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What Is Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)?
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EBITDA, or earnings before interest, taxes, depreciation, and amortization, is a measure of a company’s overall financial performance and is used as an alternative to net income in some circumstances. EBITDA, however, can be misleading because it strips out the cost of capital investments like property, plant, and equipment.
This metric also excludes expenses associated with debt by adding back interest expense and taxes to earnings. Nonetheless, it is a more precise measure of corporate performance since it is able to show earnings before the influence of accounting and financial deductions.
Simply put, EBITDA is a measure of profitability. While there is no legal requirement for companies to disclose their EBITDA, according to the U.S. generally accepted accounting principles (GAAP), it can be worked out and reported using the information found in a company’s financial statements.
The earnings, tax, and interest figures are found on the income statement, while the depreciation and amortization figures are normally found in the notes to operating profit or on the cash flow statement. The usual shortcut to calculate EBITDA is to start with operating profit, also called earnings before interest and tax (EBIT) then add back depreciation and amortization.
Posted on September 30, 2022 by The D.E.A. ROGUE WARRIOR
By Staff Reporters
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The final hour of trading on a Friday when stock index futures, stock index options, and stock options all expire. This happens on the third Friday in March, June, September, and December. See Quadruple Witching Hour.
Triple witching sounds like something from a horror movie, but it’s actually a financial term. Options and derivatives traders know this phenomenon well because it’s the day when three different types of contracts expire. It happens only once a quarter and can cause wild swings in volatility, as large institutional traders roll over futures contracts to free up cash. Doing so creates a ton of increased volume—sometimes 50% higher than average, especially in the last trading hour of the day—but individual investors needn’t feel spooked. In fact, some might even view this volatility as a profit-making opportunity.
Which 3 Types of Derivative Contracts Expire on Triple Witching Day?
Stock Options: These are contracts taken out on the direction of a stock price at a future date. Unlike stocks, they’re not an investment in a company; rather, they’re the right to buy or sell shares of a company at a later time frame. Calls let you buy stock shares at a set price, known as the strike price, on or before the expiration date. Puts give you the right to sell shares.
Index Options: These are futures contracts on a stock index, such as the S&P 500. These options are settled in cash.
Index Futures: These are futures contracts on equity indexes. These contracts are also settled in cash.
A futures contract is also referred to as an “anticipated hedge” because it’s used to lock in prices on future buy or sell transactions. These hedges are a way to protect a portfolio from market setbacks without selling long-term holdings.
It’s worth noting that a few times a year, single stock futures also expire on witching day, adding a fourth asset to the trading cauldron, and that’s why some investors refer to this date as “quadruple witching,” although the terms are interchangeable.
When Is Triple Witching? Triple Witching Calendar 2022
In modern trading, triple witching happens on the third Friday of March, June, September, and December (the last month of each quarter).
Upcoming Triple Witching Dates
Friday, March 18, 2022
Friday, June 17, 2022
Friday, September 16, 2022
Friday, December 16, 2022
What Is the Witching Hour?
In the U.S. stock market, the last hour of the trading day, before the closing bell, sees the most trading activity, so the witching hour is from 3–4 pm EST. In folklore, the “witching hour” actually happens in the dead of night, from 3–4 am. It was known as a time when spirits reached the height of their powers. During the Middle Ages, the Catholic Church even banned people from venturing outside during this time, so as not to get caught in the chaos.
Today, such ideas aren’t taken any more seriously than mere superstition, but triple witching can cause chaos among investors, if they are not aware of what is happening.
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What Happens During Triple Witching?
As you might imagine, a lot of trading activity happens in the market when stock options, index options, and index futures contracts all expire. We’re talking a lot of money here: during Triple Witching in September 2021, for example, around $3.4 trillion of equity options expired.
So, what exactly is going on? Should they keep their hedges on? Should they speculate? Should they roll, or close out, their contracts, and if so, by how much? This is what generates the increased trading activity, and the large trades, especially from offsetting trades, can cause temporary price distortions.
At the same instant that the derivatives contracts expire, the anticipatory hedges that traders have placed become unnecessary, and so traders also seek to close these hedges, and the offsetting trades result in increased volume. These large volume increases can in turn cause price swing (i.e., volatility) in the underlying assets.
How Does Triple Witching Affect the Stock Market?
Triple witching itself doesn’t move the stock market; it just creates increased volume. In the same way, the expiration of the options and futures contracts don’t necessarily result in volatility—that’s caused by the actions that traders take based on the temporary price fluctuations of their underlying assets which can be moved due to the increased volume.
When this happens, arbitrageurs try to take advantage, often making trades that are completed in mere seconds. An arbitrageur is a trader who looks for price inefficiencies in a security and then seeks to make a profit by buying and selling it simultaneously. This practice involves much risk.
Is Triple Witching Bullish or Bearish?
Historically speaking, triple witching is not always an “up” day, and it’s not always a “down” day for the markets. It does not signify a trend. Typically, it neither moves the market significantly higher nor lower; it simply adds a temporary increase in volume and liquidity.
However, it’s important to note that market volumes also tend to be higher on index re-balancing day as well as during and after broader macroeconomic news events, and so, when taken in tandem with triple witching, these events can cause big moves in the market.
Examples of Triple Witching Volatility in Light of News Events
On June 18, 2021, a record number—$818 billion—of stock options expired, which led to nearly $3 trillion in “open interest,” or open contracts. On this day, the Federal Reserve also announced that it might raise interest rates in 2023 due to inflationary pressures. These news events resulted in increased volatility, and the S&P 500 lost 1.3% while the Dow Jones Industrial Average dropped 1.6%.
On September 17th, 2021, one week ahead of the Federal Reserve’s meeting, market volatility was growing based on mounting concerns about the COVID-19 Delta variant impacting the economy as well as the Federal Reserve’s announcement that it would begin to unwind its monetary stimulus. These news events, taken along with the S&P 500’s quarterly index rebalancing, which also happened that day, caused the S&P 500 to lose 1%.
Is There Such a Thing as “Quadruple” Witching?
Single Stock Futures are the fourth type of derivative contract which can expire on triple witching day. This can cause the phenomenon to be called “quadruple witching,” although one term can replace the other. Single stock futures are futures contracts placed on individual stocks, with one contract controlling 100 shares being typical. They are a hedging tool that was previously banned from trading in the United States. The Commodity Futures Modernization Act lifted the ban in 2000, and single stock futures were traded on the One Chicago Exchange from November, 2002 until September, 2020, although currently they are only available on overseas financial markets.
How Did Triple Witching Affect 1987’s “Black Monday?”
On October 19th, 1987, the Dow Jones Industrial Average lost 22.6% in a single trading session. The day became known as “Black Monday,” but triple witching events, which took place the Friday before, on October 16, 1987, had caused the selloff of options and futures contracts to rapidly accelerate, resulting in stocks tanking in pre-day trading. The massive sell orders were left unchecked by any kinds of systematic stop gaps, and so financial markets roiled globally throughout the day. This stock market crash was the greatest one-day decline to occur since the Great Depression in 1929.
Taking lessons from the event, regulators moved the options expiration from the morning to the afternoon and put “circuit breakers” into place that would let the exchanges temporarily halt trading in the event of another massive sell off.
How Can Investors Prepare for Triple Witching Days?
The triple witching takeaway is that investors should be aware of what happens on these days and understand that there is a lot more volume in the markets. There could be some drastic price swings, but investors shouldn’t be carried away by any short-term emotions (which, really, is great advice any day in the markets).
