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Monday, November 9, 2009

Myth: Our Health Care System is what Americans want

Thom Hartmann posted this Walter Conkite quote:
"America's health care system is neither healthy, caring, nor a system."
How did it get this way? Well if you're looking for places to lay blame, go no further than the railroad companies, J.C. Bancroft Davis, and a careless (or corrupt) Supreme Court in the 1886 U.S. Supreme Court case Santa Clara County v. Southern Pacific Railroad Company (118 U.S. 394) which dealt with the railroad's refusal to pay taxes in California. But, although the court's decision had nothing to do with granting corporations the same Constitutional rights as living breathing human beings, Mr. Davis- the court reporter in this case -titled the decision as awarding personhood to corporations. (He was a former Southern Pacific employee.) Subsequent cases relied on this phony precedent.
So now we have paper fictions (corporations) with free speech rights they were never intended to have, which allow them to buy the airwaves, the newspapers, the magazines, our members of Congress and , yes, even the Presidency. That is why even though the vast majority of Americans want Universal Health Care for all, our representatives keep refusing to implement it.

Friday, November 6, 2009

Myth: The Government Will Take Care of Me

As we live longer and longer, the uncertain and usually untold story about quality of life needs to be looked at. The number one cause of debilitating but not immediately fatal conditions such as arthritis, dementia, heart & respiratory decline is longevity. How is this affecting us as families, communities and a society? How will it affect us?
I've met with more couples than I care to admit who are "in betweeners", that is, they are cornered into taking care of adult children and at the same time saddled with caring for one or both sets of their parents. The stress is palpable, incredibly emotionally and financially draining.
Right now, Medicare does not pay for long term care. State Medicaid programs do but only if you are virtually impoverished. I won't go into the details here, but the legal consequences of shifting assets to qualify for Medicaid keep getting more punitive as the financial solvency of the program becomes more and more scary. What are the options?
Well, you can:
  • Be really rich or have really rich kids. Seriously. This is an option that works for a few people.
  • Spend down your assets to qualify for Medicaid.
  • Set up an Income Cap Trust- see http://www.dhs.state.or.us/spd/tools/program/osip/wg5.htm
  • Buy Long Term Care insurance
  • Hope and pray that the health care reform bills in Congress will deal with this issue (not likely).
  • Only get malignantly terminal illnesses
Let's examine these primary alternatives.

The first one is the best but, based on statistics, the least probable. Even so, the reality is that even well-off folks buy Long Term Care insurance because they've done the math: If you could save the monthly premium for long term care insurance in an account earning 6% for 20 years- instead of buying the insurance -then you would have enough money to pay for about 9 months of care. The insurance, on the other hand, would give you inflation adjusted care for 5 years.
The second possibility is commonly used, but usually involuntarily. Plus, it leaves your spouse in a world of financial hurt, if you care about that.
The Income Cap Trust should be drafted by an attorney. It can allow you to qualify for Medicaid earlier, and stay on longer, by meeting the "300% of SSI standard income limit" test.
Buying Long Term Care insurance LTCi) is actually the cheapest option for all of us, if you can qualify. This is especially true in Oregon which is a "partnership" state, meaning that to the extent you have private long term care insurance you will be exempted from Medicaid recovery from your estate. For example, let's say you have LTCi, go on claim, and your insurer pays out a total of $300,000 before you die. Your Medicaid exempt assets will be increased by $300,000.
The fourth option, hoping Congress will fix it, doesn't look too promising. We can't afford the programs they've already promised us.
The last option is out of our control. And, I wouldn't wish that on anyone.

