euros in any Cypriot bank any more,” said Dino Karambalis, 49, an IT worker, standing at the end of a 30-people-long queue at the Laiki Bank, where he had 90,000 euros in savings. “They say this levy is only for Cyprus, but why should anyone believe that? This is undermining confidence in the euro as a whole, and in the whole EU project itself. I was pro-European before, but not now.”

This weekend, the Cypriot parliament sought to reassure smaller savers, saying those with less than 100,000 euros would face at most a levy of less than one percent. State television also talked of a one-time charge of up to 25 percent on savings of over 100,000 euros held at the Bank of Cyprus. With that in mind, capital controls will be imposed to stop a run on the banks when they reopen next week.

But whatever new measures come in, some damage has already been done by declaring savers’ accounts to be fair game in the first place. Britain’s Business Secretary, Vince Cable, warned on Friday that it could lead Northern Rock-style runs on banks all over the eurozone in future.

January 28, 2013

Japanese finance minister: “elderly are an unnecessary drain on the country’s finances”

Filed under: Government, Health, Japan — Tags: , , , — Nicholas Russon @ 11:32

The Guardian reports on recent comments by the new finance minister in Japan:

Japan’s new government is barely a month old, and already one of its most senior members has insulted tens of millions of voters by suggesting that the elderly are an unnecessary drain on the country’s finances.

Taro Aso, the finance minister, said on Monday that the elderly should be allowed to “hurry up and die” to relieve pressure on the state to pay for their medical care.

“Heaven forbid if you are forced to live on when you want to die. I would wake up feeling increasingly bad knowing that [treatment] was all being paid for by the government,” he said during a meeting of the national council on social security reforms. “The problem won’t be solved unless you let them hurry up and die.”

Aso’s comments are likely to cause offence in Japan, where almost a quarter of the 128 million population is aged over 60. The proportion is forecast to rise to 40% over the next 50 years.

[. . .]

To compound the insult, he referred to elderly patients who are no longer able to feed themselves as “tube people”. The health and welfare ministry, he added, was “well aware that it costs several tens of millions of yen” a month to treat a single patient in the final stages of life.

Cost aside, caring for the elderly is a major challenge for Japan’s stretched social services. According to a report this week, the number of households receiving welfare, which include family members aged 65 or over, stood at more than 678,000, or about 40% of the total. The country is also tackling a rise in the number of people who die alone, most of whom are elderly. In 2010, 4.6 million elderly people lived alone, and the number who died at home soared 61% between 2003 and 2010, from 1,364 to 2,194, according to the bureau of social welfare and public health in Tokyo.

The government is planning to reduce welfare expenditure in its next budget, due to go into force this April, with details of the cuts expected within days.

Sadly, expect more of this kind of comment from hard-pressed governments as the baby boomers move out of work and into retirement.

January 16, 2013

When is a retirement fund not a retirement fund?

Filed under: Economics, USA — Tags: , , — Nicholas Russon @ 00:02

When you draw it down long before retirement to pay ordinary living expenses:

This trend has been in place since the financial crisis, but the fact that it is accelerating is extremely disconcerting. First off, this is not the kind of behavior that should be witnessed in an “economic recovery.” Second, we need to remember the huge percentage of Americans on food stamps and/or disability. As we have discussed previously, many of them also have jobs. So essentially, a wage and a check from the government is still not enough to survive. They still need to tap into a loan from their 401k plans.

From the Washington Post:

    More than one in four American workers with 401(k) and other retirement savings accounts use them to pay current expenses, new data show. The withdrawals, cash-outs and loans drain nearly a quarter of the $293 billion that workers and employers deposit into the accounts each year, undermining already shaky retirement security for millions of Americans.

    [. . .]

    “We’re going from bad to worse,” said Diane Oakley, executive director of the National Institute on Retirement Security. “Already, fewer private-sector workers have access to stable pension plans. And the savings in individual retirement savings accounts like 401(k) plans — which already are severely underfunded — continue to leak out at a high rate.”