Posted on September 30, 2022 by The D.E.A. ROGUE WARRIOR
By Staff Reporters
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A correction is a decline of 10 percent or more from an asset’s most recent high. For a stock that recently reached an all-time high of $100 per share, a correction would occur if the stock fell to $90 or lower. Corrections can happen in any financial asset such as individual stocks, broad market indexes like the S&P 500 or commodities. The S&P 500 fell below 4,336 in January 2022, marking a more than 10 percent decline from its high earlier in the year.
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Corrections can be caused by a number of different factors and they’re difficult, if not impossible, to predict ahead of time. Short-term concerns about economic growth, Federal Reserve policy, political issues or even a new variant of the COVID-19 virus all have the potential to trigger market corrections. These issues make investors fearful that their prior assumptions about the future might not be correct. When people are fearful, they typically look to sell stocks in favor of assets considered safer such as U.S. Treasury bonds.
A stock-market correction may sound similar to a crash, but there are some key distinctions between the two. A crash is a sharp drop in share prices, typically a double-digit percentage decline, over the course of just a few days. A correction tends to happen at a slower pace, therefore making the drop less steep than a crash would be. One of the most famous stock-market crashes happened in October 1987, when the Dow Jones Industrial Average fell 22.6 percent in a single day that became historically known as Black Monday.
Corrections are more subtle and are sometimes even thought to be healthy for rising markets because they help things from becoming overheated. Like their name suggests, they correct prices back down from a slightly elevated level.
Difference between a correction and a bear market
The difference between a correction and a bear market is in the magnitude of the decline. A correction is a decline of at least 10 percent, but less than 20 percent, while a bear market begins at a decline of at least 20 percent from a recent peak. Bear markets also tend to last longer than corrections because they tend to reflect an economic reality, such as a recession, rather than a short-term concern that may or may not materialize. The challenge for investors is that it’s very difficult to determine in real time whether a market is just in a correction or if it could become a bear market.
Posted on September 30, 2022 by The D.E.A. ROGUE WARRIOR
Are We Experiencing a Bear Market Relief Rally?
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Maybe yesterday – Not today!
By Staff Reporters
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A bear market relief rally describes a period inside of a bear market in which prices of stocks temporarily increase during, sometimes quite sharply, before returning to new lows. This rise in prices is typically a short-lived increase, sometimes lasting anywhere from days to months, amidst an overall long-term downward trend in the market.
In finance, a dead cat bounce is a small, brief recovery in the price of a declining stock.
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Derived from the idea that “even a dead cat will bounce if it falls from a great height”, the phrase, which originated on Wall Street, is also popularly applied to any case where a subject experiences a brief resurgence during or following a severe decline.
The dead cat bounce is a sudden and temporary increase in stock price caused by investors erroneously believing that the stock price’s reached its lowest.
The dead cat bounce can only be fully accurately determined with concrete data in hindsight.
Both falsely identifying a stock price trough (i.e., falling victim to a dead cat bounce) and falsely identifying a true price trough as a dead cat bounce will result in negative financial consequences.
I was having lunch with a close friend of mine. He mentioned that he had accumulated a significant sum of money and did not know what to do with it. It was sitting in bonds, and inflation was eating its purchasing power at a very rapid rate.
He is a dentist and had originally thought about expanding his business, but a shortage of labor and surging wages turned expanding into a risky and low-return investment. He complained that the stock market was extremely expensive. I agreed.*
Posted on September 27, 2022 by The D.E.A. ROGUE WARRIOR
By Staff Reporters
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The term integrative medicine was born from combining the practice of so-called “conventional” medicine and “complementary medicine.” Conventional medicine is what most doctors practice. This is also called “traditional Western medicine.”
Adding “outside-the-box” treatments such as chiropractic care, acupuncture, and other lifestyle recommendations like improving diet, supplements, herbs, exercise, stress management, and functional specialty labs results in the actual integration of the two disciplines. And we need both.
Posted on September 24, 2022 by The D.E.A. ROGUE WARRIOR
By Staff Reporters
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The OTCQX® Best Market offers transparent and efficient trading of established, investor-focused U.S. and global companies.
To qualify for the OTCQX market, companies must meet high financial standards, follow best practice corporate governance, demonstrate compliance with U.S. securities laws, and have a professional third-party sponsor introduction.
Penny stocks, shells and companies in bankruptcy cannot qualify for OTCQX.
The companies found on OTCQX are distinguished by the integrity of their operations and diligence with which they convey their qualifications.
I was interviewed on PBS Newshour about the insanity that is happening in the NFT (non-fungible token) market. You can watch it here. If you read my “I Kid You Not Crazy” article, then you know everything I have to say about NFTs and cryptocurrency. I can sum up my thoughts on NFTs in one sentence: NFTs, just like cryptocurrencies, are a technology of the future, but a speculative bubble induced by excess global liquidity in the present.
Personal health sensors and apps equip patients with personalised data so that they can become more proactive in managing their health. But what is still mostly the norm is that these sensitive data are governed by the companies providing these services; and they often profit out of it, oblivious to patients.
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But even though NFTs are still in their infancy, the technology might evolve in the future to become more compelling for patients to favor the agency it provides over their data.
Posted on September 8, 2022 by The D.E.A. ROGUE WARRIOR
A decision-making strategy
[By staff reporters]
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Satisficing is a business decision-making strategy or cognitive heuristic that entails searching through the available alternatives until an acceptability threshold is met.
The term economic satisficing, a portmanteau of satisfy and suffice, was introduced by Herbert A. Simon in 1956, although the concept was first posited in his 1947 book Administrative Behavior. Simon used satisficing to explain the behavior of decision makers under circumstances in which an optimal solution cannot be determined. He maintained that many natural problems are characterized by computational intractability or a lack of information, both of which preclude the use of mathematical optimization procedures.
He observed in his Nobel Prize in Economics speech that “decision makers can satisfice either by finding optimum solutions for a simplified world, or by finding satisfactory solutions for a more realistic world. Neither approach, in general, dominates the other, and both have continued to co-exist in the world of management science”.
“Satisficing” – a made-up word created by combining satisfactory and sufficient – indicates something good, but not great. Like the Canadian single-payer health system, like Medicare-for-All.
The Zeta Model is a mathematical model that estimates the chances of a public company going bankrupt within a two-year time period. The number produced by the model is referred to as the company’s Z-score (or zeta score) and is considered to be a reasonably accurate predictor of future bankruptcy.
The model was published in 1968 by New York University professor of finance Edward I. Altman. The resulting Z-score uses multiple corporate income and balance sheet values to measure the financial health of a company.
Posted on August 19, 2022 by The D.E.A. ROGUE WARRIOR
All about the Medical Executive-PostBusiness Model
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One of the questions we receive most often from readers of the Medical Executive-Post is how can we “afford” to give away so much content for free. Or stated another way, “how do we get paid for all of this?”
The simple answer is that we know many (or even most) of you will simply take the ideas that we share and implement them yourself. Do-It-YourSelfers can always simply purchase our texts, books and peer reviewed handbooks redacted in more than a thousand, medical, law, business and graduate schools, as well as the Library of Congress,Institute of Health and Library of Congress.
On the other hand, some of you will realize you need some additional help.
For example:
Maybe as a financial advisor you’re “stuck” in your financial planning business and recognize that some outside assistance is necessary to help you get to the next level of niche specificity thru our Certified Medical Planner™ chartered certification program designation. Helping physicians of all specialty types in a fiduciary focused manner is the proverbial Win-Win for all concerned.
OR, perhaps you are seeking a glossary of terms and definitions in heath economics, finance, accounting, insurance, managed care, health information technology and security; found in our Health Dictionary Series Wiki Project? Free and print versions are available.
