Independent, Fee-Only Financial Advisor

Independent, Fee-Only Financial Advisor

Thursday, September 26, 2013

Bermuda Blues

The Academy of Business Education had their annual conference in Bermuda. It was such a burden for me to pack up my Bermuda shorts and head to the island for a cool, summer breeze. When all was said and done, though, I decided it was a nice place to visit, but I wouldn't want to live there.

Don't get me wrong! It's breathtakingly beautiful. The island was created by a volcano. It is long and narrow with fish hooks of land masses at either end. The result is a set of protected beach coves with rock sculptures in the water. Stunning!

The temperature is perfect! Highs in the low 80s and lows in the mid-70s. What's not to like? Right?

There are only about 65,000 permanent residents on the island, and there is nothing (and I do mean nothing) nearby. Everything is incredibly expensive. All goods must be shipped in. Real estate is mostly inherited. Buying your own property requires millions. You either work for the government, or you work in the resorts. Opportunity is limited.

Each household is limited to one 4 cylinder car. Many people travel by scooter. Gasoline is about $9 a gallon. There are only 3 main roads on the island: North Shore Road, South Shore Road, and Middle Road. They are narrow, with some bordering on the wall of someone's house or garden. Traffic is always brisk. Sidewalks are almost nonexistent. Rental cars are not available. Travel by bus or ferry is the main option for getting around the island. We didn't realize how spoiled we are!

So, we were glad to take that flight back across the water to the good ole USA. We came back to big grocery stores with reasonable prices, gasoline just over $3 a gallon, and two cars in our garage. How decadent we Americans are!

Final GDP numbers for the second quarter came out this morning. They were a tepid 2.5%. Weekly unemployment claims continue to fall. So, it's not great news, but it's improving news. And I'll take slow in the US over Bermuda any day!

Friday, September 20, 2013

Beta Bogle, Data Devil

What a treat to sit at the feet of one of my heroes in the financial services industry, Mr. John Bogle. His nickname in college was Beta Bogle, or he was sometimes called Data Devil. And he was still full of it... data, that is.

Mr. Bogle is still preaching the value of indexing and the evils of expenses imbedded in most pooled funds. He says there has been a change or shift in thinking in the market over the last few decades. Why? Five reasons.

Turnover ratios have expanded 10 fold since Bogle's early days. He divides market participants into two categories: investors and traders. The traders have taken over!

Next, communication technology has exploded. Cable channels abound that deliver "information" (Bogle sneered at this!) on a 24-7 basis. News is "breathlessly imparted" (the old guy has such a sharp wit). Bogle says that when crises happen, "Don't do something. Just stand there."

Financial innovation has made the process complicated. Bogle prefers simple and claims that indexing is unpopular on Wall Street.

Investment banking changed from private ownership to public ownership. They started using OPM-- other people's money-- and it changed their focus from client service to profits.

And finally, the focus has shifted from the value of future cash flows to the price of the stock.

Bogle says that the current process only enriches the middleman-- Wall Street. He was a trip! I'm going back to my Keynes and find Chapter 12. Oh, and he signed my book! Love this guy!

Thursday, September 12, 2013

Back to red...

Markets broke the recent winning streak today, as all indexes ended in the red. We are still close to our annual high, though, as investors watch the Federal Reserve for signs of a pullback. Economists are betting on continued tapering. That means higher interest rates, but will these filter down to the short-term portion of the yield curve?

Housing has already lost a little steam because of the spike in long-term rates. I'm noticing yields on money markets creeping (and I DO mean creeping) higher. Could there be relief in sight for CD investors?

The good news for retirees on fixed incomes will be bad news for business, though. So far, the economic news has been JUST good enough to fuel gains in the market but not SO good that our friends at the Fed are tempted to put the brakes on a good time.

Whoever follows Mr. Bernanke (I'm a Yellen fan myself) will be under pressure the keep the easy money party going. Not only does the U.S. economy depend on this, but economies around the globe benefit from this policy.

Sooner or later, though, it will come to an end. Let's hope for a long, slow transition!

Obamacare Additions

Mississippians who want to access the healthcare exchange will go to You'll plug in your state of residence, then answer a few questions. At that point, you'll get quotes on various coverage options. Subsidies will be paid directly to the health insurance companies, so your out of pocket premium expense will be reduced based on your income. A family of 4 with adjusted gross income of $88,000 or less will be eligible for subsidies.

Monday, September 09, 2013

Ready or Not... Obamacare

October 1st marks the beginning of sign-up for the federal exchanges for health insurance. Not everyone will be rushing to sign up, though.

If you're 65 or older, you are on Medicare. While you may have a supplemental policy, your main coverage is already through a federal program. For those on Medicaid, the exchange is not for them.  Mississippi did not expand Medicaid, so only those families with an income of $23,550 (4 people) and below qualify. When you go to the exchange, you'll answer questions about your income, so this will determine if you're Medicaid qualified or not.

If you work for a company that offers health insurance, you won't use the exchanges. Employers must complete the process to show existing coverage meets the new federal standards. Nationally, 2/3 of working people have coverage through their employer.

So who are the exchanges for?

Well, they are for working people who don't have coverage through their employer AND don't qualify under income requirements for Medicaid. Folks who work for small companies and folks in basic service jobs will find themselves using the exchange.

Having trouble finding the exchange for MS? Check with the State Insurance Commissioner. While Chaney's office won't be running the exchange, they should be up to speed on the process. The state office will offer a small company exchange, but watch out. There'll be no subsidies on this one.

If you go through the federal insurance exchange for MS, you'll answer those questions about your family and your income. You'll receive quotes on coverage, along with figures for the subsidy. These will actually be tax credits. The average is expected to be $2,700-- nothing to sneeze at!

You can choose a basic coverage, called the bronze level. It will have the lowest premium but the highest out of pocket expenses. The silver level is pricier but offers more coverage. Finally, you can opt for a catastrophic coverage that only kicks in after you've spent $12,700.

So, there are options. And what if you decide to NOT get insurance? Expect to get hit with a penalty of $95. Why not skip the insurance and just pay the penalty? Because you'll have health insurance! One big event in a year can pay for itself.

Coverage starts in January. So... ready or not!

Tuesday, September 03, 2013

The open carry law has been upheld. End of discussion. But for many people, the answer is to exert personal freedom by posting a "No Guns Allowed" notice on your premises. It warns all who enter that, while the State of Mississippi says they can carry guns, MY home and business are out of bounds for such activity.
Municipalities are concerned about the implications of the new law. How do police and sheriff deal with unruly citizens who are packing? How do they keep other citizens safe when a gunfight could break out any minute? In Jackson, they plan to pass city ordinances declaring municipal buildings and lands off limits to gun carriers. This could spread to local festivals. And while the legislature pushed through this bill, they, too, have used the notice in the capitol building.
So, forget fighting these guys in court. Let's just print up a bunch of "No Guns Allowed" stickers and begin posting them everywhere. In churches. In schools. In the ladies room. On the golf course. At the mall. EVERYWHERE!
The best reason to do this? It will drive them crazy!