Author: Minich MacGregor Wealth Management

North Korea News – Geopolitics and the Markets

Written by Minich MacGregor Wealth Management on August 22, 2017. Posted in Minich MacGregor Missive.

There once was a time when the threat of nuclear war hung over America’s head like a storm cloud that just wouldn’t go away. Those days, thankfully, are long over—but the sky turned a little bit grayer lately.

As you probably know, tensions have surged recently thanks to news that North Korea has “produced a miniaturized nuclear warhead that can fit inside its missiles.”¹ President Trump fanned the flames even more when he stated that any attack by North Korea “will be met with fire and fury.”²

Since we are financial advisors, we’ll leave military concerns to the generals. The question we’re most interested in—and the question many people have asked us—is how all this saber rattling will affect the markets. Since we don’t have a crystal ball, there’s no way we can know for sure. But history would suggest that it won’t have much effect at all.

The financial services industry often likes to stress that “past performance is no guarantee of future results.” The reason is because we’ve seen time and time again that just because something happened a certain way before doesn’t mean it will automatically happen that way again. On the other hand, there’s another saying that’s equally valid: there’s nothing new under the sun. In this case, international crises are nothing new. That means we have a lot of history to turn to when trying to gauge just how tensions with North Korea might impact the markets.

Geopolitics and the Markets

Think back on all the major international events you’ve lived through; terrorist attacks and wars; economic recessions and elections; the Cuban Missile Crisis; the JFK assassination; the 1973 Arab oil embargo; the fall of the Berlin Wall; the 9/11 attacks; and Brexit. Unless you’re very young, you’ve probably witnessed many periods that seemed full of tension, drama, and importance.

But they rarely have much effect on the markets. Or rather, they rarely have a sustained effect.

Take the Cuban Missile Crisis. The world has probably never been closer to nuclear war than during those nerve-wracking thirteen days in 1962, yet during that time, the Dow^® only fell 1.2%. By the end of the year, the Dow was up 10%.³

More recently, look at Brexit. When the UK voted to leave the European Union, it took most analysts by surprise, and many predicted it would lead to a major drop in the markets. At first, it did. The vote took place on a Thursday. The next day, the Dow fell over 600 points, and then another 250 points the Monday after.⁴

But less than a month later, the Dow climbed to a new record high.⁵

A couple of weeks ago, the business with North Korea prompted the S&P^® to fall about 1.3%, its worst week in months.⁶ But last Monday, the S&P rose 1%, suggesting investor fear was short-lived.⁷

Of course, major events will sometimes cause a larger, longer drop. When World War I began, the Dow fell 30%, then closed for six months.³ After the 9/11 attacks, stocks dropped almost 15% over a two-week period.³

But even then, the markets recovered with amazing speed. For example, during the second year of World War I, the Dow rose more than 88%.³ And only a few months after 9/11, both the Dow and the S&P returned to normal.³

That’s a lot of numbers. So, what’s the takeaway from all this?

There are a few things we can learn from history.

First, we can learn that while geopolitical events often seem scary, their impact on the markets isn’t necessarily huge. That’s because many things impact the markets. Even something as big as the threat of war is only one ingredient in the dish, and it’s often buried and forgotten when the next headline hits.

If you think about it, the markets are essentially like giant aircraft carriers. It takes a lot to make them swing one direction or another, especially over a lengthy period of time.

Here’s the second thing we can learn. We said a moment ago, that geopolitical events often seem scary. We believe that’s why you often see a brief drop after they occur—because they seem scary, prompting the most jittery investors to sell.

But as you know, we must always strive to avoid making emotional investment decisions. That’s especially true when it comes to headlines and geopolitical events. Do they matter? In the grand scheme of things, yes. Do they matter to the markets? Again, yes—but not nearly as much as people think.

Remember, it’s impossible to predict what the markets will do. So, we’re not predicting here about whether the markets will climb or fall. We’re saying the recent news about North Korea shouldn’t prompt us to make assumptions one way or the other. Nor should it change how we invest.

Instead, we’ll keep doing what we always do. We’ll keep our heads and hold to our long-term strategy. In our experience, the ability to do that is far more valuable than any crystal ball.

If you have any questions about the markets, or your own portfolio, never hesitate to ask. Our team is here for you. In the meantime, enjoy the rest of your summer!

