I WOULD NEVER BE IN SALES

Every once in a while a book comes along that is refreshing, groundbreaking and fun to read.  Dan Pink's new book, "To Sell Is Human, the surprising truth about moving others", is one of those books.  I highly recommend it to anyone who is not a hermit.
My dad was a chemistry professor at Willamette University.  So I acquired a mild to blazing condescension to salespeople.  Yet, Dad ignored the fact that his occupation consisted almost entirely of "selling" chemistry knowledge to often recalcitrant young students.  His job was to move them towards an "A" in chemistry if at all possible.  He enjoyed it immensely.  And he was very good at it.  But by god it wasn't sales.
So I'm sure there was some disappointment when I became an insurance agent.  Since those were the good old days of cold calling, I had descended into the dregs of sales: dinner time telephone solicitation for insurance "x-dates".  Believe it or not, I called out of the white pages, "Good evening Mr. _____, this is Gary Duell with Farmers Insurance.  Would you be interested in comparing with us when your next insurance policy renewal comes up?"  If on the off chance they were willing, I would collect as many details as possible on my X-date card and file it by date for future contact.  I remember cheering and dancing around the "boiler" room when I got my first X-date.  And went on to collect over 2000 of them.  Hardly good use for an MBA.
Without revealing too much of Pink's excellent book, I can say that he turns the classical sales model on its head.  ABC- always, be, closing, becomes ABC- attunement, boyancy & clarity.  His research shows how sales actually is a very honorable profession, while some very honorable professions are actually sales.  I highly recommend it!

You can fool some of the people all of the time but . . .

Online newsletter OnWallStreet tells us that in May, $56 billion of net inflows (new investments less redemptions) were attracted by stock and bond mutual funds & ETFs.  Which brings the total so far thru May to $350 billion.  Now that may not seem like a very large number compared to the $13 trillion held by U.S. Investment Companies (mutual fund families).  But it bothers me; people are still chasing returns at the top of the market, believing Wall Street's mythology that somehow the economy is "on the road to recovery".         Keep this in mind:  someone else is selling those shares.

Students, no financial risks this Summer- MYTH

Financial tips for college graduates

(With a few edits, the entirety of this post is from the Oregon Department of Consumer & Business Services.  Very well done.)

(Salem) – Heading out into the world, college graduates need to be mindful of decisions that can have long term effects on their finances and know where they can get help.  “Getting off to a good start financially will make life a lot easier and gives people more financial options down the road,” said Patrick Allen, director of the Oregon Department of Consumer and Business Services.   “It is much better to take the time now and plan for your future than later wishing you had.”

Here are financial tips in a few key areas: 

Health insurance: If you land a job that doesn't offer insurance, remember that you can stay on your parents’ plan until age 26 – and you do not have to live at home, be a student, or be a dependent on your parents’ tax return. You may also buy an individual policy directly from an insurance company or through an agent. As of Jan. 1, 2014, many young people will qualify for Medicaid, the state health insurance program, or subsidies to help pay for private insurance. Visit www.coveroregon.com starting in October to shop.

Credit rating: Go easy on the credit cards. Your credit score will follow you. A poor score may force you to pay more or result in rejection for everything from insurance to a home loan to credit cards. If you need help managing debt, the Division of Finance and Corporate Securities can help you find a licensed and certified nonprofit credit counselor. Call 503-378-4140. Meanwhile, the federal Consumer Financial Protection Bureau has lots of information about credit scoring.  [And on the other hand, to build a credit score you need to incur some debt.  I recommend a very low limit credit card that pays points and which you pay off every month. GD]

Start saving: Even though you may have little left over after paying bills, putting away even a small amount starts a habit that will pay big dividends later. More than half of Americans said they are worried about a lack of savings, according to an annual Financial Literacy Survey conducted by two nonprofit organizations. This page links to tools that explain how to save:  http://www.cbs.state.or.us/dfcs/investor_info_program/america_saves.html.
[On the other hand, if you have any debt- especially any debt costing you an interest rate higher than you can safely earn -pay that down first. GD]

Renter insurance: If fire destroys your rental apartment or house, the owner’s policy will cover the structure but not your contents. If you have a lot of electronics or other expensive items, or if you lack the money to replace what you do have, you may want renter insurance. The cost averages less than $15 a month in Oregon. And, it covers your personal liability if someone is injured because of your activities on or off your premises (say your dog bites someone). [Perhaps even more likely to happen is your inadvertent damage to the building, which is also covered to varying degrees, depending on the company.  Most policies cover your possessions anywhere, not just in your apartment.  (be mindful, however, of exclusions and limitations- ask your agent!)  And if you already have car insurance on your own, adding  a Renter's Package may give you discount on your car premium. GD].

Help with finance questions: The Department of Consumer and Business Services regulates many financial services and industries. Consumer insurance advocates can answer insurance questions and are available from 8 a.m. to 5 p.m. Monday through Friday. Call toll-free in Oregon: 888-877-4894. If you have questions about consumer loans or people offering to help you manage debt, the Division of Finance and Corporate Securities can help. Call 503-378-4140. [Or, if you want greater expertise, call me.  GD]

The Department of Consumer and Business Services is Oregon’s largest business regulatory and consumer protection agency. Visit www.dcbs.oregon.gov. Follow DCBS on Twitter:  http://twitter.com/OregonDCBS.  Receive consumer help and information on insurance, mortgages, investments, workplace safety, and more.

I AM TOO CONSERVATIVE

Before I get started, two caveats are in order:

1. Remember that these blog titles are Myths.
2. By "conservative" I mean in terms of your financial security.  Politically I range from a Teapartier to a bleeding heart Liberal, depending on the issue.

First, take a look at this fascinating graph (I know.  That may be an oxymoron):

Consumer Distress Index for Net Worth

(If you can't read the small print, or if you would like to tweak the parameters yourself, click on the link directly below the graph.)  I love graphs because they make the invisible visible, the complicated simple, the hazy, clear.  Beginning in the year 2000 this graph measures 50 different data points which reflect consumer confidence.  The lower the score, the lower the level of "Consumer Distress".  The key take away:  note the peak in consumer confidence (i.e., lack of distress) just before each market crash.  Yet mildly rising consumer confidence is touted in the press as reason for optimism.  Which of course is circular thinking, "We should be optimistic because we are optimistic".  Sounds stupid when I put it that way doesn't it?

But here are the facts which should sober up your drunken revelry about the "record" stock market indices.  First of all, Americans lost $16 trillion in household wealth in the Bush recession.  It appears we've just about gotten it back.  But secondly, unless you factor in inflation & the increase in the number of households, you're dreaming.  The average family is only about halfway recovered and would need to double current asset values in order to be "even".  Ain't gonna happen.  Not because of consumer confidence.

My point here is not to put my elbow in the party cake.  My point is to emphasize the importance of not losing money.  Risk management is not only more important than chasing the Wall Street casino but it is also the only factor that is in your control.  This is both conservative and optimistic:  if you can reduce risk and have sufficient retirement income, why gamble with your future??  Why gamble at all?

CAN YOU DO IT YOURSELF?

Retirement planning consists of much more than maximizing investment returns.  I think risk management is far more important.  And difficult.  Sure, you may be able to do a great job all by yourself.  But would it be worth $49 to see if you have what it takes, and, to be sure you leave no stone unturned?

My next series of Retirement Planning courses begins this May 30th, 6:30-8:30pm.  The materials & ideas presented are based on academic research; this is not in any way a sales presentation.  Student evaluations have been "Excellent".  And I've included a lot of humor to keep it interesting.

