Love this article.  This guy really boils down investing into its simplest terms that most people should follow.  Unfortunately not many people do!

There are 5 simple tips that the author gives to everyone.  Ironically, they go against nearly everything he learned and sold for the majority of his career.  Point of the story…Wall Street is a crazy place (insert joke here).

1.  Hire a FEE ONLY advisor who you pay a percentage of assets under management fee to.

2.  Find the proper “asset allocation” eg.

- Stocks vs. Bonds

- Large-cap vs. Small-cap

- Value vs. Growth Stocks

3.  Divide your stocks between US and International.  (fyi the US stock market represents 42% of the worlds stocks)

4.  Decide if you should invest in active or passive mutual funds.  (fyi passive tend to outperform in the long run)

5.  Be sure to rebalance your portfolio.  (if your stocks are WAY up, sell some to get back to your original allocation)

The article was in the NYTimes

BURLINGAME, Calif.  — There are no one-handed push-ups or headstands on the yoga mat for Gordon Murray anymore.

No more playing bridge, either — he jokingly accuses his brain surgeon of robbing him of the gray matter that contained all the bidding strategy.

But when Mr. Murray, a former bond salesman for Goldman Sachs who rose to the managing director level at both Lehman Brothers and Credit Suisse First Boston, decided to cease all treatment five months ago for his glioblastoma, a type of brain cancer, his first impulse was not to mourn what he couldn’t do anymore or to buy an island or to move to Paris. Instead, he hunkered down in his tiny home office here and channeled whatever remaining energy he could muster into a slim paperback. It’s called “The Investment Answer,” and he wrote it with his friend and financial adviser Daniel Goldie to explain investing in a handful of simple steps.

Why a book? And why this subject? Nine years ago, after retiring from 25 years of pushing bonds on pension and mutual fund managers trying to beat the market averages over long periods of time, Mr. Murray had an epiphany about the futility of his former customers’ pursuits.

He eventually went to work as a consultant for Dimensional Fund Advisors, a mutual fund company that rails against active money management. So when his death sentence arrived, Mr. Murray knew he had to work quickly and resolved to get the word out to as many everyday investors as he could.

“This is one of the true benefits of having a brain tumor,” Mr. Murray said, laughing. “Everyone wants to hear what you have to say.”

He and Mr. Goldie have managed to beat the clock, finishing and printing the book themselves while Mr. Murray is still alive. It is plenty useful for anyone who isn’t already investing in a collection of index or similar funds and dutifully rebalancing every so often.

But the mere fact that Mr. Murray felt compelled to write it is itself a remarkable story of an almost willful ignorance of the futility of active money management — and how he finally stumbled upon a better way of investing. Mr. Murray now stands as one the highest-ranking Wall Street veterans to take back much of what he and his colleagues worked for during their careers.

Mr. Murray grew up in Baltimore, about the farthest thing from a crusader that you could imagine. “I was the kid you didn’t want your daughter to date,” he said. “I stole baseball cards and cheated on Spanish tests and made fun of the fat kid in the corner with glasses.”

He got a lot of second chances thanks to an affluent background and basketball prowess. He eventually landed at Goldman Sachs, long before many people looked askance at anyone who worked there.

“Our word was our bond, and good ethics was good business,” he said of his Wall Street career. “That got replaced by liar loans and ‘I hope I’m gone by the time this thing blows up.’ ”

After rising to managing director at two other banks, Mr. Murray retired in 2001.

At the time, his personal portfolio was the standard Wall Street big-shot barbell, with a pile of municipal bonds at one end to provide safe tax-free income and private equity and hedge fund investments at the other.

When some of those bonds came due, he sought out Mr. Goldie, a former professional tennis player and 1989 Wimbledon quarterfinalist, for advice on what to buy next. Right away, Mr. Goldie began teaching him about Dimensional’s funds.

The fact that Mr. Murray knew little up until that point about basic asset allocation among stocks and bonds and other investments or the failings of active portfolio management is shocking, until you consider the self-regard that his master-of-the-universe colleagues taught him. “It’s American to think that if you’re smart or work hard, then you can beat the markets,” he said.

But it didn’t take long for Mr. Murray to become a true believer in this different way of investing. “I learned more through Dan and Dimensional in a year than I did in 25 years on Wall Street,” he said.

Soon Dimensional hired him as a consultant, helping financial advisers who use its funds explain the company’s anti-Wall Street investment philosophy to its clients. “The most inspirational people who talk about alcoholism are people who have gone through A.A.,” said David Booth, Dimensional’s founder and chairman. “It’s the people who have had the experience and now see the light who are our biggest advocates.”

Playing that role was enough for Mr. Murray until he received his diagnosis in 2008. But not long after, in the wake of the financial collapse, he testified before a open briefing at the House of Representatives, wondering aloud how it was possible that prosecutors had not yet won criminal convictions against anyone in charge at his old firms and their competitors.

In June of this year, a brain scan showed a new tumor, and Mr. Murray decided to stop all aggressive medical treatment. For several years, he had thought about somehow codifying his newfound investment principles, and Mr. Goldie had a hunch that writing the book would be a life-affirming task for Mr. Murray.

“I had balance in my life, and there was no bucket list,” Mr. Murray said. “The first thing you do is think about your wife and kids, but Randi would have killed me having me around 24/7. I had to do something.” The couple have two grown children.

And so he has tried to use his condition as a way to get people to pay attention. The book asks readers to make just five decisions.

First, will you go it alone? The two authors suggest hiring an adviser who earns fees only from you and not from mutual funds or insurance companies, which is how Mr. Goldie now runs his business.

Second, divide your money among stocks and bonds, big and small, and value and growth. The pair notes that a less volatile portfolio may earn more over time than one with higher volatility and identical average returns. “If you don’t have big drops, the portfolio can compound at a greater rate,” Mr. Goldie said.

Then, further subdivide between foreign and domestic. Keep in mind that putting anything less than about half of your stock money in foreign securities is a bet in and of itself, given that American stocks’ share of the overall global equities market keeps falling.

Fourth, decide whether you will be investing in active or passively managed mutual funds. No one can predict the future with any regularity, the pair note, so why would you think that active managers can beat their respective indexes over time?

Finally, rebalance, by selling your winners and buying more of the losers. Most people can’t bring themselves to do this, even though it improves returns over the long run.

This is not new, nor is it rocket science. But Mr. Murray spent 25 years on Wall Street without having any idea how to invest like a grown-up. So it’s no surprise that most of America still doesn’t either.

Mr. Murray is home for good now, wearing fuzzy slippers to combat nerve damage in his feet and receiving the regular ministrations of hospice nurses.

He generally starts his mornings with his iPad, since he can no longer hold up a newspaper. After a quick scan, he fires off an e-mail to Mr. Goldie, pointing to the latest articles about people taking advantage of unwitting investors.

The continuing parade of stories does not seem to depress him, though. Instead, it inspires him further, bringing life to his days. “To have a purpose and a mission for me has been really special,” he said. “It probably has added days to my life.”

In a cruel twist, one of Mr. Murray’s close friends, Charles Davis, chief executive of the private equity firm Stone Point Capital, lost his son Tucker to cancer earlier this year. In his last several months, Tucker was often on the phone with Mr. Murray.

“Gordon has a peace about him, halfway between Wall Street establishment and a hippie,” Mr. Davis said. “It was clear that he and my son could talk in a way that very few people can, since they were in a pretty exclusive club that nobody really wants to join.”

Mr. Murray managed to outlive Tucker, but he does not expect to see his 61st birthday in March. Still, he didn’t bother memorializing himself with a photograph on his book cover or even mention his illness inside. “I’m sick of me,” he said.

But he plays along with the dying banker angle, willing to do just about anything to make sure that his message is not forgotten, even if he fades from memory himself.

“This book has increased the quality of his life,” Mr. Davis said. “And it’s given him the knowledge and understanding that if, in fact, the end is near, that the end is not the end.”

Finally!  An article comes out that speaks to the issue of the NFLPA and the “Approved-Adviser” list.  On Sunday, www.Investment News.com published an article titled “NFL Players at risk of financial roughing“.  It basically talks about the fact that there are now several NFL players (John Elway, Alex Brown and Michael Vick) who have been taken advantage of by their Financial Advisor.  It is well documented the issues that athletes have with their finances.  There are hundreds of examples of guys making millions of dollars during their career only to go bankrupt almost immediately after retiring.

Conversely, all of these players have actually been thoughtful in their investing and have sought out an Advisor.  Not only that, but they have used one of the NFLPA approved advisors!  Their money has to be safe.  Right?  Well…this is exactly where the problem lies.  I have been saying for a while, that the whole system is relatively silly.  I am asked quite frequently if my firms is “NFLPA Approved” and I always say NO!  As stated in the article, the criteria to be approved is “a background check, and pay $1,500 to be included on the list and $500 annually to remain on it. There are currently about 450 advisers on the list.”  Its obviously very simple to become approved so why not go through the process?

I don’t because a background check doesn’t mean anything!  This doesn’t mean that you are doing a good job for your clients and it certainly doesn’t mean you aren’t ripping them off or stealing from them.  All that means is that you have not been charged or convicted of anything.  This is why I say NO when I’m asked the question.  I think the biggest problem is that the list gives players a false sense of security.  Because the advisor they are considering working with is on the list, they often feel that their due diligence has been done for them and they can trust the advisor.  Again, these is the fundamental issue in my opinion.  I certainly understand the reasoning behind having such a list, but in the end it probably does more damage than good.  Oh, it also generates a nice revenue stream every year for the NFLPA because of the fees.  Is that fee really worth it?

The point of this post is just to open peoples eyes to the fact that they need to be careful and do their own research on any firm they might work with.  Hopefully the NFLPA can come up with something a little better than they currently have in place.  Below is the article.

NFL players at risk of financial roughing

Recent schemes against Elway, Vick throw union’s approved-adviser list into spotlight

By Bruce Kelly

October 31, 2010Several current and former National Football League players recently have found themselves ensnared in alleged Ponzi schemes or legal battles over failed investments.

Last month, former Denver Broncos quarterback John Elway re-vealed that he and his business partner gave $15 million to a hedge fund manager now accused of running a Ponzi scheme.

In September, Alex Brown, a defensive end for the New Orleans Saints, sued his team of investment advisers over $3.9 million in losses, alleging they had “abused the trust” of Mr. Brown and his wife, “and embarked on schemes intended to enrich themselves at the expense” of the couple, including bad investments in airplane hangars.

