Oct 25 2014

Branstad floats idea for changes to government workers’ health insurance

Iowa Gov. Terry Branstad is dreaming of an idea for changing the way state and local governments contract for employees health insurance, but said hes not committed to any specific approach or proposal.

Branstad, a Republican seeking re-election this year to an unprecedented sixth term, told The Des Moines Registers editorial board on Tuesday that hes asked his administration to consider alternatives to the current practice in which state and local governments negotiate for health coverage individually.

If the state of Iowa were to work out an agreement with local school districts and public employee groups to not have everybody negotiate for their health benefits – if we were to do something on a statewide basis instead of every little school district negotiating for their contract for their health insurance … we could save hundreds of millions of dollars, Branstad said.

The state Department of Administrative Services is looking into the idea, and Branstad said his administration has had informal discussions with local governments as well. As soon as he floated the idea to a room full of reporters and editors, however, he began issuing caveats and qualifications on his support for such a change.

Thats because discussions of state-employee bargaining and benefits – referred to inside the Capitol as Chapter 20 issues, after the relevant section in the Iowa Code – are politically combustible. The issue prompted a legislative fight in 2011 just after Branstad returned to office for his fifth term and sparked intense battles during the term of his predecessor, Democratic Gov. Chet Culver.

Branstad acknowledged as much on Tuesday at the Register, telling journalists, I dont want to get mired into some big political briar patch over this.

Any changes on employee health insurance or discussion of other bargaining issues governed by Chapter 20 would have to be worked out in a partnership, he said.

Im not looking at any change, Branstad said. Im not looking at any change. Im not recommending any change. Im just saying, Im dreaming of an idea that, if we could build broad-based support for it, could save hundreds of millions of dollars and improve the health of Iowans.

Branstad is running this year against Democratic state Sen. Jack Hatch of Des Moines. Polling shows Branstad enjoys a wide lead in the race.

In an hour-long discussion that will inform the editorial boards decision on whom to endorse in the race, Branstad also emphasized his commitment to government transparency and what he called the states successes on water quality and economic development.

Regarding open government, Branstad repeated his call for opening personnel records of terminated state employees, drawing a contrast with Democratic lawmakers who have resisted the change.

He defended his administrations use of work groups that review issues and make policy recommendations in closed meetings, arguing that making their discussions and proposals public – as happens with other, officially appointed commissions and task forces – could mislead Iowans about what policies the administration intends to pursue.

We dont want to give people a false impression that this is something were recommending just because somebody has looked into it or studied it, he said. We look into and study a whole lot of things that eventually dont become policies or recommendations.

The state has boosted funding for water quality efforts by 26 percent in recent years, Branstad said, while effectively partnering with farmers and the federal government to encourage conservation investments on Iowa farms.

He lauded the Nutrient Reduction Strategy, the deal his administration helped broker for voluntary water-quality improvement efforts by landowners in response to pollution on state waterways. Environmental groups and political opponents have faulted the strategy for not requiring action by farmers and others.

Oct 25 2014

10 Insurance Myths (Men Are More Likely Than Women to Believe 8 of Them)

Men may be more gullible when it comes to insurance myths than women but even women think a number of popular myths about insurance are true, according to a survey by online insurance seller insure.com.

Insure.com said it recently surveyed 2,000 adults, half women and half men, from all regions of the country, asking them whether 10 insurance-related statements were true or false. All the statements were false, according to the online insurance provider.

More than half of people surveyed (52 percent) have a misunderstanding of how to insure a house. Most believe a house should be insured for its real estate market value whereas insuring a house based on the cost of reconstruction is the recommended route.

Insure.com also looked at who is more likely to believe a myth – men or women. In all cases except two, men were more likely to be duped by an insurance myth.

In one exception, women were more likely than men to erroneously believe that red cars cost more to insure than other cars, due to the perception that they get ticketed more. But insurers do not use car color as a factor in setting rates.

