SpaceX Delivers a Badly Needed Win for the U.S.

I was chatting with my 80-something next door neighbor over the weekend. Fred’s a conservative, no-nonsense ex-marine who lived through World War II and served in Korea. I don’t think we have the same political views, and he’s a lot better with tools than I am. But I’m okay in Fred’s book because we both sent our kids to public schools and because I’m the only other guy in our rapidly gentrifying neighborhood who still mows his own lawn.

Fred hasn’t seen the U.S. on a losing streak like we’ve had in 2020 since he was a kid during the Great Depression. We’re both hoping last weekend’s well-executed SpaceX launch will get us out of our collective funk.

The what launch?

Lost amid the 24/7 coverage of urban riots and pandemic resurfacing was a monumental leap forward in human space travel on Saturday and Sunday. For the first time ever, a private company (SpaceX) launched astronauts into orbit, nearly a decade after the government retired the NASA space shuttle program in the aftermath of the Challenger tragedy.

On Saturday afternoon, two NASA-trained U.S. astronauts lifted off from the same Florida launchpad that once served Apollo missions and the space shuttles. But the rocket and capsule they were piloting was built and operated SpaceX (not NASA). After bad weather scrapped the launch midweek, liftoff and orbiting followed the plan to perfection. Then on Sunday, the Falcon 9 rocket successfully rendezvoused with the International Space Station (ISS).

As The New York Times reported: “It was a moment of triumph and perhaps nostalgia for the country, a welcome reminder of America’s global pre-eminence in science, technological innovation and private enterprise at a time its prospects and ambitions have been clouded by the coronavirus pandemic, economic uncertainty and political strife.” 

My son is a college student majoring in Mechanical Engineering and Aerospace. He’s also a hard-core basketball fan, but I hadn’t seen him this excited since his school was blowing through the March Madness brackets over a year ago. He and his classmates were glued to their various screens and monitors all weekend whooping and hollering after each successful phase of the Falcon 9 mission. It’s another kind of passion the young generation has. But since they didn’t take their exuberance to the streets, the SpaceX/NASA mission—and young people’s excitement over it-- went widely unreported by the news media.

Historic firsts

Saturday’s mission was the first launch of NASA astronauts from the United States since we retired our space shuttles in 2011. Over the past decade, NASA has paid Russia’s space program an estimated $90 million per seat to transport our astronauts to the ISS. Acknowledging its own limitations, NASA has encouraged SpaceX and other private companies to take the lead in commercializing space flight and furthering scientific exploration.

While our space program has always been pretty good at launching huge things into the sky, it was not until 2015 that SpaceX figured out how to reuse the massive launch boosters rather than dumping them into the ocean--expensive and toxic trash never to be seen again. Watching the boosters coast to a pillowy soft landing on top of the waiting drone ship—completely intact--was arguably more impressive than the launch itself. This aspect of the public-private partnership is great for the U.S. space program, great for the environment and great for taxpayers. The massive cost savings can be passed on to future space travel customers.

More impressive than the technology and the public private partnership was SpaceX founder Elon Musk’s relentless pursuit his Falcon rocket vision. He has suffered numerous a very public embarrassing string of failures (YouTube) that would have been career enders for most government or corporate bureaucrats. But, he never stopped fighting and never made excuses.

Conclusion

Fred told me over the din of his weedwhacker the other day: “Two things I never thought I’d see in my lifetime: Figuring out how to re-use a rocket and a Jewish guy mowing his own lawn.”

Whether it’s race relations, politics, public health, space travel or lawn care, the more you can see the other side’s point of view, the faster we can get over our differences and become a productive society again. NASA figured it out. Why can’t the rest of our so-called leaders?

#SpaceX #NASA #Falcon rocket #Falcon  #Elon Musk

As Clients Scramble to Update Insurance, Don’t Let Them Be Infected by Taxes

Businesses may have come to a grinding halt during the pandemic. But, the phones of many estate planners and insurance professionals we know have been ringing off the hook. Millions of Americans have suddenly been forced into contemplating the fragility of life; they’re dusting off estate plans and upping their insurance policies like never before.

But, one thing that often gets over looked in the mad-dash for peace of mind during these unsettling times is the tax implications of interest and appreciation on those life insurance policies—for yourself and your heirs. Fortunately, three of our clients are well-versed in this subject, and they have been sharing their expertise with the national media recently. Below are excerpts from their interviews:

Can interest gained on life insurance benefits be taxed?

There’s a lot of confusion in this area. According to Randy Fox, founder of Two Hawks Consulting, LLC (Skokie, IL) it depends on how the policy is originally funded. “If the policy is a modified endowment contract (MEC), then funds borrowed or distributed from the policy will be taxable as ordinary income. Otherwise, the answer is usually NO.”


