Sniffed Links

Back with your links this week. With the recent Wells Fargo fiasco it is a good reminder to check your credit reports regularly.  It also makes we reflect on how these things can happen. With the numerous regulatory agencies in existence it is beyond me how any bank and financial institution can get away with things like this. Of course the problem lies in how these regulatory agencies are structured. In our world it is FINRA and the SEC. The Consumer Financial Protection Bureau will surely be making its voice heard soon and now we also have the DOL in our "business". FINRA, SEC and CFPB are much different from the DOL in the fact that they can levy fines. Fining companies is needed but it also is what leads to the bigger problem in my opinion. The CFPB's fine on Wells Fargo came well after the acts started. Shouldn't the acts be caught sooner and stopped? Are these organizations protection agencies or fine generators? This is a much longer discussion for another day but the conversation is needed.

Policing the Banks Is an Inside Job - The New York Times

America is running out of vacant apartments - Business Insider

Why does it feel like the economy is still stuck in neutral?

FAFSA and DRT Process


All opinions in the links are the authors' own and are not meant to be investment advice.

Market Commentary - October 2016

I guess this month is as good as any to address the election year and the relationship to elections and markets. Before sharing some statistics let’s address the fact that this year’s election seems to be bringing out more “fear” of what the market may do if a particular candidate wins. While the markets could have a short term reaction we do not believe it is necessary to make any sort of long term investment decisions based on this. Volatility is what makes markets what they are and at times it is higher or lower than the average, but volatility is a constant. This is not to say tweaking a portfolio is unwarranted but making drastic changes based on who the next President might be is not advisable.

Now on to some anecdotal numbers just for fun. Historically, both parties have been good for markets with average annual gains of 6.7% under Republicans and 9.7% under Democrats. A misconception (one we have even made) is the assumption that a divided government is better for markets since both parties will have to "give in" and compromise or get nothing done. The annual returns paint a much different picture. In the two years following an election, the S&P 500 has gained on average 16.9%, when one party controls the White House and Congress vs. 15.6% when one party controls Congress and the other party controls the White House

One final interesting stat I came across was regarding the S&P 500's performance the three months leading up to an election. Since 1948, if the S&P 500 rises from July 31st through October 31st, 88% of the time the incumbent party/person gets reelected. Take that for what it's worth, which honestly isn't much!




Fed Week Sniffed Links

The Fed decided to leave rates unchanged yet again. The markets love it. Not sure we do but alas what can we do. The Fed presumably knows more than us. For now, enjoy the ride and buckle up for what could be bumpy fall. Here are this week's links. The first one is pretty interesting. You can plug in your income and see where you rank worldwide. Enjoy.

Global Rich List

How Higher Wages Could Sink the Economy | The Fiscal Times

10 Things Found In Warren Buffett's Office | SparkFin

The Greatest Bubble of All-Time?


All opinions in the links are the authors' own and are not meant to be investment advice.

Volatility Returns Sniffed Links

Most of the Summer marked what seemed like one of the least volatile few weeks in recent memory. Gone were the triple digit swings in the market. We welcomed the mundane double digit ups and downs. Well the volatility has returned. We believe it is a mix of the "will they or won't they" Federal Reserve debate around interest rates that is once again mixing markets. We still think they will raise rates at least once this year but we certainly aren't counting on it. Mix this with the absolute craziness of the election and we expect some volatile weeks ahead. Here are some links to get you through the weekend...

  1. Birth of the Index Mutual Fund: 'Bogle's Folly' Turns 40 - MoneyBeat WSJ

  2. How Higher Wages Could Sink the Economy | The Fiscal Times

  3. Here's the Salary You Need to Buy a Modest Home in New York City, San Francisco & 25 Other Places — Reality Check | Apartment Therapy Therapy

All opinions in the links are the authors' own and are not meant to be investment advice.

Market Commentary - September 2016

While most of the focus lately seems to be on the U.S. and European economies, emerging markets are slowly starting to show some signs of life. If the global economy is going to stage a recovery, emerging markets may hold the key. The world seems fixated on the Federal Reserve and whether they will or won't hike rates by a quarter point and the impact of BREXIT. Much more attention needs to be shifted to emerging markets.