OR, as a doctor maybe your medical practice is growing so much you just hit a wall where you don’t have time to do it all for your patients. After all, with only “so much” time available every day and week, it’s vital to delegate or outsource anything that isn’t really core to your practice and management skill set.
OR, maybe you are even starting, buying or selling your medical practice and need our financial and valuation services. Part (1) – Part (2) – Part (3) Financial, estate, investing and retirement planning services are also available.
OR, you may just need a second informed opinion about a topic not listed; there are a myriad of issues to consider in the competitive ecosystem today.
So, in the meantime, I hope that the ME-P content continues to be helpful food for thought, and perhaps we’ll have an opportunity to cross paths soon at a future conferences or podcasts. Feel free to invite us to speak at your own seminar/podcast online V-log, as well.
Posted on August 17, 2022 by The D.E.A. ROGUE WARRIOR
The Professional Edge Radio Show
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By Sean G. Todd Esq., CPA, MTax, CFP™
[Registered Investment Advisor]
Sean G. Todd draws upon the substantial knowledge of tax and financial planning which he gained in his 20+ years of practice. Sean is a licensed attorney with a Master of Taxation degree. Sean is also a licensed Certified Financial Planner™ practitioner and a Certified Public Accountant. He has extensive experience in the areas of Tax, Estate and Financial Planning. Sean has been an adjunct professor at Oglethorpe University and Emory University in Atlanta. He is currently teaching Federal Income Tax Planning at The University of Georgia.
Sean earned his Bachelor of Science in Business from Indiana University and his law degree from Ohio Northern College of Law. In addition, Sean continued his education with a specialization in tax by earning a Master of Taxation degree from The University of Akron. Sean has been a featured speaker at the National Self Storage Association meeting in Las Vegas, Nevada on several occasions. He also lectures on topics dealing with estate and financial planning and the new tax laws.
Clients benefit when working with Sean because of his practical experience. He has completed over 2,000 estate and financial plans for individuals and business owners in the State of Georgia, and clients also benefit from his professional training in investments, finance, accounting, estate planning, taxes and the law. He has an unmatched ability to coordinate all the moving parts to objectively evaluate and provide effective professional advice to his clients.
Editor’s Note:Be sure to visit and subscribe to this ME-P to learn much more from Sean G. Todd. He has deep subject matter expertise of the topics presented aligned with a pragmatic medical perspective from his sister who practices in the Midwest. And, be sure to directly tune into Professor Sean Todd’s own: “The Professional Edge Radio Show” every Sunday at 9-10 am, EST.
Posted on August 16, 2022 by The D.E.A. ROGUE WARRIOR
By Health Capital Consultants, LLC
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GROWING SCRUTINY OF TELE-MEDICINE
On July 20, 2022, the Office of Inspector General (OIG) of the U.S. Department of Health & Human Services (HHS) released a Special Fraud Alert on telemedicine. On the same day, the U.S. Department of Justice (DOJ) announced a “nationwide coordinated law enforcement action” against 36 defendants, and the Centers for Medicare & Medicaid Services (CMS) Center for Program Integrity announced administrative actions against 52 providers, related to alleged telemedicine arrangements. These coordinated actions indicate a growing scrutiny of telemedicine arrangements by federal government regulators. (Read more...)
Posted on August 13, 2022 by The D.E.A. ROGUE WARRIOR
By Staff Reporters
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Limiting the $35 cap on the price of insulin only to Medicare members is not that consequential, experts said. While the cost of insulin has skyrocketed over the years, many people with private insurance already pay no more than that amount. About a fifth of those who take insulin and have health coverage through large employers pay more than $35 a month for the medication, according to an analysis from the Kaiser Family Foundation. More than a quarter of people with Affordable Care Act policies and nearly one-third of those insured through a small employer pay more than that threshold.
Some private insurers and states are taking action to help Americans afford the drug. UnitedHealthcare will eliminate out-of-pocket costs for insulin for certain policyholders starting next year, while 20 states have placed caps on co-payments. Also, two drug makers are working on inexpensive versions of the insulin medication, while some other manufacturers are offering deep discounts for certain patients. “Bottom line is I don’t think stripping it out will have a major impact on the private sector,” Gerard Anderson, a professor of health policy and management at Johns Hopkins University, said of the insulin cap.
Posted on August 11, 2022 by The D.E.A. ROGUE WARRIOR
By Staff Reporters
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Inflation eased off historically high levels in July, raising hopes that a relentless surge in prices may have peaked. Consumer prices increased 8.5% from a year ago, down from a 9.1% annual rise – a 40-year high – in June, according to the Labor Department’s Consumer Price Index. Gasoline prices fell but food and rent continued to march higher. Economists surveyed by Bloomberg had estimated yearly inflation would fall to 8.7%. On a monthly basis, consumer prices were unchanged, compared to a 1.3% rise in June. Core prices, which exclude volatile food and energy items and generally provide a better gauge of future trends, increased 0.3% in July following a 0.7% rise the prior month. That held the annual increase at 5.9% after three straight monthly declines.
And, in a bit of good news for aged Americans, Social Security payments may take their biggest jump in years. The surge could be as high as 10%, which is larger than recent increases in the consumer price index. Social Security carries an official name of the “Old-Age, Survivors, and Disability Insurance (OASDI).” Even the rich can get benefits. The income calculation tops out at a maximum of $142,800.
Posted on August 10, 2022 by The D.E.A. ROGUE WARRIOR
By Staff Reporters
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The US Senate passed their climate, health and tax package, including nearly $80 billion in funding for the IRS.
The Inflation Reduction Act allocates $79.6 billion to the agency over the next 10 years, with more than half of the money going to enforcement, with the IRS aiming to collect more from corporate and high-net-worth tax dodgers.
The remainder of the funding is earmarked for operations, taxpayer services, technology, development of a direct free e-file system and more. Collectively, those improvements are projected to bring in $203.7 billion in revenue from 2022 to 2031, according to recent estimates from the Congressional Budget Office.
The biggest revenue-raiser of the IRA is a 15% minimum tax on corporations with profits of $1 billion or more, which is expected to generate $258 billion over 10 years. This addresses the problem of the rampant tax dodging among large companies that has mostly benefited wealthy shareholders and executives. The bill includes a 1% excise tax on companies’ stock buybacks, raising an estimated additional $74 billion. This will discourage corporations from siphoning resources into share repurchases that largely benefit shareholders and executives with stock-based pay. Those resources could instead go toward worker wages or other productive investments. And the bill would boost IRS enforcement to ensure the ultra-rich pay.
Finally, the Inflation Reduction Act would also extend a tax limitation on pass-through businesses for two more years. The limitation on how businesses can use losses to reduce taxes is supposed to expire at the start of 2027. A pass-through or flow-through business is one that reports its income on the tax returns of its owners. That income is taxed at their individual income tax rates. Examples of pass-throughs include sole proprietorships, some limited liability companies, partnerships and S-corporations.
Posted on August 9, 2022 by The D.E.A. ROGUE WARRIOR
By Staff Reporters
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Japanese technology company SoftBankGroup posted a $23.4 billion loss in this April-June quarter as the value of its investments sank amid global worries about inflation and interest rates. SoftBank Group Corp.’s loss of 3.16 trillion yen was a reversal from its 762 billion yen profit in the same quarter a year earlier. The company said that quarterly sales rose 6%. And, for the fiscal year that ended in March 2022, Softbank racked up losses of 1.7 trillion yen ($13 billion), a reversal from the 4.9 trillion yen profit for the previous year. Annual sales grew 10.5% to 6.2 trillion yen ($46 billion).
