Investment Lessons from a Mission Trip to Quantico

Have you ever served in the Marine Corps? If so, you and the rest of our armed forces volunteers are my heroes. Last week the college and career group from my church, East Maryville Baptist returned to Quantico Marine base in Virginia to conduct a summer camp for elementary kids who live there. With help from four of our college students, I ran the soccer portion of the camp for 50 high-energy but extremely polite kids. Temperatures were over 90 each day and you can’t play soccer in the shade. It was an exhausting but rewarding week.

Each day we commuted by bus onto the base from Stafford, Virginia where a local church hosted our group. As we entered the vast 55,000-acre military campus on our first day, I noticed a large LED street information sign that flashed, “Altered traffic pattern, UXO removal program under way”.

After day 2, I became curious to find out about “UXO” and a google search on my phone pulled up a fascinating history. From the 1930’s through the 1940’s, much of the north end of the base was used for artillery training. As time passed and war subsided, the base developed into the elite command and training center that is modern day Quantico. Housing and schools were erected to serve a population that now numbers more than 12,000 military and civilians working on the base.

Across the street from the Crossroads school where we conducted our camp was the location of the old Russell school, which was demolished to make way for a new one. After demolition, they discovered old, rusted shells left over from the 30’s when it was an artillery range. Some mortar rounds were still live “unexploded ordinance” or UXO. They closed the road each night to search for and remove any UXO that they found. The most common munition they encounter is the 4.2-inch mortar. When they located UXO, they cordoned off a 300-yard area for safety and called technicians in to conduct controlled detonations.

removing UXO at Quantico VA

It was a little concerning that live munitions were buried 150 yards from our camp location but we were too busy sweating to give it much thought.

As I drove home at the end of the week I had time to reflect on my proximity to something so deadly and how unaware that I was to the danger. I realized that investors can fall prey to the same circumstances in their investment portfolio. When was the last time you looked for antiquated, rusty and even dangerous investments in your portfolio that need to be removed and detonated by an expert?

In your portfolio, “danger” comes in the form of risk. We use modern technology to measure, understand and monitor the risk of every single investment that our clients hold, even if it’s in their company retirement plan or at another financial institution. There is no excuse for not knowing how much risk you are taking, individually and collectively with your financial future. You’ll feel the impact when you least expect it.

Your antiquated investments are the expensive broker-sold mutual funds, annuities and “house brand” products that you first started investing in years ago. Upgrade these holdings before the costs rot out a hole in your financial plan. You have ample access to modern, low cost exchange traded funds that are more tax efficient. You can find alternatives that will cut your fund related expenses in half if not more.

If you need help figuring out what is “dangerous” and “rusty” in your portfolio, call us for a complimentary evaluation. We have decades of experience in identifying these mortars in your investment account.

Monitoring Demand for Discrepancies

We have highlighted our concerns about end-user demand weakness before. As Yellen and others have touted rosy forecasts of a surging economy, we have questioned their evidence for such optimism. The key area we monitor for confirmation is demand from real people for goods and services. If the economy is going to improve, someone has to have the resources (cash or credit) and the desire to buy stuff.

The Fed can disrupt or delay prudent financial decision-making through their actions. When they did QE, it created a temporary environment for public companies to issue cheap debt and use the funds to buy back stock. This is penny-wise and pound-foolish and we have pointed out why in previous posts (here and here). The Fed played this hand to great effect from 2009 to 2014 and then left the stock market to flat-line as it searches for the next growth fix. 


Do you have an extra $250,000 to pay for healthcare in retirement?

A recent CNBC article asks the question whether $245,000 is enough to cover healthcare costs in retirement. Let that number sink in for a second. Especially, when you consider the article goes on to project those same healthcare costs up to $367,000 using the Medicare Board of Trustee’s estimate of inflation. That’s even before considering that “high-income beneficiaries” have to pay a higher percentage of the total cost of Medicare premiums. High-income beneficiaries are considered to be individuals with Modified Adjusted Gross Income of greater than $85,000 and married couples above $170,000. Currently, beneficiaries pay about 25% of the cost, but high-income beneficiaries will pay 35, 50, 65 or 80% of the cost depending on their level of income.

How much do you have saved for retirement? In your plans, have you allocated more than $250,000 to the cost of health insurance?

If not, what impact will an expense of this level have on your retirement? If the projections are correct, a quarter of a million dollar expense in retirement could derail any plan that’s not properly accounting for such expenses. As the article states, this expense could cause a detrimental impact to your yearly income at a point when going back to work is no longer a viable option. Don’t let this be your retirement picture.

If healthcare is going to be such an impact on your retirement, what other major expenses are not covered in your retirement plan? One of the core pieces of our financial planning process is to identify the specific expenses that your retirement could hold. We help you evaluate your current situation, your goals and desires, and your retirement years to create a financial plan than can hopefully withstand whatever life throws at us.

We can help you make sense of these complicated issues. Do you have questions about your retirement plans or need help figuring out how much healthcare will cost for you? Get an answer by sending us a question:

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Brexit Eve Observations From History

As we await the results of Britiain's "Brexit" vote, consider that the European Union wasn't created by European countries voting to join it. It was formed by a treaty enacted by politicians. I was a municipal bond salesman back in 1992 when the Masstricht Treaty created the European Union (and eventually the Euro).

European countries tried to get their citizens to ratify the Treaty after the fact. The Danes voted "nej" (no) and opposition grew from there. The chaos that ensued caused a global currency panic. I vividly recall the eventual collapse of the Exchange Rate Mechanism in the aftermath.

I find it sad when citizens have to vote to leave something when they never voted to join it in the first place. Especially when none of the EU leaders or the 85,000 bureaucrats working are elected by EU member citizens. 


The Stock Market's Problem in One Chart.

After Janet Yellen was confirmed Federal Reserve Chair Person in February 2014, she quickly halted the Feds "Quantitative Easing" asset purchase programs. The effect of QE on stocks is visibly discernible in this FRED chart.

Options for stock investors - Pick one:

1. The Fed restarts QE (not likely)
2. Congress passes a "helicopter drop" stimulus bill (less likely)
3. Stocks remain stagnant until economic activity materializes (probable)

Yellen has been a dogmatic proponent of Income equality. She is very unlikely to restart QE. There is no chance congress does anything in an election year and earnings weakness has stock range-bound. You have to believe that the US economy is strong enough to accelerate in the midst of economic weakness across the rest of the planet to be positioned for bullish "risk on" trades right now.

Surrendering to FOMO (fear of missing out) can cost you an enjoyable future.

Fear of missing out is causing a certain class of young adults to adopt some strange financial habits.  Last weekend, my wife and I were having a quick dinner at Blaze Pizza (not as good as Kachapuri but a cheap date dinner!) before our movie started. I observed a 20 something girl at the table behind me snapping several pictures. She posed for a duck face, snapped a picture of her food and another picture taking a bite. After eating 1/2 a slice of pizza, posting her pictures to her social media and checking her "fan reactions", she threw her mostly uneaten food away and left. She stood in line longer to acquire her dinner than she spent consuming it.

I stopped to process what I witnessed. Either this young lady wasn't very hungry or her motivation in visiting the pizza shop was driven by something other than hunger. She was so engrossed in filing an online update of her activities that she was oblivious to her actions. At least she only wasted 8-10 dollars. Other people are paying a heavier financial toll for FOMO addiction. Is this the first financial effect of a social media obsessed culture? I hope this doesn't develop into an area that we are forced to address in our financial planning practice but it's a trend we will keep an eye on. 

Scroll through the iPhone screen for the infographic (source: in Canada):


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