For your tuition you will receive:

• Financial House in Order Guidebook
• Managing Your Money in Retirement Guide
• Getting Your Estate in Order Guide- this is a wonderful resource
• Personal Wealth Index Scores/Report-it's not all about money.  Life is more than a math problem.
• Social Security Analysis Report- avoid the most common HUGE, irreversible mistake I encounter.
• Course Workbook and Essential Reports

 You Will Learn:

• Optimal Asset Allocation in Retirement
• Defining Core Priorities
• How Money Affects Your Life
• How to Develop an Income Plan
• Sequence of Returns Risk
• Questions to Ask a Potential Adviser
• When to Take Social Security
• 3 Reasons Retirees Run Out of Money

For more details and to register, go to http://www.richnessoflife.org/ccc/
Or call me at 503-698-1110
Gary 

AARP is a reliable source of financial advice & evidence based public policy.

Once again, lest there be any doubt, the title of this post is a MYTH.  Current case in point is the recent AARP "BULLETIN" titled "Now's the Time for Tax Reform", written by Nina E. Olson, "National Taxpayer Advocate".  Not.  That is, if this is our advocate, who needs an adversary?
The upshot of Ms. Olson's article is that we have met the enemy of tax reform. And it is us.  Because we average Americans greedily cling to our "special interest" deductions such as mortgage interest and medical expenses.  She opines we must be willing to give up these deductions in exchange for "comprehensive simplification"of  the tax code.  The underlying presumption is that the complexity of the tax code causes "high" tax rates and simplification will cause our taxes to go down.
This is of course total nonsense.  And it is embarrassing (but not surprising) to read it in a massive marketing organization's (that's what AARP is) newspaper.  Here's why:

1. The problem is not complexity.  That may have been the case before computers were invented.  They can handle it now.  Complexity is simply a symptom of the real problem.  The most powerful interests keep slipping abusive provisions into the tax code, which our few remaining ethical lawmakers then attempt to fix.  Which lobbyists then try to undo.  And so on.  This vicious cycle is responsible for the malignant growth of the tax code.  Ms. Olson cites required minimum distribution rules and Social Security taxation as examples of how  tax complexity baffles seniors.  But just about anyone can figure them out.
2. The problem is inequity, that is, those who benefit most from government expenditures contribute the least to the Treasury, measured as a percent of their income.  No, I'm not talking about welfare cheats or those naughty seniors who keep whining for their meds so they can stay alive.
3. The cheaters, the "winners" in the tax game are:
   a. Those wealthy individuals who are hiding $11.5 trillion off shore, strictly to avoid Federal, State and local taxes.  See http://www.taxjustice.net/cms/front_content.php?idcat=2
   b. Corporations are more difficult to assess.  Nobody seems to know the exact total trillions offshored by them.  It seems reasonable to guess that the total of individual and corporate tax dodging exceeds the entire GDP of the United States.

Want to eliminate the national debt in one fell swoop?  Make an offer to everyone with offshore income & assets:  Bring that money home this year, pay full taxes on it, and you will not go to prison.  And if you are an artificial person (corporation) you will be allowed to keep your corporate charter(s) and continue operation.

Myth: The Stock Market will always out-perform all other investment options

Yours truly used to spout this myth when I worked for  broker-dealers, before I became an independent Registered Investment Adviser (yes, regulations dictate adviser be spelled "'er" not "'or").  And in practically the same breath we uttered the caveat, "past performance is no guarantee of future results".  That's how we were trained to mislead the public.  But can anyone tell me how in the world those two statements fit together??  What if I am looking for guarantees?  Are there any left that are worth examining?  Of course there are.  But here's the key:  ethical risk transference.
I added that pesky word "ethical" because the vast majority of risk is transferred to those unwilling to assume it.  Taxpayer bailouts of the wealthiest people and companies in the world are a good example.  Profits are privatized.  Losses are socialized. 
Taking on risk should be voluntary.  Fortunately, there are entities and individuals still willing to take all market risk off your shoulders.

WE'RE IN AN ECONOMIC RECOVERY

Is the economy recovering?  I don't think so, not as evidenced by a market buoyed primarily by a couple trillion dollars of newly printed money.  But judge for yourself.  Pattern recognition is supposed to be one sign of cognitive intelligence.  What do you think of this pattern?

S&P 500 Since Inception


Note the peaks just before the big crashes in 2002 & 2008.  And this peak is even more artificial than those.    Wouldn't it make sense to prepare for the possibility that we're due for another even more severe burst bubble?  It is possible to lock in your gains and even participate in continuing market growth should that unlikely prospect occur?  Yes, it is not only possible but quite easy.  But not if you stay fully invested in today's foamy, smoke & mirrors, yeehah market.  Recent studies indicate that retirees should have, at most, 10-15% at risk in securities, which includes stocks, bonds and mutual funds investing in them.  How should your retirement assets be positioned?

MYTH: Celebity investment "Advisers" outperform the rest

I am severely biased on this topic but recent research shows that "retirees who work with financial planners can get more mileage from their retirement portfolios - approximately 1.82% higher returns during retirement."  Even though that is true, on average, investment returns are the least important value we advisers provide to our clients!
In an excellent summary of the issue in Advisor Perspective, Bob Veres opines,
"Jim Cramer, Suze Orman and other so-called investment pundits and gurus are constantly telling consumers that they can do a great job of managing their portfolios on their own.  Why pay a fee for professional asset management when you can turn on the TV and get Cramer's stock-picking expertise for free?"
Veres goes on to quantify the huge value that holistic advisers (as opposed to product pushers masquerading as "planners" or celebrity "advisers" peddling financial porn) generate for their clients, ranging from annualized 4-8% better long term performance.  Yes.  4-8%!  On the other hand, the average investor costs himself 2% per year versus unmanaged indexes.  Granted, exceptions abound.  But if you're "average" why not employ a planner?  Most of us pay for ourselves many many times over.  Here's how, according to Veres:

1. We keep you from chasing the next hot stock or fund just before it tanks.
2. We make sure you stick with your asset allocation by employing at least twice yearly rebalancing
3. We help define and implement diversification on many levels.  Veres only discusses investment diversification but it is also important to have health, interest rate and inflation diversification, to name a few other risks in addition to volatility.
4. We consider and prepare for taxation.  The types and timing of assets acquired and income taken must be framed in your unique current and expected tax picture.
5. On average, we compel you to not only save more but smarter (usually with tax advantages).

The best reason to avoid Cramer's Action Alerts and use a real adviser, who is held to a fiduciary standard like yours truly?  Veres continues, 
"Mark Hulbert has compared the overall performance of Cramer's Action Alerts with the Wilshire 5000 index for the calendar years 2009, 2010 and 2011.  (You can find the chart here).  Hulbert found that over the three-year period, Cramer's recommendations would have delivered an investment performance of roughly 9.9% a year – and this did not account for trading costs or tax obligations that accumulate when you're buying and selling 10 or 11 times a day.  During the same time period, the Wilshire 5,000 [unmanaged] index delivered an average annual return of 14.9%."

Yes, I'm more boring than Jim Cramer.  But I'll bet you'll be better off in the long run.  Even the short run!
Gary 

MYTH: We don't like risk.