Also in September, financial adviser Mary Wong pleaded guilty to stealing more than $3 million from investors, including Eagles quarterback Michael Vick and several other NFL players, in a Ponzi scam.

These cases come as the NFL Players Association, the union representing 1,800 players, looks to strengthen the screening process for its financial adviser program, which has come under attack in recent years.

Indeed, NFL players, like all professional athletes and high-net-worth individuals, are highly susceptible to being taken advantage of when it comes to investing their money, observers say.

And professional athletes often are susceptible to the siren call of the “inside deal,” and believe that brokers and advisers have access to such privileged, back-room knowledge, said Arthur Grant, chief executive of independent-contractor broker-dealer Cadaret Grant & Co. Inc.

“They believe the myth that Wall Streeters can double their money in six months, and only if they can get in that private game, they could do that too,” he said.

Started in 2002 — after adviser William “Tank” Black was convicted of stealing $11 million from players he represented — the program requires that advisers have appropriate financial qualifications, such as a certified financial planner mark or registration with the Financial Industry Regulatory Authority Inc., to be included on a select list for players.

Advisers must also undergo a background check, and pay $1,500 to be included on the list and $500 annually to remain on it. There are currently about 450 advisers on the list. The list includes a disclaimer, indicating that the advisers are neither endorsed nor recommended.

In an open case originally filed in 2006, five players are suing the NFLPA over its oversight of the approved list of advisers, alleging that it was negligent in vetting reps.

The league, which runs background checks on advisers, is also named in that lawsuit.

The case centers on a jailed hedge fund manager, Kirk Wright, who stole more than $150 million from clients, including several NFL players, and eventually killed himself in prison. The case was dismissed late last year in a Georgia state court, but the players, including former All-Pro safety Steve Atwater, appealed the decision last spring.

The lawsuit alleges that Mr. Wright was on the adviser list even though he should have been disqualified because liens had been filed against him.

“I’m assuming our case is getting the NFL and the NFL Players Association to review their [adviser] programs,” said Quentin Williams, one of the attorneys representing the five players.

It’s unclear if any of the advisers involved in the most recent round of alleged frauds victimizing NFL stars were on the NFLPA’s list.

Carl Francis, a spokesman for the union, declined to comment on the recent cases or the lawsuit involving Mr. Wright. He also said the adviser list is private and available only to players.

Mr. Francis added that the union is planning to place more emphasis on financial education for the players.

In July, Dana Hammonds, director of financial programs and adviser administration for the union, told InvestmentNews that the union is in the process of crafting new qualifications which advisers must meet to get on the list.

Greg Aiello, a spokesman for the NFL, did not return calls seeking comment.

One of the major issues is that athletes often rely on referrals from their inner circle. That trust — along with some athletes’ lack of sophistication with money — can easily be taken advantage of.

“There are predators out there who are focused on athletes,” said Mr. Williams, the attorney suing the NFL and the player’s union in the Kirk Wright case.

E-mail Bruce Kelly at bkelly@investmentnews.com.

I was forwarded an article this morning from www.TheStreet.com that gives a pretty fair assessment of the current state of the economy.  It highlights the good and the bad and allows you to form your own opinion.  Do you agree/disagree with any of the points?

Doug Kass

11/01/10 – 02:00 PM EDT

This blog post originally appeared on RealMoney Silver on Nov. 1 at 8:55 a.m. EDT.

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way — in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only. “– Charles Dickens, A Tale of Two Cities

So began A Tale of Two Cities, one of only two historical works of fiction written by Charles Dickens. Dickens’ novel depicts the plight of the French peasants who were beaten down by the French aristocrats in years leading up to the revolution, the corresponding brutality demonstrated by the oppressed toward the upper class amid the early years of the revolution and the depiction of many unflattering social parallels with life in London during those years.

The idea of the “people” against the “elites” in which social and political system changes occur, embodied in Dickens’ work, is a recurring one over the course of history — and is omnipresent today.

In the broadest sense, as investors in November 2010, we face the best of times and the worst of times.

Above all, the “best/worst” literary metaphor is most apt in the tension between the best of times (the cyclical tailwinds of monetary/fiscal stimulation that have buoyed growth) and the worst of times (the secular headwinds of a number of nontraditional factors that have produced a shallow recovery and that threaten a self-sustaining recovery).

The Best of Times

Politics. Today’s populism — manifested by increased activism, distrust in our financial institutions and rejection of the incumbent status quo — began two years ago with the 2008 Democratic tsunami and has continued with the Republican Tea Party. The midterm elections tomorrow seem likely to produce gridlock, which has traditionally been market-friendly.

The social condition. The breathtaking growth in the Tea Party signals a growing conservatism in the U.S., an ideology typically associated with a desire for less government spending and for legislation favoring business.

The economy and policy.

• Global coordination: Through a committed all-in central banking community around the world, we avoided an economic Armageddon two years ago.
• Record low interest rates: With short-term interest rates anchored at zero, there are few alternatives for investors.
• Liquidity aplenty: A resolved Fed is promising that liquidity will remain abundant.
• An uptrending economy:: The overall rate of worldwide economic growth, while shallow, remains positive. Over here, the Chicago, Dallas and Richmond PMIs were better than expected last week. Over there, U.K. GDP rose by almost twice the rate of consensus expectations and, overnight, the rate of growth in the China’s October PMI quickened to the most rapid pace in six months.
• A likely nadir in the unemployment rate: Future jobs growth, based on improving initial claims data (lowest since July) and a continued improvement in corporate profits, appears likely to improve — especially within the context of a possible repudiation of the administration’s policies in the midterm elections this week (which could serve to reinvigorate business confidence).
• Inflation remains quiescent: Inflation rates remain subdued, owing importantly to minimal gains in the employment cost index. Low wage growth will help to sustain corporate profit margins.
• Housing has bottomed: New-home production continues well below demographic and household formation growth trends, and with mortgage rates at generational lows, affordability at the best gauge in several decades and the benefit of homeownership over renting at 10-year highs, there is an accumulated buildup in latent demand for housing.
• The conditions for a normal and self-sustaining economic recovery are at hand: Interest rates are low, durable expenditures (automobiles and housing) have been deferred, and the unemployment rate has likely bottomed. The consensus of forecasters for a moderate improvement in economic growth is a conservative one.

Equities.

• Valuations are not rich: The U.S. stock market’s valuations (at around 13x) remain below the historic mean (15.5x). When placed against the currently low level of inflation and interest rates, share prices are even cheaper.
• Return expectations and individual investor participation are low: While slowly building in the near term, multiyear individual inflows into domestic equity funds has been limited, providing the potential for greater equity buying power (and interest) in the years ahead.

The Worst of Times

Politics. It can be argued that the likelihood of gridlock in the aftermath of this week’s midterm elections is not a P/E-expanding event, as the significance of our fiscal challenges (local, state and federal) and the currently weak domestic economic growth trajectory need to be quickly addressed. Moreover, the politics and policy of populism will remain with us for the foreseeable future and, with it, is the continuum of higher marginal tax rates for the wealthy and the burden of costly and cumbersome regulation (after years of laissez faire attitudes regarding policy within our regulatory agencies).

The social condition. Our Dickenesque condition of social inequality remains in the forefront of the political tide and future. The contempt for the wealthy and large corporations could be manifested in continued initiatives aimed at increasing upper-income earners’ tax rates and in reducing corporate profitability (through increased taxes and the costs of heightened regulation).

The economy and policy.

• Lack of global coordination: Conditions are far different for QE 2 than QE 1. Unlike QE 1, when the world’s central banks were all-in. U.S. policy makers are a bit on their own this time, as other areas of the world reject more massive monetary responses in favor of dealing more directly (and urgently) with their own fiscal imbalances. QE 2′s impact remains uncertain, and the unintended consequences of more easing pose additional risk (e.g., the CRB hit a two year high on Friday).
• A cyclical low in interest rates is at hand: Interest rates have already fallen to very low level, but while anchored at zero, they cannot go lower. Moreover, nearly every cycle characterized by the search for yield (as investors buy almost any long-dated asset) has backfired historically. Finally, any evidence of rising inflation (which we have already seen in feedstock and in food inputs) will incite the bond vigilantes and cause interest rates to resume their climb. (I continue to view shorting bonds as the trade of the decade.)
• Late in the liquidity game: By most measures, it is growing late in the liquidity game, and the cost and consequences of imbalances created by fiscal/monetary stimulation are ever closer at hand. Meanwhile, our fiscal imbalances multiply, our currency craters (as a worldwide rush to currency devaluation is offsetting some of the normal trade-deficit benefit), and the bulls rationalize these concerns by suggesting that the consequences “are beyond our investment time frame.”
• Anemic economic growth poses inherent risks to its sustainability: The shallow domestic economic recovery is vulnerable to policy mistakes, a drop in business/consumer confidence and other unknown and exogenous variables. Meanwhile, the rate of sales growth is already beginning to decelerate and screwflation threatens record high corporate profit margins.
• Unemployment will remain elevated: The jobs picture is likely to be mired by a structural deterioration in employment and the continued propensity to hire on a temporary basis in the face of higher costs and more regulation. Limited wage growth and sour consumer confidence — last week the University of Michigan Index dropped to its lowest level in a year — will constrain personal consumption expenditures.
• The large productivity gains of the last decade are over: With average weekly hours worked stretched to the upper limits, most of the impressive productivity gains of the past few years seems over, as increased hirings are likely to negatively impact profitability.
• Housing’s rebound will be muted: Weak confidence and a poor jobs market coupled with the surprisingly large drop in home prices will undermine the housing recovery. Mortgage-gate threatens the rebound in housing by signaling a deluge of unsold shadow inventory in 2011 and another possible fall in home prices.
• Tail risks: The long tail of the last credit cycle promises to show up in new quarters over the next one to two years. Mortgage-gate was a recent example of that tail. Odds favor more — both here and abroad.
• It’s different this time: The residue of the last cycle also brought with it a number of nontraditional headwinds that will continue to serve as a governor to economic growth (higher marginal tax rates, local, state and federal fiscal imbalances, more costly and burdensome regulation etc.). If gridlock means kicking the legislative can down the road until the next Presidential election and avoiding the necessary fiscal focus that would remedy the poor jobs picture, the self-sustaining economic thesis will be in jeopardy.

