Because it's Easy, Most Investors Research a Financial Advisor's History

Sadly this is a myth as evidenced by the EquiAlt scam perpetrated by the private real estate company in Florida.  Which should have been their first clue.*

The second clue would have been found by checking whether the sales people offering these securities were registered.  They weren't.

The third clue would have been found by checking whether the investments themselves were registered.  They weren't.

And, possibly, the fourth clue might have been one of the principals driving a $2.4 million car, a 2018 Pagani Huayra with a 764hp 6.0L V12 engine.  I had never even heard of this car until now.  I haven't figured out why but the crooks tend to spend their ill-gotten gains on such trinkets.  Could be that they know there is no favorable end game for them so they go for the biggest thrills and self-indulgences they can imagine.  I don't get it.

How can you avoid getting suckered and ripped off like this?  Here're a few tips:

1. Have a comprehensive written retirement plan that includes a cash flow plan and is built upon a reasonable rate of return.  This helps you from getting seduced by outsized promises.  Because every puzzle piece in your plan fits because there is reason and research behind it.

2. Check the licensing and regulatory history of anyone to which you provide detailed personal financial information and/or from whom you accept advice, including advice about moving your money or buying anything with it.

3. If investments or other financial products are recommended, check out the company and the specific investment, custodian, fund or insurance company to be sure they are registered in your resident state.  Here is Oregon's Division of Financial Regulation link.

4. Since there are plenty of states with reasonable homestead exemption limits, try to avoid companies in states with unlimited exemptions**.  This improves your odds.

5. Finally, simply ask the "advisor", "Are you a legal fiduciary?"  Then check the link in #2 to see if that is true.

Merry Christmas and Happy New Year to all.

Gary Duell

Your Constructive Comments are Welcome!

*Why do I say that?  Florida is one of several states that has an unlimited homestead exemption in bankruptcy as long as the debtor has lived in Florida for 40 months or more and their lot is a half acre or less in a municipality or 160 acres elsewhere!  By comparison, Oregon's limit is $50,000.  If you were a crook, which state would attract you?

**Kansas, Florida, Iowa & Texas.  Of course, a large well-established corporation won't benefit from this exemption anyway.

Bullies Are Bad

In one of his comedy routines, Chris Rock drops a funny and I assume true story about bullies, most notably in his daughter's private school.  He says, ". . .bullies do half the work. Teachers do the other half, but it's the bully half that you'll actually use in the real world."  When the principal assured him there were no bullies in their private school he threatened to take his daughter out.

Now I'm sure he doesn't really fully believe that but, based on my own experience, he does have a point.  It wasn't until I was bullied in elementary school that I overcame being bullied!

Even by age 11 the only smaller person in my class was my best friend Rob.  So we were the target of bullies, most notably Jerry (name changed to protect innocence) who was quite a bit taller.  Jerry liked to pull our hair, and, sneak up from behind and put us in choke holds.  The latter was terrifying.  I didn't dare complain to a teacher or the bullying would simply intensify.  I missed a lot of school pretending to be sick.
During one of those fake sick days I came across an ad for a self defense course- ironically -in my Superman comic book.  Out of hope and desperation I sent off my $1.00 and waited.  A few weeks later a slim booklet arrived which, to my surprise, had a tactic for disabling someone choking you from behind!  I practiced and rehearsed and practiced in my bedroom.
The next time Jerry attempted to strangle me, with little confidence it would work, I nevertheless executed the steps:  Reach back over each shoulder and grab the assailant's clothing.  Bend forward and crouch down.  Then thrust up powerfully with your legs while pulling down with your hands.  To my shock and delight, Jerry went flying over my head, upside down, and landed badly on the pavement.  He missed a couple of days of school.
Happily, all the bullying stopped.  Interestingly, Jerry became part of our little group and a friend as well.

Lessons Learned:

1. Fear of harm is a powerful motivator.

2. There are people out there who you've never met and never will meet who have valuable information to share with you.

3. Research, education and mastery can transform your life.

4. Most bullies aren't evil, they just need someone to get their attention and set boundaries.

5. Enemies can become friends.

After that incident my peers seemed to believe I had special knowledge in all areas of life and I became a sort of amateur therapist, then and throughout junior high as well.  Which almost always consisted of me just listening without offering any solace or advice.

It wasn't until working with a story-telling coach this year that I realized that 6th grade bully set me on my current course decades ago and explains why I enjoy this profession so much:
It is very gratifying to research, curate and implement for my clients the best strategies for handling their "bullies".  The bully of taxes.  The bully of running out of money.  The bully of old age.  The bully of market risk.  The bully of ill health.  The bullies of fear, greed and jealousy.  And the big one, the bully of time relentlessly racing by without filling it with life, with what you want, with happiness.

