Using Tabata to Reach Your Fitness Goals

high-intensity-interval-trainingWe all know how important physical exercise is to excellent living, yet occasionally we don’t have the time to dedicate 50-60 minutes six times a week like many of the experts suggest.  For those on a busy schedule, the Tabata protocol might be a good alternative for those days when you don’t have a lot of time for a full blown workout.

Tabata training is 4 minutes of intense intervals utilizing one or more exercises.  Using jumping rope as an example, a Tabata drill goes like this:  Jump rope as hard as you can for 20 seconds.  Rest for 10 Seconds.  Repeat 7 more times for a total of 8 sets.  The whole Tabata drill only takes 4 minutes.

Tabata training can be done with a number of different exercises including:  sprints, push ups, sit ups, squat thrusts, dumbbells, or swimming.  The key is to push yourself as hard as you can for the full 20 seconds, and rest for the full 10 seconds.  It appears the secret to Tabata’s success lies in the 10 second rest periods, because no rest or more rest had less successful results.  While not impossible without one, using a Tabata timer will make timing the intervals much easier.  Timers like the Gymboss® can be purchased, but you can also find several Tabata timers available for free download to your Smartphone or computer.

Tabata was developed and named after Japanese  physiologist, Dr. Izumi Tabata at Japan’s National Institute of Fitness and Sports.  Dr. Tabata and his team of researchers did a study comparing the effects of moderate intensity endurance (typical aerobics) and high endurance intermittent training (Tabata drills) on VO2 (1) max and anaerobic activity.  Dr. Tabata’s team discovered that a moderate intensity endurance program produced VO2 increases of about 10% with no anaerobic capacity (2) improvement.  The Tabata group; however, improved their VO2 max by 28% and their anaerobic capacity by 28%!  Both groups worked out 5 days per week for 6 weeks.  Additionally, Tabata drills were discovered to be an outstanding way to burn fat.  In fact, it was demonstrated that fat burning often continued up to two days after the last Tabata workout.

Make no mistake, Tabata is not for an out of shape beginner.  It is a serious exercise program that should only be attempted once you are already conditioned.  However, when you are short of exercise space or time, Tabata removes any excuse you might have for not getting in your workout.

(1) VO2 Max is often used as a measurement of an individual’s physical fitness. It is the maximum capacity of an individual’s body to transport and use oxygen.

(2) Anaerobic capacity refers to an individual’s ability to perform at maximum output, usually refers to strength or power rather than endurance (e.g., ability to sprint at the end of a distance race).

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VOUCHERS ARE A FREE MARKET SOLUTION FOR FIXING PUBLIC EDUCATION

schoolchoice1Although we have been conditioned to believe public school is a different animal, free markets work for education too.  In America, universities compete for scholarships, grants, and tuition dollars.  Consumers, not colleges, determine where those education dollars are ultimately going to be spent.  Unlike our centrally planned and taxpayer funded public school system, America’s university system is considered the best in the world.  Over the last 150 years we have experimented with government controlled school monopolies, and they have proven to be expensive, overly bureaucratic, and inefficient.  It is time we consider free market solutions to solve the problems that are inherent to our current public education system.

Treating education as an entitlement tends to destroy education’s value in the minds of its recipients.  According to the law of diminishing marginal utility, as a person increases consumption of a product (i.e. education) while keeping consumption of other products constant, there is a decline in the marginal utility (value) that person derives from consuming each additional unit of that product.  What this means is that the more we have of something the less we value the portions we possess above what we really want.

Let’s use the “all-you-can-eat” buffet style restaurant as an example.  These restaurants entice us with “all you can eat,” while knowing each additional plate of food provides less utility to us than the one before.  Despite their enticement, most people will eat only until the utility they derive from additional food is slightly lower than the original. For example, say you go to a buffet and the first plate of food you eat is very good. On a scale of ten you would give it a ten. Now your hunger has been somewhat tamed, but you get another full plate of food. Since you’re not as hungry, your enjoyment rates a seven at best.  Most people would stop before their utility drops even more, but say you go back to eat a third full plate of food and your utility drops even more to a three.  If you kept eating, you would eventually reach a point of total dissatisfaction, or ‘dis-utility.”  In education, the first plate of food is learning to read and write, as well as basic math.  Beyond the basics, most families don’t value additional education.  While this is a bold statement, public school student appreciation for education drops off dramatically with mastery of the basics, and parental disinterest in post- elementary school teacher conferences confirms this reality.  Whereas restaurant food bills are normally paid by the people eating the food, such is not the case for public education.  Instead, the bill is usually paid by someone else.  This lack of “skin in the game” by the consumers of public education further diminishes the value people have for it.