The Treasury Department has imposed sanctions on virtual currency mixer Tornado Cash, which has allegedly helped to launder more than $7 billion worth of virtual currency since its creation in 2019. Treasury’s Office of Foreign Assets Control says Tornado Cash’s systems were used, among other things, to launder more than $96 million drawn from the June Harmony blockchain bridge theft and August Nomad crypto firm heist. Mixing services combine various digital assets, including potentially illegally obtained funds and legitimately obtained funds, so that illegal actors can obscure the origin of the stolen funds. Secretary of State Antony Blinken said in a statement that the U.S. “will continue to pursue actions against mixers laundering virtual currency for criminals and those who assist them.”
Posted on August 8, 2022 by The D.E.A. ROGUE WARRIOR
By Staff Reporters
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Home builders face multiple demand and supply-side pressures. On the demand front, potential home buyers have receded from the market. Existing home sales slid 5.4% in June. Meanwhile, borrowing capacity has been curtailed by rising interest rates. The average mortgage rate has accelerated at the fastest pace in 35 years. A 15-year fixed rate mortgage is now about 4.8%, up from 2.2% a year ago. These factors have effectively destroyed demand. Meanwhile, the supply chain for home building material and the cost of labor continues to increase the cost of building new homes. This is why home builders’ sentiment dropped 12 points in June, according to the NAHB survey.
It is the first research to measure long-term symptoms in both infected and non-infected people and therefore creates a more accurate distinction between symptoms caused by long COVID and those from other reasons such as stress or insomnia.
Posted on August 4, 2022 by The D.E.A. ROGUE WARRIOR
By Staff Reporters
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Editor’s Note:FHA manual underwriting guidelines were updated in 2020 and require that, for those applicants with credit scores below 620 or a debt-to-income (DTI) ratio that exceeds 43%, mortgage applications must be manually underwritten. For a fiercely frugal doctor, or debt adverse medical professional with “poor” credit because of little to no debt, this may actually be good for them. But, it may also make it difficult for a modern automated mortgage lender to issue a loan. Our debt ridden and consumer driven society is largely causative.
With many Lenders now making automated lending decisions, much like emerging healthcare A.I. initiatives, it can seem confusing why others are still sticking to a manual process. But, a few physicians with little to no credit/debt history, and hence a low FICO score, may actually find it a bonus.
Many mortgage lenders currently use computer-based systems to assist with their lending decisions. These systems will look at your client’s credit score, borrowing history, etc. to decide whether or not to approve a mortgage application. It can then be argued that the value of an Underwriter is decreasing; much like physicians are slowly being devalued for many emerging reasons.
Now, understand that not all [minority of clients] applicants will fit into the box that automated decision making systems like. Due to this, there is a need for manual decisions to be made, that will benefit both the Lender and the Borrower (client)!
Manual underwriting allows our Underwriters to look at the bigger picture and get a balanced view on the potential physician and/or client’s ability to repay the mortgage they are applying for. This means they can have a look at the overall risk to the Society and consider what conditions can be used to meet our lending policies. By using manual underwriting in every case, this embeds sensible and responsible decision making within the Society.
A hands-on approach means a look deeper into your financial position, and consider cases where physician clients may have:
Low credit scores;
Minimal credit history;
Self-employed applicants;
Applicants in fixed term employment contracts; and
Many more; like really a good personal risk profile.
Manual Underwriters
It is clear to see the benefits for the Society, and physicians, retrospectively. Some benefits of manual underwriting, according to experts David Cox and Richard Groom, include;
“I like that we can look at cases that many other high street lenders wouldn’t consider. This doesn’t mean we are risk takers; we just apply common sense”.
“I enjoy the hands-on approach we apply. Every applicant is different, so why should they all be pushed through an automated system?”
“Just because something doesn’t quite fit, it shouldn’t result in a computer says no decision. It’s great to be able to look at an individual’s situation and see what changes we can make to turn the negative to a positive”.
“The great thing about manual underwriting is that while our lending policy is the core of what we do, applying a manual approach means we can consider applications outside of this, where it benefits the borrower and the Society”.
Posted on August 3, 2022 by The D.E.A. ROGUE WARRIOR
By Staff Reporters
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The dollar sank to a one-month low after data last week showed the US is technically in recession.
It reflects a “sell-the-fact” reaction in markets as investors expect milder Fed rate hikes.
A weak Chinese economy is also affecting the performance of the greenback on demand concerns.
The US dollar index, which measures the greenback’s performance against six other currencies including the Japanese yen, slipped 0.52% to trade at $105.35 – its lowest since July 5th. The safe-haven currency has endured sharp sell-offs in recent weeks, only rising on two days since mid-July as a “sell-the-fact” reaction hits markets over expectations that the Fed will become less aggressive in its monetary policy after data showed US GDP contracted for two straight quarters – the technical definition of a recession.
London-based BP earnings tripled and underlying replacement cost profit, which excludes one-time items and fluctuations in the value of inventories, jumped to $8.45 billion from $2.80 billion in the same period a year earlier. The soaring earnings allowed BP to return billions of dollars to shareholders, with the company boosting its dividend by 10% and announcing that it would buy back $3.5 billion in shares. BP said it expects to increase dividends by about 4% annually through 2025.
Moreover, job openings in the U.S. fell to 10.7 million in June to mark the lowest level since last fall, signaling that a red-hot labor market is cooling off a bit as the economy slows. Job openings slipped from 11.3 million in May. They have dropped three months in a row after peaking in the early spring at a record 11.9 million.The last time job openings dipped below 11 million was in November last year. The number of people who quit jobs in June, meanwhile, only fell slightly to 4.23 million, the Labor Department said Tuesday. Quits topped 4 million one year ago for the first time ever, part of a pandemic-era trend that’s become known as “the great resignation.” Before the pandemic, the number of people quitting jobs averaged fewer than 3 million a month.The high number of people quitting jobs suggests the labor market is still quite robust, though. Most people who quit usually find a better job. Layoff also stayed at historically very low levels. Big picture: The economy is cooling off — and so is a sizzling labor market.
Finally, semi-conductor stocks plunged. For example, shares of Taiwan Semiconductor Manufacturing Company (TSMC)—the world’s biggest and most valuable semiconductor manufacturer valued at $440 billion—fell 2.4%. Its Taiwanese peers United Microelectronics and MediaTek dipped 3% and 1.6%, respectively. Meanwhile, U.S. chip-maker Intel stock dropped 1.5% on the same day.
Posted on August 1, 2022 by The D.E.A. ROGUE WARRIOR
By Staff Reporters
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According to founder and real estate investing company CARROLL, his company has raised rents up to 30% over the past year. Of course, costs are going up as well. “So as our costs go up — our costs of interest, our costs of renovations, our cost of our employees,” Carroll told Fox Business. “We need to push those increases along through rent increase.” Because of rising property prices, renting has become the only option for a lot of people. “We are seeing a supply-demand imbalance,” he adds. “And now they have a lack of buyers because of mortgage rates. So, again, this has all kind of been a perfect storm for the multifamily business.” While it’s hard to say whether rent increases are sustainable, Carroll says that his company’s occupancy rates are at all-time high.
The stock market could be gearing up for new record highs before year-end as the 2022 bear market is over, Fundstrat’s Tom Lee just said. The biggest takeaway for me on events of this week? Convincing and arguably decisive evidence the ‘bottom is in’ — the 2022 bear market is over.” Lee’s confidence stems from the fact that between a negative GDP print, another 75-basis-point interest rate hike from the Fed, and more natural gas volatility due to Russia’s Nord Stream pipeline drama, a lot of bad news occurred this week and yet the S&P 500 and Nasdaq 100 managed to stage a 3% rally. “When bad news doesn’t take down markets, it is time for investors to assess.” In fact, despite a strong US dollar and heightened economic uncertainty, companies are reporting better-than-feared results. With 52% of the S&P 500 having reported second-quarter earnings already, 73% beat profit estimates by a median 7%.