Sources

¹ Joby Warrick, Ellen Nakashima, Anna Fifield, “North Korea now making missile-ready nuclear weapons, U.S. analysts say,” The Washington Post, August 8, 2017. https://www.washingtonpost.com/world/national-security/north-korea-now-making-missile-ready-nuclear-weapons-us-analysts-say/2017/08/08/e14b882a-7b6b-11e7-9d08-b79f191668ed_story.html?utm_term=.0d2f43723e39

² Bryan Bender and Jacqueline Klimas, “Trump’s ‘fire and fury’ threat to North Korea sparks new fears of war,” Politico, August 8, 2017. http://www.politico.com/story/2017/08/08/trump-north-korea-warning-241409

³ Ben Carlson, “How markets reacted to geopolitical crises,” The Economic Times, April 13, 2017. http://economictimes.indiatimes.com/markets/stocks/news/how-markets-reacted-to-geopolitical-crises/articleshow/58158842.cms

⁴ Jethro Mullen, Ivana Kottsaova, Patrick Gillespie, “Dow plunges over 600 points as U.K. ‘earthquake’ crushes global markets,” CNN Money, June 24, 2016. http://money.cnn.com/2016/06/23/investing/eu-referendum-markets/index.html?iid=EL

⁵ Matt Egan, “Stocks have never been higher,” CNN Money, July 12, 2016. http://money.cnn.com/2016/07/12/investing/dow-stock-new-high-record/index.html

⁶ John Ydstie, “North Korea has markets neverous but not panicked,” NPR, August 11, 2017. http://www.npr.org/2017/08/11/542856313/north-korea-has-markets-nervous-but-not-panicked

⁷ Sue Chang and Ryan Vlastelica, “U.S. stocks gain 1% for the first time in 3 months as geopolitical fears ebb,” MarketWatch, August 14, 2017. http://www.marketwatch.com/story/dow-futures-flirt-with-100-point-gain-as-north-korea-fears-put-on-back-burner-2017-08-14

Newton’s Third Law

Written by Minich MacGregor Wealth Management on August 14, 2017. Posted in Minich MacGregor Missive.

Over the last two months, we’ve discussed something called Newton’s Laws of Finance. They’re our spin on Sir Isaac Newton’s famous “Laws of Motion” that you probably learned about in school.

This month, let’s look at the third and final law. The original is probably the easiest for non-scientists to remember:

For every action, there is an equal and opposite reaction.

This law is easy to understand. Imagine shooting a cannonball. The ball will fly in one direction, while the cannon will roll backwards in the opposite direction. The same principle applies when firing a gun. The “kick” you feel is just Newton’s third law saying hello.

So how do we apply this to finance? Like this:

For every financial action, there is an opposite reaction.

Or, to put it another way: for every financial decision you make, there is the potential for an unintended consequence.

Here’s what we mean. Let’s say you own 100 shares of XYZ Corporation. The value of your shares has gone up recently, so you decide to sell. You’ll make a nice profit, and have a quick infusion of cash that you can use however you want.

You’ve also triggered a capital gains tax.

Or, let’s say you decide to allocate more of your investment portfolio to bonds instead of stocks. Bonds are traditionally thought of as providing more safety than stocks, and who doesn’t want more safety?

But you also miss out on next week’s stock market rally.

In the first scenario, you turned a profit, but also generated taxes. In the second scenario, you traded in growth for safety.

For every financial action, there is an opposite reaction. One aspect of your financial life goes in one direction, a second aspect goes in another direction.

Of course, you could flip these scenarios around. Maybe you decide to hold onto your XYZ stock, because you don’t want to trigger capital gains taxes. But next week, the stock falls sharply in price. You avoided taxes, but not losses.

Maybe you decide to allocate most of your portfolio to stocks and have very little in bonds. You’ll give yourself more opportunity for growth … but take on more risk, as well.

The point of all this, is that when people make a financial decision, they often make it without truly thinking about the consequences. They act without understanding the inevitable reaction. They want something, so they decide to get it. They fear something, so they decide to avoid it. It’s not that those decisions are necessarily bad. It’s that they’re made without seeing the whole picture.

Put it this way: an experienced gun owner always braces for the kick before he or she fires.

