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Sunday, January 24, 2021

Democracies Guarantee Absolute Freedom

I hope the degree to which this topic is an absolute myth is obvious.  Sometimes I wish the framers of the Constitution had also listed a Bill of Responsibilities.

I'll just leave this article here for you to read and to reach your own conclusions.  What does this have to do with financial planning?  Context matters.  Democracy matters.  Equity and fairness matter in our lives as well in the minds of our lawmakers.  Freedom without wisdom and responsibility is fatal.  And makes it extremely difficult for the average person to plan a future.

Statement on the Principles of Democracy

January 19, 2021

We, the undersigned, are scholars of democracy who have watched the recent deterioration of U.S. democracy with growing alarm.

We recognize in American democracy today many dangerous conditions from other declining democracies: hyper-partisan polarization, mutual political enmity and distrust, zero-sum politics, lack of tolerance for opposition and minorities, rampant propagation of falsehoods and conspiracy theories, and the encouragement or rationalization of violence. The willingness of prominent politicians to violate basic democratic norms is a common warning sign of democratic distress. And when these violations become routine and expected, the downward spiral is very hard to reverse.

But we also see something uniquely dangerous in America right now — an electoral system that allows for minority rule. It is not only possible but now common for one party to win the presidency and the Senate, and then seek to establish long-term control over the judiciary despite a majority of citizens preferring a different party. It has also become common under divided government for an opposing party to obstruct on purely partisan grounds a president’s ability to even have judicial nominations considered.

It is one thing to ensure that the rights of political (and other) minorities are respected, to plant, as our constitution does, restraints on majority rule. But it is quite something else in a democracy to give a political minority the power to rule.

Minority rule is dangerous in two respects.

First, it undermines the legitimacy of governing institutions. A basic principle of democratic legitimacy is that a government must have majority support in order to make policy. A government that allows a minority to rule over a majority (especially for a prolonged period) violates this principle.

Second, and more dangerously, minority rule can prompt and enable the minority party to take increasingly radical and anti-democratic actions to entrench its dominance, by changing the rules to make it harder for its opponents to win elections, or even to cast ballots.

The minimum condition for a system to be democratic is that its people can choose and replace their leaders in free and fair elections. When a ruling party bends the rules to suppress opposition votes or rig the political playing field, a country can no longer be said to be a democracy, no matter how much it may allow freedom of the press and association.

As the world’s oldest democracy, the American system suffers from many deficiencies and anachronisms in need of reform. But no goal of democratic reform is more urgent and foundational than the fairness and representativeness of our political system.

The Congress should take the following steps to enhance democratic equality and fairness:

  • Defend and expand the right to vote for all Americans.
  • Require nonpartisan commissions in each state to redraw congressional and state legislative districts, so that state legislatures can no longer gerrymander districts to advantage their party.
  • End the ability of a small group of ultra-wealthy donors to secretly bankroll candidates and parties by requiring transparency in all political spending.
  • Narrow the conditions under which the Senate filibuster can be used as a tool of legislative obstruction.
  • Grant the people of the District of Columbia and Puerto Rico the right to vote for statehood, which would provide full and equal representation to nearly four million Americans who are currently disenfranchised.
  • Establish a nonpartisan, independent federal elections agency to ensure that the voting process is fair, consistent, secure, and legitimate.
  • Study ways to reduce politicization of the federal courts.

The first three of these steps would be accomplished by the passage of HR 1, the For the People Act.

None of these reforms should be dismissed as partisan. Each of them seeks to address problems of unfairness and dysfunctionality that are eroding the capacity and legitimacy of American democracy at home and abroad. Each would make our precious constitutional system a more just and workable democracy, better able to address the great policy challenges that now confront us.

This is only a partial agenda for renewing our democracy. There would still remain the longer-term task of altering other perverse incentives that drive the hyper-partisan polarization of our politics. But these are harder questions that will likely require even bigger solutions.

In the near term, however, we urge our elected leaders to take these initial steps to make our democracy fairer, more inclusive, and more capable of addressing our major policy challenges. Even a democracy that seeks to prevent “tyranny of the majority” through checks and balances must ensure that, over time, government reflects the voice and interests of the majority, as they emerge through free, fair, and equal elections. Otherwise, democracy deteriorates into “tyranny of the minority.”

Larry Diamond
Senior Fellow
Hoover Institution and Freeman Spogli Institute
Stanford University

Lee Drutman
Senior Fellow
New America

Steve Levitsky
Professor of Government
Harvard University

Daniel Ziblatt
Professor of Government
Harvard University

Deborah Avant
Professor of International Studies
University of Denver

Naazneen H. Barma
Associate Professor of International Studies
University of Denver

Frank R. Baumgartner
Professor of Political Science
University of North Carolina, Chapel Hill

Sheri Berman
Professor of Political Science
Barnard College, Columbia University

Robert Blair
Assistant Professor of Political Science and International and Public Affairs
Brown University

Henry E. Brady
Dean, Goldman School of Public Policy
University of California, Berkeley

Rogers Brubaker
Professor of Sociology
University of California, Los Angeles

John M. Carey
Professor of Government
Dartmouth College

Michael Coppedge
Professor of Political Science
University of Notre Dame

Katherine Cramer
Professor of Political Science
University of Wisconsin-Madison

Rachel Epstein
Professor of International Studies
University of Denver

Henry Farrell
Professor of International Affairs
Johns Hopkins University

Morris P. Fiorina
Professor of Political Science and Senior Fellow
Hoover Institution
Stanford University

Luis Ricardo Fraga
Professor of Transformative Latino Leadership and Political Science
University of Notre Dame

Francis Fukuyama
Senior Fellow
Freeman Spogli Institute for International Studies
Stanford University

Daniel J. Galvin
Associate Professor of Political Science
Northwestern University

Laura Gamboa
Assistant Professor of Political Science
University of Utah

Martin Gilens
Professor of Public Policy, Political Science, and Social Welfare
University of California, Los Angeles

Kristin Goss
Professor of Public Policy and Political Science
Duke University

Jessica Gottlieb
Associate Professor of Government & Public Service
Texas A&M University

Virginia Gray
Professor of Political Science Emeritus
University of North Carolina, Chapel Hill

David Greenberg
Professor of History and of Journalism & Media Studies
Rutgers University

Anna Grzymala-Busse
Professor of Political Science
Stanford University

Jacob Hacker
Professor of Political Science
Yale University

Hahrie Han
Professor of Political Science
Johns Hopkins University

Gretchen Helmke
Professor of Political Science
University of Rochester

Liesbet Hooghe
Professor of Political Science
University of North Carolina, Chapel Hill

Daniel Hopkins
Professor of Political Science
University of Pennsylvania

William Howell
Professor of Political Science
University of Chicago

Bruce W. Jentleson
Professor of Public Policy and Political Science
Duke University

Theodore R. Johnson
Senior Fellow
Brennan Center for Justice

Richard Joseph
Professor Emeritus of Political Science
Northwestern University

Eric Kramon
Associate Professor of Political Science and International Affairs
George Washington University

Katherine Krimmel
Assistant Professor of Political Science
Barnard College, Columbia University

Didi Kuo
Associate Director for Research and Senior Research Scholar
Center on Democracy, Development and the Rule of Law
Stanford University

Timothy LaPira
Professor of Political Science
James Madison University

Yphtach Lelkes
Assistant Professor, Annenberg School for Communication
University of Pennsylvania

Margaret Levi
Professor of Political Science
Stanford University

Robert Lieberman
Professor of Political Science
Johns Hopkins University

Scott Mainwaring
Professor of Political Science
University of Notre Dame

Jane Mansbridge
Professor of Political Leadership and Democratic Values
Harvard University

Lilliana Mason
Professor of Political Science
University of Maryland

Corrine M. McConnaughy
Research Scholar and Lecturer, Department of Politics
Princeton University

Jennifer McCoy
Professor of Political Science
Georgia State University

Suzanne Mettler
Professor, Department of Government
Cornell University

Michael Minta
Associate Professor of Political Science
University of Minnesota

Terry Moe
Professor of Political Science
Stanford University

Yascha Mounk
Associate Professor of the Practice of International Affairs
Johns Hopkins University

Pippa Norris
Professor of Political Science
Harvard University

Anne Norton
Professor of Political Science
University of Pennsylvania

Brendan Nyhan
Professor of Government
Dartmouth College

Norm Ornstein
Emeritus Scholar
American Enterprise Institute

Benjamin I. Page
Professor of Decision Making
Northwestern University

Kathryn Pearson
Associate Professor of Political Science
University of Minnesota

Tom Pepinsky
Professor, Department of Government
Cornell University

Anibal Perez-Linan
Professor of Political Science and Global Affairs
University of Notre Dame

Paul Pierson
Professor of Political Science
University of California, Berkeley

Ethan Porter
Assistant Professor, School of Media and Public Affairs, Department of Political Science
George Washington University

Robert D. Putnam
Professor of Public Policy
Harvard University

Kenneth Roberts
Professor, Department of Government
Cornell University

Amanda Lea Robinson
Associate Professor of Political Science
Ohio State University

Jonathan Rodden
Professor of Political Science
Stanford University

Nancy L. Rosenblum
Professor of Ethics in Politics and Government Emerita
Harvard University

Kim L. Scheppele
Professor of Sociology and International Affairs
Princeton University

Kay L. Schlozman
Professor of Political Science
Boston College

Daniel Schlozman
Associate Professor of Political Science
Johns Hopkins University

Cathy Lisa Schneider
Professor, School of International Service
American University

Gisela Sin
Associate Professor, Department of Political Science
University of Illinois

Dan Slater
Professor of Political Science
University of Michigan

Anne-Marie Slaughter
Professor Emerita of Politics and International Relations
Princeton University

Rogers M. Smith
Professor of Political Science
University of Pennsylvania

Susan Stokes
Professor of Political Science
University of Chicago

Alexander George Theodoridis
Associate Professor of Political Science
University of Massachusetts Amherst

Chloe Thurston
Assistant Professor of Political Science
Northwestern University

*Institutions and titles are listed for identification purposes only.

