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Tuesday, August 1, 2017

The Fed Funds Rate is Significant and Warrants Close Attention

I hope I don't repeat myself too often in pointing out that the titles of this Financial Myths blog are, indeed, financial myths.  Especially this one.  All the Fed Fund rate is is the rate that the Federal Reserve suggests that banks charge each other for overnight loans to meet their reserve requirements.  Financially sound banks can negotiate better terms amongst themselves.  The rest can pay the set rate or, failing that, go to the Fed's discount window.
For the sake of simplifying this, imagine that you and a friend each have a coffee cart.  You're on different corners so you don't mind cooperating.  One way you do that is if, at the end of the day you don't have enough cofee to meet demand the following morning you can borrow from your friend, who may have coffee left over from today.  Then when your suppliers open the next day you restock and also buy enough to pay your friend back.  And vice versa.  You agree to pay each other 0.1% of the value of the borrowed coffee for the overnight loan.
This has nothing to do with the prices you charge for your coffee!  No relationship whatsoever.  But suppose the public doesn't know that.  You meet with your friend and decide to double your loan rate to 0.2%.  Then you both announce that your Coffee Beans Overnight Rate has doubled so you must also double your coffee prices.  The public says, "Well, yes, that makes perfect sense".  But the fact is, you have not incurred any additional costs no matter how high you raise the Coffee Beans Overnight Rate because you borrow from, and pay, each other almost equally.
Banks and other financial institutions use the Fed Funds rate as an excuse to raise the cost of their money even though they had plenty to loan out at lower rates.  It is merely one of many parts of the one-way wealth valve that has decimated the middle class and enriched the already enriched by removing virtually all connection between productivity and income.  If the Fed were really interested in fulfilling its mission of Full Employment, it would inject funds directly into the economy, straight to individual human consumers.

Your Constructive Comments are Welcome!

Thursday, June 1, 2017

Top Ten Attributes Millionaires Share- Guest Contributor

These are not myths!  Becoming a millionaire seems out of reach to many people. It appears as if you need money to make money. However, several studies have been applied to millionaires and billionaires. These studies covered habits of the upper class instead of just their financial status. Take a look at the habits or attributes that these successful people share so  you can emulate a few of them. You might find yourself managing a huge, bank account .

1. Keeps Up With Financial News
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The "Wall Street Journal" is a classic newspaper that's dedicated to the financial world. Financial information is also found in certain sections of any other newspaper around town. Currently you might skip over this news section. But consider changing that habit. The majority of wealthy people are deeply involved with each day's financial news. They're aware of businesses that are expanding or declining in value. Mergers, stock information and other data contribute to your financial health in the long run. Any piece of information in the financial news can guide your choices as you refine your 401(k) investments or stock purchases on the side. Understanding how the financial world works is a first step toward being a wealthy individual.

2. Improves Their Education

If you examine a millionaire's educational background, he or she may have a list of degrees, certifications and classes earned over the years. Successful people thrive on education. They want to constantly improve themselves, especially if they manage employees at some point. Millionaires take classes on psychology, marketing and other broad subjects so that they can apply that information to their everyday operations. Some individuals may want to change industries entirely so they go to school to learn about a specific trade or sector. Every piece of knowledge only improves the millionaire's outlook on life as more opportunities open up in response.

3. Maintains a Budget

When hardworking people look at millionaires in the news, it appears that there's a never-ending flow of money. Successful people know better, however. You might be surprised to hear that millionaires have budgets. They may have more wiggle room in their grocery shopping budget, but there's still a limit on spending patterns. By being conservative with the spending, any extra funds can be invested back into stocks or bonds. Wealthy people tend to make the money work for them as interest adds up over time. Anyone can start a budget and gain more wealth. It simply takes some dedication to the process in order for it to be successful.

4. Rises Early

Sleeping in is not on the millionaire's list. On most days, including the weekend, they wake up between 5 a.m. and 7 a.m. The early morning is normally a productive one for any human being because the body's circadian rhythms tend to be the strongest at this point. Millionaires take advantage of the clear mind upon waking, and they'll start their day. Emails, meetings and work responsibilities can be the priorities with the morning open to career opportunities. If anything can't be taken care of during the morning, the entire afternoon is still open. Millionaires know that hard work pays off when you spend time on your goals.  But having said that, everyone is different.  Some people do their best work well into the wee hours.  It’s important to be sensitive to your unique cycles and capabilities.