Tuesday, October 20, 2009

Don't listen to the hype about the Baucus Bill

S. 1796, the 1,502-page America's Healthy Future Act bill (aka the Baucus Bill) has been excreted from the Senate Finance Committee. And the hysteria about its length has already begun. Oh my, the table of contents alone is over 12 pages!
What you will not hear, however, is that all such bills are issued in "markup" format. They are double and triple spaced. They only use up the middle third of the page. This leaves room for Senators, staff & lobbyists to mark up the bill to render it totally contrary to its purpose, I mean, to be sure all interests are taken into account.
If you cut and paste the bill into Word, take out most of the spacing, and use 2/3 of the page instead of 1/3, the bill shrinks to 439 pages, about the size of the average trashy novel. So it is short enough for anyone to read and understand. Anyone. You can do it yourself at:
http://finance.senate.gov/press/Bpress/2009press/prb101909.pdf
So if your Congressperson bloviates about this bill being too huge to read, you might help him or her find another career when the next election comes around.
I would hope the bill is as long as it needs to be to be sure no one ever again goes bankrupt because of our health care system, that everyone is covered, and that our costs are reduced by 1/3. I'll let you know after I finish reading the bill. But of course by the time the mark ups are done it will be unrecognizable from its current form.
I guarantee you one thing though: this is a momentous moment in our country's history. Health care reform will only be as good as what is demanded by each and every American. I wish I could remember who first said this: the best measure of our humanity is how large a circle we have to draw to include everyone we think of as "us". On this issue, let's draw a circle large enough to include every citizen.

Tuesday, October 6, 2009

The Economy is Recovering

I circulated this article in one of my client e-letters back in April. I still contend that it is a myth that our economy will "recover", whatever that means. The key idea here is WE DON"T WANT IT TO GO BACK TO THE WAY IT WAS. Our economy was (and still is to a large extent) based on fluff, fantasy, unsustainable excess, magical thinking and unrealistic expectations.

You might find it helpful to peruse an excerpt from General Electric CEO Jeffrey Immelt's speech, delivered in Toronto on February 11, where he discusses the concept of "reset".

"If you think this [recession] is only a cycle you're just wrong. This is a permanent reset," he said. "There are going to be elements of the economy that will never be the same, ever. Smart businesses are the ones that are going to hunker down in the cycle, which you've got to do, but that also understand we're going to come out of this in a different world."

This is what I've been saying for over a year now. And this is why cycle theorists like Harry Dent (chief economist for AIM funds) had been wrong over and over again. The media tend to discount such "negativity" as they keep propagating the "optimistic" myths that Wallstreet keeps feeding the investing public:

"This is just a cycle. Things will bounce back.", "Everyone has lost money.", "No one can predict the market.", "We're doing the best we can.", "We've hit bottom. The market can only go up from here.", "Things will bounce back.", "Don't lock in your losses by selling out now." etc. ad nauseum. None of those things are true! Here is what is true:

You can protect your money from the future market declines that are on the horizon without missing out on gains if and when the market recovers. But only if you take action. Take the Wealth Index questionnaire as a first step. It is free. It takes 20 minutes. It helps me assess the best course of action for you. Here's the link: WEALTH INDEX

Friday, September 4, 2009

Myth: Fee-only advisers are always better

Dear readers,
How advisers are paid is no guarantee of honesty. Often it is a good sign if a fee-based planner doesn't charge you a fee. Most of the best financial products pay commissions because the best companies recognize that advisers add value in screening and recommending financial alternatives for their clients. That's why I usually don't charge a fee for the often substantial services I provide, such as the wonderful Wealth Index: I don't believe in "double dipping" my clients.
This lady, however, will coin a new epithet about the financial services industry, "My investments went Zabalaoui!".

February 19, 2009- Financial Adviser Magazine

Fee-Only Pioneer Guilty In Ponzi Scheme
A woman considered among the pioneers of the fee-only financial planning movement has pleaded guilty to using a Ponzi scheme to embezzle more than $3 million from clients.

Judith Zabalaoui, 71, bilked her New Orleans area clients between 1993 and 2007 while working as an independent advisor, according to published reports.

Zabalaoui was charged with gaining limited power of attorney over client funds by promising returns of between 13% and 26% if clients invested in two companies, the reports said.

The companies, however, were nothing more than UPS store mailboxes that Zabalaoui rented in Colorado and Delaware. She also set up phone lines and created phony letterhead and employee names to support the ruse.

The funds were embezzled using multiple wire transfers from Charles Schwab custodial accounts to her personal account. She then used the money for on an array of personal items—including clothing, vacations and rent payments—for herself, friends and family members, according to the Times Picayune in New Orleans.

