Inflation Worries Inflated?

Yep, we have plenty to worry about as we grind through another seemingly endless winter on the two-year anniversary of the pandemic (2/22/22). Russia has invaded Ukraine. The first of many interest rate hikes seems imminent. Tax rates are likely going up. COVID remains omnipresent. The long-running bull market is taking a breather to massage out some leg cramps as it officially enters “correction” territory.

At times like these my dad used to say: “Things are never as good or as bad as they seem.”  He had a very high stress job which often involved life-and-death situations. But he kept things even keel and rarely brought his worries home with him.

His point was this: Whenever you’re on a roll -- whether in business, sports, investing, gambling or even your romantic life -- there are “cracks in the foundation” you’re not seeing because you’re caught up in the euphoria of your winning streak. And when it seems like you can’t get a break, no matter which direction you turn, there are actually good things happening all around you, but you’re not seeing them as you wallow is pessimism or self-pity.

Lessons from the Super Bowl

Case in point: At least two recent Super Bowl winners (2017 Philadelphia Eagles and 2015 Denver Broncos) have been in painful rebuild mode ever since they hoisted the Lombardi Trophy. Did they just get cocky or lazy after becoming world champs? No. They were simply a team of over-achievers that came together for one magical season despite all the aging veterans hobbling through in the final years of their contracts. They defied the odds with a roster held together with duct tape and safety pins. It makes for great stories the media and call-in-shows, but doesn’t set the foundation for a dynasty.

Momentum myopia works the same way when you’re on the schneid. Take the markets. While the S&P 500 officially entered “correction” territory today, did you know the index is still up more than 98% from where it was at this time five years ago? That’s better than a 14% annual rate of return!

 

Take inflation. The Labor Department reported earlier this month that the consumer-price index (CPI) in January reached its highest level since February 1982, when compared with the same month a year ago. As The Wall Street Journal reported, “that put inflation above December’s 7% annual rate and well above the 1.8% annual rate for inflation in 2019 ahead of the pandemic.”

Not great news, but let’s remember we’re talking about an arbitrary 12-month period today (Jan 2021 – Jan 2022) and comparing it to an arbitrary 12-month period 40 years ago (Jan 1981 – Jan 1982). If you widen the parameters of your comparison, you’ll see the peaks and valleys are not nearly as steep.

While we’re seeing jaw-dropping year-over-year price increases for things like gasoline (+49.6%), used cars & trucks (+37.3%) and energy +29.3%), let’s remember we’re coming off the extraordinarily low pandemic era prices when nobody went anywhere or did much of anything.

Let’s go back to 2019, a full year before the pandemic. According to the U.S. Bureau of Labor Statistics, the CPI stood at 255.7. Today it stands at 281.9, including a substantial jump last month. If my math is correct, the CPI has risen just 10% over the tumultuous last three years, a compound annual rate of about 3.3%. Not much higher than the historical rate of inflation in the U.S.

Still not convinced? Take a look at gas prices, which everyone can relate to. Some of my earliest childhood memories are of around-the-block gas lines during the Arab oil embargo of the early 1980s. You may be old enough to remember it was the first time that gas prices first hit an un-American $1 a gallon (gasp!)

Today the price of gas has more than tripled to $3.44 a gallon according to U.S. Energy Information Administration stats. That seems pretty steep, but if you do the math, you’ll see it’s a compound annual growth rate of less than 3%. There’s that 3% number again -- the long-term historical rate of inflation. When it comes to gasoline, we just got spoiled by $2.10 a gallon during the depths of the pandemic (November 2022). Same goes for interest rates. Even if the Fed invokes four separate rates hikes in 2022, each hike is likely to be no more than 25 basis points. So if rates are a full 1% higher than they are today, the will still be extremely low by historical standards.

It may get tougher for those with huge credit card debt or variable rate mortgages they never should have qualified for in the first place, but I don’t think that’s the case for most of your clients.