I used to have five chickens, Stella, Sophie, Sam, Gertrude and Emma.  Gertrude died of cancer.  Emma, Sam and Sophie filled the bellies of the local coyotes, one by one and in that order.  So I'm left with Stella, my least favorite.  STELLAAA!!
How could you have a least favorite chicken, you ask?  Well, my favorite, Sam, was a beautiful Black Sexton with big brown eyes and an inquisitive, friendly disposition.  She was the only one who would let me pick her up.  She was the only one who would be practically under foot while I was weeding, ready to pounce on worm and bug.  Stella, on the other hand, was downright obtuse.  I would throw out a handful of popcorn duds- one of the their favorite treats -and while her sisters would dash over to gobble them up she would linger at a distance until it was too late.  She would never let me get close to her.  I thought she was simply dumb.
But the other day when I tried to herd her into the coop, she adeptly evaded me with the circle-around-the-bush technique.  Then it dawned on me:  She's the one who is still alive.
We seem hold the same illusions about our investments, preferring the "friendly" ones even though they don't serve us well.  Shouldn't it be a clue, the billions Wall Street spends on convincing us to let them keep using and losing our money?  Unfortunately, we like the risks that we're told to like, the risks that are heavily marketed to us as the prerequisites to making it big.

Myth: Social Security is in Trouble

Financially, this blog title is a myth.  Politically it is not.  An absolutely excellent article on AlterNet by Lynn Stuart Parramore is the basis for this post and I will quote it heavily.  I had led you to believe I would do a Fiscal Bluff Part II follow up post but I think it has become apparent the world did not come to an end.  So I'm saving that for later.  Social Security has been part of the Fiscal Bluff debate for inexplicable reasons.  Parramore lists those reasons in her article titled, "The Giant Lie Trotted Out by Fiscal Conservatives Trying to Shred Social Security".
Here I list each supposed "problem" with Social Security and the corresponding truth:

1. OMG seniors are living so much longer than we expected!  They're going to bankrupt the system!  THE TRUTH:  Social Security's original policymakers quite accurately predicted increasing longevity.
2. OMG we need to raise the "normal" (or "full") retirement age as a result!  THE TRUTH:  In fact, retiree life expectancy gains since 1935 have been modest.  Early figures were based on expectancy at birth, not at age 65.  Life expectancy at 65 has only increased by 5 years since 1940, from 14.7 years to 19.6 years.  Besides, the Full Retirement age has already been increased from 65 to 67 for certain age groups.  Unnecessarily.  By the Greenspan Commission back in 1983.  Remember?  Greenspan, the architect of our fiscal disaster.
3. OMG we're going to be supporting a sea of broke old people!  THE TRUTH:  Longevity gains have gone to the affluent.  Among the poorer and less educated, women have lost 5 years, men 3 years.  Out of 34 industrialized countries we rank 27th in life expectancy.  So as Parramore points out, raising the retirement age again would be a "direct assault" on the less fortunate.  Furthermore, life expectancy gains are expected to slow in the future.

 Social Security and Medicare need to be completely off the table in the budget cut discussion.  Sure, there are efficiencies to be found.  But our out-of-control military spending, outrageous corporate welfare, lax design and enforcement of tax law are much larger and more urgent areas true fiscal conservatives would be targeting.  If they truly were fiscal conservatives rather than plutocrats living under the delusion that it saves money to ignore our fellow citizens.
 

"Fiscal Cliff" or Fiscal BLUFF?

Do you think Congress is totally partisan?  (Note to my Tea Party impaired friends, "partisan" means "prejudiced in favor of a particular cause", that is, either Democratic or Republican in this case.  It does not mean, "Contrary to my current beliefs".)  Partisanship has been most dramatically manifested by the Republicans voting lockstep against any Democratic proposals regardless of merit, some of which they once supported or even invented themselves!  Even so, I don't think they're uniquely partisan.  Because the one issue both parties agree upon is kowtowing to the super rich.
 
Let me define "super rich".  A super rich person already has so much wealth that his lifetime material security is guaranteed.  The pathologically super rich, though, become unhappy if their wealth fails to increase every moment in time.  Any involuntary cost, even though it will have zero lifestyle impact, even though it might actually benefit them, is tantamount to a physical assault.  This includes taxation.  (Whether this arises from overly controlling parents, or not being held enough as infants, we can only speculate.)  Those who benefit from the Golden Goose that lays their golden eggs, the infrastructure that makes wealth possible, need to help feed the goose.  It is impossible to single handedly create wealth in a vacuum.  But neither party seems to have the guts to ask these folks for sufficient revenue to protect and build our Commons.  (Yes, that's capital "C" Commons.  Please review the definition.)

Which brings us to the topic at hand, the fabricated myth of The Fiscal Cliff, lions, tigers and bears, oh my!  (Will we ever develop immunity to irrational, baseless fears?)  "The Fiscal Cliff" rolls off the tongues of pundits in every media with little explanation of what the hell it actually is or why, or even if, it is a bad thing.  Personally, I think we should let "it" happen and I'll explain what "it" is in a moment.  But before that, start thinking of The Fiscal Cliff instead as a snowy Fiscal Bluff over which we're about to take a fun glide on our Fiscal Sleds,  ("Bluff" being an intentional double entendre).  The Fiscal Cliff is an exaggerated, astoundingly nationalistic & partially manufactured distraction from vastly more serious issues such as the poisoning of everything we ingest & global climate change. issues nobody wants to deal with until it is too late.  Which it probably already is.  But . . .

To put it simply, our economy will tumble over the Fiscal Bluff in January, supposedly, when two job killing events will occur:  higher taxes caused by the expiration of the Bush tax giveaways, and, precipitous cuts in government spending.  Media and political dufuses somberly lament that this will allegedly send unemployment sky high and the markets into a ravine.  You would think an asteroid is hurtling towards us.  Some people perversely lust so much for this to be true that they're firing otherwise profitable employees (need I say Papa Johns?).

The first odd thing you will note about these two devilish horns is the implication that government spending creates jobs, which is true with one major exception.  The exception is military spending which, although it does create jobs, only creates one-third as many as, say, building a domestic school or bridge.  The second odd thing you will note is the implication that taxes create unemployment, which is false with few exceptions.  These two views are incompatible.  So reality must be somewhere in between.

The details are too lengthy to post here, but that's the beauty of the Internet (which arose from government programs, by the way).   Do your own research and don't believe anyone, including me.  So, in anticipation of this sleigh ride,  what do you do with your money?  Stash it in places that will protect it from any market declines but which will also participate in market gains should those occur.  Yes, there are such places.

To be continued . . .

MYTH: The FDIC has 99 years to pay claims

I'm not sure where this myth originated nor do I really care.  But it is a myth indeed.  (I suspect either anti-government zealots and/or crooks selling "better" savings vehicles.)  The fact is that FDIC regulations require the FDIC to replace lost bank deposits "as soon as possible " (see 12 USC1821(f)), usually the next day.
The FDIC was formed in response to the bank failures of the Great Depression (no, not this one, the one in 1929), Prozac for the banking system so to speak.  I think it was a mistake because one artifact of safety nets such as the FDIC is that those with moral weakness (aka "humans") might tend to take more risks than they would in the absence of the insurance.
For example, imagine a football game with no referees.  Instead there is just Game Insurance so that whichever team loses the game actually gets to win.  Both teams win!  Cheating & incompetence don't matter!  How hard would either team try if that were the case??  I would prefer strict rules strictly enforced, with real penalties, which is how football is conducted now.  Anybody know of a Wall Street banker who has been jailed since 2008?  I don't.  Where are the hundreds of heads that should be rolling from AIG, Lehman, & Countrywide, to name a few?  The only things that are rolling are their companies' executives . . . in cash.  Win win.
But back to the topic, the FDIC is indeed an important safety net for those of us here at the bottom of the food chain.  And a married couple can easily enjoy a million dollars of protection.  At the same bank.  Each may have an IRA and an savings account insured up to $250k per account.
Having said that, keep in mind that there is no risk-free investment or savings vehicle.  Let me say that another way.  There is no risk-free investment or savings vehicle.  (Do a google search for "financial risk" to review the different types of risk.)  This is important enough to say a third way:      There is no risk-free investment or savings vehicle.  Here's why.
Although CDs and bank accounts are FDIC insured, they guarantee that you'll be subject to inflation certainty.  Not inflation risk ("risk" is when you're unsure whether or not an event will occur.), inflation certainty because inflation will certainly exceed the returns your bank can offer.
So ultimately, the types of financial risk you need to minimize depend on what order you rank the four main financial priorities for a portfolio:

1. Preservation
2. Income
3. Liquidity
4. Growth

If Preservation of principal is your top priority then FDIC insured products may be appropriate.