Most of her clients, according to published reports, came from Resource Management Inc. in Metairie, La., which she founded in 1974, according to the Times Picayune. By the time she left the firm in 1991 to set up her own business, Zabalaoui was regarded as one of the pioneers of the financial advisory profession and among the first advisors to transition to a fee-only model in the early 1980s. She became a certified financial planner (CFP) in 1979, but the certification expired in 1999, according to the Times Picayune.

Resource Management has denied any involvement with Zabalaoui since she left the firm and has not been accused of any wrongdoing, according to the Times Picayune.

She pleaded guilty in Federal District Court in New Orleans on Wednesday to five counts of mail fraud as part of a plea agreement in which she has agreed to pay restitution to clients.

At her plea hearing, she told the court that she moved to Birmingham, Ala., after Hurricane Katrina and that she has suffered from depression, according to the Times Picayune.

Zabalaoui faces a maximum sentence of 20 years in prison, a fine of $250,000 and three years of supervised release for each count against her, according to published reports. Her sentencing is scheduled for May 20.

Wednesday, September 2, 2009

What's true about life. This is no myth.

Nellie

I was feeling down the other day; overwhelmed, angry and sad, as if my priorities were all helter skelter. So I walked up the hill by my office to get some advice from my wise friend Nellie.
I whined and complained and shed some tears. She was patiently silent.
I asked her, “Tell me what’s important. Where should my focus be? What are the big three or five or six things I’m forgetting?”
“Well”, she began, “I start with the heart, the faithful heart. It so easily and consistently holds us mere seconds away from death. So start with the heart.
Next, the breath. Isn’t it a joy to sit here with me and share this fresh sweet air and all that it carries?: Oxygen, the fragrance of the unseen, the eternal ebb and flow of life, universally shared by all beings. The harmony of the heart and the breath is a key lesson for us. Pay attention to the breath.
Then, I would rank being fed way up there on the list. Think of all the hundreds of ways that the world sustains you and how you help sustain it. We are here to be fed.
And finally I personally really enjoy being held in loving arms, in the gaze of a beloved for whom I am also beloved.
These aren’t in order of importance of course; they all hinge on one another. ”
She was right. I was taking life’s most important basics for granted. I released a big sigh, thanked her and turned to walk down the hill, glancing briefly back at her weathered headstone which reads:
Nellie Hunter
Lived 22 days.

Friday, April 17, 2009

The Market is Recovering

Two years ago it was obvious to a lot of us that the market was held up solely by Wall Street's hot air, the unrealistically limitless expectations of the public, and unprecedented phantom value (a record % of our economy consisting of financials, most notably derivatives, & most notably credit default swaps which- before they blew up -comprised nearly $40 tril. of the global economy!)
The scariest fact about the current economy is that the US debt to GDP chart looks like a hockey stick. The only other time in our history it has been that high was just before the Great Depression. But here's a link to the most skeptical article about that:
http://www.businessinsider.com/2009/2/us-debt-levels-are-fine-debt-to-gdp-chart-is-wrong-and-meaningless
If the chart is so "wrong and meaningless" why is it correlated with economic debacle?
The second fact is price/earnings ratios. Here's another contrarian article:
http://moneynews.newsmax.com/michael_carr/michael_carr/2009/02/26/185905.html
The bump up in recent quarterly earnings is not from sales in most cases. It's from expense reductions and accounting magic as overpaid "managements" attempt to justify their existence. Layoffs are one short term strategy being used to the hilt.
Which leads us to the 3rd factor; unemployment. We have yet to feel the multiplier effects of this job decimation. Who is going to buy all the stuff? Who is going to make all the stuff to buy? See the most recent report at: http://www.bls.gov/news.release/pdf/empsit.pdf
No one has given me any evidence that the market will not seek new bottoms. Soon. And there is plenty of evidence that it will. But I could be wrong.
So, regardless, wouldn't it make sense to eliminate risk of loss without missing out on market recovery if I'm wrong and it indeed happens? Most folks don't even know that it's possible to do that, much less how easy it is.

Friday, March 27, 2009

20 Questions for your Financial Adviser

20 Questions You Must Ask Your Financial Adviser

If you have a financial adviser, or are in the process of selecting one, ask these questions to be sure you’re getting all the information you need to determine if that adviser is a good fit for you. Remember, not everyone has your best interest at heart. It’s up to you to make informed decisions about who is going to guide you in the management of your money and assets. You have to ask the right questions or you may not get the important information you need.
If you don’t have an adviser, I would urge you to get one. There are simply too many new products and ideas to keep up with. A good adviser will be on top of the market, market alternatives and new approaches that can best serve your needs. While selecting your adviser may take a little work, the payoff should be well worth the effort.