Realizing taxpayer funded education is susceptible to the law of diminishing marginal utility, I prefer a policy where citizens are not forced to pay for the education of families who don’t value it.  Instead, I support eliminating public education entirely and allowing the natural order to inspire families to pursue the education they deem appropriate.  It is wasteful to spend money on citizens who don’t value education, but it is wise to let families invest the money they normally pay in taxes towards education opportunities that already exist in the free market.  Public education in the 21st century is like bottled water: an unnecessary expense when quality education is readily available in so many other places at much lower costs.  Online academies, homeschool curriculums, and most private schools are much less expensive, usually more successful in equipping students for the 21st century, and far less controversial than public schools.  If education wasn’t a government provided entitlement, the free market would quickly provide the education resources necessary for citizens to function in the 21st century.

school-choice-1Evidence suggests that under a policy where taxpayers aren’t forced to pay for the education of their neighbor’s children, poor families would also have access to quality education through patronage.  At Whitefish Christian Academy (where I serve as board president), many struggling families who value education (and ensure their children work hard in class) have received tuition assistance necessary for their children to attend. Financially successful people in our community continually demonstrate their willingness to partner with hard working families and students who value education, like they do.  In spite of the efforts of public school monopoly advocates to paint successful Americans as inherently selfish, I suspect most communities possess citizens as generous as mine, particularly if they are freed of the burden of paying for public education.  Community rejections of school bond issues are usually indictments against the inefficiencies of public school bureaucracies rather than denials of education’s societal value.

The inequality created by America’s monopolistic public school system is apt to become our most pressing civil rights issue.  Recent popular documentaries like “Waiting for Superman” and “The Cartel” demonstrate that inner city communities value education as much as any other. They also reveal that public school monopolies are rejected as vehemently in poor minority neighborhoods as they are in affluent, predominantly white ones.  Teacher protests in Wisconsin and New Jersey have exposed government policies that favor teachers and school administrators over taxpayers and children.   Parents and students are quickly learning that better alternatives exist; however, the only thing blocking them from receiving a decent education in their neighborhood is their government protected public school monopoly.

Even though privatizing education is the most efficient way to improve education, I realize America isn’t ready for the idea of jettisoning taxpayer funded education altogether; therefore, I support a voucher system where each child is entitled to a set dollar amount of education paid for with a voucher.  Under such a program, each family is free to choose where their vouchers will be spent.  Families may choose to homeschool, enroll their children in private, parochial, or public school, or use the money to hire private tutors.  In order to continue receiving funds, I support the requirement that students demonstrate grade level proficiency before receiving more funds.

Free market competition in public education will improve it immediately.  For communities that lack the courage to do away with public education entirely, the voucher system is the most viable method for introducing free market competition into public education.  Because both poor and wealthy communities have voiced strong desires for school choice and equally loud impatience with public school costs and inefficiencies, vouchers are now politically viable.  Free markets have proven effective in providing the highest quality of goods and services at the lowest prices to the greatest number of people; therefore, I support the idea of a voucher system that promotes education choice.

Requesting Your Credit Reports: What You Need to Know

facIn my experience, checking your credit report regularly is one of the best ways to keep tabs on your identity and to prevent errors from becoming major hassles.  No one wants to deal with an incorrect credit report when they’re buying a home, and checking your credit reports often can help you nip potential issues in the bud before they wreak havoc on your credit rating.  For years now, I have been using  AnnualCreditReport.com, a truly free website that makes the process of monitoring my credit reports extremely easy.