According to Tom Suvansri, founder of Premier Trust Advisors, LLC in Stamford, Connecticut, the answer is Yes, if the policy is surrendered. “The interest earned above the amount contributed would be considered taxable. Also, if cash value is withdrawn above the amount contributed, then any interest earned would become taxable,” Suvansri explained. To avoid that situation, Suvansri said you can start borrowing from the life insurance company “once you've withdrawn your contributions.” 


So, would a trust help to avoid certain taxes?


Suvansri said yes, since there are “irrevocable life insurance trusts” that can be used to remove the life insurance proceeds from potential state and federal estate taxes. Fox said the appropriate trust will keep “insurance proceeds out of the estate of the insured and avoid estate taxes.” 
Our experts are also asked frequently if you can be taxed on cash-value policies?  


Fox said Yes, it’s possible you can be taxed if you withdraw money from a modified endowment contract policy.” Baker also agreed you can be taxed in certain instances, such as if you cash a policy—"but only on the gain over basis.” Suvansri agreed that yes, you can be taxed “if you surrender a policy with cash value and it exceeds the amount paid in premiums. Any gain would be considered taxable.  Also, if you withdraw cash value above the amount of the premium paid into the policy then it would also be considered taxable,” added Suvansri.  


What about gift taxes?  


According to Fox, every individual is currently allowed to transfer $11.58 million during their lifetime, adding that they are also allowed to give any other person $15,000 per year without utilizing any of their $11.58 million exemption. “Should they choose to give more than $15,000 to an individual during any year, that amount would be subject to a gift tax. At that point, they can choose to utilize some of their allowable exemption, but should file a gift tax return in order to track their total lifetime gifts,” added Fox, who is also the editor-at-large of the Planned Giving Design Center.


Baker concurred that a gift tax is paid on any gifts that exceed the $11.58 million lifetime exemption per spouse. “So only transfers of property greater than $11.58 mil (or $23.16 mil (in the case of a married couple) are subject to tax,” said Baker.


Conclusion


Back in 1789, another tumultuous time in our nation’s history, Benjamin Franklin observed that “in this world nothing can be said to be certain, except death and taxes. As was the case 231 years ago, it takes a crisis to get people to act. Don’t let your clients infect themselves and their loved ones with chronic taxes while rushing to get their affairs in order during these unsettling times. They’re counting on you.




#life insurance  #estate planning  #tax planning #pandemic #Randy Fox #Guy Baker #Tom Suvansi #Planned Giving

Diversifying Our China Risk

Chinese military strategist Sun Tzu liked to say: Keep your friends close and your enemies closer. Great advice and it cuts both ways.

Earlier this week, Australia joined the growing ranks of countries planning to investigate China over its handling of the novel coronavirus and its lack of transparency. Like many other countries, Australia wants an international investigation into the TRUE origins of the virus, how it spread so quickly and why it wasn’t contained.

Experts believe the virus originated late last year in a Chinese market selling wildlife in the central city of Wuhan. Since then it has spread at an alarming rate, infecting more than 2.3 million people worldwide and killing nearly 180,000 so far. While geographically close to China, Australia managed to get the epidemic under control before it strained its public health system. It has recorded less than 7,000 cases on only 71 deaths.

China is Australia’s most important trading partner, but relations between the two countries have deteriorated amid Australian accusations of Chinese meddling in domestic affairs and concern about what Australia sees as China's growing, and undue, influence in the Pacific region.

Would U.S. companies ever have the courage to decouple from China?

Two of our clients—Blake Christian and Dr. Guy Baker—explained various scenarios recently in interviews with the national media. Here are excerpts:

Blake Christian, CPA, senior tax partner of HCVT, LLP in Park City, Utah pegs the odds of decoupling happening at about 70-percent. “Our companies are not going to pull out of China completely, but they’ll substantially reduce their reliance on any single country, not just China,” said Christian. “Nike is always going to look overseas for low-cost goods and manufacturing, but they’ll need a more diversified supply chain.”

Dr. Guy Baker, Ph.D, founder of Irvine, California-based Wealth Teams Alliance agreed. “The biggest reason China is such a large component of U.S. life is MONEY. Cheap labor has always driven economic decisions. Large companies have moved production offshore to gain a price advantage. ‘Made in China’ has been the label of low-cost goods, often shabby workmanship and usually unsafe raw goods.”

The next two three years will “frankly suck” as we adjust, but three to ten years from now, America is going to be a “powerhouse manufacturer,” observed Christian. “If I’m a U.S. business person right now, I want to be in logistics. I’m going to buy warehouses before I buy office buildings. I believe the sweet spot is to have 17 warehouses throughout the U.S. so everything is no more than one day away for your customers. Isn’t that better than shipping stuff back and forth across borders on a 12- to 14-day journey?”

“This experience has caused people to reassess this decision and how much of a slave
they have become to the economic master,” noted Baker. “The supply chain crisis has awakened the survival instincts of America and given pause to the reality that America is not in control of its future. Lip service to liberty is being replaced by the reality of slavery to a foreign authority.”