 

Your Constructive Comments are Welcome!

Sunday, January 17, 2021

Financial Advisers Keep Their Clients From Procrastinating

Well, all know this isn't true.

But it isn't your fault.  This last year Gary Duell was the procrastinator.  None of the smartest people in the room (not including yours truly) could agree on what was going to happen and what to do about it.
 
Now that a major source of craziness will largely be out of the picture, I'm more comfortable with recommendations for this year:
 
  1. Focus on Goals and Cash Flow-  block out the massive media intrusions into your lizard brain, the eat, lust, fight, flight instincts.  Focus on your goals and the plans in place- or that we're working on -to achieve them.  Review your budgets and determine which expenses are in your control and which don't contribute to your goals.  Then eliminate them.
  2. Manage Risk- note that I don't say avoid risk, commonly defined as volatility.  As I say repeatedly in my classes, when you're accumulating savings volatility is your friend due to dollar cost averaging.  When you're spending, or on the cusp of spending, your retirement funds then volatility is your enemy.  Manage where and to what degree you allow volatility in your portfolio.  This usually consists of either algorithm-based risk managed ETF and/or third party backed guarantees.
  3. Remember Taxes!  Taxes, not healthcare, will be your largest retirement expenditure (on average).  Do you have a plan for future [higher] taxation?
  4. Be a perpetual student.  Recent studies have shown investors procrastinate 5-10 years before implementing our advice.  That hasn't been my experience.  But I get chagrined if my clients wait 5-10 months!  Especially now.  So never stop listening and learning.
  5. Seek good returns but follow evidence and ethics.  As data becomes easier and easier to collect and analyze, the bad actors in our economy will be taken out of the game.  It's inevitable.  I am really encouraged by the surge in ESG, SR & Impact investing.  Most of us know without being told that lying, cheating and stealing never work out well in the end.  Companies that foist their costs onto the environment or other people will either evolve or die.  Don't invest in them.
  6. Take care of your physical, mental and social health.  Without a mind and body it's tough to enjoy anything.  Keeping connected to others, to nature and things outside yourself, your odds are improved!

Your Constructive Comments are Welcome!

Monday, January 11, 2021

Divinely Inspired Algorithms Can Beat the Market

As the case I'm going to describe would indicate, it is a solid myth that divine inspiration can feed your greed.  

That is so wrong on so many levels, isn't it?  But some investors apparently didn't think so.

(this blog post is based entirely on the case described in Wealth Management magazine regarding two Utah con men titled, "SEC:  "Divinely Inspired" Traders Were Mere Frauds") 

Thomas J. Robbins & Daniel J. Merriman "lost" $11 million of their clients' money by investing them in a fake company aptly named "ConTXT",  They claimed their algorithm-from-God (my portrayal, not in the article) would yield returns of 7.5% per week.  That's right, per week.  And with no risk!  I think you'd even have trouble doing that dealing crack.  But I don't know.

They appeased early investors for failure to achieve these returns by explaining technology was not yet sufficient to manifest their "spiritual revelation".  This while never investing the money and just spending it on themselves, using it all up within months.  To keep investors engaged, Robbins & Merriman touted their religious faith and phony large clients like the Mormon church, the Rothchilds, etc.

The article didn't mention this but a common thought pattern of such crooks is they believe their victims deserve to lose their money for being so greedy as to think they could actually get such outrageous returns.  I nearly agree with them in this case; tell me how that thought can exist in a healthy mind, all at the same time.

So here are the key points, if we're to learn something from yet another bunch of scammers:

  • Both men (four were actually involved) were ex-cons who had met in prison, their attendance in which had been precipitated by prior financial fraud.  
  • As a result, neither was licensed or registered to give financial advice or sell financial products.
  • None of the investors had looked them up on https://brokercheck.finra.org/ before handing over their money.  It's free.  It takes one minute.
  • The investors were driven by misplaced trust (religion and money never mix well) greed and FOMO (fear of missing out), the worst investor motivators.
  • Had they performed some due diligence, none of them would have been victimized.
  • Had they focused on their goals and reasonable proven ways to realize them they wouldn't have had any interest in ConTXT to begin with.  (I love that name.  What a blatant giveaway.  Robbins & Merriman put the "Con" in ConTXT.)

Your Constructive Comments are Welcome!

Monday, December 21, 2020

Fiduciary Advisers Who Offer Insurance Products Are Just Out To Make Money

Just to be clear, this blog is about Financial Myths and the name of this post is indeed a myth.  Or can be.  There are "advisers" who sell insurance products in the absence of a financial plan in order to make a quick buck.  But at prevailing money management fee rates (1.02% as of 9/2020)
an adviser would make twice as much over a ten year period selling asset management vs. an annuity for example.
As this article points out, "selling" insurance products is a "hot-button" issue, unjustifiably so.  The celebrity "advisers" (hack, gag) often use this as a deal killer, "run in the opposite direction" they say, if your adviser offers annuities or life insurance.  Unfortunately, life isn't this simple.
A true fiduciary recognizes the importance of risk management through transference of risk, the law of large numbers, and risk pooling.
Risk management starts with identifying, measuring the impact of and weighting a client's existing and future risks.  Then the practicality and cost effectiveness of solutions are explored.  Then the practical and cost effective solutions are implemented.
Which involves transference of risk, normally to a legal third party such as- for example -an insurance company or options seller thereby taking advantage of the law of large numbers (as the size of a statistical population increases, its behavior and outcomes become more precisely predictable) through risk pooling (combining resources with others on a mass scale).
It is impossible to be a fiduciary and ignore or- worse -disparage well-proven yet boring actuarial science.

Your Constructive Comments are Welcome!

Wednesday, September 23, 2020

ESG Funds Are Having a Moment - What It Means for the Modern Investor


CNBC recently published an article articulating the rise of investing in companies that rank highly on environmental, social and and governance (ESG) factors during the COVID-19 outbreak.


Interestingly enough, these funds were already experiencing big growth before the COVID-19 outbreak, with assets having doubled over the last two years.

In the video below, I articulate my thoughts on this rising trend.



Your Constructive Comments are Welcome!

Monday, August 31, 2020

MYTH : Trump's Social Security Tax Holiday Will Help Employers and Their Employees

The United States Capitol Rotunda

Well, this is a solid myth, that's for sure.  Smart and ethical CPAs are recommending that their clients not just walk, but sprint away from the Memorandum Deferring Payroll Tax Obligation.  Let me preface this by declaring that I'm not an attorney and that all of this is my opinion.  But I can read and think. 

First, a little background.

The current IRS Commissioner is Trump appointee Charles Rettig, who, during his confirmation hearing, "told lawmakers he would ensure that the agency is 'impartial and non-biased from top to bottom' and follows the law."  

This seems unlikely, given that Rettig's Beverly Hills law firm specialized in defending wealthy clients against taxing authorities.  Since taking over the IRS, Rettig has slashed 4000 employees, including 19% of enforcement and compliance staff.  Like every single other Trump appointee, Rettig was selected for his ability and enthusiasm to vandalize the very agency to which he was appointed.

So Trump's Memorandum Deferring Payroll Tax Obligations allows any employee with bi-weekly pay of less than $4000 to defer paying of their 6.2% share of Social Security tax.  This appeals to two kinds of Trump supporters:  the wealthier ones who hate Social Security and, including this group, the less well-off supporters who hate taxes and government in general, despite all the benefits they enjoy as a result.

The key word here is "deferring".  What could make this tax easier to pay in the future?  Some tax people are rightly claiming that only Congress has the ability to waive such taxes.  But they've already granted that right to the President in the event of a national emergency, which Trump declared in April due to the [fake, according to him] pandemic.  

In fact, it will simply put employers at risk of fees and penalties.  On top of that, I've seen nothing in the regulations that prevents employers from going after former employees for reimbursement. According to our Senator & Senate Finance Committee ranking member Ron Wyden, "Donald Trump's scam is obvious — juice paychecks before the election and sock workers with a massive tax bill early next year when he’ll be out of office or never have to face voters again. While many businesses are unlikely to go along with Donald Trump’s fake tax cut, billions could be drained from the Social Security trust fund. This scheme is designed to give Donald Trump a talking point — it won’t benefit workers in any way.”*

Whether you're an employee or an employer, don't be seduced by this nonsensical campaign trick.


 

*Thanks to Think Advisor for their excellent article on this and choice quotes.

Your Constructive Comments are Welcome!

Wednesday, August 26, 2020

Karl Marx, Jay-Z & SGI Funds have a lot in common

Usually the title of these posts IS a myth.  But believe this one is true.  Where did I come up with these seemingly completely unrelated topics?  Oddly, they were in the top 10 financial search words last month.