    A report due out this week from the financial advisory firm HelloWallet found that more than one in four workers dip into retirement funds to pay their mortgages, credit card debt or other bills. Those in their 40s have been the most likely culprits — one-third are turning to such accounts for relief.

December 18, 2012

Don’t expand the Canada Pension Plan: reform it

Filed under: Cancon, Economics, Government — Tags: , , , — Nicholas Russon @ 10:52

Andrew Coyne briefly praises the CPP before advancing a plan to (eventually) supplant it entirely:

By most measures, Canada’s retirement income support system is an outstanding success. The poverty rate for Canadian seniors, with just 4.4% living below half the median income, is among the lowest in the world. The Canada Pension Plan, once careening towards insolvency, is now on a sounder footing. Millions of Canadians contribute to their Registered Retirement Savings Plans every year, with a view to replacing more of their income than the 25% covered by the CPP; Tax-Free Savings Accounts are a fast-growing alternative. For most people, then, the pension system works well. There is no evidence of a generalized pension “crisis.”

[. . .]

Suppose an additional levy were tacked onto CPP premiums. Only instead of going into the regular CPP pot, the funds would accumulate in the contributor’s own personal fund — like an RRSP, only compulsory. To avoid wasting money on management fees, funds would be invested strictly passively (ie buying the indexes), with the particular asset mix varying as the investor aged: more stocks when younger, more bonds when older.

Any increase in benefits would thus have to be fully funded; at the same time, since legal title to the funds would rest with the contributor, there would be no way politicians could raid the kitty. Moreover, with such a direct link between contributions and the size of their nest egg, contributors would be less likely to see the rise in premiums as a tax increase, and more as savings, mitigating labour market effects, at least on the supply side.

On its own, this would be vastly preferable to CPP expansion. If we liked the results, we might even think of going further. Over time, one could imagine migrating more and more of the regular CPP over to these mandatory personal accounts, allowing the CPP fund to be slowly wound down. Rather than simply expanding the CPP, the challenge of population aging presents an opportunity to reform it.

October 16, 2012

Early Baby Boomers had it much easier than those who followed

Filed under: Cancon, Economics, USA — Tags: , , , , , — Nicholas Russon @ 10:44

Depending on where you draw the demographic line, I’m either a (very) late Baby Boomer or an early arrival from the next generation. I “get” the anger that some younger folks feel about the BB’s, because I came along too late to benefit in the same way that the early boomers did:

But, have baby-boomers really enjoyed a cozy ride through life? The truly lucky were their parents, who worked in the post-Second World War “Golden Age” of low unemployment, rapidly rising real wages, rising house prices, and expanding public and private pension plans.

The postwar boom was petering out by the late 1970s and early 1980s, just as many baby boomers were entering the job market. The 1980s and 1990s were marked by two severe recessions, and by an increase in jobs which often did not provide steady wages or a decent pension.

The unemployment rate for the baby-boomers, then mainly in their early thirties (age 30-34), was more than 10 per cent from 1983 to 1985, and over 8 per cent for the boomers in their late thirties during the recession years of 1992 to 1994.

Many baby-boomers never managed to find the secure and well-paid jobs characteristic of the 1960s and 1970s that lay the basis for a decent retirement. A recent study by former Statscan assistant chief statistician Michael Wolfson found that one-in-four middle-income baby boomers face at least a 25 per cent fall in their standard of living in retirement. (He looked at persons born between 1945 and 1970, and earning between $35,000 and $80,000 per year.)

The proportion of all persons age 65 to 70 who are still working bottomed out at 11 per cent in 2000 and is now 24 per cent, and about one half of persons aged 60 to 65 are still working today.

In my entire career, I’ve worked for only one company that provided a pension plan — and I was laid off before my contributions vested anyway. I don’t expect to ever voluntarily retire: I won’t be able to afford it. And I’m far from alone in that.

July 30, 2012

Federal government cracking down on Old Age Security applicants

Filed under: Bureaucracy, Cancon, Government — Tags: , , — Nicholas Russon @ 16:55

An interesting story in the Toronto Star:

After 40 years as a registered nurse, Yvonne Gardner never thought she’d have to beg to get her federal pension benefits.