5. Leads Healthy Lifestyles

For the most part, millionaires lead healthy lifestyles. They'll prioritize exercise while eating a balanced diet. Some entrepreneurs even have gyms or workout equipment in their offices as a way to streamline the workday. Although there are some exceptions to this rule, the healthy lifestyle tends to be a main habit shared throughout the millionaire set. It's possible for anyone to acquire this attribute with a little perseverance. You can't be fresh and ready for opportunity if you feel tired and sick with unhealthy foods and no exercise. Millionaires actively seek out restaurants with a healthy spin on their favorite foods, or they might hire a cooking service to help them out at home.

6. Limits Media Distractions

If you're inclined to sit in front of the TV for hours at a time, a millionaire status may not be in your future. Most wealthy people don't spend a lot of time dabbling with media distractions. Television, social media and movies are all distractions from other tasks that can be completed in a day's time. In general, millionaires might spend about one hour in front of the television each day. Turn off your TV so that you can challenge yourself in other ways.

7. Sets Daily Goals

You may have lifelong goals in mind that include scaling a mountain or meeting the President of the United States, but millionaires create daily goals. They'll take some time each day to write down their goals for the next 24 hours. It's a fact that not all goals will be achieved so successful people prioritize the list with numerical highlights. Once the day begins, millionaires start on their to-do list and try to complete it by the day's end. Goal setting is a habit that everyone can get into with some dedication to the art.

8. Takes Real Breaks

Millionaires also understand the value of a break from hard work. Lunch hours must remain sacred. Eat, socialize and unwind during this period so that your mind can be focused when afternoon responsibilities arise. This break concept applies to your nighttime rest as well. Adhere to a reasonable bedtime hour, such as 11 p.m. Shut off lights and electronics as you fall asleep. By maintaining this bedtime and break schedule, you'll be fresh to take on the day's challenges.

9.  Takes time for Creative pursuits

Being creative with your funds is also a part of a millionaire's habits. Any extra funds might be put towards an invention or concept that you've been nurturing for the past few years. At some point, you may have a new product or service that catapults you into an even higher tax bracket. Be a millionaire who's happy with life by investing in things that are important to you. It can pay off in the end.

10. Is Generous and grateful

Although in mainstream media we see mostly stories to the contrary, in general the wealthy are also generous with their time and money.  They view the world as abundant.  Gratitude for what one has is more important than constant striving after more and more.  

Jessica Kane is a professional blogger who focuses on personal finance and other money matters. She currently writes for Checkworks.com, where you can get personal checks and business checks.


Your Constructive Comments are Welcome!

Saturday, April 29, 2017

Financial Journalists are Always a Good Source of Unbiased Advice

Yes, the title of this blog is a myth.  In fact, I find most evidence to the contrary.  Part of the reason is that like everyone else in business, journalists want "customers" and often resort to a bit of hyperbole or even outright falsehood to get more eyeballs.  The myth is that journalists have nothing to sell, they're just here to educate us with sober, neutral information, right?  Nonsense.
A good example is this Dan Caplinger article in Motley Fool:
https://www.fool.com/retirement/general/2015/02/21/think-twice-tony-robbins-financial-advice.aspx

Nothing like a little name dropping to get attention.  I'm not a fan of Robbins' late entry into the financial services world but Caplinger's critique is way off base, to wit:


  1. Caplinger wites, "Robbins has some financial experts raising their eyebrows" and then fails to mention any of them or why they're raising their eyebrows.  In admiration?  Astonishment at how great his advice is?  A shift in consciousness?  Constipation?  This is an evidence-free and meaningless statement.
  2. "The key to his process involves creating income for life".  Oh. My. God!  That is so disgusting and horrible!  What could he possibly be thinking??  And Caplinger left out the most important word "guaranteed".  By way of comparison, Social Security is an annuity and we can see how many lives that program has utterly ruined.
  3. "Unfortunately, the reality of how indexed annuities actually work often leaves them missing the mark in terms of being a perfect investment solution for many people."  Give me a break.  You could plug anything else into that dodgy sentence substituted for "indexed annuities" and it would be true.  All investment & savings options have pros and cons.  Not a single option is "perfect".  That goes without saying.  But apparently, until this article was written, nobody knew that before.  Thank you so much Dan for bringing us back down to Earth.
  4. "Wall Street's own self-regulatory agency has put out an investor alert about indexed annuities".  I have intense problems with that totally misleading sentence.  Go read the "alert".  Mr. Caplinger makes it sound like a dire warning when the "alert" is actually a better more informative and unbiased article than his.  Yes.  Please read the alert.  And understand, too, why Wall Street doesn't like annuities:  because annuities don't pay as well as "managing" assets; annuities don't require "management".  Frankly, most assets don't either.
  5. "surrender charges of as much as 20% can apply . . .granted, not all insurance providers have these draconian provisions".  Actually, none of them do.  I couldn't find any annuity product with such onerous terms.  None of the ones I use have more than 10 year periods.  Besides.  Annuities are designed to compete with other principal-protected, long term vehicles like Treasuries and CDs, which they soundly trounce.  Everyone has some money they won't need for 10 years or more and annuities are great places for it.  Short term money should be elsewhere.
Let me finish by saying, I could not write an article like Dan Caplinger's.  Because I'm a legal fiduciary


Your Constructive Comments are Welcome!