I feel your pain

I know rent and housing costs keep spiraling upward. I just got whacked with a 25% increase for my office space. I was pissed when I first saw the new lease – especially with so much commercial space available. But my wife reminded how much nicer the building is than when I moved in a dozen years ago. And now the lease includes a fully renovated office, VOIP phone service, high speed internet, unlimited coffee and access to a stunning roof patio and a modern 24/7 gym right in the building. So even though I’m paying 70% more than I did a dozen years ago. Do the math: it’s an average annual increase of only 4.1% for much nicer digs. Don’t tell the building owner, but that makes writing the monthly rent check a little less painful.

Bottom line: let’s take the long-view here and not get spooked by the doom-and-gloom headlines.

Conclusion

Writer and humorist, Sam Ewing, once said: “Inflation is when you pay $15 for the $10 haircut you used to get for $5 when you had hair.” Perhaps, but eventually you get to an age in which you don’t need as many haircuts as you used to and or you stop caring what you look like on Zoom calls. So, in the long run everything evens out.

Don’t agree? Tell me why.

 

 

#inflation, #marketcorrection, #volatility

Zoom Fatigued? Go ‘Old School’ with Audio-Only Virtual Meetings

Guest Post: Tina Dietz

Much has been written about improving team connectivity and maintaining company culture in a remote working environment. The prevailing solution to increase team communication and productivity is having virtual meetings through Zoom, Slack, Skype, Google Meet and other video meeting platforms. Yet, we can all agree that “Zoom fatigue” is real and can undermine team cohesion and job performance. So, what do we do to enhance our team’s relationships, bolster company culture and lead our team well, even when we are working remotely? There’s a very simple, yet powerful answer: We listen!

Research shows that with audio-only communication, we develop better listening skills, become more attuned to our team’s needs, form deeper connections and establish a culture of verbal equity. In turn, this increases overall productivity and happiness, strengthens dedication to the organization and reduces stress levels.

A recent academic study suggested that audio-only communication improves team cohesion and productivity, whereas video communication can undermine group problem-solving and may contribute to verbal inequity (which is an unequal distribution of talking time for each person). This can lead to some people dominating the conversation and can result in an unintentional relational strain among team members, which will negatively impact effectiveness.

However, the study also showed that when audio-only communication is used, team communication is more evenly distributed, because members are not relying on visual cues that indicate that others are continuing to, or are about to, speak. This frees up people who are inhibited by the fear of interrupting to add to the conversation. The study also revealed that in audio-only meetings, members mirrored one another’s vocal tone and pitch much more than they did in video interactions. This vocal mirroring increased their connection and their ability to problem-solve. Furthermore, some people rated their peers as more likable and trustworthy in audio-only interactions.

In addition to increasing productivity and strengthening team connection, audio-only meetings help us understand our team members better. Auditory discernment is a powerful tool. Our ability to determine others’ emotions simply by hearing their voices is evident through our personal experience and has been proven in multiple studies.

We’ve all had the experience of knowing if a friend is talking to a coworker or a family member without even hearing the name of who they’re speaking to. In fact, in one study, participants were instructed to listen to an audio clip of someone asking the simple question, “How are you?” and try to determine whether they were talking to a platonic friend or to a romantic partner. Interestingly, participants had an accuracy rate of 60.2%. This implies audio-only meetings help us better understand our team because we are not distracted by the mixed signals that visual cues and vocal tone can potentially send. Therefore, over time, we can become more attuned to our team’s needs and know when it’s best to address issues, adjust our communication style or offer support.

Furthermore, through audio-only communication, leaders encourage active listening (intentional listening and emotionally-intelligent engagement) among the entire team. According to researchers from the University of Iceland, when supervisors actively listened to their employees, employees reported higher dedication and vigor. This correlated to an increase in reciprocal communication, more psychological safety throughout the organization and improved physical and mental health. Taken further, this indicates that when leaders establish an environment where everyone’s voice is heard and people engage in thoughtful participation, we create a climate where we can maximize strengths, address weaknesses and curb burnout. 

