This is my occasional — sometimes weekly, sometimes monthly — posting of articles from around the internet that I found interesting and hope that you do, too.

Why You Might Want to Leave a 401(k) With a Former Employer

It looks like the preferred choice by the Department of Labor (DOL) is for 401(k) participants to leave their 401(k) accounts with their former employers, although heretofore financial advisors seem quick to recommend they roll the accounts over to an IRA for more flexibility…and likely higher fees. This article cites a number of reasons to take the DOL preferred choice and to not rollover the account. The article cites a few reasons, including lower-cost funds might be available in the plan and that the plan offers protection against creditors. With respect to the first reason, we do try to design fund lineups for plans that include the least expensive fund choices and funds that cover the investment spectrum. The DOL is wrong, though, to assume that the rollover choice will always be the more expensive option, as smaller plan can have plan fees—not necessarily fund fees—that are quite high.

Melinda Gates: I spent my career in technology. I wasn’t prepared for its effect on my kids

Count me as a bit surprised to see the angle taken in this article by Melinda Gates, who probably has gotten over being referred to as Bill’s wife, on the subject of technology in the family. This article offers some helpful steps to help manage family technology issues. One of her favorite things is to have a “device-free dinner,” which is already a policy at our home, so it’s one of mine, too, but she has other good suggestions, too, along with a bunch of rabbit-trail website links for more discovery. If you have children, read this now.

How to Avoid Focus-Stealing Traps

This blog from Evernote—I’m a big user of it—is a couple of weeks old, but I only just got around to reading it—look, a SQUIRREL! I think it’s worth your time to read it. My first takeaway was that, “a failure to focus inward leaves you rudderless, a failure to focus on others renders you clueless, and a failure to focus outward may leave you blindsided,” which is an excerpt from a new book by Daniel Goleman, well known for his emotional intelligence books. The blog highlights three ways to regain focus: 1) voluntarily disengage our focus from what’s distracting us; 2) work toward resisting distraction so that we don’t gravitate back to it; and 3) concentrate on what we’re supposed to be doing and imagine how good we will feel when we achieve it. It also includes some very practical ways to focus, like leaving your phone in another room. I particularly identified with one‘s vulnerability to distraction when I’m fatigued from too much focusing. Even as I type this, I can see that there’s a bold “3” next to the word “Inbox” that I can see on the portion of my Microsoft Outlook application that’s showing. Even though I have all notifications turned off, the number three is beckoning me…be right back.

Hurricane Harvey’s Impact — And How It Compares To Other Storms

Give me a topic of interest and combine it with clever ways of displaying the data, and I’m hooked. Check out this look at hurricane rainfall totals.

This article is what seems to me to be a pretty thorough look at the economic impacts of hurricanes and other weather-related events. Hurricanes have been the most devastating of natural disasters, and it’s looking like Harvey’s costs could dwarf Katrina’s 2005 $160 billion price tag, and that’s with Irma and Jose on his heels—and then there’re hurricanes K-Z.

Phillips Curve Doesn’t Help Forecast Inflation, Fed Study Finds

Something that every Economics 101 student learns is the Phillips Curve. That concepts asserts a connection between unemployment and inflation, saying that as unemployment falls, inflation rises, as employers are forced to raise wages to attract employees. That hasn’t happened in the current cycle, however, as some have fretted, and the Federal Reserve’s latest research into the concept has produced the headline, above. Not that anyone has asked me, but I think this is another anomaly that has resulted from the financial crisis and ultra-low-forever interest rates. I’m not a fan of shifting paradigms, but I think they might have moved around a bit as a result of these two things.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Historical performance is no guarantee of future results. Investing in mutual funds and ETF’s involves risk, including possible loss of principal.

The post What I Read This Week | September 2017 appeared first on Strategence Capital.

Euro Zone Growth Revised up to Highest Rate in Two Years

https://www.reuters.com/article/us-eurozone-economy-gdp-idUSKBN18Z13N

For a while, the U.S. was the best house in a bad neighborhood. It’s economic growth was tepid, but compared to others, it was relatively strong. That view may need to be reassessed, as Europe posts stronger economic numbers, as this story describes. Even though this is reflected in the relative stock market performance of the two countries, there is very little correlation between economic growth and stock market returns. There is a much stronger, inverse correlation between valuations and stock market returns, but there European stocks have the edge, too.