Your Constructive Comments are Welcome!

Just Ignore Mail from the IRS

Another obvious financial myth, this title  "Just Ignore Mail from the IRS" is true only if you want your life to become more difficult and expensive.  In one of dozens newsletters I subscribe to, this one entitled IRS Tax tips provides a list of what To Do and Not To Do with IRS correspondence.
(By the way, IRS won't initiate contact with you by text, social media or email asking for your personal information.  Those are scams.)

• Don't ignore it. Most IRS letters and notices are about federal tax returns or tax accounts. Each notice deals with a specific issue and includes specific instructions on what to do
• Don’t throw it away. Taxpayers should keep notices or letters they receive from the IRS. These include adjustment notices when an action is taken on the taxpayer's account, Economic Impact Payment notices, and letters about advance payments of the 2021 child tax credit.They may need to refer to these when filing their 2021 tax return in 2022. In general, the IRS suggests that taxpayers keep records for three years from the date they filed the tax return.  
• Don't panic. The IRS and its authorized private collection agencies do send letters by mail. Most of the time, all the taxpayer needs to do is read the letter carefully and take the appropriate action.  
• Don't reply unless instructed to do so. There is usually no need for a taxpayer to reply to a notice unless specifically instructed to do so. On the other hand, taxpayers who owe should reply with a payment. IRS.gov has information about payment options.  
• Do take timely action. A notice may reference changes to a taxpayer's account, taxes owed, a payment request or a specific issue on a tax return. Acting timely could minimize additional interest and penalty charges.  
• Do review the information. If a letter is about a changed or corrected tax return, the taxpayer should review the information and compare it with the original return. If the taxpayer agrees, they should make notes about the corrections on their personal copy of the tax return and keep it for their records.  
• Do respond to a disputed notice. If a taxpayer doesn't agree with the IRS, they should mail a letter explaining why they dispute the notice. They should mail it to the address on the contact stub included with the notice. The taxpayer should include information and documents for the IRS to review when considering the dispute.  
• Do remember there is usually no need to call the IRS. If a taxpayer must contact the IRS by phone, they should use the number in the upper right-hand corner of the notice. The taxpayer should have a copy of their tax return and letter when calling the agency.  
• Do avoid scams. The IRS will never contact a taxpayer using social media or text message. The first contact from the IRS usually comes in the mail. Taxpayers who are unsure if they owe money to the IRS can view their tax account information on IRS.gov.

 

More Information:
Understanding Your IRS Notice or Letter
Tax Topic 651,  Notices – What to Do
Tax Topic 653, IRS Notices and Bills, Penalties, and Interest Charges

Your Constructive Comments are Welcome!

Cryptocurrency is Just a Fad

I don't believe the title of this blog is true, any more than the Internet was ever just a fad.  Crypto and the hard & soft technology underlying it is simply too deep, complex, varied and vast to just disappear.

This article by Gritt Trakulhoon (love that name) is the most realistic, reasoned take I've seen yet on crytpocurrency.  I share it with you here in its entirety.

The conundrum is, however, what do I do now?  Gritt lays out the risks very well.  I agree that extending Anti-Money Laundering regulations and Know Your Customer requirements to crypto will benefit everyone and make the whole game feel less pirate-like.

Gary

Q: In your opinion, what is the most valuable utility that a cryptocurrency can provide today?

A: The first version of blockchain was introduced by the Bitcoin protocol as a form of “peer to peer electronic cash” over a decade ago. In the years since, the breadth of use cases within the crypto ecosystem has truly exploded. There are thousands of decentralized applications out there, each offering different utilities, use cases, characteristics, and economic models. In my mind, Decentralized Finance (DeFi) is the most obvious answer to your question. DeFi aims to democratize finance by replacing legacy, centralized institutions with peer-to-peer relationships that can provide a full spectrum of financial services. Users can trade, lend to earn interest, or borrow without an identity, credit score, or a bank – all from the comforts of their crypto wallets and web browser. Lenders, borrowers, buyers, and sellers transact with each other directly without the need to trust each other, through agreed-upon rules and conditions set in smart contracts. These smart contracts are secured on a blockchain, making them trustworthy yet decentralized.  The markets are always open and there are no centralized authorities who can block payments or deny users access to anything. Having said that, DeFi is merely the financial piece of a wider movement towards Web 3.0 and the “ownership economy.” Non-Fungible Tokens (NFTs) have found use cases in industries including the arts, collectibles, gaming, and identity management due to their provable authenticity property.  Meanwhile, Decentralized Autonomous Organizations (DAOs) are internet-native organizations with no central leadership. DAOs enable new forms of governance where users collectively make important decisions about how the organizations evolve, what behaviors are permitted, and how economic benefits are distributed. The great thing about this movement toward ownership economy is that it allows for shared ownership and direct monetization models for creators and users. For example, in decentralized exchanges, users can play the role of the exchange itself, providing liquidity to an exchange pool and earn trading fees when users trade.