Audio allows you to be yourself

Finally, one of the most powerful ways audio-only meetings increase team relationships and performance is by reducing stress. On the technical side, audio-only meetings help mitigate issues due to a poor internet connection (we’ve all had our faces frozen in a contorted expression for everyone to see, haven’t we?). Additionally, it is human nature that we become more self-aware when we see ourselves on camera. Sometimes, we focus so much on what we look like that our attention is divided and we do not engage in the meeting as well as we could have. In audio-only meetings, no one has to worry about making sure we get the proper camera angle or the lighting is correct. It doesn’t matter if our hair isn’t done, our background is a mess or if our child runs into the room. Audio-only meetings allow everyone to be more relaxed, which leads to clearer thinking and higher productivity.

When we turn off the camera and adopt audio-only meetings, we can improve our team’s communication and efficiency, strengthen relationships, have a deeper understanding of others, better engage in active listening and reduce stress for ourselves and our colleagues.

So, what can we do to capitalize on these benefits, other than turning off the camera?

Be patient. The benefits will not happen overnight. At first, the conference call will be filled with interruptions. However, as your team learns one another’s rhythms, these interruptions should lessen.

Relax during the conversation. Because we are so used to “Zooming” into every meeting, we’ll initially stare at our computer or phone, as if we are on camera. Nevertheless, with each meeting, you and your team will relax, which will allow everyone to be more transparent with one another.

Intentionally listen during the call. Who else has accidentally zoned out during a phone call because they were free to do something else, like laundry? An easy way to ensure you are actively listening on team conference calls is by imagining that you are in a one-on-one conversation with whoever is speaking. This will help you be more attentive and gain insights into every member of your team.   

Ironically, audio is sometimes better equipped than video for the modern professional’s lifestyle. One client of mine is a top-notch salesperson who is constantly driving to client meetings. She finds it so much more efficient (and safer) to stay in touch with her team via conference call than Zoom when behind the wheel. Another colleague is a competitive triathlete who squeezes two daily workouts into his packed schedule. While he doesn’t try to have client meetings on the bike or in the pool, he does find himself frequently eating meals at his desk or dressed in workout attire. He finds audio significantly more efficient than video for staying in touch with clients and team members.

Conclusion

Remember: Turn off your camera, be patient, relax and focus on whoever is speaking. Try going “old school” with audio-only meetings where you can and implement these steps to give yourself and your team a new level of connection and the potential for higher productivity.

Tina Dietz is the CEO of Twin Flames Studios, an award-winning audio production company dedicated to transforming senior leaders and mature companies into global industry thought leaders.

 

Still Not Sure What to Write About?

Having a bylined article in your name is one of the most effective ways to establish credibility in your industry and position yourself as the go-to expert in your area of expertise. It also makes you a magnet for podcast producers, speaker bureaus and conference organizers seeking articulate experts.

In fact, the annual CPA | Wealth Advisor Confidence Survey™ found bylined articles are among the Top-5 thought leadership tactics that financial advisors can use (82% of respondents agreed). Our last post (Getting Your Bylined Articles Published) walked you through best practices for building relationships with busy editors. Today, let’s talk a closer look at the types of bylined articles most likely to get you the green light from busy editors.

Without being arrogant or self-serving, you want to help your peers learn a strategy, skill, or technique; solve a problem; or provide information or analysis to readers (or listeners or viewers) that helps them earn more money, become more efficient and stay in compliance. In media-speak we call this “service journalism.” Here are some examples:

• An interpretation or explanation of a market trend, and how to adjust to it or exploit it.
• An analysis of a new law or regulation, with tips on compliance.
• Case studies, and the lessons learned from them.
• Problem-solution stories.
• Common mistakes and how to avoid them.
• Using new technology to gain a competitive advantage
• How to work more efficiently, use time more effectively Building and nurturing professional relationships

A service piece often provides analysis and interpretation of hard news. That means following a breaking news story with discussion of how it affects a particular audience and what action they can take to adapt, accommodate, comply, or exploit the new development.