Whatever financial decisions you decide to make, it’s critical that you brace for the kick. Every decision has consequences. Some are positive, some are negative. Some are intended, some aren’t.

For every action, there is an equal and opposite reaction.

Financial advisors like us often use the word holistic when we describe what we do. For instance, holistic financial planning. Holistic investment management. “Holistic” simply means that we understand that the individual parts of something are interconnected, and they must always be seen that way. They are parts of a whole. Newton’s Third Law of Finance shows exactly why the word “holistic” has meaning. Whenever you make a financial decision, you must make it with the whole of your financial situation in mind.

Example: when you make a decision regarding your investments, it can also affect your taxes. Your estate. Your cash flow. Everything.

So, how do you obey Newton’s Third Law? Well, whenever you need to make a financial decision, always ask yourself: what are the pros and cons of this decision? What are the benefits? What are the risks? How will this decision affect my entire financial life?

It sounds simple. But it’s also the best way to brace for the kick.

Scientists have long used the original Laws of Motion to better understand and control the world around them. By understanding the Laws of Finance, you can better understand and control your finances.

Good luck!

“Truth is ever to be found in simplicity, and not in the multiplicity and confusion of things.”

– Sir Isaac Newton

If you can dream it, you can do it.

Written by Minich MacGregor Wealth Management on August 8, 2017. Posted in Minich MacGregor Missive, News.

Our friends and our clients (sometimes they’re the same person) often ask us: “What’s the most important thing I need to do to prepare for retirement?”

We usually tell them there’s no one thing that’s most important, but rather a lot of things. For example: securing retirement income, managing your tax situation, or ensuring your investment portfolio keeps ahead of inflation. These are just a few examples. But when it comes to your retirement, here’s a piece of advice that all too often goes unheeded:

“If you can dream it, you can do it.”

Retirement is about finally having the opportunity to focus on living. It’s no longer about getting ahead in life, but about experiencing life itself. For that reason, retirement should be fun. It should be enlightening. It should be rejuvenating. Above all, retirement should be … whatever it is you want it to be!

However, there are many people who never take the time to dream. They never create their bucket list; never ponder their deepest, sweetest desires. It’s quite possible to spend too much time worrying about how to retire and not enough on why you’re retiring, or what you want to do in retirement. People who make this mistake run the risk of experiencing the worst scenario of all:

Boredom.

To prevent that from happening, all you need is a plan. All you need is to dream. So what’s your plan for retirement? What’s your dream? Here are a few suggestions:

Write the next Great American novel.

Raise horses on your farm.

Start an entirely new career as a standup comic.

Learn how to cook Italian food … in Italy.

Work as a tour guide at the Guggenheim.

Follow the voyage of Darwin’s Beagle through the Galapagos.

Listen to jazz in a smoky bar in Paris.

Have the freedom to do what interests you versus what needs to be done.

Design and build your own house.

Compete in AAU Masters swimming at 80.

Spend a year in Rio.

Restore an old sports car and drive to car shows.

Work for human rights for people in third world countries.

Build a log cabin from the ground up.

Retrace the Endless Summer surf odyssey.

Drop anchor at every island in the Caribbean.

Build your collection of fine wines.

Spend time with your grandchildren.

You want more? You can definitely do more. Like:

Create a beautiful garden. Give your spouse a chance at a career. Ski for 100 days a season. Volunteer. Finally, finally use all of your frequent flyer miles. Create a world that consists of nothing but a hammock, a pitcher of lemonade, and a stack of novels. Return to your family’s farm and try to make a go as a farmer. Participate in guided tours of all the ancient wonders of the world. Open your own bed and breakfast. Finally get your college degree. Trek to the Himalayas. Visit all 50 states. Start another career. Scuba dive all over the world. Visit every major-league ballpark. Relax. Go on a Safari in Africa. Write movie reviews for the local weekly. Climb a 20,000 foot mountain. Rent a barge for a canal tour in Europe. Invest in startup companies. Coach youth soccer, baseball, and basketball. Drive from Alaska to Patagonia. Run the Boston and New York marathons. Play as many of Golf Digest^®’s top-100 courses as possible. Play in a garage band. Play bridge for money. Just play! Go on at least three cruises a year. Act in Community Theater. Dinner and a movie … every night! Learn to play the piano. Be a couch potato. Fix the sink. Take a trip down the Nile. Read Russian novels. Run for local political office. Absolutely nothing. Give back to all of those who helped you. Do all of the things you’ve been afraid of—skydiving, bungee jumping, and hang gliding. RV along Route 66 with your spouse and your dogs.

