Chefs Who Don’t Eat Their Own Cooking

Posted on Feb 12, 2014 in 401k, Blog, Fiduciary, News, Retirement Planning, Wall Street Greed | 0 comments

For these well-known financial companies, their proprietary funds really mean “Cooking so good, we sell it to clients, but not eat it ourselves! Irony is good food almost anywhere you find it, unless of course, you’re forced to eat your own. After Ameriprise Financial Advisors successfully sued Ameriprise over their dog food funds in their 401k, employees of Fidelity and Massmutual file their own “hypocrisy lawsuits”. MassMutual employees filed suit against their employer because 37 of the 38 funds in their 401k are MassMutual proprietary funds. $15 million in fees! Fidelity advisors/employees suit alleges that the company failed to act in the plan participants best interest by only providing Fidelity funds, and plan fees should have been $550,000 rather than $15 million. Makes you think twice about eating at these restaurants.   Andy partners with individuals, families and entreprenuers to provide objective and comprehensive financial planning. Andy is a Fee-Only, Certified Financial Planner™ and Registered Investment...

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Target Date Fund Fees Subject of Lawsuit

Posted on Sep 25, 2013 in 401k, Blog, Mutual Funds, News, Wall Street Greed | 0 comments

Stay out of Target Date-Rape Funds folks.  The layering of fees is expensive and deceptive.  American Chemicals and Equipment is suing Prinicpal over some questionable accounting used to disclose fund fees.  Howbout $120 million in “acquired fund fees” for 2012. Take a look at the disclosed fund fees for John Hancock Target Date 2035.  6 share classes with fees ranging from .71 to 4.13.  These are just the disclosed fees.  John Hancock Target Date Fund Fees – Same Fund, different shares Andy partners with individuals, families and entreprenuers to provide objective and comprehensive financial planning. Andy is a Fee-Only, Certified Financial Planner™ and Registered Investment Advisor....

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The Beat Goes On

Posted on Dec 27, 2012 in Blog, Bonds, Economics & Markets, Investments, Wall Street Greed | 0 comments

Stop watching reality television. Especially themes around fiscal cliffs. The train has left the station and the U.S taxpayers never heard the whistle. The vast majority are still being conned by the elaborate Wrestle-mania in Washington between Hulk Hogan and Macho Man Randy Savage. (My apologies to those who still believe its real.) So let’s stop watching reality t.v. start planning for the new paradigm: Euro-merica. The Fed and other central banks around the world have doubled their balance sheets in failed attempts for higher economic growth. Brian Westbury, Chief Economist at First Trust, sums this up brilliantly: “Like we have been saying for many months, quantitative easing will simply keep adding to the already enormous excess reserves in the bank system, not deal with the underlying causes of economic weakness, including the growth in government spending, excessive regulation, and expectations of higher future tax rates. It will not add anything to economic growth and, as long as banks are reluctant to lend aggressively, not cause hyperinflation either.” The evidence about tax rates and revenues is irrefutable. Milton Friedman proved that all government spending is taxation and does not stimulate the economy. After all, shouldn’t Greece have spent their way to prosperity? Economic truths don’t matter when the mandate is to increase the size and scope of Government. Yet, the mandate is couched with class envy using the sales pitch “tax those who can afford to pay a little more”. Herbert Hoover proved this not only doesn’t work, but also makes matters worse. If you worked more in order to make more money and invest your earnings increased your taxes, you probably won’t work harder. Most of people and companies will choose not to. That’s the effect of confiscatory taxation will have on the economy as a whole. Reading the Tea Leaves So the squeeze is on. Increasing taxes, regulations and govt spending will hamper economic recovery and handicap real growth in US Equity Real Estate prices. The continued printing of dollars may give stocks and real estate some upside because all this money has to go somewhere. The Fed will continue to print money, and the result will be inflationary with a weaker dollar and stronger non-dollar asset prices. I don’t see a long-term bull market based on sound economic policy: However; owning equities, real estate and commodities do offer opportunities for growth as well as an inflation hedge. Scott Grannis has posted an excellent article on his blog about “Equities as an inflation hedge” here: US Treasury bonds have traditionally been the asset class to own in conservative portfolios because of their safety and stability. That has changed. Treasury bonds are very expensive (i.e. they pay...

