Income Seeking Investor? Fair Warning

With interest rates historically low, many investors are seeking non-traditional means to generate income from their investment portfolios. Often people find comfort in investments that provide interest and dividends because it is based on the rule of thumb that one shouldn’t touch the principal. The financial media has latched on to the subject – it is not hard to find stories on a daily basis on the virtues of income investing.

And that makes me nervous. Investment styles that are currently in vogue tend to attract people that fail to consider the risks. From what I’ve seen, I have the feeling people have a false sense of security. Here are some things that the investor seeking income should consider:

-Dividend paying stocks usually go down in value on the date the stockholder is entitled to their dividend. In reality the thought of not touching the principal is an illusion.

-Focusing on dividend paying stocks pays no attention to dividend paying stocks of the future. Great companies usually do not initially pay dividends. Only when their business matures and growth slows do they begin these payouts.

-There is no documented research that proves dividend-paying stocks weather downturns in the stock market better than non-dividend paying stocks.

-Only 40% of the domestic stock universe pays dividends and a majority of these stocks fall in only a handful of business sectors. You are giving up a lot of diversification.

-If a bond or bond fund is carrying a higher yield, there is a reason for that – it’s called risk. Bonds that have longer maturities are more likely to fall in value when interest rates go up. Some bonds have higher risk of default. Other investment vehicles such as closed end funds borrow money at lower rates to buy higher yielding bonds. Some bonds go overseas and are subject to currency or sovereign debt risk. Municipalities can fail as well – all you have to do is look at the credit default swap rates of municipal bond insurers to see the risk is real. There is no free lunch here.

-How bad can it get if interest rates were to rise? If we have a sudden 2% jump in interest rates within a 12 month period, I estimate an owner of a 20 Year U.S. Treasury Bond will see the value of the bond go down by about 18%.

-If and when interest rates should rise, I fear the same herd of people flooding in will turn the other way and may cause a mass capitulation. If these yields begin to look lousy as compared to prevailing interest rates, people may hit the exits all at once and we could have an acute decline in these types of securities.

-Capital gains are more tax efficient. When one sells a security, some of the gains come back as cost basis and is not taxable. All of a dividend or interest payment is taxable. Also you control when to take a capital gain while you have no control on when to receive a dividend or interest payment.

In the end, dividends and interest shouldn’t be shunned. I only fear that investors have placed too much myopia on the subject than is warranted. Rather than income, seeking a total return approach which include capital gains will not only provide better after tax returns over the long haul, but it will do this with a lot less risk. We’ve gone through a secular bull market for income investors for over thirty years. If and when the secular cycle ends, I fear that many people will be in for a rude awakening.

Healthcare Costs Continue to Pressure Retirement Planning

Healthcare costs continue to put financial pressure on retirees. Fidelity Investments annually conducts an estimate of future retiree health care costs. In their latest release, they estimate a 65 year old couple with $75,000 in household income who retires this year should expect $10,476 in annual health care expenses and $240,000 over the course of their retirement. This represents a 4% increase from last year’s findings. This calculation assumes the couple is subject to traditional Medicare Parts A, B and D and does not have any employee retirement health benefits through their former employers. It also does not incorporate the cost of nursing home care or dental costs.

How can you account for rising health care costs within your retirement planning? Here are several things to consider:

1.) Account for Higher Costs in Your Planning: The first thing that you need to do is account for healthcare costs as a separate distinct expense in your retirement planning. The reason being is that healthcare costs grow at a faster rate than most other expenses encountered during retirement. Over the course of the past ten years, the inflation rate in the Fidelity study has been about 6% a year. If you are bundling your healthcare costs with other retirement expenses in your assumptions and not applying an appropriate inflation rate, you could be seriously underestimating your financial needs.

2.) Reconsider the Key Financial Planning Pillars: There are four key financial pillars which tend to have the most power in financial planning. This is simply the amount you save, the amount you spend, the time that you give to accomplish a goal and the risk you take in your investment strategy. Rising health care costs all suggest that more pressure needs to be applied to these pillars.