Emerging market countries possess securities markets that are progressing toward, but have not yet reached, the standards of developed nations. The four largest emerging market countries are known as BRIC (Brazil, Russia, India & China) followed by Mexico, Indonesia, Turkey & Saudi Arabia. While a country like India is already an enormous economy, they are just scratching the surface of their potential.

While advanced/developed economies have seen minimal GDP growth the last four years, many emerging market countries have experienced contractions. Many remain export heavy economies which rely on commodities (oil, wheat, gold, natural gas etc). The violent crash in commodity prices from late 2014 through early 2016 put pressure on many emerging markets. The asset class has seen negative returns in 4 of the last 5 years but, so far in 2016, emerging markets are showing much better returns and are well above most international indices. 

The importance of emerging markets in the global economy can not be forgotten. Historically they are export focused economies but as they grow and develop, they can turn into consumption driven economies. This makes the long term growth potential very high. For example, less than 300 motor vehicles are owned per thousand people in each BRIC country with India coming in at only 18 cars per thousand people! Another example, less than 106 computers are owned per thousand in each BRIC country. The opportunity for global growth and expansion is enormous. According to the IMF, emerging markets share of global GDP hit 50.4% in 2013 and that was up from 31% in 1980.

Most emerging market countries sport low debt levels and are able to grow rather quickly. Couple that with a young population demographic and further advances in technology and that should lead to an increase in productivity and spur further economic growth. Of course many risks still exist, such as political unrest, currency fluctuation and inflation to name a few. The risks and volatility in emerging markets can be extreme but if commodity prices continue to stabilize could the next big global growth driver come from "the other guys”?


Rio Fever Sniffed Links

Every four years I feel like the Olympics sneaks up on me. Of course I know its coming since NBC usually starts promoting it 12 months in advance but I don't really get excited about it until it starts and then I go all in. Other than the normal events everyone has been watching (swimming, gymnastics, etc.) I have enjoyed Ping Pong and Rugby. I never realized how quick one of these Rugby matches can be. They go for like 15 minutes and then its over. Anyway, if you find some time between commercials, here are some interesting things to read.

Most Underfunded Pension Plans: States - The Big Picture

Maybe Negative Yields Are a Sign of Prosperity - Bloomberg View

Facebook 2026

Arnold Palmer State of the Game: Golf Goes for the Gold | Golf Channel


All opinions in the links are the authors' own and are not meant to be investment advice.

Market Commentary - August 2016

As we approach a little past the mid-way point of the year, it's always good to reflect on the first half. I can confidently say the first six months of 2016 was one of the wildest periods in recent memory. Ranging from a potential market crash in China, crumbling oil prices, rising oil prices, Brexit panic, Brexit rebound and numerous things in between. 

One reason for these wild market swings could be the fact that we have less clarity on the global economy and interest rates today then we did at the beginning of the year.  If you recall in December of 2015, the Fed finally raised rates for the first time in nearly 10 years and took rates from zero to 0.25%. The Fed took action and stated their plan of 2-3 rate hikes in 2016.

Seven months later we are still at 0.25% with seemingly no clarity of when the next hike will be. Also, rates have continued to drop here and around the world. Now there are talks of the Fed possible lowering back to zero or even lower. (For what it's worth we don't think this will happen). The employment picture in the U.S. hasn't helped provide any clarity with a staggeringly low May production of only 38,000 jobs (the worst since September 2010) and then a June in which a whopping 287,000 jobs were created.

The U.S. equity market has been extremely resilient as we stand near all time highs. But the issues we faced at the beginning of this year did not all resolve themselves and are likely to shed uncertainty for some time to come. 

As we always stress, risk management is the most vital component for an investor. The recent large rally in the equity markets gives investors a chance to catch their breaths and hit the reset button. Many investors were caught off guard by the severe drop in January to Mid February. Now is a good time to revisit your risk profile and make sure it matches up with your comfort level. 


The views and opinions expressed are those of Divergent Planning only and have not been presented on behalf of, or endorsed by H.Beck Inc.

Sniffed Links

Ara got back from Armenia a couple of weeks ago and I am heading out for vacation today so there may not be links for a couple of weeks. With that in mind here is a double dose of really great reads.

Will anyone still own a car in 10 years? | World Economic Forum

Dawn of the Virtual Assistant - The New York Times

Why Most Retirees Never Spend Their Retirement Assets

Can We Ignore the Alarm Bells the Bond Market Is Ringing? - The New York Times

SLCG Blog: Things Go From Bad to Worse for BrokerCheck

Stock-picking active managers having their worst year ... ever


All opinions in the links are the authors' own and are not meant to be investment advice.