Equities.

• The market rally has been the world’s fair: Equities are substantially off the generational low of March 2009 – as the better-than-expected recovery in corporate profits appears to have been materially discounted. Meanwhile, market leadership appears to be narrowing and market volume is tepid.
• Sentiment measures ebullient: Certain measures of investors’ sentiment (AAII and Investors Intelligence) are back to levels that have typically existed at market tops. Another contrarian sign? The cover of Barron’s this weekend is entitled “Bye-Bye, Bear.”

Time and Tide Waits for No Man

“The water of the fountain ran, the swift river ran, the day ran into evening, so much life in the city ran into death according to rule, time and tide waited for no man, the rats were sleeping close together in their dark holes again, the Fancy Ball was lighted up at supper, all things ran their course.”– Charles Dickens, A Tale of Two Cities

Implicit in some of the market rise over the last few months is the view that the tension described in today’s opening missive will almost certainly be resolved favorably after the outcome of the midterm elections and the scope of quantitative easing are determined this week.

I am less certain.

When I weigh the body of the best and worst of times, I anticipate a government divided (what was described on “Meet the Press” yesterday as an “unearned” win by the Republicans in the House and a continued Democratic majority in the Senate) and few net benefits from QE 2 (and some adverse unintended consequences from further easing).

I continue to expect that the U.S. stock market has seen the top for the year, and I envision a relatively narrow trading range with a slightly negative bias over the balance of the year.

Looking ahead to early 2011, as the market braces for gridlock and more economic uncertainty and challenges, I expect the current optimism to diminish and for equities to succumb to the grimmer reality of slowing, uneven economic growth prospects, the challenges of nontraditional headwinds and a divided U.S. government unable to address key issues and imbalances.

Warren Buffett recently said It is “quite clear stocks are cheaper than bonds” right now.

This is a question that should be on all investors minds right now.  Unfortunately its actually the opposite and most people are just piling their money into fixed income right now at record rates.  The problem that most investors believe bonds to be completely safe, when they actually aren’t, especially right now.  The reason, interest rates are at historic lows and there isn’t much lower for them to go.  If they start going back up, people could be exposed to much more risk and capital losses that they thought because bond prices move in the opposite direction as interest rates.  This is a conversation I have been having quite frequently and there was an article in US NEWS yesterday that summed it up perfectly.

The biggest thing this past decade should have taught retail investors is to beware when everybody piles into any one asset class. When this happens, the chances are pretty good that a bubble has developed, and recent history shows that sooner or later, bubbles burst.

We’ve seen it happen with equities, we’ve seen it in real estate, and now we are about to see the next “bubble bursting sequel” within the bond market. Many U.S. investors have overloaded their retirement and non-retirement portfolios with all kinds of bonds, from treasuries to high-grade corporate bonds to municipal bonds.

With all of the volatility in the stock market over the past three years, it’s no wonder that so many of us have felt more comfortable investing in bonds. We get a more secure interest payment that most of the time offers a much better interest rate than, say, savings accounts.

So where is the downside risk? Quite simply, when interest rates go up, the value of existing bonds goes down because new bonds issued under higher interest rates are naturally more in demand than old bonds paying out under lower interest rates.

The simple fact of the matter is that there isn’t any room for interest rates to go in any direction now but up. As the United States and other major world economies continue their road to recovery, the risk of a faster-than-expected increase in interest rates rises because of inflationary pressure that inevitably accompanies economic recovery.

With all of this in mind, investors can prepare for a new era of higher interest rates and the bursting of the existing bond bubble by educating themselves about shorter-term fixed income investments.

TIPS. Treasury Inflation-Protected Securities, or TIPS, provide protection against inflation. The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price Index. The bottom line with TIPS: Investors get fixed interest payments along with the upside, which is protection from inflation.

Low-duration bonds. Assuming interest rates begin to rise—again, a very reasonable assumption given where they are today—the shorter the maturity of your bonds, the less volatility you’ll see, because you are not locked into a long-term yield that no longer reflects rising interest rate conditions.

Low-duration bonds may be a good option until rates appear to stabilize. At that time, intermediate maturity bonds (five to 10 years) can be expected to achieve much higher yields. Of course, you will have to give up some yield or interest payments to reduce the volatility.

Higher yielding dividend stocks. When rates go up, that will be a good sign that the economy is on solid footing and is continuing its global recovery. Another way to augment your income is with higher yielding stocks that pay modest dividends. In particular, investors should look for stocks paying a 4 to 6 percent dividend yield as an alternative to sitting back and watching higher interest rates and inflation increases erode the value of their fixed-income portfolios.

Additionally, dividend paying stocks have the potential for both capital appreciation as well as income from dividends. It is incumbent on all investors to have some hedge against the inevitable reappearance of the hidden monster of inflation, and one of the simplest ways to apply this hedge is to purchase dividend paying stocks.

Obviously, no one has a crystal ball that can foresee future financial market developments with total certainty. As with all planning activities, we can go with what past experience has taught us combined with a healthy dollop of common sense.

Investors have a slowly closing window of opportunity to prepare their portfolios for the inevitable bursting of the bond-market bubble.

You may not know who John Paulson is, but you should.  He is the founder of NY based Hedge Fund, Paulson and Co. which manages somewhere around $35 Billion!  Paulson is #45 on the Forbes list of the world’s wealthiest billionaires and is worth approximately $12 billion as of 2010. On April 16, 2010, the New York Times reported Paulson had earned $1 billion in 2007, $2 billion in 2008, and $2.3 billion in 2009 from fees received from his hedge fund by betting against subprime mortgages long before the term became well known.

So obviously when he speaks people generally listen.  In todays Wall St. Journal he gave 3 investment ideas.

1.Gold

2.Sell bonds and buy stocks

3.Buy a house

Although I may not agree with all of these, they are actually three pretty interesting ideas if you ask me and ones that anyone can make.

Below is the article “How to Bet Like John Paulson”

Hedge fund tycoon John Paulson is the man who made his name, and a fortune, betting against subprime mortgages when no one else even knew what they were.

And he’s just made three big financial calls that you need to know about.

Speaking to the University Club in New York, he said, first, that gold could go to $2,400 an ounce based on the fundamentals–and that momentum could carry it to $4,000 an ounce. Right now it’s around $1,300. Second, he said you should get out of bonds while you can: You’re much better off investing in blue chip stocks with good dividend yields than bonds.

And third, he said you should buy a home. Now.

“If you don’t own a home, buy one,” he reportedly said. “If you own one home, buy another one, and if you own two homes buy a third and lend your relatives the money to buy a home.”

(A spokesman for Mr. Paulson did not challenge the accounts of the meeting.)

Among the New York commentariat there’s been a lot of head-scratching about Mr. Paulson’s take–especially this contrarian stance on housing.

Is he right? If so, what does he know that everyone else doesn’t?

View Full Image

Bloomberg NewsJohn A. Paulson at the U.S. Open last month.

Ignore the critics. The odds have to be on his side. The reason is simple: Inflation.

There is a debate raging on Wall Street these days between those warning about deflation and those warning about inflation. We are at, or near, deflation at the moment. It may even get worse before it gets better. But Mr. Paulson sees inflation coming by 2012 or so. Last week, several contrarian money managers I was talking to made the same prediction.

The explanation isn’t hard to find.

Forget the usual technical issues economists like to talk about, such as output gaps, labor markets, money supply and the like.

Put simply: We will get inflation because we have to. It doesn’t get any more straightforward than that.

We are the most indebted nation in the history of the world.

Data out from the Federal Reserve last week revealed that in the second quarter the total sum of U.S. debts (excluding the financial sector) had risen to a record $35.5 trillion. That is 243% of gross domestic product–barely a smidgen from last year’s peak, and off the map by past history. Thirty years ago it was less than 150% of GDP.

The debt orgy has been everywhere. Government debt continues to skyrocket. Corporate debt–contrary to some reports–is rising too. And after two years of brutal retrenchment, defaults and pain, households have managed to slash their debts by a massive, er, 3% from the peak. Household debts are still twice what they were just a decade ago.

There is only one plausible route out of this appalling situation. The government needs inflation. The country needs inflation. That will shrink these debts in relation to the economy, asset prices and incomes.

Deflation would make debts even bigger in real terms. That would be a disaster. We’re skirting it at the moment, but it can’t be allowed to take hold. That’s why Fed chairman Ben Bernanke has just offered more quantitative easing–and if that won’t work he’ll try something else. Anything else.

That’s what Mr. Paulson knows–and what anybody could know if they just take a step back from the day to day details and look at the big picture.

If the government succeeds in stimulating inflation, bonds will be in big trouble. Fixed coupons become a lot less valuable when prices and interest rates rise. At 2.5%, the 10 year Treasury already offers a paltry yield: The risks surely outweigh the rewards. Take profits on your bond funds.

Housing? It isn’t just that home prices have fallen a long way. It’s also that, if you can get a mortgage, you are basically taking a reverse bet on the bond market. You could be a long-term borrower at fixed rates, instead of a long-term lender. Right now you can borrow for 30 years at around 4.3%. After the mortgage tax deduction, for some people the net effective interest rate is nearer to 3%. That’s going to prove an awesome deal if we see inflation again.

As for gold? Mr. Paulson’s prediction isn’t that extreme. I’ve seen guesses from perfectly sane people, based on the money supply and other measures, suggesting gold might go even higher.

No one knows, of course. But the bull market seems to be very much alive. And I think there’s a chance–a pretty good chance–that gold could be the next Nasdaq. (Is Gold the Next Bubble?)

Naturally, the future is unknown. And most normal people can’t afford to risk a lot of their money speculating–especially these days. But you don’t want to miss out on a boom.

How should you bet if you think Mr. Paulson’s right?

One idea: Instead of wagering a lot of your money on gold, try taking leveraged bets with small stakes. That way you can make plenty of profits if the boom continues, while minimizing your risks if it turns tail. Here are two suggestions.

First, try buying “out of the money call options” on the SPDR Gold Trust. These are simple, if misunderstood, products that can be bought through a regular broker. You can view them like long-odds bets on the GLD booming.

How do they work? Here’s an illustration: The GLD, worth one-tenth of an ounce of gold, costs around $127 a share right now. But for just $3.90 a share you can instead buy a call option, good until Jan. 2012, that will give you the unilateral right to buy into the GLD at $180 a share.

