United WiFi: First Report: #Fail

FIRST REPORT – United WiFi

In a word: SLOW

Came on at 24,000 feet, not 10,000 feet as advertised.

Sign up pretty easy, just slow.

Browsers: Works ok in Safari, Firefox and Chrome

Too slow to download files from SugarSync or use Morningstar’s Advisor WorkStation (analysis tool for investments if you’re not in the business)

OK for Gmail chat when it’s working

Twitter: blocked

Favorite error phrases I saw again and again in the first 90 minutes while trying to use email:

not connected

still working

unable to reach

trying

Oops... a server error occurred and your email was not sent. (#1)

Unable to reach MainStreet Financial Planning, Inc. Mail. Please check your internet connection or company's network settings. Help

Oops…the system encountered a problem (#502)

Loading....

An error occurred while trying to save or publish your post. Please try again. Dismiss (Blogger post)

This webpage not available

There was a problem completing this action, try again (Google+ post)

Is it worth $14.99.  In another word: NO

Yes, emails will come in and I’ll face 100 upon landing, but the frustration at this early stage is just not worth it.  Dial up was better.

Answer to a frequent question that invokes market timing

Jim: Should we stop contributing to our retirement accounts for a couple of years since the market is so high and save for a car instead?

This is a version of a question we frequently receive intimating the writer thinks the market is about ready to take a big dump and they want to miss it.  Notice they didn't say sell everything and go to cash but it's close to the same question.

My answer:

One' person's too high is another person's opportunity.  It's all supply and demand.  If people want to own more companies the market prices go up. If people want to own less companies the market prices go down.  No one, and I repeat no one, including Warren Buffet can time the market.  WB has done the best of any widely known person in America and he says "be fearful when others are greedy and be greedy when others are fearful". 

My former boss Ken Fisher, said the market climbs a wall of worry.  Seems to me we're in a time period like he describes.  Who would have thought the market would go up with the government shutdown and fiscal cliff happening at the same time? Not me. I did change my asset allocation a few weeks ago as I get nearer to retirement and announced that in last month's tweet summary going from 90/10 to 60/40 in my pension plan to reflect that change. Anna Sergunina, my partner,  remains at 90/10. Anna is 30 years old.

As for your specific question, unless you are changing your time for retirement, you'll most likely have to save more after the car diversion is over. Then again, you might find a great deal at 0% financing like others, and regret saving into cash for a couple of years making nothing.  If the market goes down like it did  in late 2008-early 2009, you can say I told you so. Only congress could drive us there. OMG, it could be bad in January and February!

Frankly, I have no idea what the market will do in the next two years, but moving some of your savings from Bucket 3 (long term) to  Bucket 1 (short term)  for a car purchase in less than two years, and continuing to dollar cost average into your retirement savings, will help you in a market turn down to recover quicker.  Otherwise, you'll just have to wait a longer time period for your long term savings to recover. That's what retired people have to do because they've stopped dollar cost averaging.

Hopefully, you've read the book we recommend, "Winning the Loser's Game" by Charles Ellis, 6th edition and follow Rick Ferri on his blog, along with The White Coat Investor.  Those resources will reinforce my comments today.

That's my position and I'm sticking to it.  Comments?

Market Timing or Recognition of Change in Timeline?

The US stock market high in mid September prompted a discussion with my partner Anna Sergunina the following day.  “So what does that mean to us? “, I asked as the topic came up.

“Nothing to me”, replied my younger partner.  “Well, I was just thinking my timeline to retirement is less than ten years.  Maybe it’s time for me to become a ‘pre-retiree’ and change my asset allocation to reflect that,” I remarked.

The next day I changed my early 2009 set asset allocation (90/10 stocks to bonds) to the more timeline and age appropriate 60/40.  Why? Was this market timing? No, it was a time horizon re-setting to a mix more reflective of my situation and prepares my investment portfolio for distributions in the not too distant future (think 8 or 9 years).

If you’ve known me as a client or colleague you probably know, or should know, I’m a big fan of Rick Ferri’s book, “All About Asset Allocation”.  It is my second most recommended book next to Charles Ellis’ “Winning the Losers Game”.  I routinely show clients the appropriate page from Rick’s book.  The one I’m now following is the Pre-Retiree asset allocation.  Thank you Rick.

The reason for financial planning is to have a roadmap and then follow that road map.  Eleven years ago I developed my own financial plan.  I submitted it to the National Association of Personal Financial Advisors (NAPFA) as part of the requirements to become a NAPFA member and demonstrate my proficiency in this field.  I didn’t have to submit my own plan but I figured any comments or suggestions by the reviewer would help me and my family is a great way. 

That plan, subject to a few comments by my reviewer and subsequent changes, is in effect today.  Every January 1^st I review my progress and look over my plan elements.  I share it with Carol, my life partner of 40 years.  If she’s happy, I’m happy.  Note: We are happy.

