Monday, January 29, 2018

Is the Miraculous Economic/Market Balloon Coming Back to Earth?

Many of you have been sprinkling the term “animal spirits” into your blogs and articles lately and referencing the Shiller CAPE ratio. Good stuff. That’s why we’re sharing Robert Shiller’s piece from yesterday’s NY Times with you: Consumer Confidence Is Lifting the Economy. But for How Much Longer?

Shiller, originator of the eponymous Cyclically Adjusted Price to Earnings (CAPE) ratio, argued that consumer confidence is a critically important advance indicator of economic booms and busts. That said, he admitted we don’t really understand how and why consumer confidence behaves the way it does.

That’s a dangerous notion. We can talk all we want about a very low (perceived) jobless rate, GDP approaching the magic 3% target, inflation in check and a record-high stock market with earnings (sort of) keeping pace with ever-rising share prices, but Shiller argues that doesn’t fully explain the buoyant mood from Wall Street to Main Street.

Our Take: It reminds of us of the balloonist who doesn’t understand the concept of helium—and that he doesn’t have an infinite supply of it. The view’s great now, but you better be ready when the fuel that’s keeping you aloft eventually runs out.

Shiller argues “animal spirits” are at work, referring to the term popularized by economist John Maynard Keynes in the 1930s referring to a “psychological state in which people get a consumerist and entrepreneurial bug that allows them to forget their worries and let their optimism guide their economic decision-making.”
Is the exuberance irrational?

According to Shiller, exuberance like this is fueling the lofty stock market, in which “prices have far exceeded fundamental valuations.” He observed that real (inflation-corrected) corporate earnings per share for the S&P 500 in Q3 were only 6-percent higher than they were in Q2 of 2007, just before the financial crisis. In contrast, real stock market prices were 39 percent higher. “That disproportionate increase is based much more on how earnings are being valued than on how the level of earnings has increased.”
Our own Wealth Advisor Confidence Survey last fall found that nearly 80 percent of advisors expected a double-digit market correction in 2018, but less than one third (31%) expected a recession.
Obviously, this disconnect has happened before and will likely happen again. According to Shiller, “The four major confidence indexes took a long ride up between 1990 and 2000, again after a recession. From the bottom of the Michigan index in October 1990 to a peak in February 2000, real S&P 500 price per share rose 256 percent while real earnings per share rose only 78 percent.”

What gives? Shiller said a traditional explanation is that investors had a rational expectation of future earnings increases, “but, it is clear that they were grossly mistaken. The S&P 500 lost just over half of its real value from its peak on March 24, 2000, to its trough on Oct. 9, 2002. No concrete event caused this plunge, though we can point to the bursting of the dot-com bubble and a recession. Both were plausibly caused by a drop in overinflated confidence.”
Shiller said that while Trump’s presidency may have exerted “some impact on animal spirits in the last year,” it doesn’t explain the preceding eight years of gradually rising confidence. “I am skeptical that the upward swing can be entirely explained by standard factors like government and central bank stabilization policy or technological innovation,” added Shiller.
Our Take: If we don’t know what’s keeping the balloon aloft, then we’ll never know what’s going to cause it to plummet--or when. Don’t trust the gauge just because it says there’s gas left in the tank.
Conclusion

Said Shiller: “History indicates that a long uptrend like this one will eventually shift downward, even if we can’t say when it will happen. While the timing will be a surprise, we can expect a sharp change in direction that is likely to have serious consequences for the economy in the United States and around the world.”

Fasten your seatbelt and always make sure your parachute is working. Think we’re full of crap? We’d love to know what you think and why.

*** Take our Insta-Poll and see how you stack up to your peers.

TAGS: Robert Shiller, CAPE ratio, consumer confidence, market overvalued, animal spirits, irrational exuberance


Monday, January 22, 2018

Surround Yourself with the Right Mix of Finders, Minders AND Grinders

One of our most popular posts last fall was: Are You a Finder, Minder or Grinder? C’mon Be Honest. As expected, the vast majority of you considered yourself Finders (82%), according to our unscientific InstaPoll. Finders are the rainmakers at professional service firms. They bring in the business and cultivate relationships that turn into new business or strategic partnerships.

Of the remainder, we expected most of you to say you were Minders (i.e. project managers and supervisors). You’re the experts that focus on process and keeping the trains running on time. But, that only describes 3 percent of you. Surprisingly, one out of every seven of you (15%) described yourself as Grinders. You’re the worker bees who put your nose to the grindstone to deliver all the promises that your firm’s finders make—no matter how aggressive and far-reaching.

This imbalance also tells us that many of you are trying to fill too many roles—burning the midnight oil every night to deliver all the promises that you and your fellow partners have made to clients and high level prospects. And supervising the work. That’s not a sustainable business model or organizational structure.

Balanced talent portfolio
As Forbes contributor, Keenan Beasley explained recently, you need a balance of finders, minders and grinders. If you’re top-heavy with minders, then Beasley says nothing will get done. Your costs will go up and you won’t be able to scale. If you have a disproportionate number of grinders, very few see the big picture and too much strategy and execution falls on the founders and you won’t be able to expand profitable. If you have too many finders, Beasley says you’ll win a lot of business, but retention of both your clients and over-worked staff will suffer.

Our Take: Be especially cognizant of that last one, folks.



By moving closer to an equal balance of finders, minders and grinder, your business will grow from both a topline and bottom line perspective. The efficiency will boost your profits and free up founders/finders to do what they do best--bringing in more (and larger) clients that enable you to scale.