Here are five suggested angles to consider for your next bylined column:

1) How to. Give the reader clear, step-by-step instructions for accomplishing a difficult task, or an ingenious solution to a common problem. For example: “10 steps to helping your client exit their business and get crystal clear about what’s next.”

2) Trend/ “You’re Not Alone.” Whenever an emerging trend sweeps a profession or industry, articles explaining the trend to different audiences appear everywhere. “If you think more and more advisory firms are merging than ever before, you’re not alone…..The latest research from {source] shows that ……. But what you might not realize is that ………”.

3) Survey Results. These articles report findings of a survey or other authoritative study (See first paragraph of this post). One key is to summarize the conclusions at the beginning of the article, and then support the conclusions by elaborating on who conducted the survey, how it was conducted, who were the respondents, what questions were asked, and what were the responses (using tables instead of prose whenever possible).

4) The Contentious Premise. If you have an idea that is novel, contrarian, or challenging to readers’ sensibilities, don’t hesitate to put it out there – you might become known as an innovator or pioneer. For instance: “Why more and more retirees still have an 80/20 allocation of stocks to bonds.” It’s great to be provocative, but you must support your contrarian premise with hard facts, data, cases, experience, and/or authority.

5) Tie in to current news trends, important deadline or significant date. Suggest a piece about “The Top Five 529 Plan Mistakes” leading up to a publisher’s May 29th issue.

Conclusion

As a guest columnist, you have two jobs:
1) To inform readers and advance your profession (not sell your services).
2) Make the editor’s life easier, not harder.

You probably won’t earn as much as a writer as you do for your “day job” – but the value of name recognition and high quality client leads your bylined column generates can give you a 10X to 100X multiplier for your efforts.

Ping me any time to discuss further.

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#thoughtleadership, #bylinedarticle, #credibilitymarketing

 

Getting Your Bylined Articles Published

Rarely a week goes by when someone doesn’t send me a link to an article in The Wall Street Journal, Forbes, Business Insider or Barron’s that’s written by someone they know – often a competitor. “What do I have to do to get in there?” they ask me with exasperation. “I know more about [topic X] than he/she does!”

Okay. Prove it.

You may know more about topic X than your competitor does, but he or she seems to know more about working the press. Here’s the good news. With today’s shrinking newsrooms, you’re likely to see more content bylined by people who don’t seem to have the words “staff writer” or “staff reporter” after their names. So it shouldn’t be that hard to get a byline in a prestigious national media outlet that’s read by millions, right?

Not so fast. Here are three important considerations.

1. Don’t wait by the phone. Media outlets aren’t likely to call you unsolicited unless you’re an A-list celebrity, a superstar athlete or a university professor who’s an expert in a very arcane area that just happens to be in the news due to a recent catastrophe, natural disaster or astronomical phenomenon.

2. Open your wallet. If you’re willing to pay for advertising space, sponsor a related conference, or pay a fee to be listed as an “Advisory Council” member (sorry Forbes), the editors will find a way to get you some space to be heard.

3. Become a trusted source. In media jargon we call this “earned media” as opposed to “paid media” see #2 above. Earned media will take some legwork, since most journalists, editors and bloggers don’t have time for lunch, golf or drinks these days. But it’s worth the effort. I’ll explain in a minute.

Steps to becoming a trusted source:

1. Isolate a half dozen media outlets in which you’d like to be seen. Ask a team member to see which journalists are covering areas of your expertise regularly. Review recent articles they’ve published and get familiar with their style and publishing frequency.

2. Send the targeted journalist/blogger a brief email or voicemail thanking them for covering Topic X. Cite a brief excerpt from a recent story to show you’ve read their work. Let them know you’re available for comment when they do their next follow-up story on Topic X. Include links to recent articles or presentations you’ve done about Topic X to show you know your stuff.