1.  

MYTH: The Best Place Is a Money Milkshake!

The most frequent question posed to me by clients, friends & new contacts is this:  "Where's the best place to put my money?"  I'll get to the presumptions behind this question in a minute.  But it cannot be honestly answered without more information.
I usually say, "Well, it depends on what you want, what your plans are, your current asset level, when you want to retire, your pre & post-retirement budget, how long you expect to live, your debt level, your rate of return history and expectations, your risk tolerance, your health, your wishes for your family or charities . . " and so on.  Sometimes though, if I'm feeling flippant, I'll say something like "It all depends on what you want.  If you want a money milkshake, the best place for your money is in a blender with vanilla ice cream and blueberries."    I'm sure, more often than not, that feels evasive, like I'm dodging the issue.
So what are people thinking when they pose that question?  I suspect most have in the backs of their minds that authoritative but fickle pie chart that shows up on their brokerage/retirement statements.  You know, similar to these:

Looking backwards, they are painfully aware that if only they had adjusted those pieces of the pie, they would have made a ton of money rather than losing.  Or, if they hadn't been so conservative, they would have at least kept up with inflation.   They blame themselves for responding- or not responding -to Wall Street's siren call.  "Now is always a good time to invest!" as TV's financial guru (not) Cramer screams.  But they shouldn't blame themselves.  Over the 20 years ending 12/31/2010, average equity fund investors earned 3.83%/yr.  The S&P500 index earned 9.14%!  The problem is chasing returns, buying high and selling low, and incurring too many expenses.  (And then there's the issue of the shrinking number of fund managers who actually beat the unmanaged indexes.  As financial data becomes more and more accessible, only about 15% of managers beat the indexes to which their styles are compared.)

But why settle for even the S&P500 returns? Below is a rather complicated graph but it's very important.  It shows RISK (defined as how wildly your account balance swings up and down over time) and RETURN (the average annual return over the 10 year period shown) for the S&P500 vs. Vanguard.  Note how much better Vanguard's unmanaged, low cost index portfolios outperform the S&P500 at large.  Even so, can we rely on the past to predict the future?

So embedded in the question, "Where is the best place to put my money." is this one:  "Where can I get the highest returns without any risk?"  What is it perhaps more important to ask?  Because the key is asking the right questions.  In addition to those posed in my second paragraph, these additional money questions are essential:

• How can I minimize my costs?  How can I get my money's worth for the fees I'm paying?
• How can I eliminate risk without taking a bath on poor returns?
• How should I best hold my invested assets (in qualified retirement accounts, real estate, hybrid products, trusts?) to be sure my plans are fulfilled?
• What trends may make historical performance a permanent thing of the past?  What is reasonable to expect in the rapidly changing future?

This is my generic answer to, "Where is the best place to put my money".  It all really depends on what you want.  And that is my skill.  Helping you figure that out, getting it down on paper, and adjusting your affairs accordingly.  If any adjusting is even necessary.

Best Always,
Gary

The First Thing They Teach Lifeguards

I just returned from a two-day conference with my field marketing organization Wealth Financial Group, based in Chicago.  Beautiful city!
Our keynote speaker was author & consultant Frank Maselli, a dynamic, animated, hilarious, brilliant man.  Frank likened us financial advisers to lifeguards, trying to convince potential drowning victims to climb into the lifeboat while there is still room.  He asked us, "What is the first thing a lifeguard has to learn?  To keep from being pulled under by the person you're trying to rescue!".
So true.  And it highlighted the stunning frustration most of us non-Wall Street advisers feel as we holler, "Get in the boat!  Get in the boat!".  The general public has been splashed, dunked, slapped and- in some cases -actually drowned by Wall Street while Wall Streeters accumulate record, massive wealth. 
As Nobel prize winning economist Joseph Stiglitz has stated, the economy is broken when financial rewards are disconnected from public benefit.  That is, you should not make a lot of money unless you've provided a lot of benefit. 
I get paid very well for what I do.  Mine is a complicated, rapidly changing, essential business.  I put my heart and soul into it and have for over 30 years.  It is my professional mission to dispel the Wall Street myth that you have to lose money to make money.  I can't believe anyone still buys that shell game.  The lifeboat analogy is right on because- as I pointed out in my last blog post -the options for reducing financial risk keep shrinking in number and in quality.  The lifeboats are filling up.  And I am focusing on swimmers who are close by and ready to climb in.     

MYTH: I can always buy Long Term Care insurance later

I know it must be irritating to you.  But I won't stop doing it.  That is, regaling you of the steadily shrinking options for reducing your financial risks.  The quantity and quality of techniques to protect yourself and your money are in an entropic spiral.
For example, I've mass emailed ad nauseum about the financial safe haven of annuities (which, not surprisingly, the Wall Street owned corporate press continue to trash).  My best company, Aviva, just reduced their minimum interest rate to 1%, making it not much better than the average CD (if it weren't for the additional benefits of tax deferral and guaranteed income).
Long Term Care risk management strategies have also been dragged onto the chopping block virtually every month.  Several big names have pulled out of the market altogether, such as Prudential and MetLife.  Others have discontinued lifetime benefits and what are called "limited pay" premium schedules.  Used to be that you could pay larger fixed premiums for 10-20 years thereby eliminating the risk of future rate increases.  All have increased their rates on new applicants and existing policyholders alike.  My own premiums have doubled in the last 10 years, but are still 1/2 the cost of a similar policy these days.  Pays to buy it early!
But sadly, the best buy in Oregon for healthy nonsmokers, United of Omaha, is discontinuing lifetime benefits, group plans, and limited pay options effective with applications signed by tomorrow, August 1.  They just told me this today!  They also implemented a healthy rate increase a month ago.
What does all this mean?  It means that long term care is a serious risk, so serious that it has the insurance companies running scared.  The good news is, if properly structured, sufficient protection is still very affordable.  With Federal deductibility of premiums and 15% Oregon tax credit, this type of insurance is heavily favored by not only the tax code but several other State and Federal provisions, such as the Partnership Program.