Karl Marx

Karl-Marx-Monument in Chemnitz
Karl Marx Monument in Chemnitz


First, what he was not.  Marx was neither Russan nor capital-C Communist, despite having written The Communist Manifesto.  He was a law student from a wealthy Jewish family headed by his attorney father.  I'm guessing his unpopularity with the authorities from whom he fled Germany, France & Belgium was due to his central belief that theology would eventually succumb to philosophy.


A prolific journalist & author, Marx was admirable in his focus on fair & efficient political and social processes (such as his belief in a "constitutional republic with freely elected assemblies".  Like I, he felt wealth and merit needed to be reconnected, without which there would be constant struggle between the economic classes.

Jay-Z

Streetart in Katoomba

The first hip-hop billionaire, Jay-Z (aka Shawn Corey Carter) holds the fascination of millions around the world.  We obsess over our billionaires, that's for sure.  But as perfectly stated in this recent USA Today article, Jay-Z epitomizes what every investor should emulate:

1. Diversify across several sectors and industries.  Jay-Z has his own champagne and congac brands, sports promotions, investments in fashion, Uber & his own Uber-like jet sharing app as well as his own venture capital firm

2. Invest in what you know and love.  This is important because if you don't love your work and your place in the world (e.g. your investments) you probably won't be motivated to put in the effort and commitment necessary to be successful.

3. Commit to your goals.  Not everyone can be a billionaire.  In fact, hardly anyone can be.  I would restate this as "pick goals that inspire your commitment".

Would Marx have liked Jay-Z?  I think so.

ESG

Experiencing heavy in-flows of new capital, ESG funds mirror the growing awareness that sensible and ethical companies are more likely than the liars and cheaters to flourish in the future.  ESG stands for Environmental, Social and Governance & the funds and companies that pass those screens.  


ESG is supposed to be a more evolved, stringent screen than SRI (socially responsible investing) or sustainable investing.  Here's what they mean, in a nutshell:

  • Environmental- conserving, protecting and even enhancing local and global natural environments
  • Social- treating employees, clients, partners and the communities in which the business operates with respect by following the law, providing quality safe products & services, & contributing to the needs of local communities.
  • Governance- operating in a compliant, equitable and transparent manner.

So I find it encouraging that people are interested in these three topics.

 

Your Constructive Comments are Welcome!

Sunday, June 7, 2020

The Power of Peace

There is a surplus of anger, desperation, futility, depression, fury and isolation in our country right now.  It's the worst I remember, even during the Vietnam debacle.
I've advocated- rather unpopularly -that peaceful resistance is the most powerful and effective response to the sources of these intense emotions.  Steeped in affluenza, racism, fascism, nationalism and all the other sick isms, if we're not furious then we're not paying attention.  I don't need to catalog all the evil things done to whom by whom; we're deluged with that.  The fury is justified, OK?  So when I say to someone that peaceful resistance is more effective than violence (bodily injury and property damage) what they hear is negation of their fury, denial of their despair, minimizing of their suffering.
That isn't my intention.  As Erica Chenowith's research proves, peaceful resistance has been more than twice as effective as violence in creating change.  She studied all such events, worldwide, since 1906 to reach that conclusion, causing a 180 degree pivot in her former beliefs.  Please read her material and watch her TED talk:  https://www.youtube.com/results?search_query=erica+chenoweth+ted+talk
I don't know about you but I don't recall ever making a good decision in the middle of anger.  Granted, anger is an action emotion, an indication that action is needed.  It is a great motivator while being an abysmally poor judge of right action.  Right action takes all of our faculties, our anger, our hearts, our minds, our relationships.  And that's why violence doesn't work:
  • Violence severely limits who can and will join you in your rebellion.  Why not adopt a strategy that can involve children, our elders, the reticent, first-time activists?  "Many people won't turn up unless they expect safety in numbers" (Erica Chenoweth)
  • The border between oppressors and the oppressed is wide and gray.  A cop may refuse to shoot rubber bullets into a peaceful crowd if he knows his daughter might be there.  Even the most corrupt enablers of dictator wannbes have families, friends & associates who love (and fear and or hate) them and eventually garner the courage to speak up and act out.
  • As a result of these two factors, nonviolent campaigns are four times larger and much more inclusive & diverse than violent ones.
Your Constructive Comments are Welcome!

Monday, April 6, 2020

6 Financial Steps You Should Consider NOW


Would you like to know why I've gotten zero freaked-out calls or emails from my clients because of the coronavirus, political upheaval or [insert your own freak-out factor]?  It's because we've already tested even worse scenarios (like the 2001-2003 recession) in their written retirement financial plans and they know they will be OK. 

However, that doesn't mean there aren't new opportunities and cautions:

1. If we have not developed your written retirement financial plan then get yourself on my schedule immediately.  I've opened my calendar up as much as possible for the next three weeks.  Call me at my mobile at 503-698-1110 or simply schedule yourself here:  https://calendly.com/g---5

Key Takeaway:  No matter what is happening in the world and in your life, there are risks to avoid and opportunities to acquire.  These risks and opportunities should be tested and executed carefully, as part of an overall plan, not by running out and buying four thousand rolls of toilet paper.

2. To make up for losses in the market-based portion of your portfolio, don't settle for inflation losses in your cash.  You should be getting at least 2.0% on your two-year money.  I've seen savings accounts paying as little as 0.07%.  Yes, seven hundreths of a percent. Increasing earnings and other benefits on your safe money will help offset these short-term fluctuations in the market and make dramatic long-term differences in your future cash flow. 

3. Does it make sense to refinance debt?  Probably.  Interest rates have tumbled with the market & I doubt they will increase this year.  Refinancing may be a great way to reduce your budget and preserve your savings

4. Is funding for your lifetime budget locked in?  If not, wouldn't that be worth finishing up?  Then you can ignore market hysteria.  Cash flow solves all other financial problems.

5. Do you need to put off that expected retirement date this or next year?  I won't sugar coat it; maybe you do.  But how do you figure out when you can retire?

6. Finally, taxes will probably shrink your money more this year than will the market.  What tax planning have you done?  Did you know the tax issue will become even more concerning in 2026 when the Tax Cuts and Jobs Act expires?  I don’t see any of my peers doing tax planning.  Maybe this is the perfect time to do Roth conversions or in-kind conversions of poor performing stocks.  When the market recovers, all the gains can be tax-free.  This video is pending my review of the three “stimulus” packages.  Lots of little- and not so little -goodies for everyone.

Warm wishes during these trying times,
and get yourself on my calendar!: 

https://calendly.com/g---5
Gary

 

Your Constructive Comments are Welcome!

Sunday, March 1, 2020

MYTH: The Markets are Crashing due to Coronavirus

I don't believe this post heading at all.  Although I'm firmly in the camp that says we should do all we can to isolate and stop the spread of this  deadly virus, correlation is not causation.  Eugene Fama's efficient market theory went out the window with the Reagan presidency, that is, the belief that full information about all market options are relected in its pricing, among other things.  I would wager these days that very little rational information is reflected in asset pricing.  Rather than knocking the wind out of the markets, the coronavirus is an excuse to get hysterical about an over-valued market.
Markets have periodic corrections of investor hyperenthusiasm.
Your Constructive Comments are Welcome!

Thursday, January 9, 2020

MYTH: Bitcoin is a Good Deal


Well, I think this is a solid myth.  And I'm not going to go on and on and on like most financial blogs you see today; volume does not equal value.
Here is the rub, as I see it:
  1. According to BitFarms (BITF), their breakeven cost of mining one bitcoin is US$2,259.  
  2. Today, one Bitcoin is worth US$7,785.
  3. At one point in 2018 it was worth nearly $20,000.
  4. Revenue per terahash (a measure of computing speed) has fallen from $4.00 two years ago to about $0.13.  That speed requires expensive hardware and electricity.
In summary, I don't know how long the public will continue overpaying for something so volatile.  If prices are driven back up it will be primarily due to investor delusion not due to any fundamental value.

Your Constructive Comments are Welcome!

Tuesday, December 3, 2019

MYTH: Ken Fisher's Lewd Remarks Don't Matter

 In case you're new to this tempest, Ken Fisher is the prolific author, WSJ writer & CEO of financial behemoth Fisher Investments.  At a recent Tiburon CEO Summit in October Fisher, a featured speaker, made several sexist, lewd remarks in portrayal of how the investment business operates in general*.  Contrary to most of the media, according to Fisher, he was describing this industry not his beliefs about how it should be run.  Still, as usual, the title of this post is a myth.  I believe Fisher's remarks do matter but not as momentously as the financial press would make it seem.

All the self-righteous hullabaloo is pollyannish and naive in the face of the larger obscenity that has not been addressed:  Fisher is a billionaire.  And then there's the subsidiary obscenity to that which is the ways he became a billionaire: merciless boiler rooms harrassing people on the phone all day,  the millions spent on questionable mass mail campaigns, & idiotic and disengenous advertising & public statements e.g. "I would rather die and go to hell than sell someone an annuity" & "I hate annuities and you should too".

I agree with Bernie Sanders that billionaires should not exist.  I think $999 mil. is plenty of "reward" for anybody.  The record wealth disparity we have today presumes there is a direct & uniform correlation between wisdom and wealth, virtue and wealth, value to society and wealth.  There are plenty of prominent models proving that this is false, including Ken Fisher.  No individual should be able to change the rules of commerce at will.  Billions can buy a lot of lawmakers and that is indeed what has occurred.