Of course, U.S. consumers will have to be willing to pay more for “Made in America goods” said Christian, “and that could trigger a big spike in inflation. Also, flights will cost more since airlines can’t sell the middle seat. Dining out will cost more since restaurants will only be able to serve has as many diners at one time than they used to,” he added.

Japan is already using $2.2 billion to help its manufacturers shift production out of China. Will this work long-term?

“Supply-and-demand is the foundation of capitalism,” noted Baker. “The free movement of goods and services seeks the most productive and cost-efficient levels. When outside forces interfere, then the natural laws of self-preservation take over. Alternative sources of production increase competition. When competition is competent and economic, then the laws of supply and demand will take over and reallocate resources efficiently. To the extent Japan can offer a viable alternative to China and other alternatives, Japan will thrive.”

Christian expects the U.S. to follow Japan’s lead and start offering domestic companies “generous employee credits and equipment credits” for moving overseas operations back to the U.S. “It’s good for U.S. workers and suppliers, and it will bring billions of dollars of badly needed tax revenue back to Treasury. For example, Apple has $100 billion offshore. If it was doing 50 percent of its manufacturing in the U.S., that big deferral wouldn’t be out there. Imagine if the U.S. becomes a manufacturing juggernaut again. Then all these other countries will be relying on us for production and we could be the one setting prices,” added Christian.

Conclusion

Like many observers, Christian believes armies of policymakers and risk management professionals will eventually be taken to task over their mishandling of the crisis. “But in the long run a lot of good things will come out of it. It has forced companies and governments to innovate on the fly and we’ll become a much healthier society,” said Christian.

Let’s hope and pray he is right.

#supply chain #China # Covid-19 #stock market  #Guy Baker #Blake Christian

Voices of Reason from Medicine and Finance

Last week’s post (I’m Not Scared; I’m Pissed) generated more comments than usual. What surprised me more was that almost everyone agreed with me. Trust me, that doesn’t happen often.

So, it got me thinking. Maybe I’m not just in the vocal minority this time. Let me share some great thinking with you from medical and financial experts on this distribution list.

Dr. Tom Hedberg, Executive Director of the International Medical Crisis Response Alliance (IMCRA), told me we’re still a long way from the Spanish Flu pandemic of 1918 that infected one-fourth of the world’s population and killed close to one million Americans. However, there’s no guarantee it can’t happen again.

“While our treatment facilities are excellent, a virulent airborne mutant contagion could prove a serious threat, and widespread infection rates could easily overwhelm such facilities,” observed Hedberg. He added that Americans are exceptionally well-informed about medical and health issues and many will be likely to take appropriate individual measures (i.e. work from home, gloves in public, disinfectant wipes in the home).

While we all have to be highly diligent about hygiene and observing shelter-in-place rules, Dr. Hedberg believes the virus in its current form poses the greatest threat to elderly persons with pre-existing health conditions. “Young children are only slightly affected and robust healthy persons are: 1) likely to get over the infection on their own and 2) Very likely to get over it with treatment,” maintained Hedberg.

“The bottom line of course will be the number of virus carriers coming into the country from high infection-rate areas. This can be limited by curtailing flights FROM such countries and encouraging flights OUT of the US. Unfortunately, the government seems to be handling this backwards if it is handling it at all,” Hedberg added.

You’re getting advice from a zillion different places, and I don’t need to add to the confusion—Josh Patrick

Josh Patrick, founder of Stage 2 Planning Partners and host of The Sustainable Business podcast told me: “Yes, the markets are plunging. Yes, we don’t have nearly enough test kits and when we do, the number of cases will skyrocket. We need testing so we know where and how bad the issue is. That’s when we can start taking actions that we know will help.”
As Patrick noted, it appears the number of cases in South Korea and China is moving down. “South Korea has been testing extensively and is likely the best model for us to use right now. I’m hoping our government figures out how to get testing done widely so we know what the real issue and numbers are in the country.”

According to Patrick, we need to have all of our news sources and political leaders tell us the truth about what’s going on. “The advice we’re getting from the science community seems to be good advice. The advice from our politicians has been mixed. The truth is with all the disinformation about the virus and its effects makes it more difficult to know what to do and what not to do. The science people are saying we are now in a phase they term community spread, so it’s now being transmitted from one human to another within our country and not from people outside the country,” noted Patrick.

Dr. Hedberg, a neuroscientist by training, had a unique take on the stock market sell-off triggered by Coronavirus. “This was a typical Stage-1 emotional response, which is usually highly volatile. The Stage-2 response came a bit later when investors began to realize how a large-scale shutdown in Chinese industry for an indefinite period would impact their holdings financially. The Stage-3 response which is underway right now is a more sober long-term assessment of the medical realities of the disease worldwide and how it may impact international trade and finance,” added Hedberg.

“We’ve been expecting a downturn in the markets, we just didn’t know what would trigger it. Now we know,” observed Patrick. “The markets don’t like uncertainty. That’s one thing we have a ton of right now. After we start seeing real numbers and see what the impact will be on the economy, I expect the markets will adjust appropriately… either up or down.”