1. What makes you different from other advisers?
Since many advisers offer the same products, most advisers will tell you that they are different because they offer high quality personal service. While this is important and may also be true, you should still carefully consider the adviser’s philosophy of creating a plan, investing, product specification, etc. Remember, at the end of the day, selecting an adviser is not just a personality contest but also an important business decision about your hard earned assets. The people who help you with your money should be worthy of handling it and be able to relate to your specific wants and needs.

2. Are you an independent adviser or do you work for a company as a captured agent?
Be wary of advisers who are associated with or employed by one company and who only recommend that company’s products. These products may or may not be the best product for you. Sometimes, if you know what you want, it is good to work with a specialist who represents only one type of product i.e. bonds or annuities. Still, think twice if that person only represents one company and feels that that company’s products are always the best for you. An independent adviser works with multiple companies and can find the best product amongst the many companies he or she represents.

3. What kind of clients are a good fit for you?
Good advisers are selective about the people that they want to work with and have clearly defined who those people are. For example, some advisers require that they make all investment decisions without your input. Others might want to work with people who are more socially conscious. For some advisers, it’s all about the money and they don’t really relate with how money affects other things in your life. And for others, they take a more holistic approach and want to work with people that think in a more holistic way. When you are working with or interviewing an adviser ask yourself, ‘Are we on the same page in the way we think about money and life?’ If so, that may be the adviser for you.

4. What percentage of your business are people like me, in my situation?
Find out what types of people the adviser usually works with. If you are retired, for example, perhaps you would have more confidence in an adviser who specializes in retirement. If you are younger, maybe you would prefer an adviser that works with younger people. Advisers are much like doctors. You wouldn’t go to a knee surgeon to have your heart repaired. Think about your adviser the same way.

5. What products do you sell the most?
Every adviser leans to one product or another. Find out from the adviser you are talking to what that is. For example, maybe the adviser likes to use bonds. That’s OK, but bonds may not be for you. Another adviser may use annuities a lot. That’s OK too, but what if you’re the kind of person that doesn’t like annuities? There are no rights or wrongs here, just good data so that you know what to expect and what your adviser will probably recommend for you.

6. Are the products you sell the most from just one company?
Does the adviser, even if he or she is an independent adviser, primarily use the products of one company? If he does, find out why. Maybe those are the products he knows best. Perhaps those products have higher commissions. Or maybe the adviser works for the company whose products he or she is recommending. Remember, many advisers will tell you that they represent many companies, but will still have their favorites and biases. You need to know if those biases are right for you.

7. How do I know you’re not just selling me high commission products?
Ask the adviser how much he or she is making on the products that are being offered to you. If its management fees, are they published? If it’s trading fees, are there discounts? If it’s insurance or annuities, just ask how much they are making –what is the commission that they are going to earn on that product? See if they give you an honest, open answer. Many advisers, for some reason, don’t want you to know what they are making. Remember, at the end of the day, it is you who is paying, either up front or behind the scenes. So, you have a right to know.

8. Do I always meet with you or do you send me off to an assistant once I’m a client?
In the name of efficiency many advisers will spend a lot of time with you when they are trying to get your business and then, once the sale is made, disappear and move you off to an assistant. Find out what the adviser you are interviewing does. Sometimes it’s OK to work with an assistant, especially if it’s just paperwork or data gathering. Too often, however, the assistant tends to become a total replacement of the adviser, leaving you behind. Find out how your adviser will work and make sure you feel comfortable with his style.

9. Can you rank my portfolio against the S&P Index for growth and risk?
Most advisers want to talk a lot about how your money will grow, and very little about how much you could potentially lose. Don’t get caught in that trap. While it’s great to talk about making money, there is always the danger of losing money. Make sure you know the potential downside losses of your portfolio. Ask your adviser to compare the growth and risk of your portfolio with a standard like the S&P 500’s growth and risk. He should put that on a chart for you so you can see historically if you are taking the appropriate amount of risk for the growth you are getting.