It is obscene that billionaires exist while families go bankrupt from medical bills.  It is obscene that billionaires exist while people die because they can't afford their prescriptions.  It is obscene that billionaires exist while we we mercilessly extract resources and other wealth from other nations.  It is obscene that billionaires exist while graduates stagger under record tuition debt design to create ever more billionaires.  Yet the financial press is all in a tizzy because Ken Fisher- accurately, I might add - likens the conventional sale of securities to trying to get into a girl's pants.  Both are driven by lust as well as disregard for the other person.

So Fisher's juvenile similes are merely symptoms of the problem, they are not THE problem.  The problem is wealth disparity resulting from the increasing ease with which unmerited wealth can be accumulated, and ease progressively enhanced by the super rich.  That is obscene in any society since it is the universal precursor to a failed civilization.

Your Constructive Comments are Welcome!

*all the juicy details here:  https://www.thinkadvisor.com/2019/11/25/cover-story-tipping-point

Sunday, November 17, 2019

MYTH: I Hate Annuities

This is a myth.  I don't use some of them, the expensive ridiculously high commissioned restrictive poorly performing ones.  But I agree with the authors of the article below:  I neither like nor dislike "annuities" as a class because they are a widely divergent collection of financial tools.  Some are indespensible and some are useless.  It just depends on your goals.

As advisors who often talk about annuities to financial advisors, we are often asked whether we “like” annuities. To that question, our standard answer is that we neither like nor dislike them—because they’re just tools, which work well in certain circumstances and do not work well in others. Occasionally, that response will elicit what may appear to be a better follow-up question:
“When—that is, in what planning situations—does an annuity make good sense and when does it not make good sense?”
That’s a core question, and one that might be in the mind of you, our reader. What’s our answer? One answer might be that “it depends… on the specific facts and circumstances of the case.” That’s a reasonable and rather obvious reply, and what our audiences often expect to hear. But it’s not our answer.
Our answer to that question is that the question in unanswerable—until we know what the questioner means by an annuity in the first place. Are we talking about a variable deferred annuity or a fixed immediate annuity? Those contracts are hugely different.
Each is an “annuity,” but the two contract forms are designed to meet completely opposite needs. Generalizations, always hazardous, are especially unproductive when used with annuities. A true statement about fixed annuities is likely to be false when applied to variable ones, and vice versa. The same is true when the annuities are immediate versus deferred. Yet many, if not most, consumers—and all too many advisors—routinely generalize about annuities, often to the extent that their conclusions are so flawed as to be worthless.
If we bear in mind this caveat—that we must generalize only when our assessment can be generally accurate—can we now attempt to answer the question posed earlier: “When, and in what planning situations, does an annuity make good sense and when does it not make good sense?” We believe that we can, and should, construct bright line tests to help us determine when an annuity is likely to be suitable for our client.
1. Where the Goal Is Immediate Income
When immediate income is the primary goal, an immediate annuity may be appropriate, so long as it is understood that it may provide no benefit at the annuitant’s death. Indeed, if the annuitant lives beyond the point where any refund element is payable, an immediate annuity will not provide any death benefit.
2. Where the Goal Is Income in the Future
Where the goal is income in the future, several annuity strategies may be appropriate.
  1. Accumulating money now, to purchase an immediate annuity later
  2. Purchasing a longevity now
  3. Purchasing a “ladder” of longevity annuities over time
  4. Purchasing a deferred annuity now, and activating the Guaranteed Lifetime Withdrawal Rider later.
3. Where the Income Amount Must Be as High as Possible on a Guaranteed Basis
Where the primary goal is income and where the amount of that income must be as high as possible on a guaranteed basis, an immediate annuity is ideal. The key word, here, is guaranteed, given that other alternatives (e.g., portfolio-based strategies) merely have the potential of generating greater retirement income, but the investor/retiree cannot be fully assured that they will.
Where the income period is a fixed number of years, a Period Certain fixed immediate annuity will generally provide a greater amount per year than can be assured from any investment alternative because the non-annuity alternative must often preserve principal.
4. Where the Goal Is Accumulation of Capital
Where the goal is capital accumulation, an immediate annuity is clearly not suitable, but a deferred annuity may be. If preservation of principal is a requirement, a fixed deferred annuity might be appropriate, but a variable one, in the absence of a Guaranteed Living Benefit rider, might not. This is because a variable annuity, except to the extent that its cash value is invested in the fixed account, does not offer safety of principal.
If, however, the purchaser is willing to regard a return of purchase payments in installments, no matter what happens to policy earnings, as a guarantee of principal, a Guaranteed Minimum Withdrawal Benefit (GMWB) rider to a variable deferred annuity can serve as an instrument for capital accumulation with “safety of principal.”
Indeed, the GMWB provision of many contracts includes a step-up feature that not only assures the return of the original investment in installments, but also any contract gain accrued as of the point where the step-up option may be exercised. However, it is important to emphasize that in this context, the safety of principal provided by the deferred annuity exists only if the annuity owner accesses the principal according to the terms of the guarantee. In the context of a GMWB, this means that principal is not guaranteed, unless the annuity owner is willing to extract that principal as a series of periodic payments over a span of many years.
(Excerpted from The Advisor’s Guide to Annuities, 5th ed.)




Your Constructive Comments are Welcome!

Friday, November 8, 2019

You Can't Get Decent Returns Without Risk

This could, or could not, be a myth depending on how we define "decent" and "risk".

My definition of "decent" is a rate of return that exceeds the "risk-free" rate plus inflation.   The risk-free rate is typically the T-bill rate or long-term government bond yield.  The current long-term composite (>10yrs) is 2.12, down from 2.35 a week ago.  The current long term projected inflation rate is 1.9%.  So a ROR of 4.02 would be decent, according to my definition.
Take a look at the private wealth portfolios below, from FTA Wealth Advisors.  The grayed out columns are the benchmark indexes.  Look, for example, at the Foundation Strategy column.  Worst historical drawdown was -9.47%  while the S&P500's was -50.95%!  And since inception- including both recessions -it averaged 6.22% vs. 5.5% for the S&P.  The bottom row shows median monthly returns.   Then take a look at the next chart.



This shows year by year performance.  Wouldn't it have been nice to have made money during the last two recessions instead of losing it and needing almost 10 years to recover?