Dr. Hedberg expects to see some “Stage 3” market correction as investors learn more about the disease and “how low the death rate is compared to the infection rate--and which segments of the population (i.e. the elderly) are most seriously affected.”

Job One: Helping clients keep emotions in check

Uninformed emotional selloffs should be “avoided at all costs,” noted Dr. Hedberg. “While IMCRA makes no claims to be an international financial advising organization, our general advice is to avoid stampeding out of certain holdings unless careful research proves that the organization in which stock is held is primarily supported by Chinese labor in areas like Wuhan, which are unlikely to recover rapidly.”

Patrick said that when pandemics come under control, markets historically correct. “I’m hoping that’s true this time as well.” In terms of predicting a recession or further market adjustment, Dr. Hedberg said the most accurate assessment will come from “monitoring the global impact of COVID-19 as we head toward springtime in the northern hemisphere and the likely decrease in the spread of the disease late this month and on into April.”
 

Common sense rules the day

Our experts agreed we should abide by the common sense (not bunker) approach to taking care of ourselves and our loved ones:

1) Refrain as much as possible from crowded environments where many people are breathing and re-breathing the same air.

2) Use gloves in public whenever possible.

3) Cough and sneeze into your elbow.

4) Use face masks in public whenever possible.

5) Increase your consumption of vitamin C through citrus fruits.

6) Avoid physiologic stress situations such as going out into the cold inappropriately dressed.

7) If you exhibit symptoms, do not just wander into an emergency room or your doctor’s office till you call.

Conclusion

If you want to give up and convince yourself that the world’s coming to an end, go ahead. Just don’t drag the rest of us down with you. For all of our faults, the U.S. has always been a nation of fighters. We’re generous in times of need. We adapt to change faster than most other large countries. We don’t let anyone, or anything push us around.

We’ll get through this crisis--and all the ones that follow.

# Covid-19 #stock market  #Tom Hedberg #IMCRA #Josh Patrick #Sustainable Business

I’m Not Scared; I’m Pissed

The events of the past two weeks reminded me of a story.

One day last fall I went in for my annual physical. The longtime family doctor we loved had recently retired. He sold his practice to a huge medical conglomerate. Let’s call it Medical, Inc. As you can imagine, the level of care and time spent with patients is quite a bit less at Medical, Inc. than it is at a small family practice. You’re no longer a person; you’re just a patient DOB and a case number.

Long story short, a very inexperienced technician botched my standard electrocardiogram test (not once but twice). Her errors caused in an apparent “blip” on my EKG chart, which panicked my new 30-something doctor into thinking I had a heart arrhythmia. Again, he didn’t know me very well.

Next thing you know, the door to the examining room is locked. I’m forced to swallow aspirin tablets. Local cops and EMTs are rushing me into an ambulance while a small crowd of onlookers in the parking lot is trying to see who the poor sap in the gurney is. Pretty humiliating.

Does any of this sound familiar?

As some of you know, I’m a national class triathlete and distance runner in my age group. I have no history of heart disease or cardiovascular illness. My ticker’s just fine and I had just done a hilly 25-mile bike ride that morning before coming in for my physical.

Didn’t matter.

The more I pleaded my case, the more belligerent the emergency workers got: “Mr. Berkowitz. Do you understand what’s happening? If you don’t get in the ambulance right now, we’re going to have to sedate you.”

Finally, it hit me: Holy crap. I’m in the system and I can’t get out!

“Okay, fine. I’ll play along” I told myself. ”I can’t believe this is happening to me,” I thought as we whizzed down a major state highway, blowing through red lights to get to the hospital emergency room.  

I tried not to think about my half-eaten bagel, briefcase and computer still sitting in my car outside the medical center. I tried not to worry about my wife working out of town that week or my teenage son who’d be expecting me to pick him up at school in an hour. I wasn’t allowed to call anyone.

To be honest, I was mostly panicking about the big fat bill I was likely to get for the unexpected ambulance ride. I tried not to think about all the client meetings that would have to be cancelled that die (and the lost revenue).

You can’t fight the riptide

I’ve learned one thing from all those rough-water ocean swims--you can’t fight the riptide. You have to let the riptide take you where it wants to go and trust that it will eventually deposit you onshore. You might end up half a mile down the beach from where you started; but at least you’ll be on dry land none the worse for the wear.

Same goes for the Covid-19 virus and all the residual panic it has triggered. I know the virus is for real. I know there’s no known cure. I know our government and disease control experts F’d up their chance to do early testing and detection. I know the media and financial markets are pouring more gasoline on the panic fire. But, we’ll get through this crisis just like we got through the Global Financial Crisis, 9/11, Y2K, AIDS, SARS, Ebola and every other catastrophe we’ve faced in recent decades. These Black Swan crises seem to come every 10 years or so, and we’ll surely have another one before the end of this decade.

Here's the thing.