“I hope no one passed up the red Miata they really wanted because they thought the insurance would be more expensive,” said Amy Danise, editorial director of Insure.com.

In the other exception, the 44 percent of people who think an insurance company will cancel their car insurance right after they get in a bad accident were evenly split between the sexes.

The biggest disparity between men and women involved the myth that out-of-state speeding tickets can’t follow the violator home. They can follow the driver, and can lead to a rate increase depending on the insurance company, according to insure.com. Men were far more likely to think that speeding tickets can’t follow them home (66 percent) than women (34 percent).

10 Myths

Below are 10 insurance myths, with the realities and comments provided by insure.com, and the gender breakdown of those who believe the myths are true.

Myth 1: I should buy insurance coverage for my house based on its real estate market value.

  • 52% think it’s true (45% women, 55% men).
  • Reality: Buy coverage based on a home’s cost to reconstruct (materials and labor).

Myth 2: Red cars cost more to insure because they get pulled over for speeding more.

  • 46% think it’s true (52% women, 48% men).
  • Reality: Car color doesn’t affect insurance rates.

Myth 3: If I cause a crash with extensive damages to others, my auto insurance company can cancel me immediately.

  • 44% think it’s true (50% women, 50% men).
  • Reality: If an insurer wants to drop a customer due to claims, it generally has to wait until the policy period is up.

Myth 4: Small cars are the cheapest to insure.

  • 40% think it’s true (42% women, 58% men).
  • Reality:  Small and mid-size SUVs and minivans are generally the cheapest to insure. Small cars are not, often because they’re chosen by more inexperienced drivers who tend to make claims, and because passengers incur more expensive injury claims.

Myth 5: The Affordable Care Act (also called Obamacare) allows health insurance companies to base rates on medical conditions such as high blood pressure, heart disease and cancer.

  • 36% think it’s true (42% women, 58% men).
  • Reality: It’s just the opposite – the Affordable Care Act prohibits health insurers from basing rates on pre-existing conditions.

Myth 6: Comprehensive auto insurance covers everything and anything.

  • 32% think it’s true (41% women, 59% men).
  • Reality: Comprehensive coverage is tragically misnamed. It covers only narrow portions of possible problems, including car theft, storm damage, animal collisions and vandalism.

Myth 7: Thieves prefer to steal new cars.

  • 29% think it’s true (42% women, 58% men).
  • Reality: It’s more lucrative to steal old cars and sell them for parts.

Myth 8: If my friend borrows my car and crashes it, their insurance will pay for damage.

  • 25% think it’s true (48% women, 52% men).
  • Reality: You and your insurance are on the hook when someone else drives your car.

Myth 9: The Affordable Care Act (also called Obamacare) requires me to take the health insurance plan offered by my employer.

  • 19% think it’s true (41% women, 59% men).
  • Reality: The Affordable Care Act requires almost all Americans to buy health insurance but doesn’t say where they must get it.

Myth 10: Out-of-state speeding tickets cant follow you home.

  • 13% think it’s true (34% women, 66% men).
  • Reality: Oh yes they can.

“These misunderstandings can lead to financial loss,” said Danise. “We hope the survey results open people’s eyes to their true risks and insurance gaps.”

 Insure.com sells auto insurance, home insurance, health insurance, and life insurance online.

Oct 24 2014

The Fundamental Challenge of Fundamental Investing

Investment managers fill out a lot of questionnaires.
Consultant research, requests for proposals, databases, client
due diligence surveys hundreds of times a year, we are
invited to characterize our firm and how we do what we do.

One of the boxes we typically need to check is whether our
process is quantitative or fundamental. Lately, Ive been
wondering how much longer we will be asked this question. How
will any manager be able to function in the future without
adopting at least some aspects of a quantitative approach?

My firm has used quantitative techniques since the
mid-80s. We analyze the characteristics of stock market
and company performance over long periods of time and distill
the attributes of successful investments into a disciplined,
repeatable process. Fundamental managers, in contrast,
typically look at far fewer companies but believe that they can
analyze them more deeply through company meetings, hands-on
research and other forms of human insight.