For 14 months, the Toronto retiree has been struggling to prove to Service Canada that she’s eligible for the $500 monthly Old Age Security (OAS) pension.

In the latest twist, she was asked for copies of plane tickets for all of her travels in and out of Canada since moving here from England in 1975 — a mission impossible — as proof she has lived here the minimum 10 years required to qualify.

Deprived of the pension she was counting on, Gardner, a native of Suffolk, England, is 10 months behind in rent on her one-bedroom downtown apartment and faces eviction.

If this woman’s issue is typical, then I will probably also have problems claiming OAS, as my family came to Canada in 1967 and I know for certain that we did not retain any of our travel documents from that far distant time.

However, the story is in the Toronto Star, which certainly has been willing to creatively tell stories that make the government look bad in the past. Here’s a comment on the story that has to be a joke:

I have no idea why this person thinks the story has anything to do with Capitalism, but he or she is certain that the answer is Socialism. Doesn’t much matter what the question is, I guess.

June 18, 2012

Who’s afraid of austerity?

Filed under: Economics, Europe, Government, USA — Tags: , , , , — Nicholas Russon @ 08:17

At the BBC News website, Niall Ferguson on why young westerners should welcome austerity:

The heart of the matter is the way public debt allows the current generation of voters to live at the expense of those as yet too young to vote or as yet unborn.

In this regard, the statistics commonly cited as government debt are themselves deeply misleading, for they encompass only the sums owed by governments in the form of bonds.

The rapidly rising quantity of these bonds certainly implies a growing charge on those in employment, now and in the future, since — even if the current low rates of interest enjoyed by the biggest sovereign borrowers persist — the amount of money needed to service the debt must inexorably rise.

But the official debts in the form of bonds do not include the often far larger unfunded liabilities of welfare schemes like — to give the biggest American schemes — Medicare, Medicaid and Social Security.

The most recent estimate for the difference between the net present value of federal government liabilities and the net present value of future federal revenues is $200 trillion, nearly thirteen times the debt as stated by the U.S. Treasury.

Notice that these figures, too, are incomplete, since they omit the unfunded liabilities of state and local governments, which are estimated to be around $38 trillion.

These mind-boggling numbers represent nothing less than a vast claim by the generation currently retired or about to retire on their children and grandchildren, who are obligated by current law to find the money in the future, by submitting either to substantial increases in taxation or to drastic cuts in other forms of public expenditure.

[. . .]

It is surprisingly easy to win the support of young voters for policies that would ultimately make matters even worse for them, like maintaining defined benefit pensions for public employees.

If young Americans knew what was good for them, they would all be in the Tea Party.

A second problem is that today’s Western democracies now play such a large part in redistributing income that politicians who argue for cutting expenditures nearly always run into the well-organised opposition of one or both of two groups: recipients of public sector pay and recipients of government benefits.

January 31, 2012

Andrew Coyne on the sudden appearance of Stephen Harper’s “hidden agenda”

Filed under: Cancon, Economics, Government, Politics — Tags: , , , , — Nicholas Russon @ 12:19

We’ve been waiting for it to appear since the 1990′s, so it’s about time that it finally put in a cameo:

At last, the hidden agenda, and not a moment too soon. Vague, indirect and overseas as it was, Stephen Harper’s Davos speech was perilously close to a vision statement, of a kind the prime minister has seldom made until now, and will henceforth have to make often.

It would be nice if he had shared with us his concerns about the ageing of the population, and the threat it poses to our long-run social and economic health, sometime before the last election, rather than joining in the all-party consensus that there was nothing wrong with Canada that could not be fixed with more and richer promises to the elderly.

[. . .]