As long as human beings have the will to live and as long as businesses want to make money, we’ll get back to some semblance of normalcy in our lives sooner rather than later. You can’t fight those natural forces any more than you can hold back the ocean. You have to relax, go with the flow and learn to adapt.

In my next post, I’ll share some really great insights about disaster recovery and resilience from my friends Dr. Tom Hedberg of the International Medical Crisis Response Alliance (IMCRA) and Josh Patrick, founder of Stage2 Partners and host of the Sustainable Business podcast.

Back to my ordeal

After 36 frustrating hours in the hospital emergency room, I was finally whisked to a comfy private room and told to rest up for my all-important “treadmill test.” Having completed 20 marathons, 50 triathlons and eight 24-hour running relays, I wasn’t too concerned about walking 20 minutes on a treadmill. But when you have dozens of people checking your vital signs every 15 minutes with concerned looks on their faces and when they keep asking are you sure you’re up to this, you start to doubt yourself and wonder if maybe there really is something wrong with you.

Own your fears

Same thing happens when you’re glued to the news and the doomsday stock market bulletins all day long. You start to question all the foundations and stability in your life. DON’T DO IT!

Down in the bowels of the hospital, they have armies of technicians, banks of treadmills and lots of high-tech equipment to monitor your vital signs. You get your torso shaved, drink some electrolytes and start walking on the treadmill up a slight grade. Well, 45 minutes into the test, I’m hardly breaking a sweat and the pulse monitor’s barely elevated. Just like in the back of the ambulance, I cursed under my breath: “What a waste of resources!”

Finally, the head cardiologist walks in with an annoyed look on his face. He takes a look at my chart and snarls at the technicians: “Jesus Christ! What are we doing here, people? Obviously, this man’s an athlete. Get him out of here and start treating some sick people.”

Conclusion

Just remember, stocks are still up over 450 percent from the end of the global financial crisis, 11 years ago this week. Let’s take a healthy pause, get ourselves re-centered and get back to work and school ASAP so we can get on with our lives.
We’re all in this together and we’re only as strong as our weakest link. Let’s put aside our petty differences and help each other out so we can get back to normal.

That’s how we beat the terrorists after 9/11. That’s how we’ll beat Covid-19.

# Covid-19 #stock market  #Tom Hedberg #IMCRA #Josh Patrick #Sustainable Business

Corona Coping: Listen to Your Doctor and Financial Advisor

One of the great things about my building is that you can network informally with so many smart people from all types of businesses and professions. After a week like we just had, it can be very helpful to get a big-picture global perspective from outside the financial world.

The International Medical Crisis Response Alliance (IMCRA) is right down the hall from me. Executive Director, Dr. Tom Hedberg and I have become friends thanks to shared interests in fitness, fiction and coffee-intake. Like behavioral finance pros, neuroscientists like Dr. Hedberg are fascinated by the way that human emotion takes over our rational decision-making during times of stress.

I asked Hedberg how serious the Coronavirus really is in the U.S.

Hedberg said it’s very hard to predict because U.S. citizens are historically not likely to be “closely bound” by government regulations concerning quarantines and isolation measures. “While our treatment facilities are excellent, a virulent airborne mutant contagion could prove a serious threat, and that widespread infection rates could easily overwhelm such facilities,” noted Hedberg. That being said, Hedberg believes Americans are “exceptionally well-informed about medical and health issues” and that most of us will take appropriate measures such as using disinfectant wipes in the home and gloves in public. 

The bottom line of course will be the number of virus carriers coming into the country from high infection-rate areas. “This can be limited by curtailing flights FROM such countries and encouraging flights OUT of the US,” added Hedberg. 

While infection rates could be significant, experts say fatality rates so far have been low.

“It appears the virus in its current form poses the greatest threat to elderly persons with pre-existing health conditions,” noted Hedberg. “Young children are only slightly affected and robust healthy persons are: 1) likely to get over the infection on their own and 2) Very likely to get over it with treatment.”

Hedberg reiterated the importance of staying calm and not overreacting to the news coming out of other countries, as well as the inflammatory domestic headlines about Wall Street and the economy.

True, the stock market had its worst week since the 2008 global financial crisis. But even with a 12-percent sell off, the broad-based indexes are still up by about 6 percent over the past 52 weeks and up by over 400 percent since 2009. While he’s not a professional investor, Hedberg said he’s going “bargain hunting” next week for undervalued stocks.

While over 80-percent of respondents to our annual CPA/Wealth Advisor Confidence Survey™ think we could see another 10-percent market correction within 12 months, only one in five (21%) think it’s “very likely” we’ll experience a recession within that time. That number moved only 5 percentage points from this time a week ago, before the market sell off began. There’s still time to take the survey….Give us 5 minutes of your time, and we’ll send you a report to show your responses stack up to your peers.

NOTE: We don’t make money from the survey or share respondent names or emails. It’s a pro bono effort in association with The Financial Awareness Foundation.