If it booms to, say, $300, equivalent to $3,000 an ounce, you can exercise the options and make $120. But if gold plummets, as it has in the past, all you can lose per share is your $3.90 stake.

A second alternative: Take a look at speculative gold mining stocks. They should give you plenty of bang for your buck in a mania. There are funds, such as U.S. Global Investors World Precious Minerals fund, that specialize in smaller mining companies. One intriguing stock is Alaska’s NovaGold Resources (For more see this MarketWatch story.) A number of rich, powerful investors are involved–including Marc Faber, George Soros, and… John Paulson.

This idea interested me so much that I have already gone to the website (http://rftgf.org/joomla/) and sent a message to inquire about how I can get involved.  The gist on the article is that a NY Hedge Fund manager from Atlanta wants to start converting some of the empty commercial properties that are losing money into parks.

He notes that inside of 280 “With $3 billion to convert properties to green space, Atlanta would be transformed. Georgia Tech foresees the equivalent of 15 new Piedmont Parks inside the Perimeter and 100 outside. These could include a network of greenways and bikeways to connect the entire region, automobile free.”  Thats incredible!  As a Buckhead condo owner the idea of having a park nearby is pretty exciting.  There is so much stalled construction right now that this really makes sense to me!

What do you think??

The article can be found HERE from the AJC.

AJC — Q&A with Mike Messner about Redfields to Greenfields

Michael Messner, a 1976 Georgia Tech Civil Engineering graduate, grew up in Atlanta and remembers the city before it morphed into a metropolis.  Since 1995, Messner has been a partner in the hedge fund Seminole Capital, managing more than $1 billion in assets.

Now Messner is trying to reclaim land spoiled, in a way, by the financial industry – commercial property that is overbuilt and vacant, worth less than its loans.

He and his wife Jenny are funding “Redfields to Greenfields,” Georgia Tech led research to study converting these properties “in the red” into green space plus raw land to hold for development after the economy rebounds.

Q: What is the Redfields to Greenfields concept?

A: Over the past 10 years, government policies pushed vast over-investment in useless, unproductive commercial and residential development.  Total real estate values reached $45 trillion then fell by $15 trillion; the whole U.S. stock market is worth $14 trillion.

Now, vacant and excess buildings hurt our economy, neighborhoods, banks, businesses and homeowners. Banks’ capital is frozen in bad real estate and bad loans.

Rather than backstop these bad loans, with a zero interest policy, buying $1.5 trillion of mortgages, TARP, TALF and PPIP, and other programs, the Fed and Treasury should help finance the acquisition of some excess commercial real estate for new urban parks and land banks—raw land held for future development.

With bad loans removed from their balance sheets, banks would make new, productive investments in the Internet-based, asset-light economy of the future.  Liquidity would return to the real estate market and property values would stabilize.

Q: How would Redfields to Greenfields work?

A: A Fed-backed land bank fund would finance purchases of bad real estate at 0% interest through the banks.  Nationally, a $200 billion fund would stabilize the $30 trillion real estate market, producing a huge return on investment.

The Federal Reserve would buy into the fund as it sold its residential mortgage backed securities. They would buy these new Land Backed Securities. This is a banking system balance sheet proposal — not a big government spending project.

Q: How is Atlanta is the “poster child” for the problem?

A: Atlanta’s retail vacancy rate is 13%, one of the highest in the nation. The Atlanta region has vacant office space equivalent to 24 empty Bank America Towers, the largest office building in the Southeast. Over 30 percent of homes with mortgages were in negative equity at the end of 2009, leading to one of the highest foreclosure rates in the country.

Because of this, Georgia leads the nation in bank failures. The city has lost over 30,000 construction jobs in the last three years.  Atlanta has vacant lots selling for 25 cents on the dollar. Commercial real estate transactions are down 90% from 2006, so there is no liquidity in the market.

And Atlanta is park-poor. Less than 5% of its area is parkland; it is among the lowest metros in green space per resident.

Q: What is Georgia Tech’s role?

Georgia Tech Research Institute has already worked with 6 cities (Atlanta, Cleveland, Denver, Miami, Philadelphia, and Wilmington, Del.) to produce “shovel-ready” plans. Studies for 5 more cities (Detroit, Hilton Head/Savannah, Houston, Los Angeles, and Phoenix) are underway. These plans encourage each city to “think outside the box” and build real estate plans for their region. The work can be found at www.RedfieldsToGreenfields.org.

The studies show thousands of jobs would be created immediately for demolition and green space conversion. The plans would also stabilize local property values and remove bad loans from bank balance sheets. Banks could then apply their capital to new loans to support economic growth. Philanthropic entrepreneurship would be stimulated. Remaining property owners would show more confidence in the economy knowing their property values have stabilized.

Q: How big would the impact be for Atlanta?

A: With $3 billion to convert properties to green space, Atlanta would be transformed. Georgia Tech foresees the equivalent of 15 new Piedmont Parks inside the Perimeter and 100 outside. These could include a network of greenways and bikeways to connect the entire region, automobile free.

That’s a lot of money, but finishing the Streets of Buckhead would cost about $1.5 billion. If the banks financed Streets of Buckhead, Atlanta would just have more of the same: excess commercial and residential developed real estate. An investment in green space of that same magnitude would remake the entire region and stabilize everyone’s property values. Tech estimates the parks initiative could generate $20 billion in economic development, 175,000 temporary construction jobs and 100,000 permanent jobs.

Q: Isn’t this more big government?

A: I am the last one that wants more big government.  Big government created this problem with their policies.  They are now into the real estate market up to their eyeballs.   Over 90% of all new mortgages are guaranteed by the federal government; FDIC is one of the biggest commercial land owners in the country.  One could argue that the federal government’s real estate involvement should be limited to the ownership of government buildings and raw public land, like we are suggesting they help finance.  This will help get them back to those basics.

Locally, we are really pushing for non-profits, and maybe even for-profits, not local governments to be the “entrepreneurs” to solve this problem.  These entrepreneurs need a financing mechanism, like developers have had … hence the Land Bank.  In your area, Redfields to Greenfields Atlanta is a non-profit led by Atlanta citizens.  The Atlanta BeltLine greenway effort is a non-profit.  Piedmont Park is now run by a conservancy.

Q: So your interest is in more parks?

A: No, I came at this completely from the financial perspective. The financial crisis that erupted in 2008 was solely due to excess real estate investments. Bear Sterns, Lehman, Fannie, Freddie, the hundreds of bank failures were all due to bad real estate investments.  The more we try and support these bad investments, the more we distort the entire financial system.  Let’s clean up the mess “on the ground”.

Q: Has anything like this been tried before?

A: The U.S. railroad industry has shown that more assets don’t increase wealth. It’s the utilization of assets that increases wealth. This country has eliminated 55% of railroad track in the last 60 years, 200,000 miles worth. Yet, rail tonnage handled is up 5.3x, resulting in a 12 fold increase in rail productivity. Railroads have never been more profitable and efficient than they are today. We’ve converted 19,000 miles of the excess tracks to Rail-for-Trails, linear parks.

Pittsburgh, PA converted excess steel mills to parks and green space in the 1980’s and is now considered the most livable city in the U.S. Flint, MI has invested $4 million in a land bank, holding excess property as raw green space, and has increased the remaining property value in the city by $100 million. So, tearing down actually increases overall wealth.

Q: Is the political environment now – many are calling for smaller government, less taxes, a greater unfettering of the “free market” to turn the economy around – more difficult than it was two years ago for your plan?

A: Again, this is a banking balance sheet proposal – not a bigger government project. Over the past ten years, our country took “cash” from the banks and put it into real estate. The banks’ balance sheets now have too much real estate on their books. Rather than the Fed buying Mortgage Backed Securities or Treasuries to provide liquidity in the system, the Fed can buy underutilized commercial real estate to be held as green space. Banks and developers would just turn bad real estate to cash, and the Fed could hold a new asset, Land Backed Securities, rather than Mortgage Backed Securities they hold now. The new cash could then been invested in better investments, like internet start-ups, or the stock market.

Redfields to Greenfields reduces the government’s current backstopping of bad real estate paper, which helps our capitalist system become less dependent on big government.

Q: When you explain it, do you get accused of big government meddling in the free market?

A: The banking system provided easy financing for developers to build unneeded properties throughout our nation. With so much bad real estate developments, the Fed has now been forced to reduce the Fed funds rate to effectively 0% and provide other real estate backstopping programs. Why can’t the banking system help finance a new asset: raw urban land? Rather than the Fed providing 0% funding to the banks for all their real estate assets, provide 0% funding for bad real estate to be held as green space.

Q: How does Redfields to Greenfields compare with the $800 billion 2009 stimulus plan?

A: The stimulus money has changed nothing about our country. Jobs were protected but not stimulated.  No one gets anyplace faster, no new productivity improvements were generated like the Interstate Highways did. Stimulus projects were not transformational.

Converting real estate to green space and freeing that capital would be transformational and would have three positive effects.  1) Direct job creation for demolition and green space conversion. 2) Strengthening the banking system by removing bad real estate loans so banks can make new loans. 3) Real estate owners will spend and invest more, knowing their properties have stabilized in value.

And, most importantly, Redfields to Greenfields would have major visible effects in every urban neighborhood in the country. People would see the impacts of the Land Bank fund.

Q: Why is green space so important?

A: Urban parks play a vital role in the social, economic and physical well-being of a city’s residents.  People who live near parks have more ways to walk, run, play do other heart healthy activities. Parks preserve regional ecosystems amid growing cities. Well-maintained parks promote community engagement and civic pride.

In a city like Atlanta, where no natural boundaries help regulate development, parks can be a very important land management tool.  The overall real estate market can be more productive and valuable.

Q: A year from now, what do you hope to be able to say about the impact of Redfields to Greenfields on metro Atlanta?

A: I hope the people of Atlanta will have a financing option through our nation’s banking system that can help them acquire dead malls and other underutilized commercial real estate for conversion to new parks and land banks. Central Park took 15 years to build. Rebuilding Atlanta with more green space will probably take equally as long, but hopefully, within the next year, you can start.

