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Month: July 2017

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America’s Best Girl

Records are made to be broken, standards are met to be surpassed, and the world is full of “firsts.”  But sometimes a new record comes from an unlikely source, and it’s in those instances that something truly remarkable happens.

The remarkable happened ninety-one years ago.  On August 6th, 1926, Gertrude Ederle became the first woman to swim across the English Channel.1  Her feat set an amazing example for other women to follow, but it did more than that.  Despite swimming in terrible conditions, Ederle smashed the records of the five men who had gone before her.

In the 1920s, few people took female athletes seriously.  Even in the Olympics, female athletes were treated far poorer than their male counterparts.  During the 1924 Olympics in Paris, female competitors had to stay in hotels far away from the city.  The US swim team, which included Ederle, “had to travel five to six hours each day just to practice in the Olympic pool.”1

But from a very young age, Ederle knew she wanted to swim, no matter the cost.  When Ederle was five she came down with the measles, which severely affected her hearing.  “The doctors told me my hearing would get worse if I continued swimming,” she once said, “but I loved the water so much, I just couldn’t stop.”1

So swim she did, setting both American and world records in the process.  In the aforementioned Olympics, she won both the gold and bronze medals in different events … all while suffering from an injured knee.1  But it was the Channel swim that provided the greatest challenge of all.

It didn’t come easy.  To cross the Channel, Ederle started at Cape Griz-Nez in France.  The goal was to come ashore at Kingsdown in England.  In a straight line, it was a 21-mile swim.  But the distance was the least of Ederle’s worries; she also had to contend with choppy seas, cold water, and boats.  Of the five men who had already swum the Channel, the fastest had done it in a little over 16 hours.  The slowest required 26 hours and 50 minutes … over one full day in the water.

Ederle’s first attempt, in a slightly different location, ended in failure.  She did not get along with her trainer, a man who had tried, and failed, to swim the channel himself over twenty times.  Nevertheless, she got off to a torrid start, swimming 23 miles in less than 9 hours.  But at one point, her trainer, who was following along in a boat, thought she was drowning and ordered that she be recovered from the water.  The result was immediate disqualification.  Furious, Ederle fired her trainer and vowed to try again.2

Her second attempt came a year later.  Now Ederle had something new to worry about—competition.  Several other women, including three Americans, were all trying to become the first to swim the Channel.  Instructing no one to interfere this time, Ederle ventured into the water at 7:00 a.m. on August 6th and started to swim.  The boat that accompanied her held up signs along the way, reminding her that she had been promised a new car if she made it.1

But the ocean was very rough, with wind and waves impeding her every stroke.  At one point, her new trainer was so worried that he shouted, “Gertie, you must come out!”

Ederle raised her head.  “What for?”2

Fourteen hours and thirty-one minutes later, Ederle reached England.  Because the sea was so turbulent, her 21-mile swim had turned into a 35-mile one.  Yet she made it, breaking the previous record by two hours and two minutes.  When she emerged onto the shore, the first person to greet her was an immigration officer.  He requested her passport.2

Back home in New York, a ticker-tape parade was waiting.  Over two million people greeted her.  Men sent proposals to her in the mail.  Musicians wrote songs about her.  President Coolidge invited her to the White House and called her “America’s best girl.”1

That’s why we still remember her to this day.  Not simply because she broke a record.  Records are broken all the time.  But because she broke a record when so many obstacles—her gender, her health—stood in her way.

And that is truly remarkable.


Richard Severo, “Gertrude Ederle, the First Woman to Swim Across the English Channel, Dies at 98,” The New York Times, December 1, 2003.

“Gertrude Ederle,”, last modified on May 29, 2013.

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Newton’s Second Law

Last month, we introduced Newton’s Laws of Finance.  They’re our spin on Newton’s famous “Laws of Motion” that you probably learned about in school.

This month, let’s look at Newton’s Second Law.  Here’s how a textbook might describe the original:

The acceleration of an object as produced by a net force is directly proportional to the magnitude of the net force, in the same direction as the net force, and inversely proportional to the mass of the object. 

Yuck.  While that’s probably as simple as 1+1 for someone with a physics background, it’s not exactly easy to remember, is it?  That’s why most of us opt for this handy little equation:

F=ma, or force equals mass times acceleration.

Basically, the greater the mass of an object, the greater the amount of force needed to accelerate the object.  If you hit a baseball with a bat, the ball will go flying.  But if you hit a car with the same bat, the car won’t move at all.  You need a much greater force to cause the car to accelerate.