MYTH: Financial rewards are the best motivation

I must give credit for this post to Paul Begala, political writer for Newsweek.   In the June 25th issue he passed on an anecdote which, whether true or not, epitomizes a major destructive attitude, a cultural virus in our country.  I quote it directly:
I have a wealthy friend who lives in a wealthy neighborhood.  One day he was in his front yard, chatting with his next-door neighbor, a Republican, who asked him why he's a Democrat.  My friend said he'd grown up poor but had gotten a good public education, worked his tail off, and made it.  Then he pointed to the gardener across the street.  "Don't you want that gardener's son to live the same American Dream we have?"  His neighbor shot him down, sniffing, "That gardener's son will be my son's gardener".
This is entitlement thinking- and parenting -at its worst.  I like Warren Buffet's philosophy that you want to give your children enough so they can do anything, but not too much so they don't have to do anything.  The guy in the story has embodied the mentalities that we came here to this continent to escape; nepotism, meritless accumulation of wealth and power, repression of the virtue, hard work and intelligence of our fellow citizens.  What if his son turns out to be a lazy jerk?  And the gardener's son a brilliant inventor who, for lack of basic education fails to blossom?  We, as a society, lose.  The rich son loses.  The gardener's son loses.  Personally, I expected my son to make his own mistakes, take some hard knocks, and learn to rely not only on his own brains and initiative but also to seek out help and partnerships from others, while pursuing work that he enjoys and is good at.  After an excellent education in our public schools and universities, he makes a great living and loves his work.  He has become a healthy adult, highly valued in our economy.  The question is not what we get in this life, but what we become.  I know I've said that many times.  It's worthy of repetition.
People who are insecure & afraid can become greedy and lose their compassion for others.  Another favorite quote:  The highest expression of human intelligence is kindness.  (And I don't mean shallow courtesies.)  Although our Republican Congress is not the exclusive domain of this sickness, they dominate the field.  Rather than skillful statesmen ( remember Mark Hatfield?) they have become small-minded, mean-spirited, irrational sycophants, creating a death spiral to the bottom of dysfunction by institutionalizing the "virtue" of aggressively self-imposed stupidity.  As a result, the self-destructive culture they have created, after a 30-yr. concerted effort, is harming themselves more than the issues they fear (gays, taxes, government regulation, dark-skinned people. non-Christians, equal opportunity etc.)  In fact, their fears have been baseless all along.  They have met the enemy in the mirror.

Myth: You think you know . . .

In a great article given to me by my Mother, Linfield College economics professor Eric Schuck claims, "What you think you know is wrong."  The article appears in The Oregonian at http://www.oregonlive.com/opinion/index.ssf/2012/06/debunking_economic_myths_or_th.html  The online title is "Debunking economic myths [which is dear to my heart], or the trouble with what you think you know"
I will summarize and gently editorialize his three myths:
Myth #1.  Firms (companies) are job creators-  
Giving special deference to firms as "job creators" simply is not an accurate assessment of their mission and role in society. They make profits, not jobs.  Professor Schuck goes on to point out that to an economist jobs generally aren't a benefit, they're a cost of profit-making.  Under our current legal structure, the primary purpose of a corporation is to make money for its owners.  If they can do it without employing anyone, then they must.  Such is the psychosis of the corporate model.  I highly recommend the documentary, The Corporation.
So whose legal mission is it to create jobs?   That would be an obligation of the federal government under the Employment Acts of 1946 and 1978, he points out.  And it has largely failed in that mission, having lost 160,000 public sector jobs this year alone.  Because of myth #2.
Myth #2.  Governments should work by the same budgetary rules as families.   
There are two sides to this- revenue and expenditures -but I disagree that this is a myth for both sides; when times are tough for a family it makes sense to increase revenue if at all possible, just like governments must [selectively] raise taxes in a recession.  And some "deficit" spending is necessary for a family too such as taking out education loans for retraining or getting a new outfit to dress for success in job interviews.  But Professor Schuck is right on that the role of government is to stabilize the economy.  Which means preserving jobs whenever possible.
Myth #3.  Federal deficits are the scariest problem the economy faces.
This section is so good I have to include the whole thing:  [Federal deficits are] not, and here's why: Current interest rates on federally issued bonds are running at about 1.5 percent. Current inflation rates are right around 2 percent. Adjusting for inflation, the real interest rates on public debt is "less than zero." Effectively, people buying U.S. Treasury bonds are paying the government to borrow money from them. If there was ever a time to run a deficit to offset reductions in spending at the state and local level to stop job losses, this is it. Better still would be to use those negative real interest rates to finance infrastructure investments that both create demand and improve productive capacity. There are worse things in this world than using debt to pay for much-needed roads, cops and schools, especially when the short-run cost of that debt is pretty much zero. Debt and deficits are long-run problems; unemployment is a short-run problem. Fix today's problems first.  By increasing, not decreasing, government spending.  

Ten Predictions for 2012

I've learned to severely limit my clairvoyant claims; even with what seems to be the perfect collection of data it only takes one tiny detail to derail an entire prediction.  It's like winning a Tesla sports car . . . with no key.
So I'm borrowing these Ten Key Predictions from Neuberger Berman, courtesy of AdvisorOne*, so that if they don't pan out I can simply return them.  I do agree with all ten, in principle and except as noted.

#10-  Sector rotation continues to be pivotal- They see "attractive" returns in energy, information technology, staples (like sugar, rice, etc. not paper staples) & health care.  Which means higher than normal inflation in those areas too.
#9- High geopolitical tensions- Although somewhat stable, there seems to be no place for security seekers.  China may not be the economic engine we imagined.
#8- Income oriented assets will be "an attractive source of income"  Neuberger likes master limited partnerships.  But for you and me, equity indexed annuities with income guarantees are safer.  Aviva is attempting to pull their killer annuity from the national market but Oregon won't let them do it quite yet.  Please take the time to let me explain this product to you.  It's going away soon!
#7- Favor high-quality equities if you simply can't resist the stock market.  In the short term I disagree with this in principle because I see little to support the current market bubble.
#6- Global Monetary Easing may make commodities and emerging markets attractive.  Key word is "may".  I'm still not sure what effect the $600 trillion in outstanding CDOs will have if and when they come home to roost.
#5- China will experience a soft landing.  What?  China's not going gangbusters anymore?  No, it isn't because no one can afford to buy their stuff.
#4-  European Debt crisis will reach a tipping point.   Failure to reach any workable solutions means the EU will by default (linguistically not financially) select "none of the above".  The tentacles from that mess reach around the world.  And the possible effect on us is exacerbated by the USA's shadow inventory of foreclosures.
#3- USA avoids double dip recession.  I don't know.  The really smart guys are saying 1.5-2% "growth" in our economy.  But I just don't trust the employment and housing data coming out.  Sure more people are getting jobs but are they real jobs?  Family wage jobs?  Full time with benefits jobs?  In most cases, no.  So who is going to buy all the stuff?
#2- Obama will win a second term.  However you feel about this, the stats show that with an approval rating at or above 48% and unemployment below 7.4% Obama should win.  And then there's the embarrassing inability of the Republicans to come up with a viable candidate.  Neuberger points out that Obama's successes outweigh anything else (e.g., nine straight quarters of economic growth, 22 consecutive months of private sector job gains, the death of Osama bin Laden, Libya)
#1- Prominent Politics:  significant in Europe, sound and fury here.  Neuberger is far more optimistic than I that the EU members will come up with viable solutions to their fiscal ailments.  And stateside it will be impossible to guess whether Congress will finally accomplish meaningful budget and tax reform.  It appears many of the Congressional crazies will lose their seats this round.  None too soon.
Best Always,
Gary 

*http://www.advisorone.com/2012/02/27/10-key-predictions-for-markets-election-in-2012-ne?utm_source=dailywire22712&utm_medium=enewsletter&utm_campaign=dailywire&page=2 

IRS's "Dirty Dozen Tax Scams for 2012"

Tax time is an extremely emotion-laden month, whether you get a refund or a bill.  Emotionality and rationality tend to be mutually exclusive, don't they?  As a result, we risk becoming easy fodder for bad ideas and the scam artists who promote them.  To Preserve your Wealth, avoiding mistakes is more important than finding the next hot investment.
IRS helpfully publishes their annual Dirty Dozen scam list which I will summarize for you below.  If you have more time, the link is well worth exploring.  Here they are:

1. Identity Theft- This is one good reason to file as early as possible.  Gary.  It is very easy for a thief to file a false return with made-up W-2s & 1099s claiming income tax withholding that never happened.  If you've already filed, IRS will notify you that a 2nd return has been filed before issuing another refund.
2. Phishing- For you linguists, according to Wikipedia, "phishing" probably originated with "phreaking" which involved various tricks to steal free phone calls ("free" + "phone" = "phreak".  I would have said, "phrone"), including using Cap'n Crunch whistles.  Phishing scammers will bait you with a phony email that appears to have come from your bank or some official agency, asking you to confirm your social security number or other private info.  Neither IRS nor banks do this by email!  By the way, when you're done reading this, please send me all your passwords and PINs.
3. Tax Preparer Fraud-  Most preparers are honest and competent.  The main danger sign is if the preparer fails to sign your return and/or doesn't have a Preparer Tax ID number on the return.  Both are now required in 2012.  And never consent to share any of your refund with the preparer.  Finally, as a planner and not a critic, tax return preparers want to be your hero this year by maximizing your refund or minimizing your tax.  But often this results in higher total taxes over your lifetime.  For example, Traditional IRA contributions may be inappropriate if you expect to be in higher tax brackets in coming years (that is, all of us).  Have an experienced long-term planner (uh, ahem, like me) do some projections for you.
4. Hiding Income Offshore- This only works if you are in the Fortune 500 with Wall Street law firms on retainer.  It does not work for real people.  One website estimates there are over 36,000 corporations registered in the Cayman Islands alone.  That's one & a half customers per corporation.  Wow, now that's customer service.
5. "Free Money" from IRS or Social Security scams- Happening more frequently in small church congregations of low income or elderly folks, the first clue here should be, "Why is this person talking about this in my church?"  The scammers file false returns for a large fee, the refund arrives, and then later so does the audit letter.  As far as I'm concerned, these are the lowest scumbags on the totem pole.
6. False income and Expenses-  You're thinking, hey wait a minute, why would I file extra income??  To get refundable credits such as the EITC or the American Opportunity Tax Credit.
7. False Form 1099 Refund Claims- If you didn't get the 1099 yourself, don't let anyone make one up for you.  And certainly don't let them use your info. to file a return for others.
8. Frivolous Arguments- Here's a list:  http://www.irs.gov/taxpros/article/0,,id=159853,00.html  If you recognize any of them in a pitch made to you by a "tax expert", run in the opposite direction.
9. Falsely Claiming Zero Wages- Again, for a hefty fee, scammers will indeed get you a refund.  Consider it a temporary loan with a $5000 penalty.
10. Abuse of Charitable Organizations and Deductions- self evident.
11. Disguised Corporate Ownership- Again.  And again.  This only works if you are a huge multinational corporation, enjoying special tax laws you wrote yourself.  (IRS never pays attention to the tax laws I write for them.)  If someone says little ol' you can do the same thing, same strategy: run in the opposite direction.
12. Misuse of Trusts- If it has not at least been reviewed by a local attorney that you know and trust, the trust probably will not deliver on the scammer's promise.

 I've said it many times before, that a system built to be totally abuse-proof will in itself become abusive.  Enforcement of the law is important.  All these government intrusions into our lives are here because many of us demand them in order for the playing field to be level.  Unfortunately, it has become abusive to the powerless and subservient to the powerful, thereby largely failing in its purpose.

Myth: "Jobs Creation" will turn the economy around.

Sorry fellow Progressives, Liberals & Democrats. The sad truth is, Job Creation is a corporate shell game unwittingly adopted by many of us, designed to perpetuate the Conservative Nanny State. Job creation sounds really nice, is politically expedient, but unfortunately is just another iteration of the thoroughly debunked "trickle down" economic theory.  Feel like you're getting pissed on?  That's trickle down economics happening to you.
But here's how the argument goes:
1. Lower taxes on people with gobs of money.
2. They will suddenly burst into a fever pitch of hiring many many workers to make or do new stuff.
3. Those new workers will pay new taxes.
4. Which will pay for the revenue gap created by lowering taxes on people with gobs of money.

This is trickle down, voodoo, supply side economics at its worst. It has never ever worked!  Ever! And the best example is the Bush tax cuts. Between 2001 & 2007 (the Bush years, remember?) the top 400 income recipients saw their after tax income skyrocket 476%. During the same period, median family income soared, well . . . zero %. The economy shed millions of jobs & trillions of dollars in wealth. What happened?
1. The people (which includes multi-national corporations, according to our "Supreme" court) with gobs of money kept almost five times as much of it, sheltering it in offshore accounts, trusts & other tax-avoidance schemes.  They are no happier than before.  (The corporations, of course, feel absolutely nothing even though they are people.)
2. Rather than creating jobs, they squeezed down existing wages & benefits using the threat of unemployment as leverage.
3. People who actually work for a living saw their real income shrink or stay flat, or
4. They lost their jobs, their asses & their homes.   They are much less happy than before.
5. Thereby decreasing demand for goods, stifling economic growth & decreasing tax receipts.
6. Go to #1.

Henry Ford recognized that production- or supply -does not create demand, or jobs.  Purchasing power creates demand, which increases prices, production and economic growth.  So he paid his employees much higher wages than his competitors because he wanted his employees to be able to afford his cars!  You know the rest of the story.

Here's the key issue:  do we want a country that rewards hard work, intelligence, creativity and teamwork?  Or do we want a country, like we have now, that rewards being rewarded?  Seriously.  The argument against taxing the wealthy is that it would be "punishing success".  Oh spare me.  Inheriting $50 mil. is "success"?  Cashing in $100 mil. in stock options is "success"?  Does anyone really believe Mitt Romney "earned" $20.9 mil. last year?  What value did he create in return?  Would he have "worked" any less hard for $10 mil.?  In truth, virtually all of the $20.9 mil. was passive income that would have come in even if both he and his wife had been in comas.  That's how valuable they were in the marketplace of labor.  What we are really rewarding is narcissism, plain and simple.

The rich in character, like Bill Gates and Warren Buffet, recognize that their massive wealth would have been impossible without public resources.  They recognize their obligation to the system which enabled their vast wealth.  Too bad this enlightened view isn't more contagious.

The Evil of Annuities.

The financial- and not so financial -media just love protecting their readers from  . . . look out!  Be careful!  Oh no!  ANNUITIES!!  Be very afraid!  Every article I've read (and I don't use absolutes lightly) recommending against annuities commits one or more of these errors:

• Invalid comparisons.  For example, saying annuities have "high fees" without describing to which kind of annuity they refer or to which alternative they are comparing.  Variable annuities indeed have high fees, as much as 3-4%, even when you are losing money, compared to virtually every other investment alternative outside of hedge funds!  Variable annuities are market-based and can lose money.  Fixed  and Indexed annuities do not, are not, and cannot.  Some have no fees.
• Outright false or outdated information.  For example, the most common claim is "Your money is tied up for ten years.  Or longer!"  Well guess what.  In exchange for principal protection and minimum rates that are 3-4 times higher than CD rates, the annuity company needs some built in stability in return.  Plus, your money really isn't "tied up".  Virtually all annuities provide annual liquidity of 10% or greater.  And with all the annuities I offer, penalties decline and vanish no later than the 10th year, or altogether in the case of death, terminal illness, or need for long term care.  The point is, annuities are for your long term safe money!
• Focusing on the irrelevant.  For example, "annuity salesmen earn huge commissions!"  Even if that were true (it's not) so what?  Annuity commissions are less than those you pay for houses, cars, prescriptions, electronics, and a whole slew of other things you buy.  Annuities are complex and always changing, the market is very competitive, and- because of the media bias about them -it is difficult to educate a paranoid public about them.  The relevant question is, "Does this particular annuity accomplish your financial goals better than any other alternative?"  That is my sole focus when I select an annuity product.  The answer is very often, "Yes".