While we all know about the millions of dollars most athletes make at a young age and the way many of them blow it, thats not always the case.  Many players use their money and celebrity for good.  Either through their own foundation, existing charities or just causes they find worthy some guys spend much of their free time and money helping.  Its always great to hear those stories so I wanted to make note of a pretty cool one that a couple Saints players from Atlanta recently helped organize.  Their donations are going to make a huge impact in the local New Orleans community!

http://www.nola.com/saints/index.ssf/2010/09/saints_have_adjusted_to_abnorm.html

GIVING BACK: A group of Saints players welcomed a group of players from the budding football program at Sojourner Truth Academy to the team’s practice facility Thursday and presented them with a $100,000 check. Brees, quarterback Chase Daniel, center Jonathan Goodwin, cornerback Jabari Greer, safety Roman Harper, safety Malcolm Jenkins, cornerback Tracy Porter, safety Chris Reis, cornerback Leigh Torrence and offensive tackle Zach Strief each donated $5,000, the total of which was matched by $50,000 from the Saints & NFL Youth Programs.

The charter high school was started in 2008 by Los Angeles transplants Channa Mae Cook and Kristin Leigh Moody, who had intended to spend a week in New Orleans helping to rebuild McDonogh 42 Elementary. Cook and Torrence were classmates at Stanford, which is how the Saints players wound up getting involved.

“All the guys standing up here are just happy to have a chance to do that, and obviously commend Channa and all the staff at Sojourner Truth for everything they’re doing for these kids,” Brees said.

One of my friends posted this article today on her facebook and I was intrigued by the title.  Its incredibly long, so I really cant do it justice by paraphrasing, therefore I have just included the entire article below.  The actual article can be found at by clicking this link for the NYTimes.com.  The entire article is pretty fascinating and a makes some very interesting points about 20-somethings.  Im not usually overly interested in psychology, but this article certainly grabbed my attention.   Some of the points I found most interesting are in orange.  Enjoy and let me know your thoughts.

Great quote to consider…”“to think about all the things I’m supposed to be doing in order to ‘get somewhere’ successful: ‘Follow your passions, live your dreams, take risks, network with the right people, find mentors, be financially responsible, volunteer, work, think about or go to grad school, fall in love and maintain personal well-being, mental health and nutrition.’ When is there time to just be and enjoy?””

August 18, 2010

What Is It About 20-Somethings?

By ROBIN MARANTZ HENIG

Why are so many people in their 20s taking so long to grow up?

This question pops up everywhere, underlying concerns about “failure to launch” and “boomerang kids.” Two new sitcoms feature grown children moving back in with their parents — “$#*! My Dad Says,” starring William Shatner as a divorced curmudgeon whose 20-something son can’t make it on his own as a blogger, and “Big Lake,” in which a financial whiz kid loses his Wall Street job and moves back home to rural Pennsylvania. A cover of The New Yorker last spring picked up on the zeitgeist: a young man hangs up his new Ph.D. in his boyhood bedroom, the cardboard box at his feet signaling his plans to move back home now that he’s officially overqualified for a job. In the doorway stand his parents, their expressions a mix of resignation, worry, annoyance and perplexity: how exactly did this happen?

It’s happening all over, in all sorts of families, not just young people moving back home but also young people taking longer to reach adulthood overall. It’s a development that predates the current economic doldrums, and no one knows yet what the impact will be — on the prospects of the young men and women; on the parents on whom so many of them depend; on society, built on the expectation of an orderly progression in which kids finish school, grow up, start careers, make a family and eventually retire to live on pensions supported by the next crop of kids who finish school, grow up, start careers, make a family and on and on. The traditional cycle seems to have gone off course, as young people remain un­tethered to romantic partners or to permanent homes, going back to school for lack of better options, traveling, avoiding commitments, competing ferociously for unpaid internships or temporary (and often grueling) Teach for America jobs, forestalling the beginning of adult life.

The 20s are a black box, and there is a lot of churning in there. One-third of people in their 20s move to a new residence every year. Forty percent move back home with their parents at least once. They go through an average of seven jobs in their 20s, more job changes than in any other stretch. Two-thirds spend at least some time living with a romantic partner without being married. And marriage occurs later than ever. The median age at first marriage in the early 1970s, when the baby boomers were young, was 21 for women and 23 for men; by 2009 it had climbed to 26 for women and 28 for men, five years in a little more than a generation.

We’re in the thick of what one sociologist calls “the changing timetable for adulthood.” Sociologists traditionally define the “transition to adulthood” as marked by five milestones: completing school, leaving home, becoming financially independent, marrying and having a child. In 1960, 77 percent of women and 65 percent of men had, by the time they reached 30, passed all five milestones. Among 30-year-olds in 2000, according to data from the United States Census Bureau, fewer than half of the women and one-third of the men had done so. A Canadian study reported that a typical 30-year-old in 2001 had completed the same number of milestones as a 25-year-old in the early ’70s.

The whole idea of milestones, of course, is something of an anachronism; it implies a lockstep march toward adulthood that is rare these days. Kids don’t shuffle along in unison on the road to maturity. They slouch toward adulthood at an uneven, highly individual pace. Some never achieve all five milestones, including those who are single or childless by choice, or unable to marry even if they wanted to because they’re gay. Others reach the milestones completely out of order, advancing professionally before committing to a monogamous relationship, having children young and marrying later, leaving school to go to work and returning to school long after becoming financially secure.

Even if some traditional milestones are never reached, one thing is clear: Getting to what we would generally call adulthood is happening later than ever. But why? That’s the subject of lively debate among policy makers and academics. To some, what we’re seeing is a transient epiphenomenon, the byproduct of cultural and economic forces. To others, the longer road to adulthood signifies something deep, durable and maybe better-suited to our neurological hard-wiring. What we’re seeing, they insist, is the dawning of a new life stage — a stage that all of us need to adjust to.

JEFFREY JENSEN ARNETT, a psychology professor at Clark University in Worcester, Mass., is leading the movement to view the 20s as a distinct life stage, which he calls “emerging adulthood.” He says what is happening now is analogous to what happened a century ago, when social and economic changes helped create adolescence — a stage we take for granted but one that had to be recognized by psychologists, accepted by society and accommodated by institutions that served the young. Similar changes at the turn of the 21st century have laid the groundwork for another new stage, Arnett says, between the age of 18 and the late 20s. Among the cultural changes he points to that have led to “emerging adulthood” are the need for more education to survive in an information-based economy; fewer entry-level jobs even after all that schooling; young people feeling less rush to marry because of the general acceptance of premarital sex, cohabitation and birth control; and young women feeling less rush to have babies given their wide range of career options and their access to assisted reproductive technology if they delay pregnancy beyond their most fertile years.

Just as adolescence has its particular psychological profile, Arnett says, so does emerging adulthood: identity exploration, instability, self-focus, feeling in-between and a rather poetic characteristic he calls “a sense of possibilities.” A few of these, especially identity exploration, are part of adolescence too, but they take on new depth and urgency in the 20s. The stakes are higher when people are approaching the age when options tend to close off and lifelong commitments must be made. Arnett calls it “the age 30 deadline.”

The issue of whether emerging adulthood is a new stage is being debated most forcefully among scholars, in particular psychologists and sociologists. But its resolution has broader implications. Just look at what happened for teenagers. It took some effort, a century ago, for psychologists to make the case that adolescence was a new developmental stage. Once that happened, social institutions were forced to adapt: education, health care, social services and the law all changed to address the particular needs of 12- to 18-year-olds. An understanding of the developmental profile of adolescence led, for instance, to the creation of junior high schools in the early 1900s, separating seventh and eighth graders from the younger children in what used to be called primary school. And it led to the recognition that teenagers between 14 and 18, even though they were legally minors, were mature enough to make their own choice of legal guardian in the event of their parents’ deaths. If emerging adulthood is an analogous stage, analogous changes are in the wings.

But what would it look like to extend some of the special status of adolescents to young people in their 20s? Our uncertainty about this question is reflected in our scattershot approach to markers of adulthood. People can vote at 18, but in some states they don’t age out of foster care until 21. They can join the military at 18, but they can’t drink until 21. They can drive at 16, but they can’t rent a car until 25 without some hefty surcharges. If they are full-time students, the Internal Revenue Service considers them dependents until 24; those without health insurance will soon be able to stay on their parents’ plans even if they’re not in school until age 26, or up to 30 in some states. Parents have no access to their child’s college records if the child is over 18, but parents’ income is taken into account when the child applies for financial aid up to age 24. We seem unable to agree when someone is old enough to take on adult responsibilities. But we’re pretty sure it’s not simply a matter of age.

If society decides to protect these young people or treat them differently from fully grown adults, how can we do this without becoming all the things that grown children resist — controlling, moralizing, paternalistic? Young people spend their lives lumped into age-related clusters — that’s the basis of K-12 schooling — but as they move through their 20s, they diverge. Some 25-year-olds are married homeowners with good jobs and a couple of kids; others are still living with their parents and working at transient jobs, or not working at all. Does that mean we extend some of the protections and special status of adolescence to all people in their 20s? To some of them? Which ones? Decisions like this matter, because failing to protect and support vulnerable young people can lead them down the wrong path at a critical moment, the one that can determine all subsequent paths. But overprotecting and oversupporting them can sometimes make matters worse, turning the “changing timetable of adulthood” into a self-fulfilling prophecy.

The more profound question behind the scholarly intrigue is the one that really captivates parents: whether the prolongation of this unsettled time of life is a good thing or a bad thing. With life spans stretching into the ninth decade, is it better for young people to experiment in their 20s before making choices they’ll have to live with for more than half a century? Or is adulthood now so malleable, with marriage and employment options constantly being reassessed, that young people would be better off just getting started on something, or else they’ll never catch up, consigned to remain always a few steps behind the early bloomers? Is emerging adulthood a rich and varied period for self-discovery, as Arnett says it is? Or is it just another term for self-indulgence?

THE DISCOVERY OF adolescence is generally dated to 1904, with the publication of the massive study “Adolescence,” by G. Stanley Hall, a prominent psychologist and first president of the American Psychological Association. Hall attributed the new stage to social changes at the turn of the 20th century. Child-labor laws kept children under 16 out of the work force, and universal education laws kept them in secondary school, thus prolonging the period of dependence — a dependence that allowed them to address psychological tasks they might have ignored when they took on adult roles straight out of childhood. Hall, the first president of Clark University — the same place, interestingly enough, where Arnett now teaches — described adolescence as a time of “storm and stress,” filled with emotional upheaval, sorrow and rebelliousness. He cited the “curve of despondency” that “starts at 11, rises steadily and rapidly till 15 . . . then falls steadily till 23,” and described other characteristics of adolescence, including an increase in sensation seeking, greater susceptibility to media influences (which in 1904 mostly meant “flash literature” and “penny dreadfuls”) and overreliance on peer relationships. Hall’s book was flawed, but it marked the beginning of the scientific study of adolescence and helped lead to its eventual acceptance as a distinct stage with its own challenges, behaviors and biological profile.