Strategy Disclosures
Disclosure applicable to all strategies:
Performance prior to 9/30/16 has been independently verified by Alpha Performance Verification Services. Please ask your financial advisors for a copy of the performance verification
report.
Performance presented is hypothetical (back-tested). The back-test calculations are based on the same methodology used when product was/is launched. The actual strategy invests in index and
bond funds and/or ETF’s which may be similar but different from the instruments used in the model. Prospective application of the methodology used to manage the basket may not actually result in
a performance commensurate with the back-test returns as shown. The back-test period does not necessarily correspond to the entire available history of the basket or any individual instrument. No
ETF expenses, trading costs or custodial fees are accounted for in the hypothetical data. Hypothetical model results have inherent limitations due to the fact that they do not reflect actual trading and
may not reflect the impact that material economic and market factors might have had on the advisor’s decision-making if actual client funds had been invested in the strategy. No matter how positive
the model returns have been over any time period, the potential for loss is always present due to factors in the future which may not be account for in the model.
The investment strategy that the back-tested results were based upon can theoretically be changed at any time with the benefit of hindsight in order to show better back-tested results and
theoretically the strategy can be adjusted until desired results are achieved. Therefore back-tested or hypothetical data must be approached with caution because it is constructed with hindsight and
may not reflect material conditions that could affect a manager’s decision process, thus altering the application of the discipline. There is no assurance that these back-tested results could, or would
have been achieved by FTA during the periods presented.
The data used to construct the back-tested results were obtained from third-party sources. While FTA and outsourced providers believe the data to be reliable, no representation is made as to, and
no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. The information and opinions expressed in this document are for informational purposes only.
Any recommendation or opinion made in this document may not be suitable for all investors. The information contained herein does not constitute and should not be construed as investment advice,
an offering of investment advisory services, or an offer to sell or a solicitation to buy any security.
Past performance does not guarantee future performance. While FTA believes that the factors which have historically affected the markets over time will continue to do so, there can be no guarantee
that these effects will persist or that they will have the same intensity as past time periods.
Disclosures to Country Rotation Strategy
Third Party Model Creation: The Logical-Invest Country Rotationi Strategy is developed by and licensed from Logical-Invest.com. Logical-Invest.com is not a registered investment advisor and does not
provide financial investment advice. Logical- Invest solely creates and maintains models that it licenses to other firms. Software provided by Logical-Invest.com is solely responsible for the
performance described herein. Financial & Tax Architects, LLC (“FTA”) receives trading signals for this investment strategy from software provided by Logical-Invest.com. From time to time FTA
utilizes these signals as a part of this strategy. Execution of trading signals, performance, and allocation may differ from what is displayed described herein. Thus, FTA’s future performance using the
signals provided could materially differ from described performance.
The Country Rotation Strategy (CRS) is a strategy created by Logical-Invest.com and licensed by Financial & Tax Architects. It seeks to add geographic diversity through the rotation of a wide variety
of individual countries ETFs by blending the mix of risk adjusted growth. This strategy offers significant non-US global exposure and allows for the harvesting of returns from those outperforming
countries even in a sideways market. The strategy uses momentum and relative strength indicators to choose between countries. When risk is high, it invests in fixed income ETF's. The strategy
pursues a rule-based investment process that allocates between Long Duration Bonds and the four top ranked countries or regions to try to achieve an optimal risk/return profile.
Disclosures to Global Sector Strategy
Third Party Model Creation: The Logical-Invest Global Sector Strategy is developed by and licensed from Logical-Invest.com. Logical-Invest.com is not a registered investment advisor and does not
provide financial investment advice. Logical- Invest solely creates and maintains models that it licenses to other firms. Software provided by Logical-Invest.com is solely responsible for the
performance described herein. Financial & Tax Architects, LLC (“FTA”) receives trading signals for this investment strategy from software provided by Logical-Invest.com. From time to time FTA
utilizes these signals as a part of this strategy. Execution of trading signals, performance, and allocation may differ from what is displayed described herein. Thus, FTA’s future performance using the
signals provided could materially differ from described performance.
The Global Sector Strategy is a strategy created by Logical Invest and offered by Financial & Tax Architects. The strategy is based on seeking an optimum allocation between the Global Equity Sectors
and Long Duration Treasuries market. Equity Sectors present well-defined, long lasting cycles along the overall economic cyclical development of global markets, therefore allowing the strategy to
receive returns from the outperforming sectors even as the market goes sideways. Simultaneously, the strategy benefits from the long term inverse correlation between equity markets and long
duration bonds while capturing value from the money flows into safe havens of US treasuries in crisis times.
Disclosures to Sleep Well Bond Strategy
Third Party Model Creation: The Logical-Invest Sleep Well Bond Strategy is developed by and licensed from Logical-Invest.com. Logical-Invest.com is not a registered investment advisor and does not
provide financial investment advice. Logical- Invest solely creates and maintains models that it licenses to other firms. Software provided by Logical-Invest.com is solely responsible for the
performance described herein. Financial & Tax Architects, LLC (“FTA”) receives trading signals for this investment strategy from software provided by Logical-Invest.com. From time to time FTA
utilizes these signals as a part of this strategy. Execution of trading signals, performance, and allocation may differ from what is displayed described herein. Thus, FTA’s future performance using the
signals provided could materially differ from described performance.
The Sleep Well Bond Strategy is a bond rotation strategy licensed by Logical-Invest.com and offered by Financial & Tax Architects that seeks, through optimum allocation, to achieve superior returns
while attempting to offer a risk profile similar to that of the broader based US bond market. The strategy pursues a rule-based investment process that uses ETF's to allocate between long term US
treasuries, High Yield Corporate Bonds, Emerging Market Bonds and Convertible bonds to try to achieve the appropriate risk/return profile so that the allocation among the asset classes is
optimized. Cross-correlation and volatility of asset classes are accounted for to try to achieve lower overall portfolio volatility. The strategy is designed as an all-weather, diversified, multi-asset
strategy generating optimal performance while attempting to mitigate downside risk.
Disclosures to US Prime Dividend Strategy
The U.S. Prime Dividend Strategy invests in leading American dividend paying stocks and/or ETF's
to expose the investor to companies with increasing, sustainable dividend payouts. The strategy
employs an intermediate tactical overlay in order to determine when the strategy should have a bullish or bearish stance. When the strategy has a bullish stance, it is fully invested in an array of
American dividend paying stocks and/or ETF's. When it is in a bearish stance, it is invested in an ETF designed to track the Barclays Capital US Intermediate Aggregate Bond index.
The performance is prepared using the following methodologies: (i) by a hypothetical model portfolio to which an investment methodology is applied on a current and on-going basis; (ii) at the
beginning of each annual period, the model begins with $100,000 invested in exchange traded funds (iii) all securities are priced at month’s end and all securities held are valued at the closing price as
of the last business day for each month; (iv) the cost basis and proceeds for individual security purchases and sales are based on the day and time a trade was entered into and the price is recorded as
of the time the decision was made; (v) on a monthly basis, performance is calculated using a holding-period return; (vi) annual performance for the model is computed by linking the monthly
performance results for the indicated number of months; (vii) the total investment performance includes both realized and unrealized gains and losses, as well as dividends but does not take into
consideration any interest on cash; (viii) all performance results are net of management fees; (ix) net of fee performance has been reduced by the management fee but is gross of all other fees and
transaction costs; (x) net of fee performance is calculated using an annual management fee of 2.00% applied quarterly, in arrears; and (xi) the U.S. Dollar is the currency used to express performance.
The performance represents hypothetical model results for U.S. PRIME DIVIDEND STRATEGY during the measurement time period. As such, these results have limitations, including, but not limited to,
the following: (i) U.S. PRIME DIVIDEND STRATEGY results do not reflect actual trading by specific FINANCIAL AND TAX ARCHITECTS clients, but were achieved by means of the calculation
methodologies described above; (ii) model performance may not reflect the impact that all or any material market or economic conditions would had on use of U.S. PRIME DIVIDEND STRATEGY by an
individual client; (iii) for differing reasons FINANCIAL AND TAX ARCHITECTS clients would have experienced investment results, either positive or negative, during the measurement period that were
or may have been materially different from those reflected by the U.S. PRIME DIVIDEND STRATEGY model performance. For Example, variances in client account holdings, investment management
fees incurred, the date on which a client began using U.S. PRIME DIVIDEND STRATEGY, client account contributions or withdrawals and general market conditions, would have caused the performance of a specific client’s portfolio to vary substantially from the U.S. PRIME DIVIDEND STRATEGY model performance results; and (iv) different types of investments and investment strategies involve
varying levels of risk, and there can be no assurance that any specific investment or strategy will be either suitable or profitable for a prospective client.
The model performance does not reflect other earnings, brokerage commissions, and custodian expenses. It is important to note that actual portfolios would be charged other fees and transaction
costs and performance would be lower. Hypothetical past performance is not indicative of future results. Therefore, no client should assume that future performance will be profitable, equal the
hypothetical performance reflected for U.S. PRIME DIVIDEND STRATEGY, or equal the corresponding historical benchmark index. The historical index performance results for the index reflect
reinvested dividends, but do not reflect the deduction of transaction and custodial charges, or the deduction of an advisor fee, the incurrence of which would have the effect of decreasing the
historical index performance results. The historical index performance results are provided for comparison purposes only, so as to provide general information to assist a prospective client in
determining whether the index performance meets the client’s investment objectives. Historical index performance results do not reflect the impact of taxes. It should not be assumed that portfolios
will correspond directly to any such comparative benchmark index. Further, the comparative index may be more or less volatile than U.S. PRIME DIVIDEND STRATEGY.
Disclosures to Foundation Strategy
The Foundation Strategy attempts to emulate, as best as possible, the diversified investment style practiced by leading endowments, specifically that of Yale University. The strategy invests in ETF's
designed to track the performance of large domestic stocks, large foreign stocks, 10-Year Treasury Notes, the Goldman Sachs Commodity Index, and the NAREIT Real Estate Investment Trust
Index. Each asset class is separately graded on a technical score designed to move into bonds when that asset class is in a prolonged downturn.
The performance is prepared using the following methodologies: (i) by a hypothetical model portfolio to which an investment methodology is applied on a current and on-going basis; (ii) at the