Fiduciary Rule Fight Brews While Bad Financial Advisors Multiply

http://www.fa-mag.com/news/fiduciary-rule-fight-brews-while-bad-financial-advisors-multiply-33122.html?section=43&utm_source=FA+Subscribers&utm_campaign=784edfd13b-FAN_FA+News_Ruby_Recept_LG_Columbia_060717&utm_medium=email&utm_term=0_6bebc79291-784edfd13b-234719005

I hate the idea that we have to have a Fiduciary Duty law, as it means more compliance work, even though in our advisory relationships, we act as a Registered Investment Advisor, where we already a fiduciary duty to our clients. Still, when I read the anecdotes in this article, I know the law is needed. You owe it to yourself to read this article, if for no other reason than to know some products to watch out for. If you’re like me, you’ll find yourself fuming as you read the cases.

RIA Models Retainer Fees After A McDonald’s Menu

http://www.investmentnews.com/article/20170526/FREE/170529930/ria-models-retainer-fees-after-a-mcdonalds-menu

At times, I find myself thinking that if I read another article about what millennials want, I’ll puke. Other times, I wonder what we can do to attract them to our practice…maybe avocado toast and coconut milk lattes? I do like the idea of alternatives to the traditional assets-under-management (AUM) fee model, and this article talks about an advisor offering he calls a “ ‘McDonald’s menu model’ of retainer-fee options.” In our RIA, we have the flexibility to implement these pricing options and have begun to offer them to clients where the traditional AUM fee model doesn’t make sense.

Five Common Mistakes People Make When Paying for College

https://www.wsj.com/articles/five-common-mistakes-people-make-when-paying-for-college-1496628841?tesla=y

With one in college and another soon to be there, I’m drawn to these article like a moth to a light. This article suggests that these are biggies: 1) Not applying for aid; 2) Not looking into a 529 [state tax benefits make many of these very attractive]; 3) not budgeting for true costs; 4) misfiring on scholarships [neglecting smaller ones, look local first]; 5) Obsessing about elite schools.

2017 Trends in Investing

https://www.onefpa.org/business-success/Documents/2017%20Trends%20in%20Investing%20Survey%20Report%20-%20FIN2.pdf#search=2017%20trends%20in%20investing

This is a broad ranging survey of financial advisors. It covers the topics of Investments Used, Diversification, Asset Allocation/Rebalancing and others. It’s a treasure trove of information. One question asks about the level of confidence in a 60/40 stock/bond portfolio to produce similar results as it has historically. Degrees of confident total 50%, while those expressing doubt total 46%. (Put me in the very-doubtful camp.) 73% of respondents say that alternative investments comprise no more than 10% of client portfolios. When asked about the economic outlook over the next 6 months, 1 year, 2 years, and 5 years, bullishness was recorded by 52%, 51%, 47%, and 43% or respondents, respectively. Lots more in this piece. FWIW, 95% of respondents are CFP practitioners.

Smarsh Survey Highlights Firms’ Struggle To Keep Up With Electronic Communications

http://www.smartbrief.com/original/2017/06/smarsh-survey-highlights-firms%E2%80%99-struggle-keep-electronic-communications?utm_source=brief

This article discusses the trouble that the financial services industry is having in monitoring client communications, all of which is regulated. 52% of respondents said the biggest compliance risk is with text messaging. Not even caring about the compliance aspects, I concur with this, as it may be clients’ favored way of communicating, LPL Financial and others says no because of the apparent inability to retain and oversee text messages. As in many cases, the regulatory framework can not keep up with technology.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing

The post What I Read This Week appeared first on Strategence Capital.

Here’s a collection of readings I found interesting this week. I hope you do, too. Got any additions?

In his weekly, “Thoughts from the Frontline,” John Mauldin addresses a subject that has increasingly mentioned of late, that is, the possibility of negative interest rates as a tool of stimulating the economy. Of course, we’ve had ultra-low policy (i.e. Federal Reserve) rates for a while now, but as he says in the piece, “we’ve seen a clear tendency on the part of central banks since 2008: if a crazy policy doesn’t produce the desired results, make it even crazier.” Further in the letter, he suggests that the zero level of interest rates is akin to the zeroes in the change from 1999 to 2000; i.e. banks may have a different version of Y2K, as they may be unprepared—system wise—for negative interest rates.

The esteemed—at least in my opinion—firm of GMO released its latest “7-year Asset Class Real Return Forecasts.” The firm uses a valuation-based, reversion-to-the-mean approach. No asset class it follows comes close to the 6.5% long-term U.S. equity return that shows up in each month’s forecast. The highest forecasted return is for emerging markets stocks (emerging debt is second), while the worst is for hedged international bonds. If anywhere close to accurate, these returns have huge implications for financial plans and pensions. You can subscribe to the monthly asset class returns, along with other GMO publications, by clickinghere.