In the 1990s, Arnett began to suspect that something similar was taking place with young people in their late teens and early 20s. He was teaching human development and family studies at the University of Missouri, studying college-age students, both at the university and in the community around Columbia, Mo. He asked them questions about their lives and their expectations like, “Do you feel you have reached adulthood?”

“I was in my early- to mid-30s myself, and I remember thinking, They’re not a thing like me,” Arnett told me when we met last spring in Worcester. “I realized that there was something special going on.” The young people he spoke to weren’t experiencing the upending physical changes that accompany adolescence, but as an age cohort they did seem to have a psychological makeup different from that of people just a little bit younger or a little bit older. This was not how most psychologists were thinking about development at the time, when the eight-stage model of the psychologist Erik Erikson was in vogue. Erikson, one of the first to focus on psychological development past childhood, divided adulthood into three stages — young (roughly ages 20 to 45), middle (about ages 45 to 65) and late (all the rest) — and defined them by the challenges that individuals in a particular stage encounter and must resolve before moving on to the next stage. In young adulthood, according to his model, the primary psychological challenge is “intimacy versus isolation,” by which Erikson meant deciding whether to commit to a lifelong intimate relationship and choosing the person to commit to.

But Arnett said “young adulthood” was too broad a term to apply to a 25-year span that included both him and his college students. The 20s are something different from the 30s and 40s, he remembered thinking. And while he agreed that the struggle for intimacy was one task of this period, he said there were other critical tasks as well.

Arnett and I were discussing the evolution of his thinking over lunch at BABA Sushi, a quiet restaurant near his office where he goes so often he knows the sushi chefs by name. He is 53, very tall and wiry, with clipped steel-gray hair and ice-blue eyes, an intense, serious man. He describes himself as a late bloomer, a onetime emerging adult before anyone had given it a name. After graduating from Michigan State University in 1980, he spent two years playing guitar in bars and restaurants and experimented with girlfriends, drugs and general recklessness before going for his doctorate in developmental psychology at the University of Virginia. By 1986 he had his first academic job at Oglethorpe University, a small college in Atlanta. There he met his wife, Lene Jensen, the school’s smartest psych major, who stunned Arnett when she came to his office one day in 1989, shortly after she graduated, and asked him out on a date. Jensen earned a doctorate in psychology, too, and she also teaches at Clark. She and Arnett have 10-year-old twins, a boy and a girl.

Arnett spent time at Northwestern University and the University of Chicago before moving to the University of Missouri in 1992, beginning his study of young men and women in the college town of Columbia, gradually broadening his sample to include New Orleans, Los Angeles and San Francisco. He deliberately included working-class young people as well as those who were well off, those who had never gone to college as well as those who were still in school, those who were supporting themselves as well as those whose bills were being paid by their parents. A little more than half of his sample was white, 18 percent African-American, 16 percent Asian-American and 14 percent Latino.

More than 300 interviews and 250 survey responses persuaded Arnett that he was onto something new. This was the era of the Gen X slacker, but Arnett felt that his findings applied beyond one generation. He wrote them up in 2000 in American Psychologist, the first time he laid out his theory of “emerging adulthood.” According to Google Scholar, which keeps track of such things, the article has been cited in professional books and journals roughly 1,700 times. This makes it, in the world of academia, practically viral. At the very least, the citations indicate that Arnett had come up with a useful term for describing a particular cohort; at best, that he offered a whole new way of thinking about them.

DURING THE PERIOD he calls emerging adulthood, Arnett says that young men and women are more self-focused than at any other time of life, less certain about the future and yet also more optimistic, no matter what their economic background. This is where the “sense of possibilities” comes in, he says; they have not yet tempered their ideal­istic visions of what awaits. “The dreary, dead-end jobs, the bitter divorces, the disappointing and disrespectful children . . . none of them imagine that this is what the future holds for them,” he wrote. Ask them if they agree with the statement “I am very sure that someday I will get to where I want to be in life,” and 96 percent of them will say yes. But despite elements that are exciting, even exhilarating, about being this age, there is a downside, too: dread, frustration, uncertainty, a sense of not quite understanding the rules of the game. More than positive or negative feelings, what Arnett heard most often was ambivalence — beginning with his finding that 60 percent of his subjects told him they felt like both grown-ups and not-quite-grown-ups.

Some scientists would argue that this ambivalence reflects what is going on in the brain, which is also both grown-up and not-quite-grown-up. Neuroscientists once thought the brain stops growing shortly after puberty, but now they know it keeps maturing well into the 20s. This new understanding comes largely from a longitudinal study of brain development sponsored by the National Institute of Mental Health, which started following nearly 5,000 children at ages 3 to 16 (the average age at enrollment was about 10). The scientists found the children’s brains were not fully mature until at least 25. “In retrospect I wouldn’t call it shocking, but it was at the time,” Jay Giedd, the director of the study, told me. “The only people who got this right were the car-rental companies.”

When the N.I.M.H. study began in 1991, Giedd said he and his colleagues expected to stop when the subjects turned 16. “We figured that by 16 their bodies were pretty big physically,” he said. But every time the children returned, their brains were found still to be changing. The scientists extended the end date of the study to age 18, then 20, then 22. The subjects’ brains were still changing even then. Tellingly, the most significant changes took place in the prefrontal cortex and cerebellum, the regions involved in emotional control and higher-order cognitive function.

As the brain matures, one thing that happens is the pruning of the synapses. Synaptic pruning does not occur willy-nilly; it depends largely on how any one brain pathway is used. By cutting off unused pathways, the brain eventually settles into a structure that’s most efficient for the owner of that brain, creating well-worn grooves for the pathways that person uses most. Synaptic pruning intensifies after rapid brain-cell proliferation during childhood and again in the period that encompasses adolescence and the 20s. It is the mechanism of “use it or lose it”: the brains we have are shaped largely in response to the demands made of them.

We have come to accept the idea that environmental influences in the first three years of life have long-term consequences for cognition, emotional control, attention and the like. Is it time to place a similar emphasis, with hopes for a similar outcome, on enriching the cognitive environment of people in their 20s?

N.I.M.H. scientists also found a time lag between the growth of the limbic system, where emotions originate, and of the prefrontal cortex, which manages those emotions. The limbic system explodes during puberty, but the prefrontal cortex keeps maturing for another 10 years. Giedd said it is logical to suppose — and for now, neuroscientists have to make a lot of logical suppositions — that when the limbic system is fully active but the cortex is still being built, emotions might outweigh ration­ality. “The prefrontal part is the part that allows you to control your impulses, come up with a long-range strategy, answer the question ‘What am I going to do with my life?’ ” he told me. “That weighing of the future keeps changing into the 20s and 30s.”

Among study subjects who enrolled as children, M.R.I. scans have been done so far only to age 25, so scientists have to make another logical supposition about what happens to the brain in the late 20s, the 30s and beyond. Is it possible that the brain just keeps changing and pruning, for years and years? “Guessing from the shape of the growth curves we have,” Giedd’s colleague Philip Shaw wrote in an e-mail message, “it does seem that much of the gray matter,” where synaptic pruning takes place, “seems to have completed its most dramatic structural change” by age 25. For white matter, where insulation that helps impulses travel faster continues to form, “it does look as if the curves are still going up, suggesting continued growth” after age 25, he wrote, though at a slower rate than before.

None of this is new, of course; the brains of young people have always been works in progress, even when we didn’t have sophisticated scanning machinery to chart it precisely. Why, then, is the youthful brain only now arising as an explanation for why people in their 20s are seeming a bit unfinished? Maybe there’s an analogy to be found in the hierarchy of needs, a theory put forth in the 1940s by the psychologist Abraham Maslow. According to Maslow, people can pursue more elevated goals only after their basic needs of food, shelter and sex have been met. What if the brain has its own hierarchy of needs? When people are forced to adopt adult responsibilities early, maybe they just do what they have to do, whether or not their brains are ready. Maybe it’s only now, when young people are allowed to forestall adult obligations without fear of public censure, that the rate of societal maturation can finally fall into better sync with the maturation of the brain.

Cultural expectations might also reinforce the delay. The “changing timetable for adulthood” has, in many ways, become internalized by 20-somethings and their parents alike. Today young people don’t expect to marry until their late 20s, don’t expect to start a family until their 30s, don’t expect to be on track for a rewarding career until much later than their parents were. So they make decisions about their futures that reflect this wider time horizon. Many of them would not be ready to take on the trappings of adulthood any earlier even if the opportunity arose; they haven’t braced themselves for it.

Nor do parents expect their children to grow up right away — and they might not even want them to. Parents might regret having themselves jumped into marriage or a career and hope for more considered choices for their children. Or they might want to hold on to a reassuring connection with their children as the kids leave home. If they were “helicopter parents” — a term that describes heavily invested parents who hover over their children, swooping down to take charge and solve problems at a moment’s notice — they might keep hovering and problem-solving long past the time when their children should be solving problems on their own. This might, in a strange way, be part of what keeps their grown children in the limbo between adolescence and adulthood. It can be hard sometimes to tease out to what extent a child doesn’t quite want to grow up and to what extent a parent doesn’t quite want to let go.

IT IS A BIG DEAL IN developmental psychology to declare the existence of a new stage of life, and Arnett has devoted the past 10 years to making his case. Shortly after his American Psychologist article appeared in 2000, he and Jennifer Lynn Tanner, a developmental psychologist at Rutgers University, convened the first conference of what they later called the Society for the Study of Emerging Adulthood. It was held in 2003 at Harvard with an attendance of 75; there have been three more since then, and last year’s conference, in Atlanta, had more than 270 attendees. In 2004 Arnett published a book, “Emerging Adulthood: The Winding Road From the Late Teens Through the Twenties,” which is still in print and selling well. In 2006 he and Tanner published an edited volume, “Emerging Adults in America: Coming of Age in the 21st Century,” aimed at professionals and academics. Arnett’s college textbook, “Adolescence and Emerging Adulthood: A Cultural Approach,” has been in print since 2000 and is now in its fourth edition. Next year he says he hopes to publish another book, this one for the parents of 20-somethings.