The first element is saving and spending. These are pretty straightforward and work in tandem. Usually higher saving correlates with lower spending and you will need to remain disciplined in your discretionary spending once you stop saving and begin the distribution stage of your retirement cash flow strategy. As discussed above, this includes appropriately accounting for anticipated health care costs.

Time is an issue as well. The earlier you can save towards a goal, the more compound investing can influence the dollars you will have at retirement. Working longer helps, although many people retire early due to health issues. If you want to retire early, bear in mind it is becoming harder and harder to achieve. This is because pre-age 60 retirees have to flip for all healthcare costs without Medicare subsidies, they aren’t entitled to Social Security yet and early retirement means more years of drawing down on financial resources rather than building upon them. I find a year or two can be the difference between successful and unsuccessful retirement projections for the younger retiree.

Finally, rising health care costs lend to a need to take higher risk in your investment strategy. When healthcare costs are rising at a 6% annual rate, it suggests that a portfolio with some element of growth will be required to keep up with expenses. Certificates of deposit, money market accounts and many parts of the bond world at current rates simply will not keep up.
I discussed each of the above in a vacuum. However all of these pillars can be combined and worked in tandem that best fits your needs and circumstances. The overriding theme is that more pressure will need to be applied on your planning and the basic options you have to accommodate healthcare costs if you haven’t accounted for these costs already.

3.) Consider Health Savings Accounts: If eligible, health savings accounts are the best of both worlds. Initially you get an initial up front deduction for the contribution from your income taxes. Then if used for qualified healthcare costs, then any earnings from those accounts are tax free. Now this is great by itself, but if you have a long time horizon and can afford to pay medical expenses out of pocket at this time, I suggest not tapping into this account in the short term and invest the funds in higher risk/return assets. Over time the increased growth can better keep up and match with the medical costs later in life. Unfortunately I see a lot of people using the account to pay current medical bills even when they can pay out of pocket. In addition, most investors seem to have these accounts invested in some cash equivalent bank account paying very little in yield. With trending health care inflation at 6%, the purchasing power of these assets erodes over time and offsets the tax benefit if it isn’t invested properly.

4.) Invest in Healthy Personal Habits: Diet, exercise and preventative care are all attributable to better health and lower medical costs. It doesn’t guarantee health, but studies have shown they all increase the chance of living a healthier life. Over the past several years the financial planning world has not only focused on healthy financial habits, but also encouraging people to live healthier lifestyles due to the influence of these on health care costs.

Healthcare costs will continue put pressure on ones retirement plans. But these simple steps will make this more affordable in your later years.

Tax Planning: Better Plan for 2013 Now

Currently millions of taxpayers are trying to get their tax returns prepared. But if you are wise, I would take a look at what’s coming in 2013 and take action now to address it.

If the tax code remains as it currently stands, we will face the largest tax increase in history. The majority of this would come from the expiration of the Bush Era tax cuts. Current tax brackets would go from 10%, 15%, 25%, 28%, 33%, 35% to 15%, 28%, 31%, 36% and 39.6%. Capital gains rates would increase from 20% for those who are currently subject to the 15% rate and those eligible for the current 0% rate would be subject to the 10% rate. The most egregious taxes would be for qualified dividends. Rates would revert back and be taxed at ordinary rates. Those currently paying 0% in the 10% and 15% tax bracket would pay 15% and 28% next year. Those currently paying 15% could be pay either 31%, 36% or 39.6%. Dividend paying stocks have been in vogue these days, but this could quickly come to a halt. In addition, the phase-out of itemized deductions and exemptions would return affecting higher income households while the marriage penalty would return.

Outside of the expiration of the Bush Era tax code, there are a few other taxes coming into play for 2013. The payroll tax cut is set to expire at year. Also the 3.8% healthcare reform act surtax on investment income will start. For those who will be in the 39.6% tax bracket next year, their qualified dividend income will go from 15% to a whopping 43.4% which doesn’t take state income taxes into account.