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Meanwhile, investors will be closely monitoring July’s Nonfarm Payrolls print, with analysts estimating a slowdown in hiring, forecasting the addition of 250K jobs which would be the lowest since December of 2020, while the unemployment rate is expected to hold steady at 3.6%. Other important economic data include final S&P Global PMIs, ISM Manufacturing and Non-Manufacturing PMIs, exports, imports, JOLTS job openings, construction spending and factory orders. Finally, the earnings season continues with a slew of major companies reporting quarterly results, including Eli Lilly and Company (NYSE:LLY), Gilead Sciences Inc (NASDAQ:GILD), Uber Technologies Inc (NYSE:UBER), Caterpillar Inc (NYSE:CAT) and Amgen Inc (NASDAQ:AMGN).
Finally, Bitcoin gained 19% since the beginning of July, which caused the crypto’s Relative Strength Index to correct from 29% on July 1 to the 60% level as of press time. The momentum coming back into Bitcoin has caused the fear and green index measurement to improve slightly from “extreme fear” in June, measuring in at 11, to “fear” in July, measuring in at 39.
Posted on July 30, 2022 by The D.E.A. ROGUE WARRIOR
What is stop-loss insurance AND how does it work?
By Staff Reporters
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A stop-loss health insurance policy covers claims above a health insurance plan’s retained claims. The claims fund of a self-funded employer will pay claims up to the predetermined deductible for each of the company’s covered employees. The role of the stop-loss is to cover all claims above these deductible levels.
According to RoundStone Insurance, aggregate stop-loss insurance is designed to protect an employer who self-funds their employee health plan from higher-than-anticipated payouts for claims. Stop-loss insurance is similar to high-deductibleinsurance, and the employer remains responsible for claims below the deductible amount.
An individual stop-loss insurance carrier determines the average expected monthly claims per employee / per month PEPM based on the employer’s history. Then, this figure is multiplied by a percentage ranging from 110%-150%. That determined amount is then multiplied by the enrollment on a monthly basis to establish the aggregate deductible.
Posted on July 30, 2022 by The D.E.A. ROGUE WARRIOR
By Eric Bricker MD
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Google Starts Stop Loss Company Called Coefficient
Coefficient Will be a Part of the Verily Healthcare Subsidiary Within Google. Coefficient Will Also Be in Partnership and Partly Owned by the Giant, International ReinsuranceCompany Swiss Re.
Posted on July 29, 2022 by The D.E.A. ROGUE WARRIOR
By Staff Reporters
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DEFINITION: For its official definition, the NBER considers a recession a “significant decline” in economic activity. Not only that—the decline must be deep, broad, and last for more than a few months. When deciding whether the economy is in a recession, the NBER looks to a variety of indicators (not just GDP) to understand the health of the economy, such as job growth, consumer spending, and industrial production. It’s not a simple or transparent formula.
Top economists don’t believe a downturn has begun but some predict a mild recession is likely by early next year. For example, residential investment plunged last quarter as the housing market slumped amid sharply rising mortgage rates while business stockpiling and investment also declined, more than offsetting a modest advance in consumer spending. Furthermore, the nation’s gross domestic product, the value of all goods and services produced in the U.S., shrank at a seasonally adjusted annual rate of 0.9% in the April-June period, according to the Commerce Department. That followed a 1.6% drop early this year. Economists surveyed by Bloomberg had forecast a 0.5% rise in GDP.
In fact, Treasury Secretary Janet Yellen also said the US economy is seeing an economic slowdown — something vital to bringing down inflation — but isn’t currently in a recession. “We do see a significant slowdown in growth,” Yellen said at a press conference. But a true recession is a “broad-based weakening of the economy,” she said. “That is not what we’re seeing right now.” The country currently is seeing job creation, strong household finances, gains in consumer spending and growth in business, Yellen said. Employment climbed by 1.1 million jobs in the second quarter, a sharp contrast with the average loss of 240,000 in the first three months of past recessions. The Treasury chief was speaking hours after data showed the US economy shrank for a second straight quarter, as higher interest rates slowed business investment and housing demand.
ON THE OTHER HAND: Yesterday was an amazing day for the stock market — especially for growth stocks. The Fed sparked a massive rally across all asset classes. It strongly implied it’ll slow the pace of rate hikes in the coming months. And it may even turn to rate cuts by the end of the year.
QUESTION: We are in near bear market correction territory – especially for tech stocks – so what are the 2 major types of valuation approaches for common stock?
ANSWER: There are basically two different approaches for common stock valuation; top-down and bottom-up. Under either of the two fundamental approaches, a physician investor will have to work with individual company data. In reality, each of these approaches is used by investors and security analysts when doing fundamental analysis.
With the bottom-up approach, investors focus directly on a company’s prospects. Analysis of such information as the company’s products, its competitive position, and its financial status leads to an estimate of the company’s earnings potential, and, ultimately, its value in the market. Considerable time and effort are required to produce the type of detailed financial analysis needed to understand a firm’s standing. The emphasis in this approach is on finding companies with good long-term growth prospects, and making accurate earnings estimates.
The top-down approach is the opposite of the bottom-up approach. Investors begin with the economy and the overall market, considering such important factors as interest rates and inflation. They next consider likely industry prospects, or sectors of the economy that are likely to do particularly well (or particularly poorly). Finally, having decided that factors are favorable for investing, and having determined which parts of the overall economy are likely to perform well, individual companies are analyzed.
A general understanding of these types is suggested for any medical professional prior to launching a self-directed [ME, Inc], or even a guided investment strategy or wealth building portfolio effort with a financial advisor [FA], stock broker or wealth manager, etc.
This banking information is usually not included in any text on financial planning, or related, until now.
A retail bank is a typical small mass-market financial institution in which individual customers use local branches; usually of larger commercial banks. Services offered include savings and checking accounts, mortgages, personal loans, debit/credit cards and certificates of deposit (CDs).
Definition of Commercial Bank
A financial institution that provides services, such as accepting deposits, giving business loans and auto loans, mortgage lending, and basic investment products like savings accounts and certificates of deposit. The traditional commercial bank is a brick and mortar institution with tellers, safe deposit boxes, vaults and ATMs.
However, some commercial banks do not have any physical branches and require consumers to complete all transactions by phone or Internet. In exchange, they generally pay higher interest rates on investments and deposits, and charge lower fees.
Definition of Investment Bank
Investment banking activities are different than those of retail and commercial banking and include underwriting securities, acting as an intermediary between an issuer of securities and the investing public, facilitating mergers and other corporate reorganizations, and also acting as a broker for institutional clients.
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Assessment
This brief review provides a retrospective on implications for modernity.
Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.
Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com
OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:
Posted on June 21, 2022 by The D.E.A. ROGUE WARRIOR
By Staff Reporters
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For the last two years, the Corona Virus killed Americans on a brutal, predictable schedule: A few weeks after infections climbed so did deaths, cutting an unforgiving path across the country. But that pattern appears to have changed. Nearly three months since an ultra-contagious set of new Omicron variants launched a springtime resurgence of cases, people are nonetheless dying from COVID at a rate close to the lowest of the pandemic. The spread of the virus and the number of deaths in its wake, two measures that were once yoked together, have diverged more than ever before, epidemiologists said. Deaths have ticked up slowly in the northeastern United States, where the latest wave began, and are likely to do the same nationally as the surge pushes across the South and West. But the country remains better fortified against COVID deaths than earlier in the pandemic, scientists said.