If all Arnett’s talk about emerging adulthood sounds vaguely familiar . . . well, it should. Forty years ago, an article appeared in The American Scholar that declared “a new stage of life” for the period between adolescence and young adulthood. This was 1970, when the oldest members of the baby boom generation — the parents of today’s 20-somethings — were 24. Young people of the day “can’t seem to ‘settle down,’ ” wrote the Yale psychologist Kenneth Keniston. He called the new stage of life “youth.”

Keniston’s description of “youth” presages Arnett’s description of “emerging adulthood” a generation later. In the late ’60s, Keniston wrote that there was “a growing minority of post-adolescents [who] have not settled the questions whose answers once defined adulthood: questions of relationship to the existing society, questions of vocation, questions of social role and lifestyle.” Whereas once, such aimlessness was seen only in the “unusually creative or unusually disturbed,” he wrote, it was becoming more common and more ordinary in the baby boomers of 1970. Among the salient characteristics of “youth,” Keniston wrote, were “pervasive ambivalence toward self and society,” “the feeling of absolute freedom, of living in a world of pure possibilities” and “the enormous value placed upon change, transformation and movement” — all characteristics that Arnett now ascribes to “emerging adults.”

Arnett readily acknowledges his debt to Keniston; he mentions him in almost everything he has written about emerging adulthood. But he considers the ’60s a unique moment, when young people were rebellious and alienated in a way they’ve never been before or since. And Keniston’s views never quite took off, Arnett says, because “youth” wasn’t a very good name for it. He has called the label “ambiguous and confusing,” not nearly as catchy as his own “emerging adulthood.”

For whatever reason Keniston’s terminology faded away, it’s revealing to read his old article and hear echoes of what’s going on with kids today. He was describing the parents of today’s young people when they themselves were young — and amazingly, they weren’t all that different from their own children now. Keniston’s article seems a lovely demonstration of the eternal cycle of life, the perennial conflict between the generations, the gradual resolution of those conflicts. It’s reassuring, actually, to think of it as recursive, to imagine that there must always be a cohort of 20-somethings who take their time settling down, just as there must always be a cohort of 50-somethings who worry about it.

KENISTON CALLED IT youth, Arnett calls it emerging adulthood; whatever it’s called, the delayed transition has been observed for years. But it can be in fullest flower only when the young person has some other, nontraditional means of support — which would seem to make the delay something of a luxury item. That’s the impression you get reading Arnett’s case histories in his books and articles, or the essays in “20 Something Manifesto,” an anthology edited by a Los Angeles writer named Christine Hassler. “It’s somewhat terrifying,” writes a 25-year-old named Jennifer, “to think about all the things I’m supposed to be doing in order to ‘get somewhere’ successful: ‘Follow your passions, live your dreams, take risks, network with the right people, find mentors, be financially responsible, volunteer, work, think about or go to grad school, fall in love and maintain personal well-being, mental health and nutrition.’ When is there time to just be and enjoy?” Adds a 24-year-old from Virginia: “There is pressure to make decisions that will form the foundation for the rest of your life in your 20s. It’s almost as if having a range of limited options would be easier.”

While the complaints of these young people are heartfelt, they are also the complaints of the privileged. Julie, a 23-year-old New Yorker and contributor to “20 Something Manifesto,” is apparently aware of this. She was coddled her whole life, treated to French horn lessons and summer camp, told she could do anything. “It is a double-edged sword,” she writes, “because on the one hand I am so blessed with my experiences and endless options, but on the other hand, I still feel like a child. I feel like my job isn’t real because I am not where my parents were at my age. Walking home, in the shoes my father bought me, I still feel I have yet to grow up.”

Despite these impressions, Arnett insists that emerging adulthood is not limited to young persons of privilege and that it is not simply a period of self-indulgence. He takes pains in “Emerging Adulthood” to describe some case histories of young men and women from hard-luck backgrounds who use the self-focus and identity exploration of their 20s to transform their lives.

One of these is the case history of Nicole, a 25-year-old African-American who grew up in a housing project in Oakland, Calif. At age 6, Nicole, the eldest, was forced to take control of the household after her mother’s mental collapse. By 8, she was sweeping stores and baby-sitting for money to help keep her three siblings fed and housed. “I made a couple bucks and helped my mother out, helped my family out,” she told Arnett. She managed to graduate from high school, but with low grades, and got a job as a receptionist at a dermatology clinic. She moved into her own apartment, took night classes at community college and started to excel. “I needed to experience living out of my mother’s home in order to study,” she said.

In his book, Arnett presents Nicole as a symbol of all the young people from impoverished backgrounds for whom “emerging adulthood represents an opportunity — maybe a last opportunity — to turn one’s life around.” This is the stage where someone like Nicole can escape an abusive or dysfunctional family and finally pursue her own dreams. Nicole’s dreams are powerful — one course away from an associate degree, she plans to go on for a bachelor’s and then a Ph.D. in psychology — but she has not really left her family behind; few people do. She is still supporting her mother and siblings, which is why she works full time even though her progress through school would be quicker if she found a part-time job. Is it only a grim pessimist like me who sees how many roadblocks there will be on the way to achieving those dreams and who wonders what kind of freewheeling emerging adulthood she is supposed to be having?

Of course, Nicole’s case is not representative of society as a whole. And many parents — including those who can’t really afford it — continue to help their kids financially long past the time they expected to. Two years ago Karen Fingerman, a developmental psychologist at Purdue University, asked parents of grown children whether they provided significant assistance to their sons or daughters. Assistance included giving their children money or help with everyday tasks (practical assistance) as well as advice, companionship and an attentive ear. Eighty-six percent said they had provided advice in the previous month; less than half had done so in 1988. Two out of three parents had given a son or daughter practical assistance in the previous month; in 1988, only one in three had.

Fingerman took solace in her findings; she said it showed that parents stay connected to their grown children, and she suspects that both parties get something out of it. The survey questions, after all, referred not only to dispensing money but also to offering advice, comfort and friendship. And another of Fingerman’s studies suggests that parents’ sense of well-being depends largely on how close they are to their grown children and how their children are faring — objective support for the adage that you’re only as happy as your unhappiest child. But the expectation that young men and women won’t quite be able to make ends meet on their own, and that parents should be the ones to help bridge the gap, places a terrible burden on parents who might be worrying about their own job security, trying to care for their aging parents or grieving as their retirement plans become more and more of a pipe dream.

This dependence on Mom and Dad also means that during the 20s the rift between rich and poor becomes entrenched. According to data gathered by the Network on Transitions to Adulthood, a research consortium supported by the John D. and Catherine T. MacArthur Foundation, American parents give an average of 10 percent of their income to their 18- to 21-year-old children. This percentage is basically the same no matter the family’s total income, meaning that upper-class kids tend to get more than working-class ones. And wealthier kids have other, less obvious, advantages. When they go to four-year colleges or universities, they get supervised dormitory housing, health care and alumni networks not available at community colleges. And they often get a leg up on their careers by using parents’ contacts to help land an entry-level job — or by using parents as a financial backup when they want to take an interesting internship that doesn’t pay.

“You get on a pathway, and pathways have momentum,” Jennifer Lynn Tanner of Rutgers told me. “In emerging adulthood, if you spend this time exploring and you get yourself on a pathway that really fits you, then there’s going to be this snowball effect of finding the right fit, the right partner, the right job, the right place to live. The less you have at first, the less you’re going to get this positive effect compounded over time. You’re not going to have the same acceleration.”

EVEN ARNETT ADMITS that not every young person goes through a period of “emerging adulthood.” It’s rare in the developing world, he says, where people have to grow up fast, and it’s often skipped in the industrialized world by the people who marry early, by teenage mothers forced to grow up, by young men or women who go straight from high school to whatever job is available without a chance to dabble until they find the perfect fit. Indeed, the majority of humankind would seem to not go through it at all. The fact that emerging adulthood is not universal is one of the strongest arguments against Arnett’s claim that it is a new developmental stage. If emerging adulthood is so important, why is it even possible to skip it?

“The core idea of classical stage theory is that all people — underscore ‘all’ — pass through a series of qualitatively different periods in an invariant and universal sequence in stages that can’t be skipped or reordered,” Richard Lerner, Bergstrom chairman in applied developmental science at Tufts University, told me. Lerner is a close personal friend of Arnett’s; he and his wife, Jacqueline, who is also a psychologist, live 20 miles from Worcester, and they have dinner with Arnett and his wife on a regular basis.

“I think the world of Jeff Arnett,” Lerner said. “I think he is a smart, passionate person who is doing great work — not only a smart and productive scholar, but one of the nicest people I ever met in my life.”

No matter how much he likes and admires Arnett, however, Lerner says his friend has ignored some of the basic tenets of developmental psychology. According to classical stage theory, he told me, “you must develop what you’re supposed to develop when you’re supposed to develop it or you’ll never adequately develop it.”

When I asked Arnett what happens to people who don’t have an emerging adulthood, he said it wasn’t necessarily a big deal. They might face its developmental tasks — identity exploration, self-focus, experimentation in love, work and worldview — at a later time, maybe as a midlife crisis, or they might never face them at all, he said. It depends partly on why they missed emerging adulthood in the first place, whether it was by circumstance or by choice.

No, said Lerner, that’s not the way it works. To qualify as a developmental stage, emerging adulthood must be both universal and essential. “If you don’t develop a skill at the right stage, you’ll be working the rest of your life to develop it when you should be moving on,” he said. “The rest of your development will be unfavorably altered.” The fact that Arnett can be so casual about the heterogeneity of emerging adulthood and its existence in some cultures but not in others — indeed, even in some people but not in their neighbors or friends — is what undermines, for many scholars, his insistence that it’s a new life stage.

Why does it matter? Because if the delay in achieving adulthood is just a temporary aberration caused by passing social mores and economic gloom, it’s something to struggle through for now, maybe feeling a little sorry for the young people who had the misfortune to come of age in a recession. But if it’s a true life stage, we need to start rethinking our definition of normal development and to create systems of education, health care and social supports that take the new stage into account.

