Long-term mutual fund holders often drift into indifference. After a few years, they have no sense of connection with their money. All fund statements and mailings are glanced at and filed or thrown out. In the back of their minds, they know there is something they ought to be doing but having put it off for many years, they simply leave it be. Mutual funds in IRAs and 401(k)s are often abandoned for decades. On retirement, the holders are shocked at how little money has accumulated.

Active investors become resentful of fund managers. Fund managers’ salaries are insulated from fund results. Salaries rise in bad years as well as good. With no stake in the outcome of their investment decisions, fund managers’ interest and yours are opposed. Fund managers make more Money than doctors, lawyers, and all but the CEOs of the largest corporations. Yet their results are no better than random picks from the stock tables.

But a high-risk investor can actually do a fairly good job of approximating total tax avoidance. If she invests in a basket of fairly high risk, poorly correlated securities, in an average year she will have some gains and some losses, but more probably a net gain. (Common stocks have averaged about 11 percent annual appreciation over the past 70 years.) She can sell all of her losers to establish tax losses and sell winners that generate an equal amount of gains. The tax-free proceeds of these sales can pay her living expenses, and any balance can be reinvested in new stocks. Until she runs out of losses, she will pay no tax. In effect, she can use risk—here viewed as a dispersion of returns—to create a tax shield, whereas we have shown why an investor who opts for a risk-free return has no such shield.

With a tax structure that favors value-creating high-risk investing and rather heavily penalizes more conservative investment patterns, it is no surprise that the United States leads the world in business innovation. The good news is that we seem, for the moment, to be better than the other guy. However, viewed through the lens of total value, the U.S. tax system is a large encumbrance when compared to an ideal system designed to maximize value creation. This is the bad news. But it is also good news, in a sense: There is room for improvement. As we get smarter, we’ll get better.

Using the MBA method, a loan is considered contractually delinquent if the payment is not received by the end of the day immediately preceding the loan’s next due date (generally the end of the month). For example, a loan due on November 1, 2006 with no payment received on November 30, 2006 would be reported delinquent on the November statement to bondholders.

Using the OTS method, a loan is considered contractually delinquent if the payment is not received by the close of business on the loan’s due date in the following month. For example, a loan due on November 1, 2006 with no payment received on November 31, 2006 would not be reported delinquent on the November statement to the bondholders.

The OTS method delays the reporting of delinquent loans by one month relative to the MBA method. It is important to know which reporting method is used by each originator or servicer when comparing delinquency statistics.

The Democratic chairman of the Senate Banking Committee, Chris Dodd, said on Thursday after two talks: “We are very confident that we can act expeditiously.”

Republican Senator Bob Bennett said: “I expect now that we in fact have a plan, which the House of Representatives and the Senate passed and signed by the president.” Details of the agreement were not initially known.

“Economy in danger”

On Wednesday evening, Bush was in a dramatic televised address on prime time demanded quick decisions. “Our whole economy is in danger,” warned the president. “Without immediate action of Congress could America in a financial panic slip, and an unfortunate scenario could unfold.” Alongside the Democrats Obama and McCain, the Republican Bush also asked leading members of Congress, attended the meeting at the White House to participate. He even called Obama personally to invite him, as his spokeswoman announced.

Even before the agreement has the hope to rescue the U.S. stock markets on Thursday brings profits. The Dow Jones index of defaults rose to the afternoon by 2.2 percent to 11,065 points. In Frankfurt, the Dax with a gain of two percent to 6,173 meters from the trade.