I have no quarrel with fundamental management. Skilled
fundamental investors historically have been strong at
identifying intangibles like management quality, brand value
and governance. But this edge relative to quantitative managers
will erode going forward. There is no question that data is
exploding around the world.
Googles Eric Schmidt famously said that today more
information is created every 48 hours than in the entire span
of history up to 2003. Financial markets are part of this
trend.

Not that simply having more data makes an investment process
better. Far from it. I am well aware of the dangers of
so-called data mining, which basically means you can find just
about anything in a large data set if you look hard enough.
What I also know, however, is that this exponentially growing
reservoir of information represents a potential competitive
advantage for the investors that can extract true meaning from
it.

This is the key question: Can the data bonanza translate to
true investment insight, or is it just a rising tide of
noise?

Behavioral finance has demonstrated how human reasoning
falls apart in the face of too much information. Investment
processes based on human insight alone must necessarily limit
the amount of information they use or the number of
opportunities they consider. Otherwise they risk falling prey
to the many cognitive errors of judgment that have been shown
to plague investors.

In my view, fundamental managers are going to have to change
or they will be left behind. Quantitative approaches
designed to capture vast amounts of information and analyze it
consistently and objectively will be increasingly
essential to manage the tide of financial data and insulate
decision making from bias.

But black box data-crunching quant is not the answer. I
believe it is possible to design a quantitative approach that
replicates many of the best features of fundamental management
individual company insight, depth, conviction, forward
focus, responsiveness and adaptability.

Modern quantitative investing is creative. With the right
tools, the data explosion can become a trove of resources to
help identify the kinds of fundamental company and market
characteristics that may lead to future outperformance.
Managers need to apply these insights consistently, to the
largest possible universe of opportunity, and be disciplined
even or especially when decisions are
counterintuitive.

I am very excited by the opportunities afforded by the
increasing reach of data. My firm is exploring ways that we
might discern investor and insider sentiment from big data,
including news, blogs, tweets and product reviews. We are also
looking at patterns of investor behavior, such as unusual
divergence among traders of the same company in different
markets or through different financial instruments.

We are intrigued as well by recent research suggesting that
it may be possible to capture previously unquantifiable
information, such as executive sentiment. Evidence suggests
that soft traits, like risk aversion and overconfidence in
executive communications, can be systematically identified.
There may be ways too to measure intangibles like brand and
governance.

Quantifying such attributes allows you to apply these
measures to a huge universe of potential investments. The wider
the net, the more likely you are to discover companies that
have been overlooked by other investors. A systematic approach
also lets you be consistent and make truly relevant
comparisons, even when looking at thousands of companies, and
helps you toward the goal of being really objective.

These classic benefits of a quantitative approach can be
realized while also incorporating the most attractive aspects
of a fundamental approach. Perhaps the future will be the best
of both worlds.

John Chisholm is CIO of Acadian
Asset Management in Boston.

Oct 23 2014

5 Investing Rules In Case of a Market Correction

I have long felt the greatest threat to the retirement dreams of most investors can be found in the combination of misinformation promulgated by the securities industry and much of the financial media. Together, they deliver a stream of marketing hype carefully crafted to enrich themselves at your expense.

They seem to go into overdrive when there is an opportunity to create fear and anxiety. The extreme market volatility we experienced last week gave them just such an opening. Their conduct was predictable and unfortunate. The amount of terrible investment advice they managed to disseminate over a short period of time was truly staggering.

If you want to avoid becoming a victim of the industry’s latest machinations, here are some rules you should follow to guide you through a possible market correction.

Oct 22 2014

Shares gain in Asia as Tokyo rebounds on bargian hunting

By Investing.comStock MarketsOct 22, 2014 02:11AM GMT Add a Comment

Oct 22 2014

People too trusting when it comes to their cybersecurity, experts say

As a child, not that long ago, Connor Brewer played video games hour after hour.