Whether talking about your finances or your health, the bottom line, said Hedberg, is to use common sense:

1) Refrain as much as possible from crowded environments where many people are breathing and re-breathing the same air.

2) Wear gloves in public whenever possible.

3) Use facemasks in public whenever possible (This is de rigeur in Japan and should become so in the U.S.).

4) Increase intake of vitamin C through citrus fruits.

5) Avoid physiologic stress situations such as going out into the cold inappropriately dressed.

6) Don’t get spooked by the headlines.

Conclusion

As with so many upsets in life, staying calm and using common sense will get us through this crisis and all its residual impacts. Don’t succumb to the headlines. Heed the advice of your financial and medical advisors and don’t hesitate to reach out them with questions or concerns. Let’s get on with your busy lives.

# Corona virus  #stock market  #Tom Hedberg #IMCRA

You Never Know. Lessons from a Zamboni Driver

Hard to believe, but it was the 40^th anniversary of the Miracle on Ice hockey game this weekend. That’s when a team of scrappy American college kids pulled off one of the greatest upsets in sports history. Against all odds, they defeated Russia’s undefeated elite professional team in the semifinals of the Lake Placid Olympics and spawned countless books, motivational speeches and a movie.

There was another hockey miracle this weekend, which I’ll get to in a minute. But first let’s look at what else transpired first in a topsy turvy week.

Baylor University’s men’s basketball team, ranked No.1 in the country, was knocked off by Kansas, ending Baylor’s 23-game winning streak. A few hours later, No. 2 ranked Gonzaga, went down hard to unranked Brigham Young University, ending Gonzaga’s 19-game winning streak. Then, the nation’s only remaining undefeated team, 4^th ranked San Diego State, lost to unranked Nevada Las Vegas, ending State’s 26-game winning streak.

Speaking of Las Vegas, Bernie Sanders, until recently a fringe candidate in the overcrowded Democratic presidential field, obliterated the competition Saturday night at the Nevada Democratic Primary. Now most of the remaining five contenders are on thin ice.

*** To what extent will the elections impact the economy and financial markets. Take our 4^th annual CPA/Wealth Advisor Confidence Survey™. See what your peers think

Back to hockey. How many of you know the name David Ayres? I didn’t either until this morning and I’m a hockey fan. In last night’s National Hockey League game between the Carolina Hurricanes and host Toronto Maple Leafs, both Hurricanes goalies got injured on separate hits by the Leafs. Without any goalies left on the bench, the Hurricanes turned to a 42 year-old Zamboni driver named David Ayres, an emergency backup goaltender and kidney transplant survivor from Toronto who was sitting in the stands.  

Without time to warm up, Ayres was asked to enter the game in the third period and preserve Carolina’s lead against the hometown team. After allowing the first two Toronto shots to slide through his pads, Ayres steadied himself and stopped the next eight shots, preserving Carolina’s 6-3 win. Ayres became the first emergency backup goaltender ever to win an NHL game was mobbed in the Carolina locker room by his temporary teammates.

Talk about being ready for anything!

Ayres, who had also battled two bouts of skin cancer, drives the Zamboni ice resurfacing machine for Toronto’s minor league team. He has filled in a few times in emergency situations in the minor leagues, but never before in the NHL. His job is simple: Be ready for anything on the off-chance your number is called.

After Carolina’s backup goalie Petr Mrzaek went down, Ayres told reporters: " I got a bunch of text messages that said, 'Get in there,' and someone came into the room and like, 'Hey, you'd better get dressed, hey, you're going out there. I was a little shocked, but loving it."

Conclusion

We live in a crazy, unpredictable world when anything can happen. Sure, things seem pretty good right now on the economic and financial market front, but this is exactly when you want clients to get regular medical checkups, “stress-test” their portfolios and see how they’d fare if a natural disaster hit.

*** Find out why half of the CPAs and wealth advisors we surveyed think a recession is possible within 12 months.

Battening down the hatches when you’re flush is the best way I know to be proactive, rather than reactive, during times of stress so you can keep your momentum going without praying for a miracle.

# Miracle on ice  #Zamboni drivers  #David Ayres

Wisdom of the Crowd? Not on Super Bowl Sunday

Whether you’re a hardcore football fun or just a casual observer, chances are you’re going to get sucked into watching the Super Bowl—the world’s most watched sporting event. Even if you don’t know a screen pass from a screen door, you’ll be tempted to make a friendly wager or two with a co-worker, a friend or someone at a neighbor’s Super Bowl party.

That’s okay. We won’t tell.

Nearly $7 billion will be wagered on Sunday’s big game according to CNBC. That’s roughly a dollar for every man, woman and child on the planet. And it’s not just cigar-chomping high rollers reaching into their wallets. Roughly 26 million regular people are expected to bet on the Super Bowl, according to the American Gaming Association. Of those 26 million bettors, only 4 million will be wagering in person at a sportsbook. Only 5 million will are expected to bet through an online or mobile platform. The rest of us — roughly 16 million — will bet illegally via a bookie, an office pool, or a “buy a square” board at your favorite pub or deli.