And although I was late getting to it (Feb. 4 publication date), I next read the firm’s Q4 Letter, which you should read (a subscription to it is free, too, and I think you should be able to find it here.) This letter is chock full of so much good stuff, that you really need to read it. Jeremy Grantham, the G in GMO, has relegated some writing to his associate, Ben Inker, but Jeremy writes the second half of it, in which he discusses what he thinks are true elements of American exceptionalism, which are its entrepreneurial spirit and its—Canamerica’s—resource basis, which makes for, as he puts it, Fortress Canamerica. As for 2016 asset classes, he’s troubled by January’s action and “quite significant statistical weight” in forecasting full-year returns. The first five days of January and full-month returns has been good in projecting full-year returns; that picture is not good. He thinks an equity bubble is not in the offing, so we should “reach Election Day more or less intact.” He thinks low oil prices are a big boon for the economy and sees no better “financial input” for a group that has been hurting for 30 years, “the median wage earner.” Good stuff; go read this piece.

Sentix is a German company that attempts to measure investor sentiment toward a wide range of global asset classes, and it recently produced a report—available to you if you agree to participate in its sentiment surveys—showing that investors were displaying the highest level of optimism toward gold in three years, and that it portended a further 5% increase in the yellow metal beyond its already heady 13% 2016 surge.

Behavioral finance and economics are fascinating to me, as I see so many ways that I and clients of mine can and do make bad decisions. This piece by Business Insider, “20 Congnitive Biases that Screw Up Your Decisions,”  lists twenty of them (duh), along with a 1-2 sentence description of each. The first one listed,Anchoring, may be one of the most prevalent, and an example of it is with security prices, thinking there is something magical about, for example, the price we paid for a stock. Confirmation Bias, is one I constantly try to fight against, by trying to take in information that does not support my views. Quick read. Hugely helpful.

Graig P. Stettner, CFA, CMT
Financial Advisor & Partner
Strategence Capital

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The economic forecasts set forth in the presentation may not develop as predicted.

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. The fast price swings in commodities and currencies will result in significant volatility in an investor’s holdings.

GMO forecasts are forward looking statements based upon the reasonable beliefs of GMO and are not a guarantee of future performance. Forward looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual results may differ materially from those anticipated in forward looking statements.

GMO and John Mauldin are not affiliated with Strategence Capital nor LPL Financial.

The post What I Read This Week appeared first on Strategence Capital.

What I Read This Week

• The Best and the Worst of 401k Plan Design Elements. Most of the elements discussed are likely to not be a surprise—offering a Roth option is generally a good idea; too many investment choices is generally a bad idea, and so forth. I found the category-based, tiered investment choices to be an interesting concept but have yet to hear sponsors express concerns about retirement readiness—at least by that name.
• Class of 2015 can’t retire till they’re 75. Once one gets past the grammar issue (should be “it’s” not “they’re”), this article cites three factors that’ll keep millennials working for longer: high student loan debt; rising rents; and the impact of the financial crisis on their saving/investing habits.
• How To Avoid Year-End RMD Errors. This article highlights six possible errors in taking Required Minimum Distributions from retirement accounts. Here’s number five: if one is still working at age 70.5, he or she does not have to take a distribution from the employer’s plan, but must take a distribution from any IRA(s) and other company plans.
• IRS Announces 2016 Tax Rates, Exemptions; Boosts LTC Deductions. A real snoozer of an article.
• A chef, a sugar tax, and an epidemic of obesity. While I am normally not a fan of taxes, I prefer the type that are voluntary, or levied based on one’s actions. This article talks about Jamie Oliver’s campaign in England to get a tax instituted on food products that lead to obesity. Ostensibly, the tax revenues could then be used to mitigate the the financial impacts of obesity.
• The Smart Money Has Never Been This Long the Long Bond. There are a couple of concepts in the futures pits: smart money and the dumb money. Historically, the dumb money has been wrong at turning points, while the smart money has been right at turning points. Currently, the smart money in the long bond contract is more net long than they’ve ever been. Thearticle suggest the long bond yield could have a 1 in front of it in the future.

Graig P. Stettner, CFA, CMT
Financial Advisor & Partner
Strategence Capital

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Some references within the article are incomplete and oversimplified. Investing involves risk and no strategy protects against loss.

 Withdrawals from a Roth IRA may be tax free, as long as they are made prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later.

Investing in mutual funds involves risk, including possible loss of principal.

Long positions may decline as short positions rise, thereby accelerating potential losses to the investor. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

The post What I Read This Week appeared first on Strategence Capital.