Finances are more than just numbers and concepts. Maintaining your finances is about living the life you always wanted to live. If your retirement is coming up, it’s time to start planning. More than that, it’s time to start dreaming.

So if there’s one piece of advice we can give you, it would be this:

“If you can dream it, you can do it.”

America’s Best Girl

Written by Minich MacGregor Wealth Management on July 31, 2017. Posted in Minich MacGregor Missive, News.

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 6^th, 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 6^th 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.

Sources:

¹Richard Severo, “Gertrude Ederle, the First Woman to Swim Across the English Channel, Dies at 98,” The New York Times, December 1, 2003. http://www.nytimes.com/2003/12/01/sports/gertrude-ederle-the-first-woman-to-swim-across-the-english-channel-dies-at-98.html?pagewanted=all&src=pm

²“Gertrude Ederle,” Wikipedia.org, last modified on May 29, 2013. http://en.wikipedia.org/wiki/Gertrude_Ederle

Newton’s Second Law

Written by Minich MacGregor Wealth Management on July 18, 2017. Posted in Minich MacGregor Missive, News.

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!

Written by Minich MacGregor Wealth Management on July 11, 2017. Posted in Minich MacGregor Missive, News.

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 Bat. You 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. https://data.bls.gov/timeseries/LNS14000000

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Overcoming the Odds: J.K. Rowling

Written by Minich MacGregor Wealth Management on June 23, 2017. Posted in Minich MacGregor Missive, News.

Over the past few months, we’ve been sharing articles about different people who achieved their goals despite facing enormous odds. This article is about:

Overcoming the Odds: J.K. Rowling

It may seem odd to feature one of the most famous, and wealthiest, authors in the world. But Joanne Rowling, as she is formally known, is actually the perfect example of what these articles are all about: how anyone can be successful, regardless of their background, upbringing, or circumstances.

As you undoubtedly know, Rowling is the author of the Harry Potter novels. What is less well known is how similar both creator and character are. If you’ve never read the books, the story starts with an orphaned Harry living inside a cupboard under the stairs in the home of his less-than-affectionate aunt and uncle. Rowling, meanwhile, grew up with a mother suffering from multiple sclerosis, and a father with whom she was not on speaking terms.

In the books, Harry eventually learns he is a wizard, and travels to a magical school called Hogwarts—a place very strange and unfamiliar, and where he doesn’t always fit in. As a young woman, Rowling also traveled to a strange and unfamiliar place. Needing a job, she moved to Portugal to teach English. Here she met her first husband, but it was not a happy marriage.

After the birth of her daughter, Rowling separated from her husband and moved to Scotland. It was a brutal time, for several reasons. First, her mother had passed away from multiple sclerosis. Second, she was forced to file a restraining order against her husband. And third, she now had a child to provide for, but no job or prospects for a career. She even suffered from clinical depression, and at one point considered suicide.¹ But it was then that Rowling made an important discovery—about herself, and about life. Here’s how she explained it:²

I think it fair to say that by any conventional measure, I had failed on an epic scale. An exceptionally short-lived marriage had imploded, and I was jobless, a lone parent, and as poor as it is possible to be in modern Britain without being homeless. By every usual standard, I was the biggest failure I knew.

Now, I am not going to stand here and tell you that failure is fun. So why do I talk about the benefits of failure? Simply because failure meant a stripping away of the inessential. I stopped pretending to myself that I was anything other than what I was, and began to direct all my energy into finishing the only work that mattered to me. I was set free, because my greatest fear had been realized, and I was still alive, and I still had a daughter whom I adored, and I had an old typewriter and a big idea. And so, rock bottom became the solid foundation on which I rebuilt my life.

You might never fail on the scale I did, but some failure in life is inevitable. It is impossible to live without failing at something, unless you live so cautiously that you might as well not have lived at all—in which case, you fail by default. Failure gave me an inner security that I had never attained by passing examinations. Failure taught me things about myself that I could have learned no other way. I discovered that I had a strong will, and more discipline than I suspected.