But in the tricky tech world we live in now, Brewer with his laptop and lopsided grin may soon be the guy who saves us from the bad guys.

Brewer is a 19-year-old sophomore at Butler Community College, a self-described loner and tech geek.

By age 12, he was writing his own codes. In high school, he and other kids he knew used desktop computers to crawl repeatedly through networks run by adults who assumed they were secure.

Today he’s what technologists call a white-hat hacker, hacking legally for companies that pay to find their own security holes. When Bill Young, Butler’s chief information security officer, went looking for a white-hat hacker, he hired Brewer, though Brewer has yet to complete his associate’s degree at Butler.

White-hat hackers, or “ethical hackers,” as they also are called, are a rapidly growing industry, Young said.

He says we are all going to need them.

The bad guys are getting a lot better at robbing us.

Young and savvy

In techno-jargon, illegal hackers are “black hats,” Young said.

Butler’s security system comes under attack several times a week, Young said. Around the world, most companies, agencies or schools face that same challenge.

Many of the new breeds of criminals are young – even kids – tech-savvy and raised on games. Hacking is an adrenaline rush to them, Brewer said.

They attack government agencies – all of them – for fun, Brewer said.

Brewer and others like him are hired by companies to deliberately attack a company’s security network. These companies pay bounties if the white hackers find security holes. “Pen testing,” they call it, for “penetration testing.”

Young has repeatedly assigned Brewer to hack into Butler’s computer system. “He finds security problems,” Young said. “And I patch them.”

College jobs experts say cybersecurity students like Brewer will in the future make a great deal of money – six figures, some of them.

“He’s a great guy, driven and ethical,” Young said of Brewer. “And he’s going to have a great future.”

Ethics, privacy, theft

We have collectively created as much data in the past four or five years as was created in the entire previous history of mankind, said Khawaja Saeed.

Saeed researches electronic commerce and teaches data communications, networking, programming and computer information systems in the Barton School of Business at Wichita State University.

A lot of that new data got thrown up on the Internet, on the cloud. But security for all that cloud data has lagged behind tech achievements, said Saeed and Murtuza Jadliwala, who researches and teaches ethics, trust, privacy, security and computer technology at WSU’s College of Engineering.

As a sheriff’s officer in Sedgwick County’s Exploited and Missing Child Unit, Brett Eisenman used to pursue criminals who used technology to create child porn. Now he instructs a new generation of people to protect us from Internet robbery and “malicious people.” He teaches cybersecurity to Brewer and other students at Butler Community College.

Many of us behave irresponsibly, he said. We don’t change our passwords, and we don’t learn enough about our electronic devices or how they interact with the networks we use. Above all, we are way too trusting, he said.

Many business people, he said, still don’t understand the risks. “When the (information technology) guy walks in, the boss just looks upon him as an extra expense,” he said.

“Bosses think we’re just money pits,” Young said.

“That’s a mistake.”

Way too trusting

Saeed and Jadliwala say Eisenman is right and that the dangers will become more severe in the next five years. That’s when the “Internet of Things” becomes a more established fact, Jadliwala said.

“Everything from your refrigerator to your electric meter – many things you own are going to be to be cyber-enabled in the next five years,” Jadliwala said. “You will see so much more wireless data available out there – and so many more entry points for bad guys.”

Advertisements tout using your smartphone to raise your garage door, Saeed said. “But if I hack into that, I can get in your house,” he said.

Some of us will even wear clothes that will wirelessly tell our doctors what our vital signs are. And hackers everywhere will tune in, Jadliwala said.

It might make your utility company’s management more efficient to make your electric meter cyber-enabled, he said.

And that means it’s communicating your data wirelessly.

“But what prevents a robber to stand outside, within 100 meters or so, with a radio receiver and figure out from your meter whether anyone is in the house or not?”

We are all too trusting, Jadliwala said. We’ve all seen headlines that should make us more careful.