Basically, there are three simple steps to requesting your credit reports.  First, just fill in your information, like name address, etc.,  then pick the reports you want to see.  There are three major credit reporting bureaus, TransUnion, Equifax, and Experian, and they are all required by law to offer you one free credit report per year.   Next, request a credit report from one of the three.  I recommend requesting a report from one bureau every four months, so you’re getting a total of three reports per year staggered throughout the year. (For example, mark on our calendar to request a report from Experian in January, Equifax in May, and TransUnion in September).  Finally, once you receive your report, read through it carefully to ensure the information it has on you is accurate.

?????????????????????????????????????????When you get the report, you’ll want to be on the lookout for potential issues such as: credit charges you don’t recognize, lines of credit you didn’t open, applications for credit you didn’t make, or strange accounts and addresses you don’t recognize.  In addition to being possible errors, they may also be signs of identity theft.  The Consumer Financial Protection Bureau (CFPB)  has useful information on how to spot and address identity theft,   as well as useful information on what  to look for and how to report potential errors.  You might also check out  AnnualCreditReport’s resource page.

If you find errors or questionable information on your credit report, contact the reporting bureau directly to  have them fixed or removed.  If you don’t agree with what is reported, then dispute it.  The first time I requested a credit report years ago I discovered my parents’ financial information was being reported on my report. I contacted the credit bureau immediately and they promptly removed the incorrect information.

Don’t be a victim of bad information, errors, or identity thieves.  The best defense against issues on your credit report is vigilance.  Using the resources outline above, you should have the tools you need to stay on top of your credit reports and the information to take action as necessary.  No one wants to have to deal with errors on their credit reports, but it’s better to deal with any issues you find now, rather than when you need your credit report to buy a home, obtain a business loan, etc.  By proactively reviewing your credit report periodically you will stay ahead of errors and criminals, and quite possibly prevent a mole hill from turning into a mountain.

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Should I buy LifeLock?

JPG-LL_Brnd_Sig_hor_full_color21st Century society is incredibly efficient.  I am often amazed at how quickly my market needs are filled.  I can order practically anything online at Amazon.com and have it delivered to my house overnight.  I can book plane tickets, a rental car, and a hotel reservation at thousands of locations around the globe, and I can buy nearly anything, anywhere, without cash just by flashing plastic.  Unfortunately, increased efficiencies often result in reduced security.

Identity theft is a serious threat, and it continues to be the number one complaint received by the Federal Trade Commission, with American consumers reporting losing over $1.6 billion to fraud in 2013.  By now, most folks have heard about the security breach at the national department store Target, where identity thieves broke into Target’s computer system and stole personal information on thousands of customers who had used credit and debit cards at Target stores.  The threat is real, and with this threat comes a heightened level of anxiety.

In the last few years clients have asked me about LifeLock, a company that claims to help customers prevent identity theft.  For $110 per year, LifeLock promises to pay up to $1 million in expenses to restore a person’s stolen identity.  They also promise to monitor your accounts for suspicious activity, scan for potential identity theft threats, respond to cases of identity theft, and track your credit score for possible problems.  Sounds like a pretty good deal, but is it?

Unless you are a high risk target (e.g., you are going through a nasty divorce, recently fired a disgruntled accountant, or you frequently hand out to strangers your personal identifiable information), I think LifeLock is unnecessary.  In many cases, your bank or credit card companies already offer you protections (check with your financial institutions for more information), against stolen identity, and you can monitor your own credit report 3 times a year through annualcreditreport.com for free (submit a credit report request to each of the three credit bureaus listed on the site once per year staggered every 4 months).

Having LifeLock is a lot like wearing a belt with suspenders.  It really isn’t necessary, but it does make folks feel more secure.  It is rather expensive insurance relative to the monetary risk, but its cheap price of $10.00/mo does make some folks sleep better at night.  Rather than hire LifeLock, I prefer to practice personal security instead.  I use cash for most purchases, and I only occasionally use credit cards; this reduces the risk of credit or debit card information being stolen.  I am careful about who I share my personal information (like account numbers, social security number, or my computer passwords), particularly over the phone with people I don’t know or trust, and I monitor my financial statements closely for unusual activity.  I think the best defense against identity theft is personal vigilance, and by taking a proactive approach, I can spare myself the extra cost of having LifeLock remind me to be careful.