NOTE: You may notice many journalists don’t make their email addresses publicly available. You can usually reach them by phone by calling the media outlet phone directory. You can also approach many on their Twitter feeds, LinkedIn profiles or personal websites. You can also subscribe to journalist databases, but I have a few other legal and ethical ways to reach busy journalists for free….Ping me for tips.

3. Be ready to respond quickly. After you’ve proven yourself a reliable source who understands a targeted media outlet’s audience (i.e., your peers), they will start calling you eventually for background. Just know the journalist won’t be sending a camera crew to your home or office for a lengthy sit-down interview. The questions often come in on tight deadline and you’ll often have to respond within 48 hours to be included in the article. NOTE: Always have someone on your team proof your comments before sending. Don’t make a time-pressed journalist do any more work than they already have on their plate.

NOTE: We have an economical service here at HB Publishing that alerts you to breaking stories that journalists with tight deadlines are working on.

4. Confirm the writing policies before pitching story ideas. Once you've identified possible guest column opportunities, call or e-mail the editor to confirm the writing policies, potential opportunities and specifications for the article. Most media outlets have strict rules about what should (and shouldn't) be included in guest columns. Word count, style and format, use of source materials and attribution will be spelled out as well as the rights they’ll need to your work (i.e., exclusivity vs. first rights, etc.).

Most media outlets will discourage you from referencing your company or product overtly in the article. Doing so could cause the story to be killed or heavily edited. To avoid such penalties, it's best to err on the side of caution. Keep it above board, just as you would when speaking at an industry conference.

5. Pitch a concise story outline. Don’t send the full manuscript. Before an editor accepts your pitch, he or she will likely ask you to submit an outline and a one-paragraph abstract summarizing your proposal. Even if such materials aren't required, it's good practice to prepare an outline before you get started.

Power of your byline

According to our annual CPA | Wealth Advisor Confidence Survey™, publishing a bylined article is one of the five most effective thought leadership tactics out of nearly two dozen choices we surveyed (82% of respondents agreed). Media outlets are always looking for new content with a fresh outlook to appeal to their audience.

The key benefits of bylines include:

• Establishing credibility in your area of expertise, and to your target audiences.
• Creating relationships with publications for future engagement.
• Starting conversations about issues for which you’re passionate.
• Positioning you as a trustworthy, go-to expert on a particular area that impacts your industry/profession and clients.
• Great platform for obtaining speaking engagements, radio interviews and podcast appearances. Speaker bureaus and producers are always scouring the web and the media for fresh voices and points of view. Having a byline in a prestigious media outlet makes you instantly “vetted.”

Conclusion

You may not win a Pulitzer, but bylined articles are one of the most effective tools available for establishing credibility with a target audience. If nothing else, they showcase you and your organization as a thought leader in your field. The article will draw attention to the stature and strength of your company which helps differentiate it from competitors. We have plenty of ways to make the process less daunting and time-consuming.

Ping me any time to discuss.

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#thoughtleadership, #bylinedarticle, #credibilitymarketing

Last Chance to Get Your New Year’s Resolutions Right

Two thirds of advisors (68%) who responded to our weekly Insta-poll believe this Holiday season has been more stressful than usual from both a business and personal perspective. So, after another difficult and stressful year, don’t beat yourself up for overeating, overspending, over-pouring and oversleeping a little during the Holiday season. Same goes for your clients. You deserve it.

Just know that your ambitious plans to get back into fitness, financial and emotional shape after January 1^st are not likely to stick. Research shows four out of five New Year’s resolutions (81%) will be abandoned by mid-January unless you started test-driving them around Thanksgiving time. The idea is to start making realistic tweaks and adjustments to your resolutions before you post them on your bulletin board and social media accounts for all to see. But in today’s A.D.D. instant gratification society, most people don’t have the patience for that.

Go real with your resolutions

Again, resolutions don’t fail because we lack willpower or discipline; it’s more about bad timing. When we launch resolutions on January 1st, we are making a change based on a calendar date when we think we are prepared to change our lives dramatically. It’s even more difficult to hit the ground running when you’ve gone a month or more without being on our A-Game.