Brexiting Right Along Sniffed Links

There has been no shortage of stuff to read for the past week. If nothing else Brexit gave an unending amount of content to sort through. Below our some of our favorites. Enjoy the long weekend and stay safe. 

Dash of Insight| Weighing the Week Ahead: Is the Brexit Vote a Turning Point for Stocks?

The More It Hurts, the More You Make: Investing After Brexit - MoneyBeat - WSJ

Taking Stock of European Equities

Bear Control: How To Keep Bears Away From Your Garden And Yard


All opinions in the links are the authors' own and are not meant to be investment advice.

More Brexit Thoughts

We have spent some time thoroughly discussing our reaction to the UKs decision to leave the EU. As you probably know we do not make asset class changes to client portfolios for short term reasons. Historically doing so is not prudent and rarely results in gains worth noting. In fact the opposite is usually true. The short term decline in the market has been severe and swift. It is, however, important to remember that fundamentally nothing will change for two years as the EU and Britain decide how to handle the exit. 

Our challenge now is to look out further. What does this mean 3-5 years out? 

Risk is one of the main things we manage for clients. This encompasses all types of risk; Economic risk, market risk, interest rate risk, to name a few. The Brexit vote however pushes Europe toward a risk that we usually mostly avoid. Political risk. Investing in mostly developed markets helps to minimize political risk to a certain extent. This is a risk often seen in emerging markets and under developed countries. We believe political instability is usually best managed by avoidance or a smaller percent of holdings. We believe the Brexit vote marks a time of potential political instability not seen in Europe in decades. 

Most modern investment theory and "prudent" portfolios call for investment in international equities. For the most part we have agreed with these models but as we move to a more global economy and freer trade the term "international" has taken on a different meaning. For example, many US companies have a large presence globally and sell their goods in many countries across the world. This makes them "international" yet when modeling portfolios they are classified as US Equities. The same goes for many international companies as well. 

As we look at the future of Europe, we are concerned about their economic growth for sure but we also know that oftentimes economies and market prices do not work in the same direction. The question we have to ask ourselves is whether we think stalled economic growth is a longer term concern for the European equity markers. Short term risks remain something we do not speculate on but we do make allocation changes based on longer term risks as we perceive them. This can be seen in our very low percentage holdings in emerging markets over the past several years. 

During times like these I like to look back at some of the more influential books when it comes to investing. A quote for Professor Jeremy Siegel in his bookStocks for the Long Run…

"Fear has a greater grasp on human action than does the impressive weight of historical evidence"

Now go look at this chart shared by industry colleague Michael Batnick. Take note of how a balanced portfolio responds to “crisises”. If this indeed turns into a crisis then you can take solace in the market reaction to other major events. 

We will be seeing many of you in the coming months to discuss changes. If, however, you want to talk now don’t hesitate to reply to this email and we can schedule a phone call. If we decide a change is prudent sooner than your meeting then we will reach out. We want to talk to anyone who is worried, concerned or just wants to talk things through. With that said, enjoy your Summer, vacations and family. Try to let us do the worrying for you. 

Brexit is Official

Britain has voted to leave the European Union. The historic vote is causing major fallout in global markets. The sell-offs will likely continue throughout the day if not longer. One of the biggest reasons for the plunge is uncertainty. The markets don't know what this means for the UK or for Europe. Or for the world, for that matter. We have always said that "certain uncertainty" is the biggest cause of market volatility. Many are saying nothing will likely happen for at least two years because of exit negotiations. This could be the bigger issue. A longer drawn out exit means a longer period of uncertainty about the future. In all honesty it is a bit of a mess and no one really knows right now what things will look like. We probably won't know for many years.

Over the coming days you can expect a lot of over reaction and over analysis. Part of the reasoning behind the sharper declines today may be related to the run up the markets had in the previous days based on an assumption the vote was going the other way.  People who were already looking for a reason to sell out of the market will use this as a way to validate their choices. No disrespect to the UK but their economy may not be big enough to have a huge impact globally. The bigger concern is if the EU loses more members. Countries like Greece, Spain and Portugal are still dealing with extremely shaky economies and having other members leave would not bode well for them or anyone involved and could trigger defaults.