I encourage everyone to take responsibility for securing their personal identity, but it is doubtful LifeLock is necessary for most people.

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Socialism and Crony Capitalism

Socialism-FailsIn my political science classes in college, I learned that a socialist system is characterized by a strong central government that commands and controls the economy.  For an economy to be considered socialist, the means of production only needs to be controlled (but not necessarily owned) by a government.  In a socialist economy, bureaucrats set wages, control prices, create quotas, and regulate distribution.  Buying and selling behavior is manipulated by central planners using tax preferences and disincentives.

Socialism is different from “free market” capitalism.  In a truly free market economy, citizens—not government bureaucrats—make the majority of economic decisions.  Individuals rather than the government determine prices, wages, levels of production, and distribution methods.  Free market economies rely on prices to be analog signals to indicate the accurate supply and demand for specific goods and services.  When supplies are low, demand pushes prices up and producers are motivated to produce more, which pushes down demand, which lowers prices, etc. What differentiates a socialist economy from a free market economy is centralized command and control or the absence of it.

When politics get involved, the proper definitions of economic terms can get confusing.  While Democrats appear to prefer a centrally planned socialist system, and Republicans appear to prefer a free market capitalist system, history has shown both parties prefer the economic system known as “crony capitalism.”

Crony capitalism is an economic system where individuals, acting through corporate entities, partner with a strong centralized government in order to enjoy the safety and profitability of a monopoly.  Crony capitalism is NOT free market capitalism, but instead is more closely aligned with socialism.  Unlike free market capitalism, crony capitalism doesn’t mind bureaucracy, government regulation, or high taxes because the crony corporations are usually exempt by government decree.  By picking and choosing winners and losers, strong central governments ensure their crony corporate partners have no real competition.  Whereas the theoretical purpose of government involvement in a socialist economy is to ensure the fair and equal distribution of goods and services, crony capitalism uses government power to keep out competition and increase profits for the crony corporations.

All name-calling aside, it is difficult for me to align with either the Democrat or Republican Party.  I prefer a free market economy with minimal government involvement in the marketplace; however, both parties continue to press for more government intervention.  While not perfect, free markets are responsible for the incredible prosperity we have enjoyed. Any political movement towards greater centralized government control will diminish our chances for future economic flourishing.

Why Taxing Only the Rich Doesn’t Raise More Revenue

tax_richOne of the byproducts of free people making different choices with their time, talents, and treasure is the unequal distribution of economic outcomes.  I suspect that no western tradition generates more passion among Occidentals than the concept of inequality.  Whether we like it or not, or whether it is true or not, many Americans believe inequality is one of America’s greatest moral failures.  During the 2012 presidential debates between President Obama and Governor Romney, large segments of the discussion centered on the topic of taxing the rich more while preserving the relatively low tax rates for everyone else.  As we will see, the policy of taxing the wealthy significantly more is not new.  I want to demonstrate from history why a steeply progressive tax code, where the rich pay significantly more and the poor pay significantly less, doesn’t achieve its intended purpose of raising more revenue.

Our Founding Fathers weren’t big fans of the income tax.  In fact, it wasn’t until 1913 that the 16th Amendment was ratified allowing the federal government to directly tax the incomes of individual Americans.  The ensuing Revenue Act of 1913 called for a tax that ranged from a modest 1% on incomes exceeding $3,000 to 7% on incomes exceeding $500,000.  It wasn’t long before a policy of “taxing the rich” significantly more was implemented.  In order to pay for WWI, Congress passed a law in 1916 that raised the tax rates on incomes over $300,000 to 70%.

Ironically, from 1916 until 1918, the number of Americans earning more than $300,000 dropped in half!  This caused President Woodrow Wilson himself to urge Congress to reconsider whether very high tax rates were productive in collecting revenue.  Wilson said that, beyond some point, “high rates of income and profits taxes discourage energy, remove the incentive to new enterprise, encourage extravagant expenditures, and produce industrial stagnation with consequent unemployment and other attendant evils.”  In the midst of a deep depression and hundreds of thousands of Americans unemployed, those who successfully implemented the steeply progressive tax policy found themselves elected out of office.