The knowledge that you have emerged wiser and stronger from setbacks means that you are, ever after, secure in your ability to survive. You will never truly know yourself, or the strength of your relationships, until both have been tested by adversity.

The “one work that mattered” was a novel called Harry Potter. For years, Rowling had dabbled away at it, often writing in cafes where it was easier to get her daughter to fall asleep. Then, having come to her realization about failure, she resolved to finish, and did so in 1995 while at the keys of an old typewriter.

Her challenges weren’t over yet, of course. It’s almost impossible to become a true “overnight success,” and Rowling was no exception. It’s incredible to think now, but her book was rejected twelve times by twelve different publishers. She was told, probably more than once, to “get a day job,” because she had little chance of making money off her dreams.

Permit yourself a chuckle here, because you know what comes next.

Today, Rowling is the author of the best-selling book series in history. She is known the world over. And it wasn’t because she was born wealthy, or because she “knew the right people.” It wasn’t because she got lucky. It’s because she realized that failure actually made her stronger. It’s because she was dedicated and disciplined.

If there’s one takeaway from these articles, it’s this: anyone can become what they want to become. Anyone can overcome the odds. All it takes is passion for your goal. That passion, in turn, creates dedication. That dedication, in turn, leads to discipline and hard work.

Armed with those tools, we can always overcome the odds.

Whatever your goals in life, we wish you the best of luck in overcoming your own odds. Just remember: never be afraid of failure. Never stop loving whatever it is you do. Above all, never stop dreaming. Never stop doing.

¹ “Harry Potter author: I considered suicide,” CNN.com, March 23, 2008. http://edition.cnn.com/2008/SHOWBIZ/03/23/rowling.depressed/index.html

² “Text of J.K. Rowling’s speech,” Harvard Gazette, June 5, 2008. http://news.harvard.edu/gazette/story/2008/06/text-of-j-k-rowling-speech/

Newton’s Laws of Finance

Written by Minich MacGregor Wealth Management on June 19, 2017. Posted in Minich MacGregor Missive, News.

When you were in school, you probably learned about Newton’s Three Laws of Motion. First published by Sir Isaac Newton in 1687, these laws explain how physical objects move. They are so important—and easy to understand—that most of us still remember them even decades later.

We were thinking about these laws the other day when we came upon a realization: each of the laws can also be applied to finance.

Now, we know this isn’t quite the same as watching an apple fall from the tree and developing the theory of gravitation. But we are financial advisors, not scientists, so to us, it’s equally interesting! That’s why, over the next few months, we’re going to share what we call:

Newton’s Laws of Finance

In this article, let’s look at Newton’s First Law. Here’s how we all remember the original:

An object at rest tends to stay at rest, and an object in motion tends to stay in motion, unless acted on by an outside force.

Here’s our version:

A financial plan at rest tends to stay at rest, while a financial plan in motion tends to stay in motion, unless acted on by an outside force.

What exactly do we mean by “financial plan?” While there’s no one definition of what a financial plan really is, in general, it works like this:

First, you look at your current financial situation. What is your income, what is your cash flow, how much do you pay in taxes, etc.
Second, you determine what you want your future financial situation to look like. What goals do you want to accomplish? What treasures (be they people or possessions) do you want to protect?
Finally, you lay out all the individual steps necessary to get you from your current financial situation to your desired financial situation. What exactly do you need to do to reach your goals? When do you need to do them?

Put these together and you have a basic financial plan.

In our experience, most people agree that having a financial plan is valuable. But there’s a widespread problem: most people procrastinate when it comes to creating OR implementing a financial plan. It’s not uncommon to hear excuses like “I’m too busy right now to create a plan; I’ll do it next year when life settles down.” Or, “I want to wait until I have a better job/the elections are over/the stock market goes up. There’s just too much uncertainty right now.”

Let’s go back to the First Law of Finance: a financial plan at rest tends to stay at rest. People who procrastinate, who delay, who act passively, will usually continue to do so indefinitely. “Next year” never comes. Life never “settles down.” Uncertainty never goes away. And so, a financial plan never gets created, and things just sort of stay the same. Forever.

The good news is that the First Law of Finance also says: a financial plan in motion tends to stay in motion.