It's fun, right?

I’m not going to debate the ethics or gambling or whether or not you should report your winnings to the IRS if you haul in more than $600. Just don’t use real money—money you can’t afford to lose—if you lay the points, buy a square, ride the dog, parlay a prop or squeeze the under or make some other kind of wager on the game. Eventually you will lose, just like you do in the stock market. No one has ever gone undefeated in the market or in sports betting. And just like investing, the pain of a loss in sports betting is felt significantly more than the thrill of a gain. I didn’t make that up. It’s based on the theory of “loss aversion” that was pioneered by Nobel prize winner Daniel Kahneman and Amos Tversky.

Bottom line: You have about the same odds of being a consistently successful sports gambler as you do being a consistently successful market timer—close to zero. That’s because the market instantaneously prices in every material piece of information that’s out there and does it a lot faster than you, or any well-staffed Wall Street firm can possibly do. 

Our client Chas Boinske, President of Wayne, Pennsylvania-based Independence Advisors and author of the forthcoming book “Masterful Investing,” likens the market to “the world’s fastest super-computer” that continuously sets and updates prices. “When you try to play the market,” writes Boinske, “that’s exactly what you’re up against—one of the most powerful supercomputers in the world Good luck.”

Oh. And there’s another thing. Vegas oddsmakers aren’t in business to lose money. They have armies of people who spend all day long scouring injury reports, field conditions, scouting reports, trends, and even the police blotter the night before big games. Their job is to set an equilibrium price (aka the betting line) that has an equal number of people on both sides of the bet. And there will be a lot of dumb people throwing down their money on Super Bowl Sunday.

Now, I can’t speak to the entire $7 billion expected to be gambled on the Super Bowl. But of the $150 million or so that’s handled legally through the Vegas Sports Book, oddsmakers consistently make a return of about 7.3% for themselves. Does that 7.3% rate of return sound familiar? It should, because 7.3% is what the stock market historically returns to investors on an annualized basis.

In case you were wondering, the line (aka equilibrium price) for tomorrow’s big game is Kansas City favored by 1-1/2 points over San Francisco and the two teams are expected to combine for 54-1/2 points. That’s what -1.5 (54.5) means when you see it in the sports section. What that really means is that half of all the bettors out there think Kansas City will win by two or more points and half think San Francisco will either win the game “straight up” or else lose the game by less than two points.

So how do they come up with half a point?

Do they split a field goal in half? Nope. Half a point is the same thing as fractional shares in the stock market. It’s the equilibrium price that keeps getting adjusted all the time so that an equal number of bettors (aka investors) are on either side of the line. Same goes for that 54.5 number also known as the Over/Under. All that means is that half of all the betters out there think the two teams will combine to score 54 points or less and half think they’ll combine to score 55 points or more. Believe me. It doesn’t matter if the score is a tense 28-26 or a blowout 49-3. If you’ve got a lot of money on the “Under,” you’ll be sweating it out big-time if one of the teams starts lining up for a field goal in the final minute of the game.

Fun, right?

Like the markets, Vegas doesn’t care who wins and who loses. The house just wants an equal amount of money on both side of the equilibrium price. In fact, professional sports books don’t do a very good job of accurately predicting the score of the game or the margin of victory. They just want a lot of transactions flowing in. Sound familiar?

If you’re new to sports betting, a point spread of 1-1/2 points like we have for Sunday’s game is pretty small. Sure, both teams are very good, Super Bowls are often lopsided affairs with an average margin of victory of about 10 to 11 points. In fact, only seven of the 53 previous Super Bowls (13%) have been decided by three points or less, and just one has had a one-point margin of victory. Further, there have been only two “pushes” in the 53-year history of the big game. A push is what happens when the favored team wins by exactly the point spread. In the 1997 Super Bowl, Green Bay was a 14-point favorite and indeed beat underdog New England by a score of 35-21. Three years later (January 2000), the old St. Louis Rams, a 7-point favorite, defeated underdog Tennessee by a score of 23-16. That’s been it for pushes.

Vegas hates pushes. They have to return everyone’s money whether they bet on the favorite or the underdog. Again, pushes don’t happen often. Sports books are set up to make money on both sides of the transaction just like market makers do. Like Wall Street analysts, oddsmakers can be consistently off target and still get paid. The average “miss” for the Super Bowl has been about 11 points when the favored team wins and it’s been about 10 points when the favored team loses.

Not great forecasting. But again, most of the time oddsmakers make money.

In case you were wonder, we found only four previous occasions in which the betting line was as close as it for Sunday’s Big game (1-1/2 points).

·         In 1982 San Francisco was a 1-point favorite over Cincinnati and ended up winning by 5 (26-21).

·         In 1973 Miami was a 1-point favorite over Washington and ended up winning by 7 (14-7).