Generally, employees fall into just one of these classifications above, said our client Blake Christian, CPA a partner at HCVT and author of the new book: Becoming a CPA-Preneur. Make sure you have the right person with the right mindset in the right role. “Occasionally an employee will have more than one of these groups of skills. When you find them make sure you retain those gems,” said Christian.

Conclusion
But, if you’re trying to be one of those organizational triathletes yourself, you’ll eventually run out of gas before you reach the finish line. Be brutally honest about what you can and cannot do, and bring in the help you need to fill those gaps ASAP.


TAGS: Finders, Minders and Grinders, Keenan Beasley, Blake Christian

*** Take our Insta-Poll and see how you stack up to your peers.

Saturday, January 13, 2018

Our Top 10 Posts of 2017

From the White House to Hollywood to the worlds of sport, business and high finance, it’s hard to remember a year in which the media has been more central to the national conversation. From fake news, to workplace misconduct to a President hell-bent on bypassing it, the media is still one of the most powerful tools a free society has to keep those in power accountable. Like it or not, the media isn’t going away anytime soon. You better figure out how to make it your friend, not your foe.

According to the Wealth Advisor Confidence Survey™ 2017 that we conducted with The Financial Awareness Foundation, half of advisors (48%) say that being quoted in the press is a “Very” or “Extremely” effective way to enhance thought leadership. Nearly two thirds of respondents (63%) say the same about writing articles for publication. Respondents were 5-times more likely to cite these channels than to cite mainstream social media (other than LinkedIn). As always, we’re here to help you make the media your best friends and referral mechanism. Just remember You Are What You Write, which was by far our most popular post of 2017. And while you’re at it Avoid These Written and Spoken Credibility Killers (#7).

Many of our other Top-10 posts related to improving your communication, your work habits and your ability to connect with Next Gen. Enjoy the list:


8. What High Performing Advisors do Differently Than Their Peers

9. New Books by HB Publishing Clients Help You Flex Entrepreneurial Muscles



Conclusion


Have a great 2018 and buy yourself some good sneakers. We’re going to be running very, very fast this year.

*** How badly have your clients been hit by tax reform? Take our Insta-Poll and see how you stack up to your peers.

TAGS: Top 10 posts of 2017, make the media your friend not foe

Wednesday, January 03, 2018

HB Clients Attracting National Media Attention

Burning the midnight oil may seem lonely at times, but your efforts did not go unnoticed by your clients or the national media. Those of you who’ve been making your weekly Gut Check™ accountability calls are 5-times more likely to obtain coverage and guest publishing opportunities.
Here’s a sampler:

BLAKE CHRISTIAN, CPA explained to Financial Advisor Magazine readers how the potential elimination of the AMT Slams HNW Clients on Real Estate. “Repeal of the alternative minimum tax could have a significant impact on investment plans,” said Christian. “Under current law, alt min’s top rate is 28 percent. Its elimination would drive many AMT clients into the 35 percent bracket and push them to invest in tax-free municipal bonds,” added Christian, a partner at HCVT LLP in Park City, Utah. Christian recently unpacked the Trump Tax proposal on the Mountain Money podcast and keys to opening a new office on the Journal of Accountancy podcast.  Blake was recently interviewed on Sarder-TV about his new book, “Becoming a CPA-Preneur, Never Again Be the Most Boring Person in the Room.
KYLE WALTERS, a partner of Dallas-based L&H CPAs & Advisors landed regular guest columns in Accounting Today (The Power of the Red Chair) and CPA Trendlines (How to Avoid Getting Run Over or Left Behind). Hint: Staying in your lane will not get it done in today’s complex advisory service super highway.

SAMUEL BETHEA, The Rosewood Group’s president, was among the cybersecurity experts profiled in Digital Guardian.
"When it comes to security measures in a small business, the metrics generally fall into two categories: internal protection and external credibility,” explained Bethea.

MATTHEW TOPLEY,
Chief Investment Officer of Fortis Wealth in Valley Forge, PA told The Street why Millennials Are Scared and This Is the Financial Reason Why. He was recently published in Planned Giving Design Center (Top 10 Life Advice Comments for Millennials). Hint: Get off Facebook and learn how to write, speak and network in the real world, advocates Topley.

ANTHONY GLOMSKI, founder of Los Angeles, based AG Asset Advisory  is frequently asked to comment about cutting-edge issues at the intersection of finance and technology. Take Bitcoin and blockchain technology. Glomski told US News & World Report that "Blockchain appears to have the potential to be as transformative as the internet.” However, he cautioned that at this stage you’re talking about “speculation rather than an investment. This phenomenon is as old as the tulip bulb bubble of 1634.” Glomski was also interviewed on Sarder-TV about his new book, Liquidity & You: A Personal Guide for Tech and Business Entrepreneurs Approaching an Exit.
 
Also check out other provocative new books by our clients:
Conclusion

According to the 
Wealth Advisor Confidence Survey™ 2017 that we conducted with The Financial Awareness Foundation, half of advisors (48%) say that being quoted in the press is a “Very” or “Extremely” effective way to enhance thought leadership. Nearly two thirds of respondents (63%) say the same about writing articles for publication. Respondents were 5-times more likely to cite these channels than to cite mainstream social media (other than LinkedIn).

Are you sure you don’t have time to publish, speak and grant interviews in 2018?

*** Are you a Finder, Minder or Grinder? Take our Insta-Poll and see how you stack up to your peers.


TAGS: Blake Christian, Anthony Glomski, Kyle Walters, Samuel Bethea, Cecil Nazareth