It’s amazing to see this Law at work. People who actually get the ball rolling, who act, who put in the energy to create and execute their financial plan … they start to build momentum. Suddenly, things start happening … and they keep happening! Their savings grow. Their tax situation improves. Their goals are reached, not just once, but over and over. We’ve literally seen people go from, “I feel like I’ll never retire” to “I retired much sooner than I thought I would!”—all because they stayed in motion.

What we’re really talking about here is inertia. Whether you’re moving or standing still, people are like all physical objects: they find it easier to keep doing what they’re already doing. If you procrastinate, you’ll find it easy to keep doing so. But if you start working toward your goals, you’ll discover it’s much more doable than you ever imagined.

All of this is important because a proper financial plan will help you:

Know how much money you’ll need to meet your expenses and reach your goals.
Choose the right investments to provide the income you need, at a suitable specific level of risk.
Potentially minimize taxes for both yourself and your heirs.
See what areas of your finances are stable and which may need improvement.
And much more!

Let’s look at the First Law of Finance one more time:

A financial plan at rest tends to stay at rest, while a financial plan in motion tends to stay in motion, unless acted on by an outside force.

YOU are that outside force. YOU hold the power in your hands to get the ball rolling. And it’s a mighty power indeed—because it’s a fundamental law of nature.

Next month, we’ll look at the Second Law of Finance. In the meantime, be that “outside force!” If you haven’t already done so, start doing what you need to do to create a financial plan today.

Happy Father’s Day 2017

Written by Minich MacGregor Wealth Management on June 13, 2017. Posted in Minich MacGregor Missive, News.

Mark Twain once said:

“When I was a boy of fourteen, my father was so ignorant I could hardly stand to have the old man around. But when I got to be twenty-one, I was astonished at how much the old man had learned in seven years.”

With Father’s Day coming up, we’ve been thinking about this quote a lot. It made us realize something about fathers. As important as they are throughout our lives, it’s the lessons we learn from them as adults that really sink in.

When we grow up, we realize all the challenges we face are things our fathers have already dealt with. When we start our own careers, we realize all the obstacles in front of us are things our fathers already overcame. When we build a family of our own, we realize all the questions that keep us up at night are things our fathers already have the answers to.

We strongly believe that as we grow older, our fathers become more important, not less.

Take this letter from Ronald Reagan to his twenty-six-year-old son, written in 1971 on the eve of his son’s marriage.¹

Dear Mike:

You’ve heard all the jokes that have been rousted around by all the “unhappy marrieds” and cynics. Now, in case no one has suggested it, there is another view point. You have entered into the most meaningful relationship there is in all human life. It can be whatever you decide to make it.

Some men feel their masculinity can only be proven if they play out in their own life all the locker-room stories, smugly confident that what a wife doesn’t know won’t hurt her. There are more men griping about marriage who kicked the whole thing away themselves than there can ever be wives deserving of blame. There is an old law of physics that you can only get out of a thing as much as you put in it. The man who puts into the marriage only half of what he owns will get that out.

Let me tell you how really great is the challenge of proving your masculinity and charm with one woman for the rest of your life. Any man can find a twerp here and there who will go along with cheating, and it doesn’t take all that much manhood. It does take quite a man to remain attractive and to be loved by a woman who has heard him snore, seen him unshaven, tended him while he was sick, and washed his dirty underwear. Do that and keep her still feeling a warm glow and you will know some very beautiful music.

Mike, you know better than many what an unhappy home is and what it can do to others. Now you have a chance to make it come out the way it should. There is no greater happiness for a man than approaching a door at the end of a day knowing someone on the other side of that door is waiting for the sound of his footsteps.

Love,

Dad

P.S. You’ll never get in trouble if you say “I love you” at least once a day.

As Mike Reagan put it:

“It was straight from Dad’s heart, honest, old-fashioned, and wise. I cried when I read it, and I’ve read it many times since then.”¹

For those of us blessed to have good fathers, we know what an incredible example they are. Whether you’re a son or a daughter, our fathers are everything we want to be. They teach us how to be good, honorable people. They teach us how to get the most out of life. If we’re lucky, they teach us how to be even happier and more successful than they were … so we can raise our kids to be even happier and more successful still.

So this Father’s Day, spare a thought for the things your dad has taught you. Good fathers show us more than how to throw a baseball, drive a car, or cook on the grill. They show us how to be a good person. They show us how to put in as much as we can into life, so we can take the same amount out of it. They show us how to leave this world better than we found it.