10. What is your theory of asset allocation?
There are two general types of asset allocation. The first is the number of different types of positions you own (i.e. individual stocks). The second is the number of different types of products you own. If your portfolio is exclusively mutual funds, you many own many different stocks through the mutual funds, but you only own one type of product, mutual funds. There are many other types of products and a well allocated portfolio will include more than one type of product.

11. How long have you been in business?
The best thing an adviser can offer you is his or her experience. Advisers that are new to the field may have only worked in an up market and not been tested in a down market. Some new advisers may only understand a few different product types i.e. annuities, and recommend what they know best as a ‘fix it’ for everything, rather than what is good for you. It’s not that newer advisers can’t do a good job for you, but experience is definitely a plus. Work with a more experienced adviser unless you are quite confident that the newer adviser is knowledgeable and competent.

12. How long have you been with the same company?
Advisers that jump from company to company may not give you the feeling of stability and trust that you would like to have. If you are working with someone who changes companies often it’s better to know that up front rather then getting a stream of announcements in the mail that your adviser has moved once again.

13. Are you an active money manager or a passive money manager?
If you’re looking to buy stocks or mutual funds, this is important. Active money managers try to pick stocks, bonds etc. that they feel will beat the market. Passive money managers believe that you cannot consistently beat the market by picking stocks and buy indexes or a majority of the stocks in a market sector or class. These types of advisers are called passive money managers and are concerned only with market classes, not with how each individual stock within the class will perform. This can get very complicated but you should know on which side of the fence your adviser is and if that is the side you prefer.

14. Why do you believe you can pick stocks or mutual funds that can consistently beat the market?
If you’re looking to invest in the market and the adviser is an active money manager, or someone who uses a lot of mutual funds (who most often are also active money manager), find out why he or she is so confident that they can consistently pick winners in the market. If the adviser tries to convince you based on past results be very wary. Most mutual funds that are ranked #1 one year are ranked far lower the next. The same is true of individual stocks and individual stock classifications.

15. What percentage do you think my portfolio could lose if we had another crash like in 2000 –2001?
The adviser should be able to answer this question in specifics i.e. if you had this type of portfolio in the year 2000 it may have lost as much as 40%. If he can’t or won’t, it might be time for you to move on. Knowing your downside risk and exposure to loss is very important and should be discussed.

16. How do you get my financial plan to get me where I want to go –to integrate with the things in my life that are more important than money?
Your money is just fuel for the journey to reach your goals, hopes and dreams. If you worry about money, ask the adviser how he is going to deal with your worry, not just the money. If you want to purchase a second home, that should be a primary consideration in picking your portfolio allocation. Make sure your adviser can see beyond the money into your material and emotional needs and make your money work for you in the full scope of your life.

17. What process do you use to determine if we are a good fit or not?
Get agreement when you are interviewing advisers as to how they plan to work with you. How many meetings; what will you get at each meeting; when and what decisions do they expect; what happens if you say ‘no’, how will they handle that; how will they help you get through your decision process? Understand what your adviser expects so that you don’t feel pressured or get blind sided during the planning process.

18. How do you decide whether I need an aggressive or conservative portfolio?
Advisers are required to determine your risk tolerance and choose products accordingly. Yet, this is not enough. The adviser must also determine what growth rate you need, and this may not be the growth rate that you expect to get or are wishing for. It’s one thing, for example, for an adviser to tell you that you should get 10% -12% return in the market. It’s quite another thing when the adviser tells you that you must have 10% -12% return to, let’s say, not run out of income. You may be taking more risk than you need to take by aiming for a return far higher than you need to make. Get your adviser to talk about your needs, not your wants.

19. If you had to pick one weakness you have as an adviser what would that be?
Getting the adviser to talk about his or her weaknesses will reveal a lot about who the adviser ‘really’ is. Nobody is perfect. Everyone is better at some things and not so good at others. If your adviser thinks he or she is perfect, you probably should go somewhere else. Sooner or later your advisers imperfection will show up. Maybe he doesn’t return calls as quickly as he should; is weak on follow through of servicing projects; gets too excited about up markets. Find out ahead of time and you won’t be disappointed or surprised later.