Hackers penetrated Apple’s cloud service and stole and posted private photos of celebrities, including Jennifer Lawrence and Kate Upton.

Worse than that, Jadliwala said, tens of millions of people saw their private credit card information compromised by hackers who breached security at Target, Home Depot and Goodwill Industries.

“Every scan you make with your credit card gives people your name, credit card number, expiration date, everything.”

How do they know?

It’s not only about our money. He said we don’t ask questions that we should ask about all this technology taking over our lives.

Facebook gives you tools to (supposedly) tailor-make who gets to see your posts, your photos, your thoughts, your life.

“But who are Facebook employees most loyal to?” Jadliwala said. “To us? Or to Facebook?”

His wife recently wanted to download a game on her smartphone. To enable the game, she had to type in her “location.”

“Why would a game need your location?” he said.

Corporations seem to put us at risk without enough thought, he said. They put our private information onto the cloud without asking our permission. And then their data miners analyze our information and target us for ads.

“I buy airline tickets to Dallas,” he said. “And after that, I get advertisements online for hotels in Dallas.

“How do they know I’m going to Dallas?”

Do hackers now know when he is going to Dallas? And what days he won’t be at home?

Costing millions

Most malicious people in technology do simple things that nevertheless fool victims, Saeed said.

They send out malware that creates viruses; they use malware to turn computers into “zombies” that send spam.

Advanced hackers are multiplying worldwide, Saeed said. And they’ve learned how to hack in and embed key logging software, which enables them to record every keystroke their victims make.

He told his own version of the vacation horror story: “You do your bookings,” Saeed said. “If I have access, I know what your plans are. And I have your business trading account. So when you go on vacation and have less access to your own accounts and are more vulnerable, I can try and get money out of your account. This has has happened many multiple times.

“At the corporate level, it’s worse. They install key logging and get access to banking records.”

Many businesses, in spite of security laxness cited by experts, really are worried; they are spending millions more every year on security. And last year, top leaders from 9,600 businesses (30 percent of them from companies worth more than $1 billion in annual revenue) answered security questions posed by a group of technology magazines, Saeed said.

Most of the companies reported that they’d suffered numerous sophisticated network attacks, some costing tens of millions of dollars.

The Global State of Information Security Survey criticizes businesses in its conclusions, saying many businesses we rely on are “defending yesterday” rather than today’s sophisticated threats. But the survey also points out that security spending jumped 51 percent among the surveyed companies from 2012 to 2013.

Big businesses have more resources to fight theft and other attacks, Eisenman said. But small businesses often lack the money and expertise.

Got a virus?

People with tech talent are guaranteed, even in this subdued economy, to get good jobs.

Saeed said the tech major he teaches at WSU has had a 100 percent job placement record in the past two or three years.

Brewer already has a job helping Butler protect its network.

Mitchell Kelly, who sat next to him in Eisenman’s cybersecurity class this past week, is a 21-year-old Wichitan with a full-time job already working with computers for the Goddard school district while completing college.

Eisenman is right, he said. People need to pay a lot more attention to their own cybersafety.

Not long ago, Eisenman went to pay his bill at a barbecue restaurant.

“They said there might be problem with your card,” the woman at the register said. “We’ve had trouble with our system; we’ve got a virus for the last week. Or something.”

“I’ll pay cash, then, please,” Eisenman told her.

Eisenman rolled his eyes, telling this story.

A computer virus? For a week?

Maybe you’ve got hackers trying to steal, he said, and maybe you shouldn’t wait a week to figure that out.

“It’s not just the networks we need to fix,” Young said.

“It’s the people.”

Oct 21 2014

Readers divided over investing bicycle infrastructure

Portlands love-hate affair with bicycling was on display in Sustainable Business Oregons most recent reader poll.

Inspired by the Bicycle Transportation Alliances call to the city of Portland to include bicycle infrastructure and safety in its list of projects to be funded by the proposed street fee, we asked how you feel.

