Practical Solutions to Some of the Greatest Challenges Facing the World Economy will be discussed by panelists; Michael S. Falk, CFA, Partnering Consultant, Focus Consulting Group, Inc. & Founder, MSF Asset Consulting; Lee Hayes, CFA, managing partner of Genesee Investments; Michael N. Lindh, CFA, CPA, senior trader at Nuveen Investments; Rawley Thomas, president of LifeCycle Returns, Inc.

1. CFA Society of Chicago
November 29, 2011

2. Michael Falk
Michael S. Falk 2011

3.  E(ntitlements)
• Are owed to…
• With costs born by …
• Equal generational narcissism / ignorance / the only way
 A(usterity) has
• Real limits…
• Perceived limits…
 T(axes) are
• Costs for a civilized society
• Impactful to growth
 Retirement is… a loss of productivity
Michael S. Falk 2011

4.  For infrequent / significant risks
 When the cost(s) is/are reasonable
 Acceptance without need is… fraud
Michael S. Falk 2011

5.  Born in 1935, OAS(D)I
 LE + 5 (65) ≈ 72 today
 SSA ≥ 50% of income for 64%
 Theaverage person receives back all of their
“premiums” paid ≤ 60-months
 Unfunded liability $8 - $20 Trillion
Michael S. Falk 2011

6.  Means-testing after premium refund
 HNW phase-out (most expensive)
• Phase-outs are reinstated @ 85
• Give back = tax reduction/cap
 Un-refunded premium = death benefit
 FRA @ 70/72, no early payments
• Employment sensitive: 7/10 @ age 65
 Benefits are not taxed + COLA’s remain
Michael S. Falk 2011

7.  For older people
 Final year = 25 - 30% of spending
 Unfunded Liability $23 - $80 Trillion
 To fix Medicare… fix health insurance
• One policy, for life
• Cat. deductible + HSA
• All hospitals / doctors “in network”
Michael S. Falk 2011

8.  Standardized OOP by age bracket…
• $5,000 when < 40
• $3,000 when > 41
• $10,000 when FRA+
 Fixed EOL benefit @ 75+
 Revocable EOL statement
 Employer role
• Only if…
• HSA contributions
• Wellness programs
Michael S. Falk 2011

9.  Periodic exams required
• Benefits (not the policy) @ risk
• Benchmark health… early detection
• Longitudinal studies
 Premium discounts (incentives) available
• Stable / improving risk factors & behaviors
• Guaranteed for two years
 Unused, EOL benefit is inheritable
Michael S. Falk 2011

10.  Tort reform – attorney caps
 No more pharma patent extensions
 Expand access
• Medical “GI” Bill
• Nurse practitioners in all pharmacies
 Electronic records
Michael S. Falk 2011

11.  Promises are huge incentives
 Protect the pool!
• Retirement benefits only for retirees (FRA)
• Monthly benefits only paid monthly
 Rationalize
• SS + Public Pension ≤ 80%
• 10-year averaging required
• Funding level restrictions: new accruals, first-time/increased benefits
 Investments
• Pension bonds… no
• HF’s only if…
Michael S. Falk 2011

12. Retirement Ages
Medicare and Social Security
Tax Rates
Country Growth Rates
Rawley Thomas

16. Lee Hayes

21. Mike Lindh
Michael S. Falk 2011

22.  Personal Introduction
 Scope of talk – Economics, Finance, Public
Finance
 Key Assumption – Everyone brings their
faith, ethics, and moral values into discussions of
appropriate public policies. There is seldom a
values-neutral position on
significant, controversial issues.

23.  Four Major Areas of Public Policy Issues
• Private Property
• Environmental Protection and Economic Development
• Wealth Distribution, Re-Distribution, and Taxation
• Entitlements, Government Liabilities, and
Intergenerational Equity
 Conclusions

24. CFA Society of Chicago
November 29, 2011