Bottom line: Each of us needs to have a plan, review our plan, and adjust our plan as our goals or timelines change.  Please don’t join or remain in the “Woulda, Coulda, Shoulda Club”.  To again quote Nike, “Just do it”.

 

Why did summer end so fast?

Why did summer end so fast?

In the old days, summer seemed to last a lot longer.  I think it was only weeks ago that we were celebrating Memorial Day and then the Fourth of July.  Now Labor Day has come and gone and my 

“To Do” list didn’t shrink much.

“To Do” lists always seem like a good idea so we can see progress in accomplishing tasks and preparing for events.  My mother made us kids create a “To Do” list, but it was mostly chores.  Maybe that’s where I learned to rebel at “the list”.

In my Air Force days, we lived and slept with checklists -one to do list for work, one to do list for home, and two dozen Air Force checklists for critical tasks so we experienced “Zero Defects”.  It was the making of many nightmares for me since lives were at stake.

So what does have to do with financial planning, now that summer is over? A lot. 

Now is the time to plan on re-balancing your portfolio since the stock market, especially the US stock market, has been going up for the last four and a half years since March 2009.  Now is the time to take some losses, if you have any, to offset some of those gains embedded in your taxable accounts that you can take lower your future taxable amounts.  Now is the time to see if you’re on track to save enough this year.  Kick it up a notch and increase your regular savings if you need it.  Now is the time to reduce long term bond funds what will shrink when interest rates go up.

There is still time. However, don’t put it on your “To Do” list.  Put it on your calendar for a specific date and time you will do this. This is how I do things these days when I can see the value in accomplishing certain tasks.  Think of how much an hour you’re making when you save $500 or $1,000 on your taxes.  And it doesn’t take an hour folks.

Still want to put these critical tasks on a “To Do” list?  Well, it’s time to burst your bubble with a Harvard Business Review article that says they don’t work: http://goo.gl/wGd2m6

Nike is right. Just do it.

Umbrella Liability Policy: NOT

Umbrella Liability Policy: NOT

Why doesn’t anyone ever tell you NOT to buy an umbrella liability policy? Hold on for just a minute while I get prepared to answer this question. But first this discussion:

Now we’re in the business of helping people make good financial decisions.  That includes looking at what kind of protection you need for what you’ve accumulated over the years or are about to accumulate.

To those ends, an umbrella liability policy adds another layer of insurance protection to your home and auto liability coverage.  It usually comes in increments of one million dollars and it doesn’t cost too much, maybe $200 or so dollars a year for the first million, less for additional millions.

Now if you’re like most middle class folks you might have $100,000 equity in a home, $100,000 in retirement accounts and $25,000 in savings.

If your auto and home liability coverage is $300,000 or more, then why would you need this additional coverage? In many cases you wouldn’t need this protection under the condition I just outlined.  First of all, most retirement accounts offer creditor protection (think of OJ Simpson avoiding the Goldman family lawsuit awarding them $30 million, but not collecting anything since OJ’s money was in the NFL pension plan). So now you only need protection for your $125,000 of equity and savings, right?

 

Well maybe. That’s where the rub comes in. In doing my research for this missive, I saw the scare tactic of gigantic lawsuits that award the plaintiff millions of dollars, leaving you or some other defendant destitute. If you don’t have enough assets they can get to, they might GARNISH your wages. Oh heavens! But it’s only 25% (federal), or even less in some states, that they can take away your from you wage income through further court action.

So, what does an umbrella liability policy cover?

Bodily Injury Liability – covers the cost of damages to another person's body. Examples include the cost of medical bills and/or liability claims as a result of:

• injuries to other parties due to a serious auto accident where you are at fault,
• harm caused to others as a result of your dog (yeah, you probably should have taken him to obedience school),
• injuries sustained by a guest in your home due to a fall, or
• injuries sustained by a neighbor's child who falls while playing in your yard.

Property Damage Liability – covers the cost of damage or loss to another person's tangible property. Examples include the cost associated with:

• damage to vehicles and other property as a result of an auto accident where you are at fault,
• damage claims incurred when your pet rips a friend's priceless oriental rug to shreds, or
• accidental damage to school property caused by your child (hey, you can't disown them).

Owners of Rental Units – helps protect against liability that you may face as a landlord. Examples include the cost of liability claims as a result of:

• someone tripping over a crack in the sidewalk of your rental property and suing you for damages, or
• your tenant's dog biting someone and you being held responsible for the injuries.

Coverage is also provided should you be sued for:

• slander – injurious spoken statement,
• libel – injurious written statement,
• false arrest, detention, or imprisonment,
• malicious prosecution,
• shock/mental anguish, and
• other personal liability situations.