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August Potty Reading

Posted on Aug 9, 2012 in Blog, Bonds, Economics & Markets, Self-Employed, Uncategorized, Wall Street Greed | 0 comments

I’m starting this edition of Potty Reading with something inspirational before I subject you to the torment of my soap box. Many of my clients and friends have heard me say before that even if I won the lottery, I would still do what I do.  I love the puzzles and challenges that comprehensive planning demands of me, but more than that I think, I love the priviledge of helping, getting to know, and developing friendships with some very special clients.  In life, we are fortunate to meet people who make us want to better and stronger in our faith.  I’m blessed to know Gary and Terri Lockman and share this video with you. —————————————————————————————————- Depublican and Remocrate Policies Must Stop Uncertainty is a key theme everywhere we look.  The financial mess in Europe, political turmoil at home, and dubious economic policies have all but caused the stock market to capitulate.  Treasury bonds and AA corporate bond yields are pushed so low, its as though the bond buyers are waiting for the priest to read the last rights to the stock market. The turmoil in Europe centers around entitlement, conflicting ideologies and unchecked fiscal policy.  Sounds familiar?  Yes, and it affords us a glimpse of where we could be in about a dozen years.  One of my favorite Gurus, Robert Sanborn, who runs the Elkhorn Fund, eloquently said: “1) we live in a world where the prudent are constantly ridiculed, pressured, and compelled to bail out the imprudent (with predictable “incentive effects”); and 2) politicians throughout the West, particularly on the left, have zero desire to address any long-term structural issues related to the bloated “public worker/entitlement” state.” Even though we can look to Europe as our future fate, November will be the tipping point for the US.  Greece, for example, borrowed an extraordinary amount of money at cheap rates.  Hardly any of that borrowed money went into productive long term investments.  In fact, the money went to public employees (unions), entitlement programs and to politicians.  Deficits kept soaring with no cuts to entitlement, crisis erupts and they make the Germans out to be the bad guys because they demanded balance budgets.  As you know, Greece held their election and the socialist won.  Ditto France, where the new prime minister just lowered the retirement age to 60 and raised the top income tax rate to 75%.  Can you find a startup company to come from France in the last 10 years? Europe’s economic policy is one of tax and spend, also know as Keynesian.  Though flawed, politicians like the power it affords them.  Voters quickly learn which Politicians will turn on the red light for them and thus,...

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Fed Policy and Your Bonds, DC’s

Posted on Mar 26, 2012 in Blog, Bonds, Economics & Markets, Retirement Planning, Wall Street Greed | 0 comments

Government spending and the Fed’s policy of buying more long-term bonds, never mind how they pay for it, has pushed the U.S. Treasury yields to lows not seen since the 1940’s.  This is significant because your conservative, “safe” money like T-bills, Treasury Bonds and even your CD’s are now subject to a certain type of risk: Purchasing power erosion, or inflation risk. Bonds have 3 sources of risk: 1) Credit Risk –  The risk of not getting paid back; 2) Duration Risk – the risk that rising interest rates will decrease the value of your bond because other bonds will pay higher yields.  3) Inflation Risk – The risk that the dividends you may get today will not buy as much groceries or gas in the future because of inflation.  Along with these risk definitions, I also want to explain two terms used when discussing interest rates:  The Nominal Return – the interest rate on the face of the bond or you see advertised on a bank CD for example; and The Real Return –  the return you get after subtracting inflation. Today, bond holders must deal with this purchasing power erosion.  The Federal Reserve policies are keeping nominal rates below the rate of inflation.  They’ve done this to keep financing costs low on Uncle Sam’s out of control spending.  The result of this effectively shifts the burden of government spending onto you.  How?  Because the nominal 2% nominal return on 10-year Treasury bonds is below the 2.9% rate of inflation.  Therefore, the real return on your bonds is -.9% and will continue to erode because it doesn’t keep pace with inflation.  Even worse, calculate the real return on your CD. We can look at the 1940’s as an excellent example of bond investing because it mirrors today’s environment with roughly the same nominal yields on Treasuries and Government spending greater than 100% of our Gross Domestic Product (GDP).  If you invested $100,000 in  10-year Treasury bonds in 1941 to and redeemed your bond in 1951, you got your original $100,000 back, but in real return dollars, you lost $34,000 to inflation.   Some ideas for you to consider if you have heavy bond exposure: First look to diversify within the bond asset class.  This means look beyond U.S. Treasuries and AA rated U.S. Companies to foreign bonds, higher yielding corporate bonds.  Also, you can diversify outside of bonds all together and research lower volatility stocks. Second, refresh yourself on the definition of safety.  What most people, especially retirees are looking for when investing in bonds is income.  While continuing to hold CD’s and Treasuries with low nominal yields may serve one definition of safety, continued erosion of your...

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