beginning of each annual period, the model begins with $100,000 invested in exchange traded funds (iii) all securities are priced at month’s end and all securities held are valued at the closing price as
of the last business day for each month; (iv) the cost basis and proceeds for individual security purchases and sales are based on the day and time a trade was entered into and the price is recorded as
of the time the decision was made; (v) on a monthly basis, performance is calculated using a holding-period return; (vi) annual performance for the model is computed by linking the monthly
performance results for the indicated number of months; (vii) the total investment performance includes both realized and unrealized gains and losses, as well as dividends but does not take into
consideration any interest on cash; (viii) all performance results are net of management fees; (ix) net of fee performance has been reduced by the management fee but is gross of all other fees and
transaction costs; (x) net of fee performance is calculated using an annual management fee of 2.00% applied quarterly, in arrears; and (xi) the U.S. Dollar is the currency used to express performance.
The performance represents hypothetical model results for FOUNDATION STRATEGY during the measurement time period. As such, these results have limitations, including, but not limited to, the
following: (i) FOUNDATION STRATEGY results do not reflect actual trading by specific FINANCIAL AND TAX ARCHITECTS clients, but were achieved by means of the calculation methodologies described
above; (ii) model performance may not reflect the impact that all or any material market or economic conditions would had on use of FOUNDATION STRATEGY by an individual client; (iii) for differing
reasons FINANCIAL AND TAX ARCHITECTS clients would have experienced investment results, either positive or negative, during the measurement period that were or may have been materially
different from those reflected by the FOUNDATION STRATEGY model performance. For Example, variances in client account holdings, investment management fees incurred, the date on which a
client began using FOUNDATION STRATEGY, client account contributions or withdrawals and general market conditions, would have caused the performance of a specific client’s portfolio to vary
substantially from the FOUNDATION STRATEGY model performance results; and (iv) different types of investments and investment strategies involve varying levels of risk, and there can be no
assurance that any specific investment or strategy will be either suitable or profitable for a prospective client.
The model performance does not reflect other earnings, brokerage commissions, and custodian expenses. It is important to note that actual portfolios would be charged other fees and transaction
costs and performance would be lower. Hypothetical past performance is not indicative of future results. Therefore, no client should assume that future performance will be profitable, equal the
hypothetical performance reflected for FOUNDATION STRATEGY, or equal the corresponding historical benchmark index. The historical index performance results for the index reflect reinvested
dividends, but do not reflect the deduction of transaction and custodial charges, or the deduction of an advisor fee, the incurrence of which would have the effect of decreasing the historical index
performance results. The historical index performance results are provided for comparison purposes only, so as to provide general information to assist a prospective client in determining whether
the index performance meets the client’s investment objectives. Historical index performance results do not reflect the impact of taxes. It should not be assumed that portfolios will correspond
directly to any such comparative benchmark index. Further, the comparative index may be more or less volatile than FOUNDATION STRATEGY.
Disclosures to High Yield Corporate Bond Strategy
he High Yield Corporate Bond Strategy (HYCB) uses a blend of High Yield Corporate Bond mutual funds and/or ETF's overlaid with sell triggers designed to attempt to minimize downside risk. This
strategy seeks to take advantage of the well-documented return premium available in the High Yield Corporate Bond universe while attempting to minimize drawdowns through security-specific risk
tolerance limits.. Securities are subject to risk mitigation designed to prevent prolonged downturns.
The performance is prepared using the following methodologies: (i) by a hypothetical model portfolio to which an investment methodology is applied on a current and on-going basis; (ii) at the
beginning of each annual period, the model begins with $100,000 invested in exchange traded funds (iii) all securities are priced at month’s end and all securities held are valued at the closing price as
of the last business day for each month; (iv) the cost basis and proceeds for individual security purchases and sales are based on the day and time a trade was entered into and the price is recorded as
of the time the decision was made; (v) on a monthly basis, performance is calculated using a holding-period return; (vi) annual performance for the model is computed by linking the monthly
performance results for the indicated number of months; (vii) the total investment performance includes both realized and unrealized gains and losses, as well as dividends but does not take into
consideration any interest on cash; (viii) all performance results are net of management fees; (ix) net of fee performance has been reduced by the management fee but is gross of all other fees and
transaction costs; (x) net of fee performance is calculated using an annual management fee of 2.00% applied quarterly, in arrears; and (xi) the U.S. Dollar is the currency used to express performance.
The performance represents hypothetical model results for HYCB STRATEGY during the measurement time period. As such, these results have limitations, including, but not limited to, the following:
(i) HYCB STRATEGY results do not reflect actual trading by specific FINANCIAL AND TAX ARCHITECTS clients, but were achieved by means of the calculation methodologies described above; (ii) model
performance may not reflect the impact that all or any material market or economic conditions would had on use of HYCB STRATEGY by an individual client; (iii) for differing reasons FINANCIAL AND
TAX ARCHITECTS clients would have experienced investment results, either positive or negative, during the measurement period that were or may have been materially different from those reflected
by the HYCB STRATEGY model performance. For Example, variances in client account holdings, investment management fees incurred, the date on which a client began using HYCB STRATEGY, client
account contributions or withdrawals and general market conditions, would have caused the performance of a specific client’s portfolio to vary substantially from the HYCB STRATEGY model
performance results; and (iv) different types of investments and investment strategies involve varying levels of risk, and there can be no assurance that any specific investment or strategy will be
either suitable or profitable for a prospective client.
The model performance does not reflect other earnings, brokerage commissions, and custodian expenses. It is important to note that actual portfolios would be charged other fees and transaction
costs and performance would be lower. Hypothetical past performance is not indicative of future results. Therefore, no client should assume that future performance will be profitable, equal the
hypothetical performance reflected for HYCB STRATEGY, or equal the corresponding historical benchmark index. The historical index performance results for the index reflect reinvested dividends, but
do not reflect the deduction of transaction and custodial charges, or the deduction of an advisor fee, the incurrence of which would have the effect of decreasing the historical index performance
results. The historical index performance results are provided for comparison purposes only, so as to provide general information to assist a prospective client in determining whether the index
performance meets the client’s investment objectives. Historical index performance results do not reflect the impact of taxes. It should not be assumed that portfolios will correspond directly to any
such comparative benchmark index. Further, the comparative index may be more or less volatile than HYCB STRATEGY.
Disclosures to International Prime Dividend Strategy
The International Prime Dividend Strategy invests in leading Foreign dividend stocks or ETF's designed to expose the investor to foreign equities that show continually increasing, sustainable, dividend
payouts. The strategy employs an intermediate term tactical overlay in order to determine whether to be in a bullish or defensive posture. When in a bullish posture, the strategy is invested in
European dividend stocks and/or ETF's. When bearish, the strategy invests in an ETF approximating the Barclays Pan-European Aggregate bond index.
The performance is prepared using the following methodologies: (i) by a hypothetical model portfolio to which an investment methodology is applied on a current and on-going basis; (ii) at the
beginning of each annual period, the model begins with $100,000 invested in exchange traded funds (iii) all securities are priced at month’s end and all securities held are valued at the closing price as
of the last business day for each month; (iv) the cost basis and proceeds for individual security purchases and sales are based on the day and time a trade was entered into and the price is recorded as
of the time the decision was made; (v) on a monthly basis, performance is calculated using a holding-period return; (vi) annual performance for the model is computed by linking the monthly
performance results for the indicated number of months; (vii) the total investment performance includes both realized and unrealized gains and losses, as well as dividends but does not take into
consideration any interest on cash; (viii) all performance results are net of management fees; (ix) net of fee performance has been reduced by the management fee but is gross of all other fees and
transaction costs; (x) net of fee performance is calculated using an annual management fee of 2.00% applied quarterly, in arrears; and (xi) the U.S. Dollar is the currency used to express performance.
The performance represents hypothetical model results for INTERNATIONAL PRIME DIVIDEND STRATEGY during the measurement time period. As such, these results have limitations, including, but
not limited to, the following: (i) INTERNATIONAL PRIME DIVIDEND STRATEGY results do not reflect actual trading by specific FINANCIAL AND TAX ARCHITECTS clients, but were achieved by means of
the calculation methodologies described above; (ii) model performance may not reflect the impact that all or any material market or economic conditions would had on use of INTERNATIONAL PRIME DIVIDEND STRATEGY by an individual client; (iii) for differing reasons FINANCIAL AND TAX ARCHITECTS clients would have experienced investment results, either positive or negative, during the
measurement period that were or may have been materially different from those reflected by the INTERNATIONAL PRIME DIVIDEND STRATEGY model performance. For Example, variances in client
account holdings, investment management fees incurred, the date on which a client began using INTERNATIONAL PRIME DIVIDEND STRATEGY, client account contributions or withdrawals and general
market conditions, would have caused the performance of a specific client’s portfolio to vary substantially from the INTERNATIONAL PRIME DIVIDEND STRATEGY model performance results; and (iv)
different types of investments and investment strategies involve varying levels of risk, and there can be no assurance that any specific investment or strategy will be either suitable or profitable for a
prospective client.
The model performance does not reflect other earnings, brokerage commissions, and custodian expenses. It is important to note that actual portfolios would be charged other fees and transaction
costs and performance would be lower. Hypothetical past performance is not indicative of future results. Therefore, no client should assume that future performance will be profitable, equal the
hypothetical performance reflected for INTERNATIONAL PRIME DIVIDEND STRATEGY, or equal the corresponding historical benchmark index. The historical index performance results for the index
reflect reinvested dividends, but do not reflect the deduction of transaction and custodial charges, or the deduction of an advisor fee, the incurrence of which would have the effect of decreasing the
historical index performance results. The historical index performance results are provided for comparison purposes only, so as to provide general information to assist a prospective client in
determining whether the index performance meets the client’s investment objectives. Historical index performance results do not reflect the impact of taxes. It should not be assumed that portfolios
will correspond directly to any such comparative benchmark index. Further, the comparative index may be more or less volatile than INTERNATIONAL PRIME DIVIDEND STRATEGY.
Disclosures to Strategic Mid-Cap Strategy
The Strategic Mid-Cap Strategy (SMC) is a strategy which seeks to exploit two seasonal influences on the stock market. These seasonal forces have historically “skewed” returns in certain months of