The Network on Transitions to Adulthood has been issuing reports about young people since it was formed in 1999 and often ends up recommending more support for 20-somethings. But more of what, exactly? There aren’t institutions set up to serve people in this specific age range; social services from a developmental perspective tend to disappear after adolescence. But it’s possible to envision some that might address the restlessness and mobility that Arnett says are typical at this stage and that might make the experimentation of “emerging adulthood” available to more young people. How about expanding programs like City Year, in which 17- to 24-year-olds from diverse backgrounds spend a year mentoring inner-city children in exchange for a stipend, health insurance, child care, cellphone service and a $5,350 education award? Or a federal program in which a government-sponsored savings account is created for every newborn, to be cashed in at age 21 to support a year’s worth of travel, education or volunteer work — a version of the “baby bonds” program that Hillary Clinton mentioned during her 2008 primary campaign? Maybe we can encourage a kind of socially sanctioned “­rumspringa,” the temporary moratorium from social responsibilities some Amish offer their young people to allow them to experiment before settling down. It requires only a bit of ingenuity — as well as some societal forbearance and financial commitment — to think of ways to expand some of the programs that now work so well for the elite, like the Fulbright fellowship or the Peace Corps, to make the chance for temporary service and self-examination available to a wider range of young people.

A century ago, it was helpful to start thinking of adolescents as engaged in the work of growing up rather than as merely lazy or rebellious. Only then could society recognize that the educational, medical, mental-health and social-service needs of this group were unique and that investing in them would have a payoff in the future. Twenty-somethings are engaged in work, too, even if it looks as if they are aimless or failing to pull their weight, Arnett says. But it’s a reflection of our collective attitude toward this period that we devote so few resources to keeping them solvent and granting them some measure of security.

THE KIND OF SERVICES that might be created if emerging adulthood is accepted as a life stage can be seen during a visit to Yellowbrick, a residential program in Evanston, Ill., that calls itself the only psychiatric treatment facility for emerging adults. “Emerging adults really do have unique developmental tasks to focus on,” said Jesse Viner, Yellowbrick’s executive medical director. Viner started Yellowbrick in 2005, when he was working in a group psychiatric practice in Chicago and saw the need for a different way to treat this cohort. He is a soft-spoken man who looks like an accountant and sounds like a New Age prophet, peppering his conversation with phrases like “helping to empower their agency.”

“Agency” is a tricky concept when parents are paying the full cost of Yellowbrick’s comprehensive residential program, which comes to $21,000 a month and is not always covered by insurance. Staff members are aware of the paradox of encouraging a child to separate from Mommy and Daddy when it’s on their dime. They address it with a concept they call connected autonomy, which they define as knowing when to stand alone and when to accept help.

Patients come to Yellowbrick with a variety of problems: substance abuse, eating disorders, depression, anxiety or one of the more severe mental illnesses, like schizophrenia or bipolar disorder, that tend to appear in the late teens or early 20s. The demands of imminent independence can worsen mental-health problems or can create new ones for people who have managed up to that point to perform all the expected roles — son or daughter, boyfriend or girlfriend, student, teammate, friend — but get lost when schooling ends and expected roles disappear. That’s what happened to one patient who had done well at a top Ivy League college until the last class of the last semester of his last year, when he finished his final paper and could not bring himself to turn it in.

The Yellowbrick philosophy is that young people must meet these challenges without coddling or rescue. Up to 16 patients at a time are housed in the Yellowbrick residence, a four-story apartment building Viner owns. They live in the apartments — which are large, sunny and lavishly furnished — in groups of three or four, with staff members always on hand to teach the basics of shopping, cooking, cleaning, scheduling, making commitments and showing up.

Viner let me sit in on daily clinical rounds, scheduled that day for C., a young woman who had been at Yellowbrick for three months. Rounds are like the world’s most grueling job interview: the patient sits in front alongside her clinician “advocate,” and a dozen or so staff members are arrayed on couches and armchairs around the room, firing questions. C. seemed nervous but pleased with herself, frequently flashing a huge white smile. She is 22, tall and skinny, and she wore tiny denim shorts and a big T-shirt and vest. She started to fall apart during her junior year at college, plagued by binge drinking and anorexia, and in her first weeks at Yellowbrick her alcohol abuse continued. Most psychiatric facilities would have kicked her out after the first relapse, said Dale Monroe-Cook, Yellowbrick’s vice president of clinical operations. “We’re doing the opposite: we want the behavior to unfold, and we want to be there in that critical moment, to work with that behavior and help the emerging adult transition to greater independence.”

The Yellowbrick staff let C. face her demons and decide how to deal with them. After five relapses, C. asked the staff to take away her ID so she couldn’t buy alcohol. Eventually she decided to start going to meetings of Alcoholics Anonymous.

At her rounds in June, C. was able to report that she had been alcohol-free for 30 days. Jesse Viner’s wife, Laura Viner, who is a psychologist on staff, started to clap for her, but no one else joined in. “We’re on eggshells here,” Gary Zurawski, a clinical social worker specializing in substance abuse, confessed to C. “We don’t know if we should congratulate you too much.” The staff was sensitive about taking away the young woman’s motivation to improve her life for her own sake, not for the sake of getting praise from someone else.

C. took the discussion about the applause in stride and told the staff she had more good news: in two days she was going to graduate. On time.

THE 20S ARE LIKE the stem cell of human development, the pluripotent moment when any of several outcomes is possible. Decisions and actions during this time have lasting ramifications. The 20s are when most people accumulate almost all of their formal education; when most people meet their future spouses and the friends they will keep; when most people start on the careers that they will stay with for many years. This is when adventures, experiments, travels, relationships are embarked on with an abandon that probably will not happen again.

Does that mean it’s a good thing to let 20-somethings meander — or even to encourage them to meander — before they settle down? That’s the question that plagues so many of their parents. It’s easy to see the advantages to the delay. There is time enough for adulthood and its attendant obligations; maybe if kids take longer to choose their mates and their careers, they’ll make fewer mistakes and live happier lives. But it’s just as easy to see the drawbacks. As the settling-down sputters along for the “emerging adults,” things can get precarious for the rest of us. Parents are helping pay bills they never counted on paying, and social institutions are missing out on young people contributing to productivity and growth. Of course, the recession complicates things, and even if every 20-something were ready to skip the “emerging” moratorium and act like a grown-up, there wouldn’t necessarily be jobs for them all. So we’re caught in a weird moment, unsure whether to allow young people to keep exploring and questioning or to cut them off and tell them just to find something, anything, to put food on the table and get on with their lives.

Arnett would like to see us choose a middle course. “To be a young American today is to experience both excitement and uncertainty, wide-open possibility and confusion, new freedoms and new fears,” he writes in “Emerging Adulthood.” During the timeout they are granted from nonstop, often tedious and dispiriting responsibilities, “emerging adults develop skills for daily living, gain a better understanding of who they are and what they want from life and begin to build a foundation for their adult lives.” If it really works that way, if this longer road to adulthood really leads to more insight and better choices, then Arnett’s vision of an insightful, sensitive, thoughtful, content, well-honed, self-actualizing crop of grown-ups would indeed be something worth waiting for.

Robin Marantz Henig is a contributing writer. Her last article for the magazine was about anxiety.

I had an article come into my inbox today from www.financial-planning.com that I found a little surprising at first glance.  It talks about the fact that the Fidelity Charitable Gift Fund (http://www.charitablegift.org/), which is the 3rd largest public charity has seen significant growth over the past year.

The Fidelity^® Charitable Gift Fund (“Gift Fund”), the nation’s largest donor-advised fund program and third largest public charity¹, today reported that its donors made more than 152,000 grants totaling $531 million to nonprofits nationwide during the first six months of 2010, up 27 percent and 16 percent, respectively, from the same period last year. Both of these totals represent the strongest first half for outgoing grants in the Gift Fund’s 19-year history².The Gift Fund also experienced strong growth in incoming contributions and new accounts. Charitable contributions were up 67 percent and new Giving Account^® openings increased 19 percent from the same period last year.

Again, this might sound odd due to the fact that many people are struggling financially and the economy isn’t showing amazing signs of strength.

There are several reasons why the fund is growing and people are giving more.

1. Many people who do have excess funds have recognized their good fortune over the past couple of years and are more compelled to give to the organizations they believe in.
2. Specific events, such as the Haiti disaster have received an incredible amount of media, which has led to substantial giving from U.S. citizens.
3. RISING TAXES! Donating money is a great way to offset this rising taxes that will take place next year for the high-income earners.

A major part of ones financial life and thus Financial Planning is recognizing the desire to donate to charity and using the best vehicle to do so.  The Fidelity Charitable Gift Fund is a great one that should be considered.

12b-1 fees are fees that mutual fund companies use to pay the brokers who sell their products.  The funny thing is not many people know about these fees and they certainly don’t know how much they are.  These fees are notoriously hidden so that the average investor has no idea what they are paying their broker.  Its actually a terribly flawed system based on deception and a lack of transparency.

There was an article today on www.financial-planning.com titled “Goodbye 12-b1 fees” which can be found HERE.  While I don’t think these fees will ever actually go away the Securities and Exchange Commission (SEC) is at least moving in the right direction.  Today the voted to propose limits on distribution fees and provide more transparency for investors“Despite paying billions of dollars, many investors do not understand what 12b-1 fees are, and it’s likely that some don’t even know that these fees are being deducted from their funds or who they are ultimately compensating,” said SEC Chairman Mary L. Schapiro, in a press release. “Our proposals would replace rule 12b-1 with new rules designed to enhance clarity, fairness and competition when investors buy mutual funds.”.

The amazing thing to me is that there actually people that take the opposite side of the argument and say that its bad for small investors.

Lynch said the fundamental problem is the way the business is built today. 12b-1 fees have become the difference between profit and loss for many firms, Lynch explained. “Smaller firms and advisors have come to count on 12b-1 fees as a material revenue source and they have built their service model, marketing plan, and the minimum assets under management required based on the 12b-1 model,” he said.

Lynch believes the impact of capping or eliminating fees will be that advisors will start to move upmarket to larger clients who they can charge larger fees and lower-end clients will be moved to a self-service approach: “Just like you pay someone to do your taxes I think the industry will move to a fee-for-service model where you don’t pay on an ongoing basis, but imbed fees within products.”

Completely ridiculous if you ask me!  Paying brokers to sell your funds and not being honest and open about the fees to investors is just unfair.  Unfortunately its the small investors who are most hurt by these practices.  Advice does not hinge around 12-b1 fees but instead around funds that are actually strong performers.  What a novel idea!  I encourage people to avoid working with any advisors who get paid 12-b1 fees.  If you are unsure, just ask! There are much better options out there…