Yet, this mindset has been around for over 4,000 years, ever since the ancient Babylonians used the start of the new calendar year to crown a new king, or to proclaim their loyalty to an existing king. It’s also when they swore to their gods they would pay off debts and promised to return borrowed goods to their neighbor. The penalty for breaking one’s resolutions back then were a lot harsher than they are today. But even then, the “stick rate” wasn’t as a high as you would think.

Harvard Business School professor, Amy Cuddy believes resolutions don’t last because too often we’re setting ourselves up for failure and self-loathing. “We tend to set unreasonable aims for ourselves and then experience negative emotions and a lack of motivation when we don’t reach them,” she observed. “Failing to meet the unreasonable goals we set for ourselves can in turn take a negative toll on our self-worth,” added Cuddy.

Sound familiar?

Researcher and author Richard Wiseman, agrees with Cuddy that we set goals that are too high or too audacious and that we also tend to be too impatient. He believes another big cause of resolution failure is that we tend to sprint out of the gate in search of immediate “returns” rather than taking “baby steps” that will take some time before they move the needle.

If you’ve been a coach potato your entire adult life, don’t resolve to run a marathon within six months. It may work in the movies, but in real life, you’re just setting yourself up for disappointment, injury and an unhealthy relapse. However, if you start with 20 minutes of walking a day with a goal of completing a 5K run in six months, your odds of success go up exponentially. And from there, you can talk about completing a 10K or half-marathon before year end with even more ambitious goals in 2023.

Beating the odds

Trying to get your clients to modify their financial behavior in the new year can be quite challenging, too. But it can be highly rewarding if true changes result, Glenn Freed, Ph. D told me. Freed, chief investment strategist of New York City-based Syntax Advisors told me you’ll further cement your status as a client’s most trusted advisor if you can “frame” your legal, charitable or financial planning discussions around New Year’s resolutions. “You can have discussions in person or through a client newsletter. The key is to use these resolutions as a way to check in with clients throughout the year,” added Freed.

The experts seem to agree on one thing: to make any resolution stick, it has to become an ingrained habit. For example: 

• Resolution: Quit smoking vs. Habit: Stop smoking that one cigarette you have every morning after breakfast.
• Resolution: Eat healthy food vs. Habit: Start substituting that one daily morning pastry for a banana.
• Resolution: Lose weight vs. Habit: Every evening after work, go for a two to three-minute run or walk around the block.
• Resolution: Manage stress vs. Habit: Meditate for two to three minutes every morning after you wake up.
• Resolution: Improve finances vs. Habit: Save an extra 2 percent of each paycheck and put half into my 401(k)s low-cost index fund and the other half into a high-yield savings account at my bank.

By immediately breaking down each resolution and seeing what the smallest habit could be, experts say your chances of succeeding will be 50 percent higher. And if even these incremental habits are hard to stick to, don’t give up. Tweak them so they’re manageable.

Conclusion

High performing advisors help their clients follow up on resolutions not only in December, but throughout the year. Framing the financial planning discussion in this way at the start of the year and then following up consistently can be an effective way to help clients stay on the path to financial resolution success. Make 2022 a great year no matter what COVID, the markets, the economy and geopolitical factors throw at us.

This new year, there’s only one resolution I guarantee you that I’ll keep: It’s to getting better at making resolutions.

Tell me what you think.

 

 

#productivity, #resolutions, #accountability

 

Helping Clients with Chronically Ill Children

Now is the time of year when it’s easy to get distracted with Holiday preparations, travel plans, social events and shopping. But for families with chronically ill children, it’s the farthest thing from their minds. Chances are you work with some of those families.

Our client, Mindy Neira, CFP®, Chartered Special Needs Consultant® at Modera Wealth Advisors in Westwood, New Jersey specializes in helping families with chronically ill children. She’ll be featured in the national media next month and here are some excerpts of her upcoming interviews. Please share this post with clients, friends and relatives who may be caring for a chronically ill child.