the year and specific sub-periods in the final three months of the year. Each year, the SMC Strategy holds an S&P MidCap 400 Index ETF from late-October to the end of May and then invests in
intermediate-term bond ETF's from June to late-October. During the third and fourth quarters of each year, the strategy raises the leverage of the midcap exposure by 100% during certain subperiods
totaling less than 25 days. These sub-periods are influenced by end-of-month and holiday seasonal forces.
The performance is prepared using the following methodologies: (i) by a hypothetical model portfolio to which an investment methodology is applied on a current and on-going basis; (ii) at the
beginning of each annual period, the model begins with $100,000 invested in exchange traded funds (iii) all securities are priced at month’s end and all securities held are valued at the closing price as
of the last business day for each month; (iv) the cost basis and proceeds for individual security purchases and sales are based on the day and time a trade was entered into and the price is recorded as
of the time the decision was made; (v) on a monthly basis, performance is calculated using a holding-period return; (vi) annual performance for the model is computed by linking the monthly
performance results for the indicated number of months; (vii) the total investment performance includes both realized and unrealized gains and losses, as well as dividends but does not take into
consideration any interest on cash; (viii) all performance results are net of management fees; (ix) net of fee performance has been reduced by the management fee but is gross of all other fees and
transaction costs; (x) net of fee performance is calculated using an annual management fee of 2.00% applied quarterly, in arrears; and (xi) the U.S. Dollar is the currency used to express performance.
The performance represents hypothetical model results for STRATEGIC MID-CAP STRATEGY during the measurement time period. As such, these results have limitations, including, but not limited to,
the following: (i) STRATEGIC MID-CAP STRATEGY results do not reflect actual trading by specific FINANCIAL AND TAX ARCHITECTS clients, but were achieved by means of the calculation methodologies
described above; (ii) model performance may not reflect the impact that all or any material market or economic conditions would had on use of STRATEGIC MID-CAP STRATEGY by an individual client;
(iii) for differing reasons FINANCIAL AND TAX ARCHITECTS clients would have experienced investment results, either positive or negative, during the measurement period that were or may have been
materially different from those reflected by the STRATEGIC MID-CAP STRATEGY model performance. For Example, variances in client account holdings, investment management fees incurred, the
date on which a client began using STRATEGIC MID-CAP STRATEGY, client account contributions or withdrawals and general market conditions, would have caused the performance of a specific
client’s portfolio to vary substantially from the STRATEGIC MID-CAP STRATEGY model performance results; and (iv) different types of investments and investment strategies involve varying levels of
risk, and there can be no assurance that any specific investment or strategy will be either suitable or profitable for a prospective client.
The model performance does not reflect other earnings, brokerage commissions, and custodian expenses. It is important to note that actual portfolios would be charged other fees and transaction
costs and performance would be lower. Hypothetical past performance is not indicative of future results. Therefore, no client should assume that future performance will be profitable, equal the
hypothetical performance reflected for STRATEGIC MID-CAP STRATEGY, or equal the corresponding historical benchmark index. The historical index performance results for the index reflect
reinvested dividends, but do not reflect the deduction of transaction and custodial charges, or the deduction of an advisor fee, the incurrence of which would have the effect of decreasing the
historical index performance results. The historical index performance results are provided for comparison purposes only, so as to provide general information to assist a prospective client in determining whether the index performance meets the client’s investment objectives. Historical index performance results do not reflect the impact of taxes. It should not be assumed that portfolios
will correspond directly to any such comparative benchmark index. Further, the comparative index may be more or less volatile than STRATEGIC MID-CAP STRATEGY.
Disclosures to Strategic Enhanced Bond Strategy
The Strategic Enhanced Bond Strategy (SEB) is an asset allocation strategy that combines conservative intermediate-term and inflation-protected bond funds with Financial & Tax Architects' fourth
quarter "prime period" trades. The strategy determines, in advance, when to be invested in bond funds and when to be invested in equities. The investment components of the strategy are: Jan 1 to
late-October: 70% intermediate-term bond funds/ 30% inflation protected Treasury bonds (TIPS); late-October to Dec. 31: 40% intermediate-term bond funds plus three prime period trades using the
S&P 500 index leveraged by 100%. Investors should be aware that the use of leveraged funds in the fourth quarter of each year increases the risk and volatility of the equity component of the
strategy.
The performance is prepared using the following methodologies: (i) by a hypothetical model portfolio to which an investment methodology is applied on a current and on-going basis; (ii) at the
beginning of each annual period, the model begins with $100,000 invested in exchange traded funds (iii) all securities are priced at month’s end and all securities held are valued at the closing price as
of the last business day for each month; (iv) the cost basis and proceeds for individual security purchases and sales are based on the day and time a trade was entered into and the price is recorded as
of the time the decision was made; (v) on a monthly basis, performance is calculated using a holding-period return; (vi) annual performance for the model is computed by linking the monthly
performance results for the indicated number of months; (vii) the total investment performance includes both realized and unrealized gains and losses, as well as dividends but does not take into
consideration any interest on cash; (viii) all performance results are net of management fees; (ix) net of fee performance has been reduced by the management fee but is gross of all other fees and
transaction costs; (x) net of fee performance is calculated using an annual management fee of 2.00% applied quarterly, in arrears; and (xi) the U.S. Dollar is the currency used to express performance.
The performance represents hypothetical model results for SEC STRATEGY during the measurement time period. As such, these results have limitations, including, but not limited to, the following: (i)
SEB STRATEGY results do not reflect actual trading by specific FINANCIAL AND TAX ARCHITECTS clients, but were achieved by means of the calculation methodologies described above; (ii) model
performance may not reflect the impact that all or any material market or economic conditions would had on use of SEB STRATEGY by an individual client; (iii) for differing reasons FINANCIAL AND
TAX ARCHITECTS clients would have experienced investment results, either positive or negative, during the measurement period that were or may have been materially different from those reflected
by the SEB STRATEGY model performance. For Example, variances in client account holdings, investment management fees incurred, the date on which a client began using SEB STRATEGY, client
account contributions or withdrawals and general market conditions, would have caused the performance of a specific client’s portfolio to vary substantially from the SEB STRATEGY model
performance results; and (iv) different types of investments and investment strategies involve varying levels of risk, and there can be no assurance that any specific investment or strategy will be
either suitable or profitable for a prospective client.
The model performance does not reflect other earnings, brokerage commissions, and custodian expenses. It is important to note that actual portfolios would be charged other fees and transaction
costs and performance would be lower. Hypothetical past performance is not indicative of future results. Therefore, no client should assume that future performance will be profitable, equal the
hypothetical performance reflected for SEB STRATEGY, or equal the corresponding historical benchmark index. The historical index performance results for the index reflect reinvested dividends, but
do not reflect the deduction of transaction and custodial charges, or the deduction of an advisor fee, the incurrence of which would have the effect of decreasing the historical index performance
results. The historical index performance results are provided for comparison purposes only, so as to provide general information to assist a prospective client in determining whether the index
performance meets the client’s investment objectives. Historical index performance results do not reflect the impact of taxes. It should not be assumed that portfolios will correspond directly to any
such comparative benchmark index. Further, the comparative index may be more or less volatile than SEB STRATEGY.
Disclosures to Strategic Hedged Income Strategy
The Strategic Hedged Income Strategy (SHI)attempts to maintain a conservative, diversified portfolio of ETF's that strives to protect your assets on the downside while attempting to achieve
consistent and steady growth on the upside. This diversified portfolio invests in instruments designed to track the performance of Spot Gold, T-bills, 10-Year Treasury Notes, 30-year Treasury Bonds,
and the NAREIT Real Estate Investment Trust Index.
The performance is prepared using the following methodologies: (i) by a hypothetical model portfolio to which an investment methodology is applied on a current and on-going basis; (ii) at the
beginning of each annual period, the model begins with $100,000 invested in exchange traded funds (iii) all securities are priced at month’s end and all securities held are valued at the closing price as
of the last business day for each month; (iv) the cost basis and proceeds for individual security purchases and sales are based on the day and time a trade was entered into and the price is recorded as of the time the decision was made; (v) on a monthly basis, performance is calculated using a holding-period return; (vi) annual performance for the model is computed by linking the monthly performance results for the indicated number of months; (vii) the total investment performance includes both realized and unrealized gains and losses, as well as dividends but does not take into
consideration any interest on cash; (viii) all performance results are net of management fees; (ix) net of fee performance has been reduced by the management fee but is gross of all other fees and
transaction costs; (x) net of fee performance is calculated using an annual management fee of 2.00% applied quarterly, in arrears; and (xi) the U.S. Dollar is the currency used to express performance.
The performance represents hypothetical model results for SHI STRATEGY during the measurement time period. As such, these results have limitations, including, but not limited to, the following: (i)
SHI STRATEGY results do not reflect actual trading by specific FINANCIAL AND TAX ARCHITECTS clients, but were achieved by means of the calculation methodologies described above; (ii) model
performance may not reflect the impact that all or any material market or economic conditions would had on use of SHI STRATEGY by an individual client; (iii) for differing reasons FINANCIAL AND TAX
ARCHITECTS clients would have experienced investment results, either positive or negative, during the measurement period that were or may have been materially different from those reflected by
the SHI STRATEGY model performance. For Example, variances in client account holdings, investment management fees incurred, the date on which a client began using SHI STRATEGY, client account
contributions or withdrawals and general market conditions, would have caused the performance of a specific client’s portfolio to vary substantially from the SHI STRATEGY model performance
results; and (iv) different types of investments and investment strategies involve varying levels of risk, and there can be no assurance that any specific investment or strategy will be either suitable or
profitable for a prospective client.
The model performance does not reflect other earnings, brokerage commissions, and custodian expenses. It is important to note that actual portfolios would be charged other fees and transaction
costs and performance would be lower. Hypothetical past performance is not indicative of future results. Therefore, no client should assume that future performance will be profitable, equal the
hypothetical performance reflected for SHI STRATEGY, or equal the corresponding historical benchmark index. The historical index performance results for the index reflect reinvested dividends, but