·         In 2015 Seattle was a 1-point favorite over New England and ended up losing by 4 (28-24). Hmmn

·         In 2014 Denver was a 2-point favorite over Seattle and ended up getting blown out by 35 (43-8)  Oops!

So much for predicted close games.

James Surowiecki’s 2004 best-seller, The Wisdom of Crowds, argues that large groups of people tend to be much better than individuals when at assessing situations and making good decisions whether we’re talking about pop culture, psychology, biology, behavioral economics, and other fields. The wisdom of the crowd even works in the famous jelly bean estimating game. As Boinske relates in his book:

You’ve probably played the jelly bean game at least once in your life. That’s when a large jar of jelly beans is placed in a public space and people try to guess exactly how many jelly beans are in the jar. Whoever guesses closest to the actual number wins a prize – often the jelly beans themselves. Whether at a school, a county fair or a church fundraiser, it’s amazing how often someone in the crowd of people will guess exactly the right answer.

One day at our firm, my assistant and I poured 1,670 beans into a large plastic jug and we set it up on our lobby. Almost everyone wanted to play the game and guesses varied wildly – from 409 to 5,365. The average of our guesses was 1,653—just a hair off the correct answer. Wow, that’s spooky!

Conclusion

Just remember this: When it comes to investing and sports betting, the game is rigged by the house. The house always has both sides of the bet covered. The more emotional you become, they more they suck you in and take your money. Enjoy Sunday’s game and make a friendly wager or two with spare cash you absolutely can’t afford to lose. We’ll have plenty of team to get emotional as global market volatility kicks in with a vengeance in the turbulent months ahead.

# Super Bowl  #wisdom of the crowd  # sports betting  #investing

Imagine Giving Employees Time Off to Sit and Think

I got to thinking the other day. It seems like all I do all day long do is “do”—I never have time to think. I’m not proud of it, but I suspect I’m not alone.

As our client Anthony Glomski, founder of AG Asset Advisory, told Medium.com and Authority Magazine recently, your employee’s minds are like computers. They can do amazing things, but you have to give them time to cool off and reboot occasionally, otherwise they start to wear down. “I’m not suggesting that you treat your people like computers,” Glomski said, “but rather, acknowledge the benefit that meditation would have for you and for them.”

As Glomski related in his book Liquidity & You: A Guide for Tech and Business Entrepreneurs 

Approaching an Exit, he was heavily influenced by early 20^th century author and entrepreneur, W. Clement Stone, who Glomski came to admire greatly after auditing Stone’s foundation early in his career. When Stone was faced with a problem he couldn’t resolve, he would lock himself in a room for 30 minutes and simply meditate. “His reliance on the subconscious would ultimately manifest the answer,” explained Glomski.

Clear the head for mindfulness

Glomski said the core of Stone’s philosophy is based on mindfulness. “It’s about having good character and believing you can achieve anything as long as it doesn’t violate the laws of man. The philosophy is also about the power of the mind and the power of action and teaching the mind how to take action,” he added.

Glomski, was also influenced by Napoleon Hill, author of the book Think and Grow Rich, originally published during the Great Depression. While researching his book, Hill interviewed hundreds of the world’s greatest entrepreneurs of his era and most credited meditation, mindfulness, and spirituality as the keys to their success.

Are you seeing a pattern?

As Glomski told Authority Magazine: “Nearly every one of the successful entrepreneurs I work with practices some form of meditation, spiritual practice or quiet thinking time. And the more progressive leaders I’ve encountered tend to pass that philosophy along within their companies and advocate for it.

This is something that’s especially important in today’s always-connect wired age.

“Technology is an amazing asset,” related Glomski, “but sometimes it can be a liability. Speaking both for myself as a business owner and as one who works closely with other business owners and entrepreneurs, I’ve found that common traits shared by so many of these high achievers are meditation, mindfulness, thoughtfulness, and setting aside time for deep, uninterrupted thought.”

It’s no surprise those high achievers are the ones most likely to give employees time to think. In my next post, I’ll explain how to incorporate employee thinking time into your work culture and why Warren Buffet spent 80 percent of his remarkable career thinking.

Conclusion

My Uncle Carl was a highly successful securities lawyer and no stranger to long hours and high stress. He liked to get up every day at 4am to jog. Afterward, he’d take a shower, eat some breakfast and then go back to bed for a pre-work power nap before heading off to the office completely recharged. I’m not recommending Uncle Carl’s morning routine, but he knew what got him into the flow state for work and he’s still fit and razor sharp in his late 80s. Carl used to remind me at family gatherings: “Hank, even if you win the rat race someday, you’re still a rat.”

I’ve always been good about unplugging my devices and staying away from texts and emails during family time and off hours. Now I’m working on unplugging my mind. I’ll let you know how I do in 2020. Better yet, ping me and let me know how you find time just to sit and think. I’ll drop what I’m doing to read it over and contemplate.

#Mindfulness #Glomski #W. Clement Stone  #Productivity #Napoleon Hill