 But yes, fixed annuities are so bad that billions flowed into them, and out of Wall Street, last year.  They are so bad that Hartford, which previously sold only variable annuities (which can lose money), came out with two fixed indexed annuities late last year.  They recognize that everyone wants at least some of their money guaranteed without losing it to the stock market, taxes and inflation.

If you want the facts, call or email for my free DVD, "The Reinventing Savings Program".  Or, watch it now online at Reinventing Savings

Avoiding Fraud in 2012

My favorite financial e-newsletter, Advisor One had an article last month about the rise in "Baby Boomer Investment Scams".  The New Year seems like a good time to forward this to you and add a few things myself as well (Surprise!  I have an opinion!).

In a hissy fit of exaggeration, though, AdvisorOne passes along the inane idea that there is a "nationwide surge" in investment fraud, citing 1,241 regulatory actions in 2010 "more than double the 506 cases in 2009".  The problem is "rampant" they chortle!

Well, we need some adult perspective here.  If we eliminate the thousands of independent RIAs like myself, the top 16 broker-dealers have about 90,000 investment advisers working for them.  Even if all of the regulatory actions were against individual advisers (some of the more serious were against their firms), that's a rate of just over one-tenth of one percent.  To be more clear, that means out of every thousand advisers, one is a crook.  "Gary, are you crazy?  Defending your detestable competitors in the brokerage community?"  No, I'm just trying to temper journalistic sensationalism.  I mean, suppose in 2011 two of every thousand brokers were crooks.  Oh no!  Doubled again!  Form another Federal agency!

All kidding aside, there are still serious concerns:

• Those are just the ones who got caught
• Breaking the law
• And didn't quickly make things right to avoid regulatory action
• The law still does not hold Wall Street to a fiduciary standard, remember?  Astoundingly, it is still legal for them to put their interests before yours.  So even though brokers have a fiduciary relationship with their clients (click on that link to see the definitions of "fiduciary") they do not have a fiduciary obligation.  It is unbelievable what it is still legal to inflict on the public.

Apparently the worst fraud  is happening in the area of Self-Directed IRAs.  Because Self-Directed IRAs have much broader investment flexibility, including real estate, often they are used to lend legitimacy to fraudulent schemes.

The State of Oregon has some great guidelines here for avoiding victimization by nefarious schemers here:
Avoid Investment Fraud and Abuse  In addition, you can subscribe to their Consumer Alerts.  I think their most important bit of advice is don't be embarrassed to report getting ripped off.  You may help save someone else's life savings and/or recover your own.  Most of us are no match for a skilled con artist.
Of course, it's best to avoid getting ripped off altogether by dealing only with independent Registered Investment Advisers who are legally required to put your interests first.

Like me.

Myth: We Make Rational Financial Decisions

Very few aspects of our financial decision making are rational, if any (depending on the person!).  Despite history, despite having been burned over and over and over, I see the same patterns repeating and it actually is making me nauseous this time.  This isn't out of self-righteousness or superiority; I'm as bad as anyone, if not worse in some cases.  Except when it comes your, my clients', money.
For example, variable annuity sales this quarter are the highest they've been since 3rd quarter 2007 according to the Insured Retirement Institute.  Yes, that's right.  Just before the last huge bubble burst.  People are chasing returns again, against all odds, laden with hope and desperation, just like in most casinos I've visited.  (I don't know about you, but I've never seen anyone smiling in a casino, usually not even the scantily clad "hostesses").  We're buying high so we can later sell low, compounding our losses.
Why do I make this claim?  Because you would think in the midst of record demand for their products, annuity companies would be throwing open their doors.  But yet another major variable annuity vendor is walking away: John Hancock.  (Variable, by the way, means that your returns can vary, up and down.  Pay attention to the "down" word.).
My preferred product at this point in the game is equity indexed annuities (EIAs).  Here's a great little video explaining the basics:  Reinventing Retirement Savings.
But even EIA companies are scaling back their guarantees, charging more for them, and reducing their minimum interest guarantees.  One of my primary carriers, American Equity, is knocking- another -half a point off all its guarantees.  Aviva, my favorite, is still hanging in there with its 2% minimum interest rate, several market indexes in which to participate, their unparalleled 7.2% income rider & high guaranteed payout rates on the income distribution side.  Plus, no one else doubles that guaranteed income if you need long term care (a few conditions apply so you should read the full disclosure).  All this for an annual fee of 0.75%, about half the average mutual fund fee for which you get no principal protection and no guaranteed income!
I expect a continuing trend of fee increases and benefit reductions as we head into the next bubble burst this coming year.  Once your contract is in force, however, most of the provisions cannot be changed.  Don't wait!

Myth: ObamaCare

Otherwise known as "ObamaCare" by its detractors (who thereby reveal they have never read the act), the Patient Protection and Affordable Care Act is one of the few bills excreted by Congress with congruence between its name and what it actually does.  The "ObamaCare" label is inaccurate because- after massive tinkering by the health care industry & Congress -the bill is vastly different from the White House's initial "principles".  Much miraculously made it through unscathed, however.
OK, Gary, what DOES it actually do?  (I recommend you review the whole thing on Wikipedia:
http://en.wikipedia.org/wiki/Patient_Protection_and_Affordable_Care_Act)
Well, of many great provisions, one resounding success of the PPACA is reduction of Medicare/caid fraud.  At a cost of $9.0 million last year (and with the help of 5000 volunteers), the bill's enforcement provisions returned over $4.0 billion to the Medicare Hospital Insurance Trust Fund, IRS & other agencies.  Let's see.  Isn't that a 44,444% return on the dollar?  Not bad for government work.  Naturally, Congressional puppets of the health "care" industry fought this provision tooth and nail.

I'll look at other great parts of this bill in future blogs.

Clients Prefer Financial Specialists- NOT

Financial services marketing powerhouse, Genworth Financial, conducted a recent survey- the LifeJacket Study -to assess what you and I think.  The numbers below surprised me . . . because they support what I've always believed:  most of us want a one-stop shop when it comes to financial services, and, many of us let things slide until it's too late.  (Genworth Financial is probably best known for its life and long term care insurance.  They are usually in the top three when I do my Top 12 company search for life and long term care clients.  They have the best rates for tobacco users too.)  Here are the numbers.

Genworth's LifeJacket Study revealed surprising statistics about the current life insurance marketplace:

• 52 million Americans with household incomes between $50,000 and $250,000 do not have coverage [they think they're immortal]
• 40% of those who have insurance don't think they have enough
• $155,000 is the national average death benefit [better than nothing!]

According to the study, consumers have specific expectations about the role they expect advisers to play.

• 66% of consumers believe that a financial adviser should offer life insurance as part of their overall financial strategy [emphasis mine]*
  
• 60% of respondents who own life insurance want to meet with their adviser at least once a year [I must have the other 40%!]
• 77% indicated that they don't expect their annual review to be a lengthy meeting – an hour or less will do  [ I feel the same way.  Honest. I'm military about ending on time.]

The LifeJacket Study reveals valuable insights needed to educate and motivate yourself to help secure your financial future, to preserve your wealth.   Download the study to learn more.
I'm a firm believer in self-education!