do not reflect the deduction of transaction and custodial charges, or the deduction of an advisor fee, the incurrence of which would have the effect of decreasing the historical index performance
results. The historical index performance results are provided for comparison purposes only, so as to provide general information to assist a prospective client in determining whether the index
performance meets the client’s investment objectives. Historical index performance results do not reflect the impact of taxes. It should not be assumed that portfolios will correspond directly to any
such comparative benchmark index. Further, the comparative index may be more or less volatile than SHI STRATEGY.
Disclosures to Value Discount Strategy
The Value Discount Strategy is a relative value strategy applied to tradable asset class proxies. The Strategy uses ETF's to invest in Stocks, Treasury Bonds, Corporate Bonds, or cash. The
strategy chooses which asset class to invest in by examining which is the most undervalued compared to the equity risk premium for stocks, the credit risk premium for corporate bonds, and the term
risk premium for treasury bonds. If no asset class is undervalued the strategy invests in cash.
The performance is prepared using the following methodologies: (i) by a hypothetical model portfolio to which an investment methodology is applied on a current and on-going basis; (ii) at the
beginning of each annual period, the model begins with $100,000 invested in exchange traded funds (iii) all securities are priced at month’s end and all securities held are valued at the closing price as
of the last business day for each month; (iv) the cost basis and proceeds for individual security purchases and sales are based on the day and time a trade was entered into and the price is recorded as of the time the decision was made; (v) on a monthly basis, performance is calculated using a holding-period return; (vi) annual performance for the model is computed by linking the monthly
performance results for the indicated number of months; (vii) the total investment performance includes both realized and unrealized gains and losses, as well as dividends but does not take into
consideration any interest on cash; (viii) all performance results are net of management fees; (ix) net of fee performance has been reduced by the management fee but is gross of all other fees and
transaction costs; (x) net of fee performance is calculated using an annual management fee of 2.00% applied quarterly, in arrears; and (xi) the U.S. Dollar is the currency used to express performance.
The performance represents hypothetical model results for VALUE DISCOUNT STRATEGY during the measurement time period. As such, these results have limitations, including, but not limited to, the following: (i) VALUE DISCOUNT STRATEGY results do not reflect actual trading by specific FINANCIAL AND TAX ARCHITECTS clients, but were achieved by means of the calculation methodologies described above; (ii) model performance may not reflect the impact that all or any material market or economic conditions would had on use of VALUE DISCOUNT STRATEGY by an individual client;
(iii) for differing reasons FINANCIAL AND TAX ARCHITECTS clients would have experienced investment results, either positive or negative, during the measurement period that were or may have been materially different from those reflected by the VALUE DISCOUNT STRATEGY model performance. For example, variances in client account holdings, investment management fees incurred, the date on which a client began using VALUE DISCOUNT STRATEGY, client account contributions or withdrawals and general market conditions, would have caused the performance of a specific client’s
portfolio to vary substantially from the VALUE DISCOUNT STRATEGY model performance results; and (iv) different types of investments and investment strategies involve varying levels of risk, and there can be no assurance that any specific investment or strategy will be either suitable or profitable for a prospective client.
The model performance does not reflect other earnings, brokerage commissions, and custodian expenses. It is important to note that actual portfolios would be charged other fees and transaction
costs and performance would be lower. Hypothetical past performance is not indicative of future results. Therefore, no client should assume that future performance will be profitable, equal the hypothetical performance reflected for VALUE DISCOUNT STRATEGY, or equal the corresponding historical benchmark index. The historical index performance results for the index reflect reinvested
dividends, but do not reflect the deduction of transaction and custodial charges, or the deduction of an advisor fee, the incurrence of which would have the effect of decreasing the historical index
performance results. The historical index performance results are provided for comparison purposes only, so as to provide general information to assist a prospective client in determining whether
the index performance meets the client’s investment objectives. Historical index performance results do not reflect the impact of taxes. It should not be assumed that portfolios will correspond
directly to any such comparative benchmark index. Further, the comparative index may be more or less volatile than VALUE DISCOUNT STRATEGY.
Disclosures to Economic Cycle Strategy
By utilizing employment and housing indicators in a manner unique to Financial & Tax Architects, The Economic Cycle Strategy attempts to mitigate the downside risk associated with investing in the
stock market. When employment and housing indicators are bullish, this strategy is long the US equity markets using various equity instruments. When the indicators are bearish, the strategy invests
in instruments that attempt to track the Barclays Aggregate Bond Index.
Performance presented is hypothetical (back-tested). Prospective application of the methodology used to manage the strategy may not actually result in a performance commensurate with the
hypothetical returns as shown. The hypothetical period does not necessarily correspond to the entire available history of the back-test or any individual instrument. The actual strategy invests in
index and bond funds and/or ETF’s which may be similar but different from the instruments used in the model. Model results have inherent limitations due to the fact that they do not reflect actual
trading and may not reflect the impact that material economic and market factors might have had on the advisor’s decision-making if actual client funds had been invested in the strategy. No matter
how positive the model returns have been over any time period, the potential for loss is always present due to factors in the future which may not be account for in the model.
The investment strategy that the results were based upon can theoretically be changed at any time with the benefit of hindsight in order to show better results. Therefore, hypothetical data must be
approached with caution because it is constructed with hindsight and may not reflect material conditions that could affect a manager’s decision process, thus altering the application of the discipline.
There is no assurance that these results could, or would have been achieved by Financial & Tax Architects (FTA) during the periods presented.
The performance is prepared using the following methodologies: (i) by a hypothetical model portfolio to which an investment methodology is applied on a current and on-going basis; (ii) at the
beginning of each annual period, the model begins with $100,000 invested in exchange traded funds (iii) all securities are priced at month’s end and all securities held are valued at the closing price as
of the last business day for each month; (iv) the cost basis and proceeds for individual security purchases and sales are based on the day and time a trade was entered into and the price is recorded as
of the time the decision was made; (v) on a monthly basis, performance is calculated using a holding-period return; (vi) annual performance for the model is computed by linking the monthly
performance results for the indicated number of months; (vii) the total investment performance includes both realized and unrealized gains and losses, as well as dividends but does not take into
consideration any interest on cash; (viii) all performance results are net of management fees; (ix) net of fee performance has been reduced by the management fee but is gross of all other fees and
transaction costs; (x) net of fee performance is calculated using an annual management fee of 2.00% applied quarterly, in arrears; and (xi) the U.S. Dollar is the currency used to express performance.
The performance represents hypothetical model results for ECONOMIC CYCLE STRATEGY during the measurement time period. As such, these results have limitations, including, but not limited to, the
following: (i) ECONOMIC CYCLE STRATEGY results do not reflect actual trading by specific FINANCIAL AND TAX ARCHITECTS clients, but were achieved by means of the calculation methodologies
described above; (ii) model performance may not reflect the impact that all or any material market or economic conditions would had on use of ECONOMIC CYCLE STRATEGY by an individual client;
(iii) for differing reasons FINANCIAL AND TAX ARCHITECTS clients would have experienced investment results, either positive or negative, during the measurement period that were or may have been
materially different from those reflected by the ECONOMIC CYCLE STRATEGY model performance. For Example, variances in client account holdings, investment management fees incurred, the date
on which a client began using ECONOMIC CYCLE STRATEGY, client account contributions or withdrawals and general market conditions, would have caused the performance of a specific client’s
portfolio to vary substantially from the ECONOMIC CYCLE STRATEGY model performance results; and (iv) different types of investments and investment strategies involve varying levels of risk, and
there can be no assurance that any specific investment or strategy will be either suitable or profitable for a prospective client.
The model performance does not reflect other earnings, brokerage commissions, and custodian expenses. It is important to note that actual portfolios would be charged other fees and transaction
costs and performance would be lower. Hypothetical past performance is not indicative of future results. Therefore, no client should assume that future performance will be profitable, equal the
hypothetical performance reflected for ECONOMIC CYCLE STRATEGY, or equal the corresponding historical benchmark index. The historical index performance results for the index reflect reinvested
dividends, but do not reflect the deduction of transaction and custodial charges, or the deduction of an advisor fee, the incurrence of which would have the effect of decreasing the historical index
performance results. The historical index performance results are provided for comparison purposes only, so as to provide general information to assist a prospective client in determining whether
the index performance meets the client’s investment objectives. Historical index performance results do not reflect the impact of taxes. It should not be assumed that portfolios will correspond
directly to any such comparative benchmark index. Further, the comparative index may be more or less volatile than ECONOMIC CYCLE STRATEGY.
Index Information
S&P 500:
The Standard & Poor's 500 composite index is an American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ. The
S&P 500 index components and their weightings are determined by S&P Dow Jones Indices. It differs from other U.S. stock market indices, such as the Dow Jones Industrial Average or the Nasdaq
Composite index, because of its diverse constituency and weighting methodology. It is one of the most commonly followed equity indices, and many consider it one of the best representations of the
U.S. stock market, and a bellwether for the U.S. economy.
Barclays US Aggregate Bond Index:
This index is a market-cap weighted index that is representative of the overall US bond market. It includes most traded investment grade bonds including corporates, treasuries, agency, and
mortgage backed bonds, but does not include TIPS or munis.
EAFE:
The MSCI EAFE Index is designed to represent the performance of large and mid-cap securities across 21 developed markets, including countries in Europe, Australasia and the Far East, excluding the
U.S. and Canada. The Index is available for a number of regions, market segments/sizes and covers approximately 85% of the free float-adjusted market capitalization in each of the 21 countries.
Barclays US Corporate High Yield Bond Index:
This market capitalization weighted index if representative of the non-investment grade corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is
Ba1/BB+/BB+ or below.
Definitions
Drawdowns/Maximum Drawdown: This is a measure of the peak to trough percentage loss in a given period. The maximum drawdown is the largest drawdown in the time period.
Median Return: This is the median monthly return of the strategy or index over a time period.
Months Positive: This is the percentage of months that a strategy or index had a positive monthly return in a time period.
Standard Deviation: This is a statistical measure of dispersion from a set of data. For the purposes of FTA marketing materials it measures the dispersion of monthly returns of a strategy or index.


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