20. What would you say is your major strength as an adviser?
Here’s your advisers chance to toot his or her horn. Just sit back and listen and see if you like what is said. Does it appeal to you or not? Do you and the adviser share the same focus? Is the adviser’s strength a strength you would like on your team? If the adviser goes on and on about himself and doesn’t relate what he can do to your particular situation, you might want to reconsider whether he or she is a good fit for you.

If you are looking for an adviser, are unhappy with your current adviser, or just want a second opinion about how you are doing, I would welcome the opportunity of meeting and speaking with you. When you are working with me or any representative from WealthFinancial Group, there is never any pressure or obligation. And, of course, we will answer all your questions.

Gary Duell
Managing Member
Silver Sage Advisers LLC
13100 SE Sunnyside Rd Suite B
Clackamas OR 97015
503-698-4812

PS: Many of my clients build real wealth by knowing their Personal Wealth Index numbers. Have you taken your Wealth Index yet? The 20 minute Wealth Index questionnaire is easy to take and will help you integrate your finances in the full context of your life. It provides invaluable information and scores as important as your credit score, blood pressure, weight and cholesterol levels. Know you number, build your wealth! Call for your Wealth Index Booklet now and I will get it off to you right away. Or do it now online at http://www.wfgnetwork.com/garyduell

20 Questions to Ask Your Adviser is published courtesy of Wealth Financial Group

Friday, February 27, 2009

Do-it-yourself Personal Stimulus Package

Because the last administration squandered trillions of our money, Obama's anti-recession toolkit is virtually empty; his Stimulus Package will be too little too late. But take heart! You can execute your own do-it-yourself Stimulus Package. But first, a quick discussion about one glaring economic myth.
One of the many weaknesses of economic forecasting is that it attempts to capture and project human behavior in gross numerical terms. What's worse, the measurements we use tell us little about what we really need to know about ourselves as a community.
For example, few people know that Gross Domestic Product (GDP) includes money we spend on waging war, building & running prisons, cleaning up superfund pollution sites, treating drug babies, fighting meth addiction . . . you get the picture. These are failures. But they all increase GDP, our primary measure of economic success. Yay, our GDP increased!
But closer to home, visualize your own Household Domestic Product, that is, your total household spending. Just having it increase wouldn't alway make you feel better would it? What if your spending doubled because you got cancer? Or went through a messy divorce? Or were in a car crash. No, to feel successful it matters what you got for your money.
Having said that, my suggested DIY Personal Stimulus Package isn't about spending money, per se. It is about taking action, which I've classified under three C's, Conserve, Connect, Create. The three C's are interrelated, not separate and distinct steps. And what's best is they don't take any money, necessarily:

CONSERVE: If you've lost your shirt in the stock market, what do you have left that you value most? Your health? Your family? Your job? The balance of your IRA? Sit down and take time to list what really matters to you and how to prevent losses in those areas. If you're depressed about losing half your retirement and you start drinking too much cheap booze then you're squandering your primary remaining asset: your health. You should be doing the opposite! Conserve your health. Take up yoga. Eat right. Get enough sleep. Meditate. Go to church, I don't know. Whatever works for you to conserve your remaining, top priority assets.

CONNECT: I keep hearing from all the business gurus that those who advertise and promote themselves during a recession will do best in the recovery. All that means is connect, whether you are a successful business or an unemployed dishwasher. Connect.
The worst thing you can do is withdraw into your cave, eating & drinking too much in front of the TV. That will trigger a downward spiral from which it will be difficult to extricate yourself. Get out and get known. If nothing else, have a party! Who can you go see, email, write to, call, have lunch with, invite to an event? Where can you look for work, for business, volunteer, or get help? Connect.

CREATE: This is similar to connect. How can you create value out of thin air? Anything you can do to increase your value in society will benefit all of us, thereby stimulating the economy as well as rewarding you.
What if you pledged to visit once per week an elderly shut-in down the street. You may perk her up enough to sufficiently improve her health- or provide early intervention -saving Medicare money, for example. What if you followed your dream of creating art, took some classes, interned at a school or business, and parlayed that into a new career? What if you started a blog that got noticed and made you famous (every blogger's fatuous dream)? Create.