Source: GEICO

Ok. So here’s my answer. Now that you know many of the facts, you can make an informed decision about whether you need an umbrella liability policy. In many cases you are better protected by having one.  Remember, I didn’t tell you NOT to get one. That will make lawyer happy, but not that happy. 

Ups and Downs

Why does the stock market go up and down every business day?

Answer: I don’t know.  I guess you can stop reading here unless you think we will have a surprise ending.

It’s a 24/7 world and the real stock markets never close.  When I was with Bank of America in the old days (before the purchase by Nations Bank of Charlotte, NC) we had stock trading centers around the world.  We were always ready to buy and sell in large quantities to make money and protect our clients if we could.  Notice making money for the bank came first.  It still does.

Professional traders make money by buying, selling, borrowing, loaning, leveraging and creating securities.  Some of these securities represent ownership of companies, but more and more securities these days seem to be created to take advantage of some situation where an artificial ownership of some element is devised to “hedge” or “leverage” some potential or actual situation in the markets.

Confused? Me too.

All I know is that these traders (small and large) make millions in what is characterized as “providing liquidity and efficiency” in the marketplaces.  Taking advantage of mispriced securities in one market over another market is just one example I understand.  Lawyers and Accountants help traders structure and execute transactions to take advantage of situations.  Everybody wins.  Or so they say.

For you and me, the individual investor, whether we’re active or passive, the deck is stacked against us.  We’re losers.  Hard to beat the big boys and girls.

First they play mind games with us.  They mislabel, misrepresent, and hype whatever is the popular fear or greed, but more often fear. They predict the future.  They tell us where these markets are headed next.  They tell us what new securities to buy to protect us from that event or make money from that event. They are usually wrong, but they get good press unless they are really wrong.  Think of Meredith Whitney’s now famous prediction of a muni bond meltdown in 2011. 

How do she get good press? Well, once in awhile they get it right and the press features them frequently thereafter.  Ms. Whitney was a good case in point since she is acknowledged to have predicted the 2008-9-credit crunch.   Think broken clock is right twice a day.   There are hundreds of stories like this one. 

So how we win this loser’s game with the deck stacked against us?  Is there an easy answer?  No.  But I’m a planner, not a money manager or a trader.  I’m also a reader.  Over the years I’m read some really good books and recommended several to help ordinary investors to understand what is going on and do as well as they can given the game we’re required to play.  We don’t make the rules.

If you’re interested in my reading list designed to educate clients, just send me an email.  I’d be happy to send you a copy.

Now for the big surprise ending that contains the answer to the question as told to me by Ken Fisher, Forbes columnist, money manager, and my former boss:  More sellers than buyers the market goes down.  More buyers than sellers, the market goes up.  “It’s all supply and demand.”  And now you know the answer.

Why Don't People Take My Advice?

Why don’t some people take my advice especially when it comes to making a will?

Frequently I’m asked, or offer advice on my own initiative, about do-it-yourself wills and other estate planning documents.  Estate planning documents can mean a durable power of attorney (durable means it is still valid during incapacity or physical absence), advance health care directive (medical power of attorney), living will (how you want to be treated), revocable trust (living trust) and memorandum to your executor about your personal effects and funeral/burial arrangements.

OK, that’s a mouthful in the previous paragraph.  What’s my gripe this time, you ask?

You didn’t ask?  Well, here it is anyway.

When I worked in two different bank trust departments we loved it when people died without a will and left things in a mess because of it.  It was even better with lots of property or accounts without beneficiaries or unreachable beneficiaries. That meant our fees got paid (we didn’t take on cases where we couldn’t get our fees). 

Judges frequently sent this work our way because we were good at getting resolution no matter how long it took, or how much it cost.  Notice the bank was interested in how much it might cost the estate and where the money was to come from for our fees.

How bad can things be when someone dies without a will or maybe an advance health care directive and is incapacited?  Think Terry Schiavo of Florida.  Remember her plight?  Google her name to get the story in full, but I’ll tell you she went into a coma without much chance of recovery and her husband and her parents fought a battle (15 years) whether to pull the plug, or not.  Messy.

Attorneys make the rules and attorneys reap the rewards when people don’t follow the rules.  They like battling heirs.  Everyone makes money here except the heirs.  Why? No written instructions (will) or proper title (joint tenants with rights of survivorship, for example) or an identifiable beneficiary are typical ways to end up in court where the judge decides.  Everyone is sure what the decedent (dead person) intended, but never got around to completing in a written form.

So now we get to Do-It-Yourself.  I have several articles I hand out that make the case for or against this method of doing it on your own without an attorney.  My premise is just do something.  Don’t end up in the “Would, Coulda, Shoulda” category. It is a mess that you leave behind.  No one knows when our number is up. Think of your family or friends or organizations that will have to deal with the consequences of your inaction. 

Not motivated? Then think about the attorneys who might get a new boat because of your reluctance to put it in writing.  Now that should get you going.