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The recent FOMC interest rate hike campaign is not all bad news. There is a silver lining for savers. “Rising interest rates represent a turn of fortunes for savers as interest earnings are finally on the rise, and eventually those higher interest rates will help reduce inflation,” Greg McBride, Bankrate’s chief financial analyst, told ABC News. “This is the opposite of what savers have endured the past three years when interest rates fell and then inflation took off.”
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Markets: Of the 17 times the S&P has dropped more than 15% since 1950, on 11 of those occasions stocks bottomed out only when the FOMC began to signal a loosening of monetary policy, according to an analysis by Goldman Sachs.
Answer For a while in the value investing community the number of positions you held was akin to bragging on your manhood– the fewer positions you owned the more macho an investor you were. I remember meeting two investors at a value conference. At the time they had both had “walk on water” streaks of returns. One had a seven-stock portfolio, the other held three stocks. Sadly, the financial crisis humbled both – the three-stock guy suffered irreparable losses and went out of business (losing most of his clients’ money). The other, after living through a few incredibly difficult years and an investor exodus, is running a more diversified portfolio today.
Under-diversification: Is dangerous, because a few mistakes or a visit from Bad Luck may prove to be fatal to the portfolio.
On the other extreme, you have a mutual fund industry where it is common to see portfolios with hundreds of stocks (I am generalizing). There are many reasons for that. Mutual funds have an army of analysts who need to be kept busy; their voices need to be heard; and thus their stock picks need to find their way into the portfolio (there are a lot of internal politics in this portfolio). These portfolios are run against benchmarks; thus their construction starts to resemble Noah’s Ark, bringing on board a few animals (stocks) from each industry. Also, the size of the fund may limit its ability to buy large positions in small companies.
There are several problems with this approach. First, and this is the important one, it breeds indifference: If a 0.5% position doubles or gets halved, it will have little impact on the portfolio. The second problem is that it is difficult to maintain research on all these positions. Yes, a mutual fund will have an army of analysts following each industry, but the portfolio manager is the one making the final buy and sell decisions. Third, the 75th idea is probably not as good as the 30th, especially in an overvalued market where good ideas are scarce.
Then you have index funds. On the surface they are over-diversified, but they don’t suffer from the over-diversification headaches of managed funds. In fact, index funds are both over-diversified and under-diversified. Let’s take the S&P 500 – the most popular of the bunch. It owns the 500 largest companies in the US. You’d think it was a diversified portfolio, right? Well, kind of. The top eight companies account for more than 25% of the index. Also, the construction of the index favors stocks that are usually more expensive or that have recently appreciated (it is market-cap-weighted); thus you are “diversified” across a lot of overvalued stocks.
If you own hundreds of securities that are exposed to the same idiosyncratic risk, then are you really diversified?
Our portfolio construction process is built from a first-principles perspective. If a Martian visited Earth and decided to try his hand at value investing, knowing nothing about common (usually academic) conventions, how would he construct a portfolio?
We want to have a portfolio where we own nottoo many stocks, so that every decision we make matters – we have both skin and soul in the game in each decision. But we don’t want to own so few that a small number of stocks slipping on a banana will send us into financial ruin.
In our portfolio construction, we are trying to maximize both our IQ and our EQ (emotional quotient). Too few stocks will decapitate our EQ – we won’t be able to sleep well at night, as the relatively large impact of a low-probability risk could have a devastating impact on the portfolio. I wrote about the importance of good sleep before (link here). It’s something we take seriously at IMA.
Holding too many stocks will result in both a low EQ and low IQ. It is very difficult to follow and understand the drivers of the business of hundreds of stocks, therefore a low IQ about individual positions will eventually lead to lower portfolio EQ. When things turn bad, a constant in investing, you won’t intimately know your portfolio – you’ll be surrounded by a lot of (tiny-position) strangers.
Portfolio construction is a very intimate process. It is unique to one’s EQ and IQ. Our typical portfolios have 20–30 stocks. Our “focused” portfolios have 12–15 stocks (they are designed for clients where we represent only a small part of their total wealth). There is nothing magical about these numbers – they are just the Goldilocks levels for us, for our team and our clients. They allow room for bad luck, but at the same time every decision we make matters.
Now let’s discuss position sizing. We determine position sizing through a well-defined quantitative process. The goals of this process are to achieve the following: Shift the portfolio towards higher-quality companies with higher returns. Take emotion out of the portfolio construction process. And finally, insure healthy diversification.
Our research process is very qualitative: We read annual reports, talk to competitors and ex-employees, build financial models, and debate stocks among ourselves and our research network. In our valuation analysis we try to kill the business – come up with worst-case fair value (where a company slips on multiple bananas) and reasonable fair value. We also assign a quality rating to each company in the portfolio. Quality is absolute for us – we don’t allow low-quality companies in, no matter how attractive the valuation is (though that doesn’t mean we don’t occasionally misjudge a company’s quality).
The same company, at different stock prices, will merit a higher or lower position size. In other words, if company A is worth (fair value) $100, at $60 it will be a 3% position and at $40 it will be a 5% position. Company B, of a lower quality than A but also worth $100, will be a 2% position at $60 and a 4% position at $40 (I just made up these numbers for illustration purposes). In other words, if there are two companies that have similar expected returns, but one is of higher quality than the other, our system will automatically allocate a larger percentage of the portfolio to the higher-quality company. If you repeat this exercise on a large number of stocks, you cannot but help to shift your portfolio to higher-quality, higher-return stocks. It’s a system of meritocracy where we marry quality and return.
Let’s talk about diversification. We don’t go out of our way to diversify the portfolio. At least, not in a traditional sense. We are not going to allocate 7% to mining stocks because that is the allocation in the index or they are negatively correlated to soft drink companies. (We don’t own either and are not sure if the above statement is even true, but you get the point.) We try to assemble a portfolio of high-quality companies that are attractively priced, whose businesses march to different drummers and are not impacted by the same risks. Just as bank robbers rob banks because that is where the money is, value investors gravitate towards sectors where the value is. To keep our excitement (our emotions) in check, and to make sure we are not overexposed to a single industry, we set hard limits of industry exposure. These limits range from 10%–20%. We also set limits of country exposure, ranging from 7%–30% (ex-US).
CONCLUSION
In portfolio construction, our goal is not to limit the volatility of the portfolio but to reduce true risk – the permanent loss of capital. We are constantly thinking about the types of risks we are taking. Do we have too much exposure to a weaker or stronger dollar? To higher or lower interest rates? Do we have too much exposure to federal government spending? I know, risk is a four-letter word that has lost its meaning. But not to us. Low interest rates may have time-shifted risk into the future, but they haven’t cured it.
“Physicians who don’t understand modern risk management, insurance, business, and asset protection principles are sitting ducks waiting to be taken advantage of by unscrupulous insurance agents and financial advisors; and even their own prospective employers or partners. This comprehensive volume from Dr. David Marcinko and his co-authors will go a long way toward educating physicians on these critical subjects that were never taught in medical school or residency training.” —Dr. James M. Dahle, MD, FACEP, Editor of The White Coat Investor, Salt Lake City, Utah, USA
“With time at a premium, and so much vital information packed into one well organized resource, this comprehensive textbook should be on the desk of everyone serving in the healthcare ecosystem. The time you spend reading this frank and compelling book will be richly rewarded.” —Dr. J. Wesley Boyd, MD, PhD, MA, Harvard Medical School, Boston, Massachusetts, USA
Posted on May 18, 2022 by The D.E.A. ROGUE WARRIOR
Is Stagflation Risk Real?