How serious is the cost side of this conundrum? The president of the C. D. Howe Institute, Bill Robson, has projected the “net unfunded liability” implied by this unprecedented demographic shift — that is, promises to pay benefits out of public funds for which we have made no provision in taxes, “net” of any savings from having fewer children about — at about $2.8-trillion. With a T, ladies and gentlemen: about 160% of GDP. (That’s in addition to the $800-billion unfunded liability in the Canada Pension Plan and its Quebec counterpart — yes, they are pulling in enough each year to meet their current obligations, but that does not mean they are “fully funded,” the prime minister’s claims to the contrary — to say nothing of the $600-billion national debt.)

January 12, 2012

QotD: When a figure is too high to be repaid, it won’t be repaid

Filed under: Bureaucracy, Economics, Government, Quotations — Tags: , , — Nicholas Russon @ 15:31

It’s hardly news anymore that public-sector pension promises will be made good (or not) on the backs of taxpayers, but I still think that the average private-sector packmule has no idea of the amount they’re going to have to pony up to vouchsafe the various municipal, state, and federal pension promises. The amount required over the next several decades beggars the imagination. In fact, the amount is preposterous: there’s no way the money is ever going to be paid out as promised. Even if it were mathematically possible (which it isn’t), taxpayers would revolt over the massive increases that would be required. If I were a public-sector worker, I’d be making a point of saving every dime of my own money that I could, because that fat public sector pension is unlikely to ever be paid out in full. (And I’m not even getting into the healthcare benefits, which are even more onerous than the pension benefits.) Basically, the bedrock truth is this: money that can’t be paid out, won’t be, no matter what agreements were signed or what the courts say.

Monty, “The Daily DOOM”, Ace of Spades HQ, 2012-01-12

December 27, 2011

Retirement age will have to rise: The Economist

Filed under: Economics, Government, Health — Tags: , , , — Nicholas Russon @ 10:38

In a development that should surprise nobody at all, governments around the world are slowly, reluctantly, grudgingly starting to make changes to their state pension systems:

Put aside the cruise brochures and let the garden retain that natural look for a few more years. Demography and declining investment returns are conspiring to keep you at your desk far longer than you ever expected.

This painful truth is no longer news in the rich world, and many governments have started to deal with the ageing problem. They have announced increases in the official retirement age that attempt to hold down the costs of state pensions while encouraging workers to stay in their jobs or get on their bikes and look for new ones.

Unfortunately, the boldest plans look inadequate. Older people are going to have to stay economically active longer than governments currently envisage; and that is going to require not just governments, but also employers and workers, to behave differently.

October 27, 2011

Postponing retirement: late Boomers and Gen X’ers face reality

Filed under: Cancon, Economics — Tags: , , — Nicholas Russon @ 00:04

Jonathan Chevreau shows that those of us getting a bit closer to retirement will have to wait longer than the previous generation before retiring:

The “double whammy” of falling stock prices and low interest rates has impacted members of DC pensions and RRSPs, who must cover the deficit through reduced personal spending and/or deferred retirement.

Towers Watson has issued its first quarterly DC Retirement Age Index, which it describes as a pension freedom tracker. It tracks the performance of a balanced portfolio of a DC plan member who has contributed to the plan from age 40 to 60. At that point, an annuity would be purchased but its value and monthly payout would depend on the performance of the plan over those 20 years.

[. . .]

With recession threatening, ongoing market volatility and falling interest rates, Towers Watson expects the Pension Freedom Age could move up to 67, or two years after the traditional retirement age (when Old Age Security and full Canada Pension Plan benefits commence).

September 11, 2011

The Canada Pension Plan and moral hazard

Filed under: Cancon, Economics, Government — Tags: , , , , — Nicholas Russon @ 11:37

An interesting post at Worthwhile Canadian Initiative looks at the overlooked failure in pension markets. I found this bit of information to be quite interesting, as it addresses a conversation I had with Dark Water Muse a few months ago:

Governments provide pensions in one of two ways. Pay As You Go (PAYG) plans use current contributions to fund current benefits. The Canada and Quebec Pension Plan were, when they were first introduced, PAYG plans. The moral hazard risk a worker faces with these plans is political: a politician will design the plan so as to maximize his or her chances of re-election.