With nearly 100 votes cast, a solid majority favored bike-related projects. But the no votes were a strong second. Heres the final tally:

  • 40 percent: Yes. Portland leads the nation for bike commuting. If we dont invest, well lost that edge.
  • 30 percent: No. Enough with the bikes.
  • 16 percent: Im not convinced. Given the maintenance backlog, Portland cant afford to spend on bikes.
  • 14 percent: Maybe. More bikes means less wear and on bridges and roads.

As always, the poll is unscientific.

Wendy Culverwell covers sustainable business, manufacturing and law.

Oct 21 2014

Payday Loans and Check-Cashers Charge Exorbitant Fees; Consumers Are Aloof

NEW YORK — Consumers are missing an easy opportunity to save money: Avoiding high-fee loans and check-cashing services. And some dont even know why, a survey says.

Despite TD Banks Checking Experience Index showing that most banking consumers rate their checking account experience as either excellent or very good, a growing number of consumers — 22% — are using alternative banking products such as check-cashing services and payday loans.

Big mistake, the bank says.

While TD Bank has a vested interest in keeping customer cash inside its vaults instead of at a competing institution such as a check-cashing service, the bank makes a fair point: Check-cashing services and payday loan providers charge hefty fees for their services.

A$500 payday loan can carry a finance charge of $54.99, a 286% annual percentage rate in interest charges.

Fees vary at check-cashing services too, but consumers can expect to pay between 3% and 5% of the total amount of the check in service fees.

One in five consumers with a bank account are using alternative banking products, which could add needless cost to their monthly budget, said Ryan Bailey, executive vice president for retail deposit and payment products at TD Bank. Consumers who are using these types of services should have a conversation with a banker to learn about less expensive financial products that can meet their everyday financial needs.

And heres the dont know why part.

Of the banking consumers who do use alternative banking services, 16% say they really dont know why they use a payday lender, check-cashing service or even Western Union. That lack of knowledge can cost those financial consumers hundreds of dollars or more in fees they really dont need to pay and, in many cases, cannot afford.

Usually, its low-income financial consumers who feel the need to use alternative banking products such as payday loans and check-cashing services. But if they bypassed those high-fee services, theyd have more cash in their pocket at the end of the month by avoiding those budget-busting fees.

 

Oct 21 2014

Fact Check: Goddard right; Reagan backed payday loans

ANALYSIS: Payday loans provide borrowers with a short-term cash advance, generally less than $500. Borrowers write a check or give the lender access to their checking accounts with the agreement that the lender will cash the check after the borrower receives their next paycheck.

Interest on the loans is high, with rates averaging 400 percent, compared with credit-card interest rates of 12 to 30 percent, according to the federal Consumer Financial Protection Bureau.

Before 2000, Arizona prohibited loans with interest rates higher than 36 percent. That year, the state legalized what it called deferred presentment transactions — better known as payday loans — for 10 years. Despite efforts in 2008 and 2010 to extend the loans legality, they became illegal in July 2010.

The Reagan quote cited by Goddard comes from a December 2009 article in the Arizona Capitol Times, while she was a member of the Arizona House. With the sunset approaching, the newspaper queried Republican lawmakers on their plans to extend the loans or let them expire.

Theyre providing a service that people seem to enjoy, Reagan said. It doesnt seem like a rip-off to me.

She reiterated her support for the loans in a second article in January 2010, saying the interest rates make the loans seem like a worse deal than they are.

It costs more to bounce a check, she said. So, if you need a bag of groceries and the two options are go to write a bad check or go to one of these places, its actually a benefit and cheaper (to borrow from a payday lender).

Oct 20 2014

Kevin Yoder sure has taken a lot of money from Kansas City’s payday-loans crowd

Kevin Yoder sure has taken a lot of money from Kansas Citys payday-loans crowd

Posted

By David Hudnall

on Thu, Oct 2, 2014 at 10:34 AM