By Merk Insight
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DEFINITION: In economics, stagflation or recession-inflation is a situation in which the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high. It presents a dilemma for economic policy, since actions intended to lower inflation may exacerbate unemployment.
A few days ago, I had the pleasure of attending the Hoover Monetary Conference – I would call it a Powwow of central bankers, if there had not been an actual Powwow a few steps outside the venue. While Hoover is known to reflect “hawkish” views, “hawks” and “doves” alike used the question of whether the Fed is “behind the curve” to argue all things inflation and stagflation.
I left the conference even more concerned about the risk of stagflation; let me explain.
Posted on May 16, 2022 by The D.E.A. ROGUE WARRIOR
By Staff Reporters
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On March 29, the House of Representatives voted 414-5 in favor of the Securing a Strong Retirement Act of 2022. If passed by the Senate, and then signed into law by President Joe Biden, the act could represent a massive economic policy shift regarding retirement savings and investment.
The retirement savings legislation, also known as SECURE Act 2.0, expands on the original SECURE Act and includes provisions to boost the required minimum distribution (RMD) age from 72 to 75 over time, broaden automatic enrollment in retirement plans, and enhance 403(b) plans.
Posted on May 13, 2022 by The D.E.A. ROGUE WARRIOR
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By Jules Lipoff, MD: Senior fellow at the Leonard Davis Institute of Health Economics and an assistant professor of clinical dermatology at Perelman School of Medicine, both of the University of Pennsylvania. Erica Mark, medical student at the University of Virginia, contributed to this article.The opinions expressed in this article do not necessarily represent those of the University of Pennsylvania Health System or the Perelman School of Medicine.
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If you follow the news or your social media feed, you know that crowdsourcing medical expenses is increasingly popular for financing health care costs. In fact, you might have contributed to one; 22 percent of American adults report donating to GoFundMe medical campaigns.
As of 2021, approximately $650 million, or about one-third of all funds raised by GoFundMe, went to medical campaigns. That staggering amount of money highlights how dysfunctional our health care system is, forcing people to resort to crowdsourcing to afford their medical care — but it’s not surprising. In the United States, 62 percent of bankruptcies are related to medical costs. This should be a wake-up call to address and reform the system further.
You’ve got a sense of your ideal retirement age. And you’ve probably made certain plans based on that timeline. But what if you’re forced to retire sooner than you expect? Aging baby-boomers, corporate medicine, the medical practice great resignation and/or the pandemic, etc?
Early retirement is nothing new, but it’s clear how much the COVID-19 pandemic has affected an aging workforce. Whether due to downsizing, objections to vaccine mandates, concerns about exposure risks, other health issues, or the desire for more leisure time, the retired general population grew by 3.5 million over the past two years—compared to an annual average of 1 million between 2008 and 2019—according to the Pew Research Center.1 At the same time, a survey conducted by the National Institute on Retirement Security revealed that more than half of Americans are concerned that the COVID-19 pandemic has impacted their ability to achieve a secure retirement.2
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There’s no need to panic, but those numbers make one thing clear, says Rob Williams, managing director of financial planning, retirement income, and wealth management for the Schwab Center for Financial Research. Flexible and personalized financial planning that addresses how you’d cope if you had to retire early can help you make the best use of all your resources.
So – Here are six steps to follow. We’ll use as an example a person who’s seeing if they could retire five years early, but the steps remain the same regardless of your individual time frame.
Step 1: Think strategically about pension and Social Security benefits
For most retirees, Social Security and (to a lesser degree) pensions are the two primary sources of regular income in retirement. You usually can collect these payments early—at age 62 for Social Security and sometimes as early as age 55 with a pension. However, taking benefits early will mean that you get smaller monthly benefits for the rest of your life. That can matter to your bottom line, even if you expect Social Security to be merely the icing on your retirement cake.
On the Social Security website, you can find a projection of what your benefits would be if you were pushed to claim them several years early. But if you’re part of a two-income couple, you may want to make an appointment at a Social Security office or with a financial professional to weigh the potential options.
For example, when you die, your spouse is eligible to receive your monthly benefit if it’s higher than his or her own. But if you claim your benefits early, thus receiving a reduced amount, you’re likewise limiting your spouse’s potential survivor benefit.
If you have a pension, your employer’s pension administrator can help estimate your monthly pension payments at various ages. Once you have these estimates, you’ll have a good idea of how much monthly income you can count on at any given point in time.
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Step 2: Pressure-test your 401(k)
In addition to weighing different strategies to maximize your Social Security and/or pension, evaluate how much income you could potentially derive from your personal retirement savings—and there’s a silver lining here if you’re forced to retire early.
Rule of 55
Let’s say you leave your job at any time during or after the calendar year you turn 55 (or age 50 if you’re a public safety employee with a government defined-benefit plan). Under a little-known separation-of-service provision, often referred to as the “rule of 55,” you may be able take distributions (though some plans may allow only one lump-sum withdrawal) from your 401(k), 403(b), or other qualified retirement plan free of the usual 10% early-withdrawal penalties. However, be aware that you’ll still owe ordinary income taxes on the amount distributed.
This exception applies only to the plan (including any consolidated accounts) that you were contributing to when you separated from service. It does not extend to IRAs.
4% rule
There’s also a simple rule of thumb suggesting that if you spend 4% or less of your savings in your first year of retirement and then adjust for inflation each year following, your savings are likely to last for at least 30 years—given that you make no other changes to your withdrawals, such as a lump sum withdrawal for a one-time expense or a slight reduction in withdrawals during a down market.
To see how much monthly income you could count on if you retired as expected in five years, multiply your current savings by 4% and divide by 12. For example, $1 million x .04 = $40,000. Divide that by 12 to get $3,333 per month in year one of retirement. (Again, you could increase that amount with inflation each year thereafter.) Then do the same calculation based on your current savings to see how much you’d have to live on if you retired today. Keep in mind that your money will have to last five years longer in this instance.
Knowing the monthly amount your current savings can generate will give you a clearer sense of whether you’ll have a shortfall—and how large or small it might be. Use our retirement savings calculator to test different saving amounts and time frames.
Step 3: Don’t forget about health insurance, doctor!
Nobody wants to spend down a big chunk of their retirement savings on unanticipated healthcare costs in the years between early retirement and Medicare eligibility at age 65. If you lose your employer-sponsored health insurance, you’ll want to find some coverage until you can apply for Medicare.
Your options may include continuing employer-sponsored coverage through COBRA, insurance enrollment through the Health Insurance Marketplace at HealthCare.gov, or joining your spouse’s health insurance plan. You may also find discounted coverage through organizations you belong to—for example, the AARP.
Step 4: Create a post-retirement budget
To make sure your retirement savings will cover your expenses, add up the monthly income you could get from pensions, Social Security, and your savings. Then, compare the total to your anticipated monthly expenses (including income taxes) if you were to retire five years early and are eligible, and choose to file, for Social Security and pension benefits earlier.
Take into account various life events and expenditures you may encounter. You may not pay off your mortgage by the date you’d planned. Your spouse might still be working (which can add income but also prolong certain expenses). Or your children might not be out of college yet.
You’re probably fine if you anticipate that your monthly expenses will be lower than your income. But if you think your expenses would be higher than your early-retirement income, some suggest that you take one or more of these measures:
Retire later; practice longer.
Save more now to fill some of the potential gap.
Trim your budget so there’s less of a gap down the road.
Consider options for medical consulting or part-time work—and begin to explore some of those opportunities now.