Europe will likely continue to have some economic struggles with the decision but we feel the global economy is much to large and global in nature for there to be widespread economic slowdown solely based on the UK's decision. Either way it is the new reality for the UK and for Europe. They will figure it out. 

As always, don't hesitate to contact us if you have questions or want to talk this through.

Market Commentary - June 2016

Less market commentary this month and more of a short economic commentary. 

Over the past several years much has been made about the slow down in mall traffic and its impact on the US retail industry. Retailers like Macy's, Nordstrom, Target, Kohl's, and JCPenny have reported slower sales, limited growth opportunities and weaker guidance. Since these "numbers" are an important facto in many economic calculations it can appear the US consumer is not spending and the US economy continues to be slower compared to historic numbers

Some of the retail malaise could be due to a soft economy but the reality is the shift to online shopping has been massive. Most people know this already but just to put the growth in perspective if we talk out 2008 and 2009 online sales have increased by a minimum of 14% annually and surpassed $300 billion in 2015. It is also no secret where most of this shopping happens. In fact you probably have Amazon open in one of your browser tabs right now. In fact it is becoming more probably that you have Amazon open on your phone's browser or you have the app installed. 

It isn't just in the US, either. Alibaba is enormous and makes some of Amazon's statistics look small. 

For many years economists looked at Walmart as a barometer for economic health but the time has come to look at Amazon as a barometer as well. Walmart is still the largest private employer in the world so there are still many great things to be gleaned from them statistically. But to  judge the US consumer do we need to look any further than Amazon? Or your neighborhood doorstep?

Sniffed Links

Three very solid links for you this week. Typically we put these in no particular order but this week please read the first one and then please take action. I can't tell you how hard it is for us to get clients to get their estate documents done. Is it a pain? Yes. Is it fun? No. Is it extremely necessary? Yes. Get in touch with an estate attorney and get it done. 

You know you should have a will–but WHY? |

401(k)s Tweak How They Charge for Expenses - WSJ

Eager to Be Wrong


All opinions in the links are the authors' own and are not meant to be investment advice.


No Links, Just a Thought

I likely won't post links next week since Ara and I will both be at a conference. I feel a little guilty because as you see there are no links this week either. Much of what we read this week was too "inside baseball" for your interest. As we have mentioned before our industry is changing (for the better in our opinion). Fees are coming down (even in some mutual funds). A fiduciary standard is on the horizon. More transparency is becoming the norm. Technology is making us able to do our job even better and with more efficiency. More regulation and more paperwork are coming but that is nothing new. The main thing you need to know is that there has probably never been a better time to get financial advice than now. Someone said recently that the days of people getting into this industry just to make money are over. It's just not that easy anymore. It's never been easy for those who do it right. Luckily, its becoming harder for those that don't.

Market Commentary - May 2016

A lot of critics, myself included, have argued that a majority of the monetary policies instituted by central banks have helped to boost asset prices. While this isn't necessarily a bad thing, the issue is many argue this helps those who already have money and ignores those who do not. For example, the big banks who are sitting on large cash piles but unwilling to lend to those who want a loan. To put things in perspective, the richest 62 people are as wealthy as HALF of the worlds population. This wealth inequality gap has been widening since 2009. As we see a continuance of zero (and even negative) interest rates this issue could only get worse. 

The term "Helicopter Money" was coined by economist Milton Friedman in 1969. Of course it doesn't literally mean helicopters dropping money from the sky but the idea is basically just that.  If the goal of a central bank is to raise inflation and economic output, one idea is to directly give citizens either a lump sum of cash or grant a universal tax rebate. The hope is this would lead to increased spending, small business creation and lead to economic expansion to kickstart economic growth. This would bypass the banks who have largely just sat on all the money supply created by quantitative easing. 

I don't see this every happening but I also didn't think negative interest rates would be something we would ever have to address either. I am very intrigued by the idea if for no other reason than to see the economic ramifications. On the flip side I feel like most Americans have received a rebate in the form of cheap prices at the gas station and this hasn't really lead to increased spending and economic growth. The cheap gas prices also are only felt by those with cars who drive a lot. It doesn't necessarily help people who live in cities and may not drive much if ever. 

Despite the recent rise in the US markets, the last 24 months shows very little progress in terms of economic growth. In fact Q1 of 2016 was about what we expected....a seemingly slowing economy. Interesting times for sure.