They show us how to be happy.

From all of us here at Minich MacGregor Wealth Management, we wish you a happy Father’s Day. And to all dads, we say, “Thank you!”

¹ “Love, Dad,” Letters of Note, May 16, 2012. http://www.lettersofnote.com/2012/05/love-dad.html

How Ransomware Works

Written by Minich MacGregor Wealth Management on May 30, 2017. Posted in Minich MacGregor Missive, News.

How Ransomware Works

Please take a few minutes to read this message, because it’s on a very important topic: cybersecurity.

On Friday, May 12, 2017, well over 100 countries started getting hit by one of the largest cyberattacks ever seen.¹ This particular attack all centers around a type of scam known as ransomware.

You know, of course, what a ransom is. Someone takes something from you—be it your property, your identity, your secrets, even a loved one—and demands money in exchange for returning it. That’s exactly how ransomware works. In this case, cybercriminals essentially take your computer hostage, locking you out of your files until you pay a ransom.

Ransomware isn’t new, but it’s now more rampant than ever. While the odds of you becoming a ransomware victim are probably low, it’s important that you still take steps to avoid it. After all, cybersecurity is really just an aspect of overall financial security—and financial security is something no one can afford to ignore.

Here are a few things you need to know:

Ransomware can get onto your computer if you visit a malicious or hacked website. It is often spread through a form of fraud called phishing, which is defined as:

“The creation of email messages and Web pages that are replicas of existing, legitimate sites and businesses. These Web sites and emails are used to trick users into submitting personal, financial, or password data. These emails often ask for information such as credit card numbers, bank account information, social insurance numbers, and passwords that will be used to commit fraud.”²

Often, phishing works because it plays on people’s fears, or because it creates a sense of urgency to act. For example, imagine you get an email that looks like it came from your bank, saying there has been suspicious activity on your account and that you must click on a specific link to fix the problem. Clicking on the link could automatically download ransomware onto your computer.

In the case of this current cyberattack, victims received a message on their computer saying their files were encrypted, and that they must pay $300 for the files to be released.

How to Protect Yourself From Ransomware

Fortunately, the best way to protect yourself from this or future ransomware attacks is by simply following good internet “hygiene.” For example:

Make sure your antivirus and antimalware software is up-to-date. Also, install a pop-up blocker in your web browser.
Routinely backup your computer files. You can save copies of your files to the Cloud with services like Microsoft OneDrive, Google Drive, and Dropbox, or to an external disc or hard drive.
Never click on links, read emails, or open attachments from people you don’t know or companies you don’t do business with.
When reading emails and websites, scrutinize them carefully. Often, they will be littered with misspellings, which is a strong sign of fraud.
Legitimate banks, retailers, and social media sites should never ask for your personal information via email. If you receive a message from someone asking for this info, assume it’s a scam.
Furthermore, as a rule of thumb, do not reply to any message, electronic or otherwise, that requests your personal information.
When doing business online, look at each website’s address. Secure websites should have a small symbol of a lock next to their URL, or the letters https (instead of merely http) at the beginning of the address. Both the lock and the letter “s” indicate that the site has been verified as secure.

What do I do if I’ve already been hit by a ransomware attack?

First off, most experts agree you should never pay the ransom.³ There’s no guarantee the criminals behind the attack will hold up their end of the bargain, and it could open you up to other forms of malware. Instead, you will need to take steps to manually remove the ransomware, which can be very difficult. If you need help with this, you can visit Microsoft’s page on the subject at https://www.microsoft.com/en-us/security/portal/mmpc/shared/ransomware.aspx.

¹Mark Thompson & Jethro Mullen, “World’s biggest cyberattack sends countries into disaster recovery mode.” CNN Money, May 14, 2017. http://money.cnn.com/2017/05/14/technology/ransomware-attack-threat-escalating/index.html?iid=EL

²“Phishing scams,” Canadian Anti-Fraud Centre, modified March 11, 2015. http://www.antifraudcentre-centreantifraude.ca/fraud-escroquerie/types/phishing-hameconnage/index-eng.htm

³Chris Baraniuk, “Should you pay the WannaCry ransom?” BBC, May 15, 2017. http://www.bbc.com/news/technology-39920269