In contrast to the poor economy experienced during the Wilson administration from 1916 to 1920, the Roaring 20’s was a time of unprecedented economic prosperity.  Americans both rich and poor were buying radios, washing machines and automobiles.  Unemployment was virtually non-existent, and it was the first and only time in American history when blacks had lower unemployment numbers than whites.  What was the cause of such a positive economic turnaround? Many believe it was the reduction of excessive progressive era tax rates.  The treasury secretary at the time, Andrew Mellon, convinced both President Warren G. Harding and his successor Calvin Coolidge, that the most effective way to raise tax revenues was to flatten the tax code.  From 1921 until 1929, marginal tax rates shrunk from a high of 77% to 24%.

The result?  Record collections of tax revenues that were so large the government almost paid off the national debt.  As for getting the wealthy to pay their fair share, In 1918, when marginal tax rates were over 70% only 20% of taxes collected came from incomes over $300,000.  However, by 1926, 65% came from top earners!  Mellon proved that the way to raise revenue was not to raise marginal tax rates, but to lower them enough to make work and investment meaningful to wealthy people.

At first glance, lowering tax rates on high incomes for the purpose of raising revenue seems counterintuitive.  However, Secretary Mellon knew that productive Americans would not produce if taxes were too high.  Mellon wrote in 1924, “The history of taxation shows that taxes which are inherently excessive are not paid.”

One of the ways that the wealthy produce less income is they invest in tax advantaged investments that are usually less attractive when tax rates are lower.  Growth stocks, insurance annuities, sophisticated and expensive retirement trusts, and tax-free municipal bonds, all become incrementally more attractive to wealthy people as their income tax rates increase.

A second way wealthy people avoid income taxes is they invest overseas in countries where their investment income is taxed less.  There are many countries where investment opportunities are unattractive when U.S. tax rates are low.  However, at some point even risky overseas investments become relatively more attractive as tax rates on U.S. investment income are increased.

Finally, when productive people get taxed more, they produce less.  If you think I am fibbing, try this experiment at home.  Tell your children that if they clean their rooms by noon on Saturday, you will take them all out for ice cream; however, whoever cleans their room first will be forced to clean the bedrooms of their less efficient siblings.  Productive people tend to have less debt, so they don’t need much income to flourish.  When income tax rates are high, wealthy people spend more time in leisure activities and less time in activities that require them to pay excessive taxes on their productivity.

lglafferArt Laffer, a distinguished economist and advisor to Ronald Reagan, developed the concept of the Laffer Curve.  Laffer postulated that no revenue would be collected when tax rates were 0% (for obvious reasons), but he also believed no revenue would be collected at rates of 100% because no one would have an incentive to produce income.  Somewhere between 0% and 100% lies a sweet spot where the greatest amount of revenue will be collected.  History has demonstrated that tax rates above 24% tend to result in reductions of revenue collected.  With our national debt at unprecedented levels, our economy in dangerous waters, and our own economic futures uncertain, it is critical that we take into the voting booth with us an understanding and historical appreciation for tax policies that actually work.

High Frequency Trading: Is The Small Investor Getting the Shaft?

60 MinutesLast Sunday 60 Minutes aired a segment about high frequency trading titled: “Is The Stock Market Rigged?”  Since its airing many of our clients have voiced concern over high frequency trading, so I have decided to share my thoughts.

To be honest, I knew very little about it prior to the 60 Minutes segment, but I did quite a bit of reading on the subject this week, and I now feel better prepared to weigh in on the conversation.  For those readers who don’t know what high frequency trading (or HFT) is, here is a little background.

Over the last few decades, technology has allowed the financial markets to make bigger and bigger buy and sell transactions faster and faster.  Trades that used to be done with handwritten orders and ticker tape can now be transacted by supercomputers in milliseconds rather than in minutes.  As it has become easier to fill large stock trades more rapidly, a cottage industry has sprouted up that exploits this new efficiency: the high frequency trader.  The high frequency trader sees your order to buy stock at a particular price, but before your order gets to the stock exchange (in less than a second), the high frequency trader buys the stock ahead of you and sells it to you at a slightly higher price.