To the last point, finding a physician job later in life can be challenging, but certain employment agencies specialize in this area. If you can find work you like that covers a portion of your expenses, you’ll have the option of delaying Social Security and your company pension to get higher payments later—and you can avoid dipping into your retirement savings prematurely.
When you retire early, you have to walk a fine line with your portfolio’s asset allocation—investing aggressively enough that your money has the potential to grow over a long retirement, but also conservatively enough to minimize the chance of big losses, particularly at the outset.
“Risk management is especially important during the first few years of retirement or if you retire early,” Rob notes, because it can be difficult to bounce back from a loss when you’re drawing down income from your portfolio and reducing the overall number of shares you own.
To strike a balance between growth and security, start by making sure you have enough money stashed in relatively liquid, relatively stable investments—such as money market accounts, CDs, or high-quality short-term bonds—to cover at least a year or two of living expenses. Divide the rest of your portfolio among stocks, bonds, and other fixed-income investments. And don’t hesitate to seek professional help to arrive at the right mix.
Many people are unaccustomed to thinking about their expenses because they simply spend what they make when working, Rob says. But one of the most valuable decisions you can make about your life in retirement is to reevaluate where your money is going now.
This serves two aims. First, it’s a reality check on the spending plan you’ve envisioned for retirement, which may be idealized (e.g., “I’ll do all the home maintenance and repairs!”). Second, it enables you to adjust your spending habits ahead of schedule—whichever schedule you end up following. This gives you more control and potentially more income.
Step 6: Reevaluate your current spending
For example, if you’re not averse to downsizing, moving to a less expensive home could reduce your monthly mortgage, property tax, and insurance payments while freeing up equity that could also be invested to provide additional monthly income.
“When you are saving for retirement, time is on your side”. You lose that advantage when you’re forced to retire early, but having a backup plan that anticipates the possibility of an early retirement can make the unknowns you face a lot less daunting.
DEFINITION: In corporate finance, a tender offer is a type of public takeover bid. The tender offer is a public, open offer or invitation (usually announced in a newspaper advertisement) by a prospective acquirer to all stockholders of a publicly traded corporation (the target corporation) to tender their stock for sale at a specified price during a specified time, subject to the tendering of a minimum and maximum number of shares.
In a tender offer, the bidder contacts shareholders directly; the directors of the company may or may not have endorsed the tender offer proposal.
Posted on April 29, 2022 by The D.E.A. ROGUE WARRIOR
By Staff Reporters
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Medicare Advantage Organizations (MAOs) delayed or denied payments and services to patients, even when these requests met Medicare coverage rules, according to a report released by federal investigators on Thursday.
Posted on April 28, 2022 by The D.E.A. ROGUE WARRIOR
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By Eric Bricker MD
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According to One Survey, only 4% of People Understand the Basic Insurance Terms of Deductible, Co-Insurance, Copay and Out-of-Pocket Maximum.
In Another Survey by United Healthcare Itself, Only 9% Understood the Terms Premium, Deductible, Co-Insurance and Out-of-Pocket Max.
This Lack of Understanding is Not the Fault of the Employee Benefits Professionals or the Employees… Rather, the Health Insurance Plan Designs Are Just Too Complicated.
Posted on April 21, 2022 by The D.E.A. ROGUE WARRIOR
By Staff Reporters
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DEFINITION: A blank check company is a development stage company that has no specific business plan or purpose or has indicated its business plan is to engage in a merger or acquisition with an unidentified company or companies, other entity, or person.
Posted on April 18, 2022 by The D.E.A. ROGUE WARRIOR
By Staff Reporters
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According to Wikipedia, the Web3 (also known as Web 3.0 and sometimes stylized as web3) is an idea for a new iteration of the World Wide Web based on blockchain technology, which incorporates concepts such as decentralization and token-based economics. Some technologists and journalists have contrasted it with Web 2.0, wherein they say data and content are centralized in a small group of companies sometimes referred to as “Big Tech“. The term “Web3” was coined in 2014 by Ethereum co-founder Gavin Wood, and the idea gained interest in 2021 from cryptocurrency enthusiasts, large technology companies, and venture capital firms.
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Now, some experts argue that web3 will provide increased data security, scalability, and privacy for users and combat the influence of large technology companies.
Others have raised concerns about a decentralized web, citing the potential for low moderation and the proliferation of harmful content,the centralization of wealth to a small group of investors and individuals, or a loss of privacy due to more expansive data collection. Others, such as Elon Musk and Jack Dorsey, have argued that web3 only currently serves as a buzzword.
Asking a “Financial Advisor” if they’re a fiduciary isn’t always enough to hire them. People can “ice skate” around that terminology and give fuzzy or unclear answers to that question. Instead, you may consider asking them to sign a fiduciary oath.
“If someone is fee-only, not “fee-based”, they shouldn’t have a problem signing a document stating how they get compensated.” “If someone is, for example, a broker dealer, insurance agent or investment advisor who works on commissions, they probably wouldn’t be allowed to sign it.” Just say NOT to contract arbitration clauses, too! As well as “Dual Registration”. Remember Bernie Lawrence Madoff.
THE FIDUCIARY OATH
This one-page document outlines five fiduciary principles a financial adviser must follow to put the client’s interests ahead of their own. They include acting with prudence, not misleading the client, avoiding conflicts of interest, and disclosing and managing unavoidable conflicts.
The oath, meant to be printed out and signed by an adviser, has been around for several years. But recent events, such as the 5th Circuit Court of Appeals striking down the DOL rule, have increased the urgency to get it into circulation.
“With the 5th Circuit ruling, it is just so important to have this oath out there because it states fiduciary principles,” said Ms. P. Houlihan, president of Houlihan Financial Resource Group. “The oath is the answer, given that the DOL rule is gone.”
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Unethical and illegal trading by specialists or market makers. A specialist may buy a stock for themselves from Dr. John Q. Public even though a better price is available from another seller. The specialist can view bid and ask prices and then manually mis-match them, or see ahead to a less favorable price. It happens in this editor’s experience, by observing how long it takes for a stop order to execute after the stop price was reached. This practice is a form of shimming. ***
Trading Imbalance
A situation where a large block of stock is put up for sale, but not enough buyers are available for purchase, and a market maker is unable to buy the imbalance. Lightly traded and tightly held stocks are considered temporarily illiquid during such imbalances. On occasion, a trading halt is put into place until enough buyers are available to purchase the deficit. On rare occasion, a handful of buyers can buy the stock at a huge discount if the stock was not halted during the imbalance. On the New York Stock Exchange, large stocks usually have a “delayed open” for such imbalances, as a trading specialist will fill the order by lining up buyers for the block, and then open trading for the stock for the day. ***
Triple Witching Hour
The final hour of trading on a Friday when stock index futures, stock index options, and stock options all expire. This happens on the third Friday in March, June, September, and December. See Quadruple Witching Hour. ***
Posted on April 9, 2022 by The D.E.A. ROGUE WARRIOR
By American Journal of Public Health
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DEFINITION: Public health is “the science and art of preventing disease, prolonging life and promoting health through the organized efforts and informed choices of society, organizations, public and private, communities and individuals”.
According to Wikipedia, selling away in the U.S. securities brokerage industry is the inappropriate practice of an investment professional who sells, or solicits the sale of, securities not held or offered by the brokerage firm with which he is associated.
An example of the term expressed in a sentence is, “The broker was selling investments away from the firm.” Brokers marketing securities must have obtained the appropriate securities licenses for various types of investments. Brokers in the U.S. may be “associated” with one or more Brokerage firms and must obtain licenses by passing standardized Financial Industry Regulatory Authority exams such as the Series 6 or Series 7 exam.
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In the past I’ve held these as well as a Series 63 and 65 license [SEC].
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