This law is a little tricky to apply to finance, but here’s our version:

Retirement potential equals amount of savings & investing times length of saving & investing.

First off, let’s define some terms.

Retirement potential means the type of retirement you could potentially enjoy.  After all, not all types of retirement are equal.  Some people retire from their main jobs, but still must work part time to make ends meet.  Others won’t have to work anymore, but don’t have the means to travel or spend time on anything but the most inexpensive hobbies.  But some people, of course, will be able to enjoy the type of retirement they always dreamed about.

Savings, of course, equals how much money you have set aside specifically for retirement.  Essentially, it’s the portion of your income reserved for tomorrow rather than today.

Length of saving & investing is the amount of time spent saving and growing your money for retirement.  In other words, did you start investing for retirement at age twenty-five … or did you wait until age forty-five?

What this law says is that your retirement potential is based off the amount of money you save and invest multiplied by how long you have saved and invested.  In other words, you can personally control the type of retirement you’ll enjoy by maximizing the amount of money you save for retirement and by investing those savings as early as possible.

Now, some caveats.  Obviously, there are other factors we must contend with.  How the markets perform, for example.  Unexpected expenses, health care costs, loss of a job … life has many curveballs to throw, and each can have an impact on your retirement potential.  But when it comes to planning for retirement, or any financial goal, it’s best to focus primarily on what we can control.  And what we can control is how much we save, how much we invest, and when we start doing both.

Basically, a person who saves $5,000 a year for retirement, and starts investing at age 30, has far greater retirement potential than someone who only saves $1,000, or someone who starts investing at age 40.  You can play with the numbers as much as you want, but the fact remains that retirement potential goes up the more you save and the longer you invest.

Another way of looking at it: just an object with greater mass needs more force to get moving, a retirement with greater potential needs more savings and investing to get moving.

Remember, retirement is about more than just picking a day to stop going to work.  It’s about where you want to live, what activities you want to enjoy, and how much money you’ll need to accomplish both while still taking care of basic needs and expenses.  It’s about what dreams you want to fulfill.

So, to increase your own retirement potential, ask yourself: should I be saving more than I am?  Should I be investing more than I am?  Should I be doing more than I am?  And if you have any friends or loved ones—especially younger folks who may not have even started saving or investing yet—be sure to tell them about Newton’s Second Law of Finance.

Next month, we’ll look at the Third Law of Finance.  In the meantime, start accelerating your own path to retirement.  Start doing what you can to increase your own retirement potential.

Start following Newton’s Second Law.

Precautions are useless after a crisis!

A singing bird was confined in a cage which hung outside a window, and had a way of singing at night when all other birds were asleep.

One night, a bat came and clung to the bars of the cage. The bat asked the bird why she was silent by day and sang only at night.

“I have a very good reason for doing so,” said the bird.  “It was once when I was singing in the daytime that a fowler was attracted by my voice.  He set his nets for me and caught me.  Since then, I have never sung except by night.”

The bat replied, “It is no use your doing that now when you are a prisoner.  If only you had done so before you were caught, you might still have been free.”

What you just read is an old Aesop fable called The Caged Bird and the BatYou may have heard us quote from it before.  The reason we do so again is because the moral, or lesson, behind the fable is something every investor needs to consider, especially right now.

What is the moral?  Here’s how we would put it:

Precautions are useless after a crisis! 

You probably know that the markets have enjoyed a very strong year.  As of this writing, the S&P 500® is up over 8% for the year.  The same is true for the Dow®.  In fact, the markets have been on a tear ever since the elections last November, in what many pundits are calling a “Trump Bump” or “Trump Rally.”

And that’s a good thing!  It’s always nice when the markets do well.

BUT.  (And there’s always a “but.”)

When speaking with investors, we often run into people who want to be extremely aggressive in chasing high gains.  “The markets are doing great!” they say.  “Now’s the time to make a lot of money!”

Unfortunately, the sad truth is that when the markets reach record highs, many investors become irrationally exuberant and make the classic mistake: instead of buying low and selling high, they do the opposite.  They become lulled into a false sense of security.

Make no mistake, it’s exciting when the markets do this well.  But that excitement is an emotion, and investing based off emotion is always a one-way ticket to trouble.

Now, before we go any further, let’s stop for a moment and agree on what we’re NOT saying.  We’re NOT saying you should feel worry, or fear, or any other negative emotion.  We’re NOT saying the markets are going to drop tomorrow.