Many of you may be asking how families who care for an ill child can prepare themselves for the jaw-dropping costs of diagnosing and treating a child’s chronic disease?

According to Neira, it’s important to utilize the many resources available to you locally and virtually, finding support groups and therapy for your client’s family and allowing loved ones to help along the way. “The journey will be difficult. but you can also find times of joy,” observed Neira. “Ask a lot of questions, follow up on resources, and be proactive about caring for your own mental well-being. One of the first steps may be to join a support group for the child’s particular diagnosis,” Neira added.  

Neira said she often sees parents (and grandparents) in this situation neglect their own personal health while caring for a chronically ill child and their siblings. “Caring for your own mental health should be a top priority for you as well,” she advises.    

Deductible expenses

Neira said it’s also important to keep one’s financial realities in focus, even when caring responsibilities can seem overwhelming. When families incur significant health care expenses there is an opportunity to deduct a portion for their taxes. “Keep diligent receipts on all out of pocket costs, including travel and stay when traveling to a doctor or for an educational conference,” advised Neira. “There are specific tax considerations for families in your situation, so it’s beneficial to work with a tax advisor or accountant. Tax deductions, credits, and some special provisions on retirement plans could be financially impactful,” she added.

It's also important for families caring for chronically ill children to know they’re not alone. There are nearly 10 million children enrolled in Children’s Health Insurance Program (CHIP). Neira said this program is through your state and can provide health coverage for children, if they are eligible. Find out more about how to apply in your state here.

Also, The Ronald McDonald House Program is a nationwide organization that helps families that need to travel for their child’s medical care with housing, support, and resources for families. The cost of food and housing is covered by the organization. The Ronald McDonald Care Mobile program provides medical and dental care for many communities as well, Neira added.

Choose the right health insurances

Neira recommends starting with employer benefits. Typically, your client will want a plan that provides the most coverage and lowest out of pocket costs. “This may mean that a high deductible plan is not going to be cost effective for the family. The employer may offer a Flexible Savings Account (FSA), an alternative to a Health Savings Account (HSA) which is only offered with a high deductible plan,” noted Neira. “This account allows you to contribute pre-tax money and can cover an array of out-of-pocket medical expenses, including co-pays and over the counter items at the local drugstore. Ask the health care provider to share a list of eligible expenses, prior to selecting this option. Note that the balance in the account must be spent by year end, or else the remaining value is forfeited.”

If your client’s employer doesn’t provide coverage, or your client is unemployed at present, they should check with their state insurance plans, said Neira. “In many states, there are resources on the website to find local assistance in reviewing the plans. Talking with someone about your options can help you navigate which plan is best for your situation. Your client may be eligible for financial assistance so it’s also beneficial to understand the eligibility within their state.”

In either case, Neira said always check that preferred doctors and prescriptions are covered with any plan you decide on. “Make a list and talk with the provider before signing up. This may take some time, especially when there are so many other competing priorities, but finding the right coverage will be impactful on your financial life.”

Conclusion

Remember you can only help someone else if your own “life vest is on,” said Neira. “Caring for a child with an illness is taxing on your physical and mental health. Take time to appreciate the positive moments when the light peaks through, while also building a community around you early and consistently to guide you through the difficult times.”

Excellent advice. And for clients who aren’t in this situation. Remind them to be thankful for their good fortune.

 

Reach Mindy directly for more.

 

What’s your take? I’d like to hear from you.

Are We in a Bubble?

Last week’s post about the record high “Quit Rate” of American workers generated a fair amount of feedback. Some said “it’s about time” that workers finally gained some leverage over greedy employers, but the majority questioned the wisdom of workers flexing their bargaining muscles at this stage of the economic cycle. They said it was irrational exuberance at best, foolhardy at worst, particularly for younger workers who haven’t been through a full economic cycle before.

Speaking of irrational exuberance, several of our clients have been interviewed in the national media

about whether our economy and financial markets are heading into bubble territory.