Friday, March 31, 2017

Oregon is #1 in Financial Literacy!

Sadly, this is a myth.
According to WalletHub.com, we rank 27th overall.  It's not like I'm not trying!
Come to one of my classes and workshops.  Let's raise this score!
www.garyduell.com


Source: WalletHub
Your Constructive Comments are Welcome!

Thursday, March 9, 2017

Annuities and the F-WORD Belong in the Same Sentence.

I've had the good fortune to meet and work with Frank Maselli.  He is a brilliant, affable and hilarious adviser to advisers.  Below I've simply cut and pasted a great and timely article he just wrote for us advisers.


I never pitch products in my training programs or keynotes because I believe that advanced skills are product neutral. It's up to each advisor to decide what's best for the client.
But I am seeing a confluence of market and demographic forces right now that is causing me to line up enthusiastically behind one particular product strategy. 

I think we have entered the Age of the Annuity!

If you've never done one before, it's time to take a hard look at them. And if you're already using them…you might want to double your efforts for the next couple of decades.

DOL & the “F-Word!”The Department of Labor “fiduciary rule” is currently stuck in the mud of Washington confusion at the moment. No one can say today if this thing is going to survive or what form it might take after all the bureaucratic sputtering is finished. 

But even if DOL disappears completely...The F-word will not. “FIDUCIARY” is here to stay!
Acting in our clients' best interests is what we do every day. So this is not a major shift in anyone's business philosophy. But it is a big shift in perception. 
The public is being told by regulators and the media to ask advisors right up front, “Are you a fiduciary?” 
Few clients understand the implications of that word, but they're certain a “No” answer, or any hesitation, is bad news. And it's likely to become a major differentiation. 
The choice to become a fiduciary is a big one and there are several sides to this issue. But being a fiduciary means a lot more than simply avoiding high fee products. In fact, when you identify the greatest threat to financial survival that most Americans are facing, fees and commissions are a minor concern. 
By far the biggest danger ahead is the very real risk of outliving our money and not having a reliable income in retirement. 
The second biggest danger is in trying to navigate retirement without some kind of professional help. Sadly, that's what the DOL rule may mean for millions of Americans.
Combined...these two risks mean that if you DON'T show the client an annuity option, you may be in for a seriously expensive lawsuit down the road. 

"Annuity Now!"

There's a classic episode of Seinfeld where Frank Costanza (George's father) tried to reduce his stress by shouting “Serenity now!” My annuity mantra may be a slight modification, but the idea is the same.
To effectively reduce the stress and fear that millions of retiring Boomers are about to face, an annuity in some form may be the best, if not the only answer. 
And you have a wide range of options to accommodate nearly every need including immediate, fixed, indexed, variable and investment only...so there really are no excuses anymore. There may be a slight learning curve, but the effort will be richly rewarded.  
Bottom line: If annuities are not part of your product mix in a major way…you need to re-think your approach fast. 

From Hater to Fan

As a former wirehouse stock-jockey, I used to pitch against annuities. I was never a fan. But times have changed. 
John Maynard Keynes famously said, “When my information changes, I alter my conclusions. What do you do, sir?” 
I believe today that annuities are the only reliable way to guarantee a steady stream of income in retirement. And before you say “Bonds do that too.” I hasten to point out that the 33-year falling interest rate cycle is over. Very few advisors today know the pain of destroying client wealth in a bond portfolio. 
The reality is that most people are living far longer than their money will last. Given that fact, annuities might be the only salvation for tens of millions of Americans. 
Plenty of advisors are already on board with annuities, but far too many are not yet. Add to that the fact that the whole DOL debacle feels like a direct assault on the annuity industry just at the time Americans need these programs most. The irony there is painfully sad. 

Best Interests! Really?