The design of Canada and Quebec Pension Plan has created large benefits for the first generation of recipients (current voters) and a much lower rate of return for future recipients (future voters). Now those gainers were the generation that entered the labour market in the Great Depression and fought in World War II, so one could argue that the windfall gain they experienced was merited on equity grounds. The point here is merely that the design of PAYG pension plans reflects the interests of the designers (for re-election) as well as the interests of the contributors and recipients.

The Canada and Quebec Pension Plans are now transitioning into fully-funded plans. The Canada Pension Plan Investment Board was, as of June 30th 2011, managing $153 billion in assets. Some is managed directly by the board, the rest is managed by “partners” ranging from Istanbul-based Actera Group to New York-based Welsh, Carson, Anderson & Stowe. I suspect that the CPP, roaming the world with billions to invest, is able to negotiate low management fees, and there must be savings associated with economies of scale in investing. But the possibility of moral hazard — someone getting rich by diverting away a tiny percentage of the return on $153 billion, or a politician exerting pressure on the CPP investment board to make electorally-sound investments — remains.

In sum, while private pension markets suffer from moral hazard, it’s not clear that governments can solve the problem.

In my discussion with DWM, I claimed that the CPP was a PAYG system (in extreme examples, like the US social security system, this can be compared to a Ponzi Scheme), while DWM — claimed that the system was fully funded from investments. As the quoted section above shows, we each had part of the answer.

It’s hard to believe that the CPPIB (the organization that handles the investments of the CPP) can remain immune to government meddling — buy this company’s stock, invest in that company’s risky-but-located-in-a-marginal-riding new venture, etc. As long at the CPPIB can remain independent of political pressure, the system might work.

September 5, 2011

False ideas about investment risk

Filed under: Economics — Tags: , , , — Nicholas Russon @ 10:25

Dan Ariely points out that most people have no idea at all about some of the key questions on investment risks:

To this point, we’ve run a number of experiments. In one study, we asked people the same question that financial advisors ask: How much of your final salary will you need in retirement? The common answer was 75 percent. But when we asked how they came up with this figure, the most common refrain turned out to be that that’s what they thought they should answer. And when we probed further and asked where they got this advice, we found that most people heard this from the financial industry. Sort of like two months salary for an engagement ring and one-third of your income for housing, 75 percent was the rule of thumb that they had heard from financial advisors. You see the circularity and the inanity: Financial advisors are asking a question that their customers rely on them for the answer. So what’s the point of the question?!

In our study, we then took a different approach and instead asked people: How do you want to live in retirement? Where do you want to live? What activities you want to engage in? And similar questions geared to assess the quality of life that people expected in retirement. We then took these answers and itemized them, pricing out their retirement based on the things that people said they’d want to do and have in their retirement. Using these calculations, we found that these people (who told us that they will need 75% of their salary) would actually need 135 percent of their final income to live in the way that they want to in retirement. If you think about it, this should not be very surprising: If you add 8 hours (or more) of free time to someone’s day, they will probably not want to spend this extra time by going for long walks on the beach and watching TV — instead they may want to engage in activities that cost money.

You can see why I’m confused about the one-percent-of-assets-under-management business model: Why pay someone to create a portfolio that’s 60 percent too low in its estimation?

And 60% is if you get the risk calculation right. But it turns out the second question is equally problematic. To show this, we also asked people to tell us how much risk they were willing to take with their money, on a ten-point scale. For some people we gave a scale that ranges from 100% in cash on the low end of the risk scale and 85% in stocks and 15% in bonds on the high end of the risk scale. For other people we gave a scale that ranges from 100% in bonds on the low end of the risk scale and buying only derivatives on the high end of the risk scale. And what did we find? People basically looked at the scale and said to themselves “I am a slightly above the mean risk-taker, so let me mark the scale at 6 or 7.” Or they said to themselves “I am a slightly below the mean risk-taker, so let me mark the scale at 4 or 5.” In essence, people have no idea what their risk attitude is, and if they are given different types of scales they end up reporting their risk attitude to be very different.

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