*The way regulatory trends are going, I think soon only licensed financial advisers will be able to recommend life insurance to the public due to the inherent & profound fiduciary responsibility such a recommendation entails.  Few of us have the patience to find & evaluate the top dozen policies in any given State.  And the Top 12 will vary widely for each individual because each company has its marketing sweet spot, the segment of the population in which it thinks it can best compete.

Medicare, hooboy!

Don't you love it when the Medicare Open enrollment period comes around every year?  I'm not even eligible yet but I've been getting all kinds of junk in the mail about which Medicare plan to buy.  And I hear that there is no lack of TV advertising.  (Oddly, the enrollment period was changed from 11/15-12/31 as in years past to 10/15-12/7.)  But here's the common element:  these ads and mail pieces encourage you to visit their website or call one of their "advisers" to determine which plan is best for you.  

I have a better strategy for you:  Visit www.medicare.gov and use their quick and easy search engine instead.  I just did it myself and 59 medical and drug plans in my zip code 97086 popped up.  If I narrow the search to Medicare Health plans with drug coverage the number drops to 11, including Original Medicare, with 5 different companies.  But even so, can you imagine calling 20 different companies to find and compare your expected total annual out of pocket risk for all 11 plans?

Well, you don't have to.  Just select "sort results by lowest estimated annual health and drug cost" button and the search engine does it for you.  Or, if you're on lots of prescriptions (I'm not on any) you can key in all of them to find out which plan will give you the lowest out of pocket cost for your drugs.

 

So your first stop should be www.medicare.gov  If you need help navigating this arena, just call or email me:  503-698-1110  g@garyduell.com

Myth: More is better, or, Why I downsized.

Not that it's that interesting but I recently made some big changes:

• I closed my office and moved it back into my home.  
• I got rid of pickup loads of stuff.  And then I sold my pickup.  
• I'm as vegetarian as I can be.  In his book Eating Animals  Jonathan Foer points out that since it has been proven we can survive quite well (at least in this country) without eating animals, shouldn't we at least try to do so?
• I rarely buy coffee out anymore, making my own at home.  
• I bike everywhere I can, when I can.  
• If I have to drive, I try to accomplish at least three tasks per trip. 
• After having to move boxes and boxes of books I now don't buy any book unless I've already checked it out from the library & can't live without it, or, if the library doesn't have it.
• My practice is virtually paperless.  I constantly beg all my companies to email rather than mail.  (One of my most progressive companies, Assurant Health, is going to begin delivering policies digitally only.  Yay!  One of my least progressive companies, Ohio National Life, still sends me single sheets of paper in 9x12 envelopes.)  The paper I do get is scanned and then shredded.
• My business itself has a very small carbon footprint.  I make a huge difference in the lives of many people without creating much waste, if any, simply by rearranging pixels on my screen.  Miraculous!  Some paper is still involved, unfortunately.
• I hold my breath for one minute every hour to reduce my CO2 emissions.  Kidding.

So that's what I've done.  Why?  The three year experiment with an external office was all for show, to look legitimate, to create an image.  But the fact is, my network of advisers, service & product providers, business colleagues, support services and educational sources is all virtual.  I average one hour-long webinar per day to keep up to date professionally.  I rarely drive to attend a class anymore.  I get dozens of newsletters and news feeds daily.  I don't take newspapers anymore.  Most of my business is conducted online.  I have more clients I've never met than the opposite (which is not really my preference).  Who needs an office full of furniture and people?  It was no longer necessary.  I did all this because life should be simpler!

When I do venture out into the big city the traffic jams astound me. what an insane way to live!  Why does anyone tolerate it?  What if, instead of building more roads in the metro area, we developed a super database of workers and jobs, then did a massive job exchange so people could work closer to where they live?  What if, instead of building the boondoggle called the Columbia River Crossing, we spent a tenth as much converting office jobs to online jobs so the Vancouverites didn't have to come over here?

Yes, life should be simpler.

MYTH: The Debt Ceiling is the most pressing issue facing Americans

Yes, despite all the hysteria in the media, the windbags in Congress and most people I talk to, the debt ceiling is much ado about nothing.  Congress and the President are playing a game of chicken to distract you from what you should really care about:  the greatest theft of wealth from you and me in the history of the world.  Some of that wealth is absolutely priceless, which I'll clarify in a minute.  I am exasperated by the failure of virtually every arm of the media to document this reality.  But after a lifetime of training-by TV -we have come to prefer drama over data, sensation over sobriety, raciness over reality.
Dennis Kucinich, despite himself, has an excellent article at CommonDreams.  I will summarize his list of the scale and means by which this theft is taking place while adding some history, details, and of course opinions.  All of these means serve to fleece all of us in order to enrich a few:

1. War.  Our so-called "defense" department was sanitized from its former more accurate name "Department of War" back in 1947.  Our war-making consumes half of discretionary spending and we spend more than all other countries combined.  President Eisenhower warned us of the Congressional/Industrial/Military complex (later, as a courtesy, he dropped "Congressional").  We didn't heed his warning and now we're being bled to death by it in two ways.  First, multinational corporations now exploit our military as their free mafia-like "enforcer", allowing them to destroy their competition and take over markets in ways that would be illegal were they to do it themselves.  That's what Iraq was all about and what most of our involvement in the Middle East is all about:  oil & oil infrastructure.  Although it would be far less costly- financially and in human sacrifice - and phenomenally quicker to simply reduce our energy consumption, the current energy market titans wouldn't make any money that way.  And they own Congress.  Secondly, most of the products manufactured by the MIC have no spin-off economic effects; they end up idle, destroyed or abandoned in the sand.  If you build a new school in an under-served community, the effects are profound, immediate & long term as well.  A $35 mil. helicopter sitting on the tarmac in Afghanistan really helps us out here, doesn't it?  Every billion dollars spent on war cost us at least 3200 jobs.  See War Costs.
2. Which brings us to Energy and the Environment.  Current environmental & energy laws and policies guarantee the transfer of massive monetary and, more importantly, resource wealth from all of us to the coffers of a few.  Some decry regulations as too strict, stifling business, hurting the economy.  This isn't true but if even it were that is a short-term view.  Our lack of self-discipline & reverence for this Earth is nothing but thievery from our own futures as well as other living things on the globe.
3. Insurance industry.  I part ways with Senator Kucinich here.  The insurance industry is complex and varied.  There are real scoundrels as well as saints.  The important question is, who adds value and who simply siphons off profits?  The test of who adds value is this:  does the company provide insurance benefits, that is, transferring risk away from consumers?  I agree that health insurers add little to no value- and even subtract from -the health care transaction.  For far less in expenditures, a single payer system would produce better health results for all of us.  It is ridiculous, and astonishingly immoral, that we have people with health insurance still going bankrupt from medical bills.  Property insurers, annuity companies, life insurers, disability insurers all perform genuine insurance functions, giving us tremendous leverage for relatively little cost.
4. Wall Street & the Banksters- now larger and more powerful than before the last crash & subsequent financial "reform", these guys are shameless, paying themselves record bonuses out of bailout funds paid by . . . you and me!  Need I say more?  What we need is genuine transparency and tax rates for speculators that are the same as those for working stiffs.  Taxes, like death, are not fair.  They are necessary.  And currently our public revenue streams are abysmally inadequate for maintaining the infrastructure, the commons, necessary for a civilized society.
5. Money Supply-  I don't know enough about The Fed to weigh in here but I do know that our money supply never should have been privatized.  Just look what would have happened to Social Security if our trust fund had been handed over to Wall Street three years ago; it would be bankrupt now.

I hate to say it, but until the average American stands up for his and her best interests, nothing will change.