Here’s what we are saying:

When’s the best time to buy a home-security system?  Before a break-in.  When’s the best time to check your blood pressure?  Before you start having chest pains.  When’s the best time to put your seat belt on?

You get the idea.

This whole philosophy of taking precautions before a crisis is why we at Minich MacGregor Wealth Management use technical analysis to follow patterns in the market—so we can spot negative trends and act.  Another reason this philosophy is important is because while it’s relatively easy to figure out why the markets are doing well, it’s very hard to predict what will make the markets do poorly. 

To see what we mean, let’s examine the current market euphoria.  More specifically, let’s ask ourselves, “Why are the markets doing so well?”

The answer is that it’s probably a combination of factors.  Our country’s unemployment rate continues to do well, having hit a 10-year low of 4.4% back in April.1  Many investors continue to be enthusiastic about the prospect of corporate tax cuts and deregulation, two policies that both President Trump and a Republican Congress have championed.  In addition, many companies are reporting strong earnings, making them attractive for investors.  Finally, sheer momentum could be playing a key role.  The fact is, we’ve enjoyed a long-running bull market for years now, interrupted by only the occasional bout of volatility.

See what we mean?  It’s easy to explain why things are going well in the present.

But what about predicting what will go wrong in the future?  That’s harder to do.  Sure, it’s easy to come up with possibilities.  Maybe Brexit will bring on the next bear market.  There are a lot of questions in the air about how the separation between the UK and the European Union will affect trade, scientific research, or currencies.

Speaking of trade, maybe it will be our own trade policies.  President Trump has repeatedly threatened to back out of or renegotiate trade deals (including NAFTA).  What if he goes too far, and a trade war breaks out?  Or maybe it will be Congress.  Maybe Republicans won’t be able to deliver on all the tax cuts and deregulation they’ve promised.  Maybe it will be a new housing bubble.  Our neighbors to the north, Canada, are currently stressing about a dramatic rise in housing prices, and what will happen if prices suddenly drop.  Could the same happen here?

The point is, it could be any of these things, or all of these things, or none of these things.  We won’t know until after it happens.  Pundits and politicians and analysts will all make educated guesses, and someone will probably be proven right.  But we can’t know.  Even technical analysis can’t help us know what will cause the next bear market.

It will only help us spot the next bear market before it gets too hungry.

That’s why it’s so important to start preparing now

So, what have we covered so far?

  • The markets are doing well, and that’s great.
  • At some point, however, volatility will return. Maybe it will be nothing more than a brief correction, or maybe it will be a full-blown bear market.
  • Since we know that precautions are useless after a crisis, we must start preparing now.What do we mean by preparing? Well, here’s what our team is doing.

Traditionally, most investors (and they’re advisors) use a methodology called “buy and hold.”  They create a pie chart showing how they want to allocate their funds, and they stick with it for long periods of time.  The problem with this is if a bear market comes during that period, no pie chart will be able to protect you.

That’s why we use technical analysis to help us analyze market trends.  Is a particular investment, asset class, or the market as a whole trending up, or is it trending down?  We also put in place a series of rules to determine at what point in a trend we decide to buy, and at what point we decide to sell.  For example, if an investment trends down below a certain price, we follow “the rules” and sell.  Period.  If an investment trends up above a certain price, we buy.

That’s what we’re doing right now: closely scrutinizing the markets for trends and patterns.  Instead of just basking in the fact the markets are high, we’re on the lookout for storms on the horizon.  We’re constantly monitoring the investments within your portfolio.  Instead of sticking with a static pie chart, we’re prepared to reallocate your funds as often as necessary, depending on market conditions.

In other words, we’re taking precautions before the crisis—whenever that crisis may come.

As financial advisors, we consider it a major part of our job to help our clients prepare for the future.  The markets are doing fantastically well right now—which means now is the time to prepare for when they aren’t.  The point of this letter isn’t to cause alarm, but rather awareness.  By being constantly aware of potential bumps in the road, we can do a better job of handling them when they come—keeping you on a straight path toward your financial goals.

In short, enjoy the current market highs we’re experiencing.  But don’t allow yourself to get complacent –  be hyper-vigilant and prepared.

Of course, if you have any questions or concerns about the markets, the economy, or your portfolio, please don’t hesitate to let us know.  Always remember that our team is here—both when the sun is shining, and when it’s time to pull out an umbrella.  If you ever have any friends or family who also want to take precautions before a crisis, please let us know.  We would be happy to help in any way we can.

1 “Labor Force Statistics from the Current Population Survey,” Bureau of Labor Statistics, June 27, 2017.

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