Q: How big of a threat to crypto is broad regulation?

A: Direct regulation of Bitcoin or other blockchain networks can’t be done due to their decentralization nature, but all the actors participating in those networks can be regulated (e.g. crypto exchanges, miners, nodes). Authorities have focused on regulating network edges (crypto exchanges) and monitoring flows (payments) instead. If regulators control the entrance and exit ramps to exchange local currencies for crypto, it would make it difficult for citizens to buy crypto. The most draconian steps regulators could take then would be to shut down these public crypto exchanges. This is unlikely to happen and is not the approach that most governments are taking.  Most governments permit exchanges to operate so long as ‘Know Your Customer’ (KYC) procedures function to assess customer risk and there is compliance with Anti-Money Laundering (AML) laws. This kind of regulation is actually beneficial for the crypto ecosystem, and could assist in the further growth of crypto, giving the industry the boost it needs for the masses to experiment with it, embrace it, and adopt it. So not all regulation is net-negative for crypto. AML and KYC compliance measures would help to purge the market of bad actors and illegal activities, thereby providing a safer environment and engendering trust for genuine investors, both institutional and retail. Financial institutions, centrally governed or otherwise, can facilitate the crypto ecosystem’s development as well. Regulation through these means can provide a legal backing to cryptocurrencies, which would result in increasing the pool of investors for the asset class. It would also come with a more pronounced consumer protection establishment.  Institutional money is waiting for regulatory clarity of the sort already implemented in other industries (e.g. hedge funds, public equities trading, etc). More institutional money flowing into the crypto system is always good: it provides more liquidity and less volatility. In the end, this is a developing industry and there remains legal uncertainty in the space. Cryptocurrencies are here to stay, but we should fully expect that regulators will continue to provide appropriate guidance as this new asset class matures.

Q: Will there be a hedge for the crypto portfolio?

A:  No. Given we’ll be recommending a very small allocation to crypto alongside our equity portfolios, we don’t believe a hedge is appropriate. Crypto has interesting hedging qualities in and of itself. Crypto could be seen as a hedge against continued irresponsible monetary and fiscal policy: surging in price if/when the extended debt cycle finally comes around.

I hope these answers have been interesting and useful to you! Again, please feel free to keep sending questions in. As potential long-term investors in crypto, it’s invaluable to gain an understanding of (and confidence within) this emerging space. I’m here to help, to guide, and to lead Titan Crypto clients to long-term crypto-driven growth.

It’s all just getting started.

More soon,

Gritt

Gritt Trakulhoon
Titan Crypto Investment Analyst

Your Constructive Comments are Welcome!

It Is Reasonable To Expect 8-12% Market Returns Over The Next Ten Years

The title of this blog is indeed a solid myth.

Before I project asset growth and income flow in Retirement Analyzer I have analyzed the client's current portfolio and compared it to my recommended allocation.  To their disappointment, I routinely reduce the assumed rate of return (ROR) by half while keeping the same volatility.  So, for example, if your historical performance has averaged 15% and volatility (annual range of increases and decreases) has been 20%, I will project 7.5% and keep the standard deviation at 20%.

Why?  Because there is simply too much of nearly every kind of debt for double digit returns to be sustainable:

• Government debt & government enabled debt (such as mortgage guarantees & bailouts of large public and private institutions).
  
• Environmental debt (i.e. we have yet to understand or suffer the costs of our profligate resource exploitation, a massive debt with which we've saddled future generations.)
• Social debt- recompense for the gradual but massive erosion and outright theft of wealth and resources from the rest of the world.
• Psychological debt- the current and deferred costs of our toxic culture and economy which will eventually transform our consumption patterns (read- dramatic reductions).

Everything I read leads to this.  And finally, a very large and well-respected firm, Vanguard, confirms my use of cynical RORs with their prediction that the highest average return of the typically highest ROR sector will be 7.5%.  Over the next ten years.  Here is their latest forecast as of 6/25/2021.

Your Constructive Comments are Welcome!