Dr. Guy Baker, CFP, Ph.D founder of Wealth Teams Alliance (Irvine, CA) said a bubble occurs whenever one sector of the economy is doing much better than would be expected if it were not for a few specific factors in play. “The dot-com boom became hyperextended because more and more dollars were flowing into companies that had no viable economic record,” added Baker a member of the Forbes 250 Top Financial Security Professionals List and author of The Great Wealth Erosion, Manage Markets, Not Stocks and Investment Alchemy. “The gold rush mentality drove the urgency to not lose out. As a result, the value of Internet companies soared and became a bubble,” observed Baker. “When the bubble popped, only the strong survived. When we look at bubble thinking today, the only real bubble driven by economics is cryptocurrency,” he added.

Regulatory bubble

While some readers also pointed to meme stocks like GameStop, non-fungible tokens and the boom in SPACs, Baker said he is more worried about another type of bubble that most folks aren’t paying attention to – the government regulation bubble. “We saw this in 2009-2010 when the government caused disfunction in the mortgage market,” explained Baker. “Homebuyers were able to qualify for mortgages based on nothing more than their signature and a statement of ‘fact.’ The free money came home to roost when the economy slipped, and these homeowners walked away from the houses leaving the lenders with an empty house and an inflated value,” he added.

Baker maintains that economic bubbles are part of the capitalistic system, and usually isolated to the companies affected, but regulatory bubbles are not. “They are dangerous and can cause huge damage to institutions and businesses,” he added.

So, how can investors protect themselves from speculative investments related to economic bubbles?

The best way to protect yourself is through wide diversification, advised Baker, adding that in a “well-balanced, smart portfolio” most of the companies that would be “disasters when a bubble burst” will not be included in the mix. He prefers ETFs and mutual funds that are well diversified. “It’s important not to buy funds that do the same thing,” said Baker. “Also, stay away from funds that say one thing and do another. Low turnover is a key metric to watch. Low turnover means the portfolio managers are making good choices and sticking with them. High turnover suggests the fund is chasing yield.”

Five stages of an economic bubble

In his landmark book Stabilizing an Unstable Economy (1986), economist Hyman Minsky identified five stages in a typical credit cycle which follow the typical stages of an economic bubble:

1. Displacement. Investors get enamored by a new paradigm, such as an innovative new technology or interest rates that are historically low.

2. Boom. The asset in question attracts widespread media coverage. Fear of missing out (FOMO) on what could be a once-in-a-lifetime opportunity spurs more speculation, drawing an increasing number of investors and traders into the fold.

3. Euphoria. Caution is thrown to the wind, as asset prices skyrocket. Valuations reach extreme levels during this phase as new valuation measures and metrics are touted to justify the relentless rise. The "greater fool" theory plays out—the idea that no matter how prices go, there will always be a market of buyers willing to pay more.

4. Profit-Taking. Believing the bubble is about to burst, the smart money starts selling positions and taking profits. But estimating the exact time when a bubble is due to collapse can be a difficult exercise.

5. Panic. It only takes a relatively minor event to prick a bubble, but once it is pricked, the bubble cannot b reinflated. In the panic stage, asset prices reverse course and descend as rapidly as they had ascended. Investors and speculators, faced with margin calls and plunging values of their holdings, now want to liquidate at any price. As supply overwhelms demand, asset prices slide sharply. Think the early days of COVID or the 2008-09 global financial crisis.

Most think we’re somewhere between Euphoria and Profit-Taking. But, as economist John Maynard Keynes famously said: "the markets can stay irrational longer than you can stay solvent."

 

What’s your take? I’d like to hear from you.

 

Conclusion

 

As billionaire value investor, Seth Klarman likes to say: “At the root of all financial bubbles is a good idea carried to excess.” Or as Warren Buffett always says: “Be fearful when people are greedy and be greedy when people are fearful.” I’m not sure whether we’re in a bubble or not, but like most things in life, the truth usually lies somewhere between the extremes.

#economicbubble, #irrationalexuberance, #investing, #diversification