Think of HFT like this:  suppose you want to buy your girlfriend a dozen roses, so you call the florist and ask what the price will be.  The florist quotes you $24.00. You tell the florist you live 15 miles away, but you will drive right down to buy the dozen roses.  Unbeknownst to you, a high frequency rose merchant eavesdropped on your phone call with the florist.  Knowing your intention to buy 12 roses at $2.00 apiece, he drove down to the florist shop from his office only 2 miles away and bought the roses in the store for $2.00 apiece.  Knowing you are on your way to buy roses, he is willing to sell them back to the florist for $2.01 apiece. When you get to the florist, the florist tells you that since you called earlier, the price of roses has risen to $2.02 (the florist added a penny per rose for his trouble).  Although you are perturbed because you are paying more than you were previously quoted, you pay $24.24 for the roses and you surprise your girlfriend.

In this scenario, the high frequency rose trader knew you were interested in buying roses, so he raced to the florist before you and bought the roses at the price you wanted to pay. He also took the risk you would buy them back at a penny or two higher when you arrived to get your flowers.  If you had balked at the price increase, the florist wouldn’t have bought them back at $2.01 apiece, and the high frequency rose trader would have been stuck with an order of roses he really didn’t want or need.

That is exactly how HFT works in the securities markets.  Electronic trade orders can’t move faster than the speed of light, and the stock exchanges are located at different locations around the world.  When an order is placed electronically, those HFT firms located between the buyers of stock and the stock exchange where the order will be filled, can buy the stock you ordered at the price you were willing to pay a millisecond sooner. The HFT then sells you the stock at a penny or so higher per share.

HFT sounds pretty rude at best, and downright dishonest at the least; but, is HFT really a bad deal for the individual investor?  I guess the best way to answer that question is to ask “compared to what?”

When it comes to buying and selling stocks, liquidity is extremely important.  A market with sporadic buyers and sellers is an illiquid and inefficient market indeed.  As distasteful as HFT looks on the surface, it appears to help ensure a large number of buyers and sellers in the market, thus shrinking price spreads and increasing the odds an investor can sell their stock in the future.

Secondly, HFT seems to be more of a burden on large institutional traders than on smaller individual investors (See Morningstar article: “About That Rigging Claim.”  From my floral analogy above, you can see that buying a dozen roses at $2.00 apiece and selling to you for a 12 cents profit doesn’t sound like a smart way to strike it rich on Wall Street; however, when you are buying 100 million roses (or shares) and immediately re-selling them for a $1 million profit, you can see where HFT can be enticing.  To date, there doesn’t appear to be widespread HFT front-running on small trades entered by individual investors.

Since the dawn of civilization, there have always been stories of markets being “rigged” against the little guy (see Proverbs 20:23).  The mission of the U.S. Securities and Exchange Commission (SEC) is:  “to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.”  When I look back over my 20 year financial career, the markets are fairer, less costly, and more orderly and efficient today than they have ever been.

In the past, small investors had huge barriers of entry that made investing difficult.  There were odd lot differential fees which made small trades extremely expensive, but today, few brokerage firms charge odd lot penalties.  Until 2001, stock prices were quoted in eighths of a dollar which increased price spreads (and trader profits), but now stocks are priced down to the penny, reducing price spreads and trading costs for all investors.  30 years ago there were almost no discount brokerage firms available to the small investor, but today there are numerous low cost opportunities to fit the needs of practically any interested investor.

Is the stock market rigged, like the 60 Minutes segment implies?  Yeah; probably, but it has always been rigged.  Even though middlemen have been skimming profits on stock trades at the expense of investors since the invention of the stock market, that hasn’t stopped millions of long term investors from accumulating vast sums of wealth.  In my financial career spanning two decades, I have observed substantially more money has been lost by NOT investing than has ever been lost BY investing.  In spite of HFT, markets today are less expensive, more transparent, and less sleazy than ever.  With the airing of the 60 Minutes segment, I suspect HFT will percolate to the top of the SEC’s list of Wall Street shenanigans to investigate.  But, I hope any regulatory cures they implement are better than the alleged financial ills of HFT.

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