So go back to the whole “fiduciary” thing for a minute. What is truly in the client's best interests? (Allowing for different needs and objectives of course.) 
Is it better to show a client an annuity with some kind of commission charge…
Or should you try to build a portfolio of super low-fee, passive ETFs or mutual funds and craft a lifetime income stream from that?
If you said “Both” that's fine! But at least put a portion of the portfolio into something that's protected forever. Why would anyone disagree with that? 
And if costs are your concern...what if the annuity itself was also low fee? 
Annuity firms right now are bringing new programs to market that look better than anything we've ever seen with lower fees, great investment choices, fantastic liquidity, and more income flexibility.
They might never get as cheap as an index fund, but let's say for the sake of argument that the incremental fee for an annuity was around 100 basis points per year. How would you ever go to a client who had depleted their assets by age 80 and say, “Gee Bob, I'm really sorry. I had a chance to guarantee a portion of your retirement income...but I was really worried about charging you 1% more in annual fees!” 
That is not a conversation you want to have. Your Monte Carlo simulation and low-fee argument won't stand up in court. And folks, there's no doubt that as many retirees start running out of money, some attorney will dig into their portfolio to find where an advisor failed to recommend some kind of safety and a guaranteed income. We haven't seen the panic yet, but just look at the demographics...it's coming like a freight train!

Why is now the right time?
In my new book, 40 Tips for the Under 40 Advisor, Tip #35 states: 

In really good or bad times...prepare clients for the opposite!
The markets have been strong and I'm not predicting a downturn here. But none of us needs a massive loss to convince us to protect some of our client's retirement savings. It's just common sense.
An annuity puts client assets into the hands of very large, very solvent and historically conservative companies who are much more tightly controlled than any bank. There is no better way to stabilize the retirement ship in a stormy sea and to take some of that longevity risk off the table! 

“The AGE of the Annuity!”
So the new era is upon us. I wrote about "The Year of the Annuity" in early 2016, but I think we are going to be in this protection business for the next 30 years. And whatever happens with the DOL rule, the F-word will likely be with us forever. Truly acting in a client's best interests transcends the trivia of commissions and fees.

  • It demands that we protect them from the greatest threat to their future…outliving their money. 
  • It mandates that we instill and insure some kind of guarantee and peace of mind in what will be for most a long retirement. 
  • It says that if you haven't done so already, it's time to open your mind to new financial instruments that help people safely DOWN the mountain...not up.  
  • It puts annuities front and center, standing tall in the line-up of solutions we offer. 
In the end we will all be judged on how well we got our people through to their goals.
Annuities used to be one simple product choice among many…but not anymore. 
They are now a core fiduciary responsibility!
Your Constructive Comments are Welcome!

Sunday, March 5, 2017

"THERE OUGHTA' BE A LAW!" and Mexico

I confess that my first reaction to outrageous behavior is, "there oughta' be a law!".   One way I attempt to keep up with the times is to watch TV at least once a week, usually a news program on Sunday morning.  Holy cow!  A dozen "there oughta' be a law!" incidents come up in 15 minutes, most having to do with advertising:

  • Gambling is portrayed as entertainment, showing idiotically grinning couples.  I've never seen people smiling in a casino, have you?  There oughta' be a law against these ads.
  • Drugs are also paired with happy, healthy actors who, in reality, will probably never need a prescription in their lifetimes.  Drug ads should be illegal.
  • Fashion is advertised as an essential source of happiness, acceptance and, well, evolving as humans!  A top fashion consultant admitted that he doesn't follow consumers' fashion desires, he manufactures them.  There oughta' be a law.  (But in my case it's obvious I don't follow fashion.)
  • Food.  If you just look around it's apparent that Americans get plenty of food.  Yet billions are spent daily trying to get us to eat cheap, crappy "food".  Or food that neither our budgets nor our bodies can afford.  This should be illegal, just like hard liquor ads are.
  • Cars are a personal statement, instant evocations of status and coolness.  Oh.  And they can transport things and people.  But we need fewer of them, not more of them.  How are these ads any different than hard liquor, gambling, drugs or food?
  • Investing "porn" is everywhere.  Really?  You're going to plan out the rest of your life based on information from whoever spends the most money to catch your eye??  Where do they get all that money to spend on ads?  From your money.  There are rational, evidence-based rules & tools you can find online, most for free.  Finally, there are honest, wise and experienced advisers in your community to help you curate the deluge of money madness.  Investing & insurance ads should be illegal. 

But then, several weeks after our Nuevo Vallarta vacation, it dawned on me what had been different- and profoundly relaxing -about Mexico.  At the resort, what was it about the pool area, the weight room, the parking lot . . . everywhere that was so calming?  No signs, no rules, no "Danger" or "Forbidden" or "Warning" placards at every turn.  It felt clean, quiet, uncluttered, adult.  They relied on the intelligence and character of their guests to make things run smoothly and so far it seemed to be working.

Wouldn't it be easier, less expensive and more effective to encourage consumers to be smarter and more discerning ?  That's a transferrable skill.  It would make us all better voters, parents, workers, entreprenuers and, yes, consumers.  Absolutely there should still be laws and enforcement of them.  But the path to perfect safety is more perilous.  Which is why our current administration wants to tempt you with that path by making you dumber.

Your Constructive Comments are Welcome!