Now there is periodic talk about extending or modifying these tax issues. But I’m not holding my breath. Election years tend to create standstill before the election. After the election, lame duck politicians are hard to rely on – especially if the power is split up between political parties within Congress and the Presidency. Rather than relying on politics and other things that we can’t control, I am advocating a more proactive approach. These are the things you may want to consider:

Tax Location: This strategy involves allocating your individual investments into accounts in a manner which optimizes the after tax efficiency of your overall portfolio. I like to call this tax account diversification as Roth IRA/401(k)’s are designed to be tax free, Traditional IRA/401(k)’s are tax deferred and then investors can also have regularly taxable accounts. You would want to be more cognizant of placing more of your tax efficient investments within taxable accounts. Low turnover stock funds and index funds and municipal bond funds (if they don’t have a great deal of private activity interest which is subject to the alternative minimum tax (AMT)) are very tax efficient in a taxable account. Roth IRA’s/401(k)’s are a great place to place the high growth portion of your portfolio. The greater the growth potential, the more potential dollars you should have for your needs over the long haul; all of this would be tax free. Mutual funds that invest in higher risk stock and commodities tend to be a good location for a Roth. Tax deferred vehicles such as Traditional IRA’s/regular 401(k)’s tend to be a great place for your slower growing diversifiers within the portfolio. Leaning slower growers in the tax deferred accounts means that less of your dollars will be subject to ordinary tax rates when withdrawn. Taxable bond funds and other high turnover/non-tax efficient strategies tend to fit well within the tax deferred account. If you have a mix of different accounts, you will find this strategy more powerful in the years to come.

Tax Gain Harvesting: Most of the time financial planners talk about tax loss harvesting. But given the higher future capital gain rates, one may want to consider taking capital gains now at the current lower rate rather than incurring a higher tax rate later in the future, especially if you were planning to incur a capital gain with an asset sale in the near future. If you find yourself in the tax bracket where you would be subject to the 0% capital gain rate, it may even make sense to incur a capital gain only to buy the holding back to create the higher cost basis for a later sale date. It may defy common logic, but sometimes the best financial strategies are counterintuitive in nature.

Roth Conversions: If you have a large portion of your portfolio in a Traditional IRA and enough funds outside of retirement accounts available to pay the tax (and if your taxable income will get hit the hardest by the tax increase), you may want to consider converting some or all of your Traditional IRA to a Roth IRA. In the future, I will discuss Roth conversions in greater detail.

Higher Funding of Tax Advantage Accounts: Higher future taxes increase the attractiveness of funding tax advantaged accounts whether they are IRA’s, employer provided retirement plans, health savings accounts, college funding vehicles and tax deferred annuities. You just want to make sure that you have accessible funds available for an emergency fund and future spending needs that aren’t subject to a tax penalty for early withdrawal. But it may make sense to keep your taxable accounts as small as possible.

Don’t Let the Tax Tail Wag the Dog: Be careful to make sure that the funding vehicle fits your goals and future needs. Often times I see people mistake tax efficiency for tax avoidance and they end up investing in areas that are a poor fit for their needs. For example I often times life insurance will be sold as an investment vehicle where a need for the actual insurance need should take precedent over the investment characteristics.

With some careful planning, there is a lot to benefit from if you think about your future tax circumstances right now. Before taking action, I would highly recommend working closely with your financial planner and tax accountant (and coordinate it so they are communication to each other as well) to see what actions make the most sense for you. With our current and projected federal budget deficits, it would suggest we will be more likely to face a higher tax environment in the future. Small tax efficient measures now could potentially make a big difference over the long term.

Keys to Investing in a Secular Bear Cycle

Over the past several postings, I discussed secular investment cycles and how valuations and volatility influence these cycles. The broad based domestic stock market has been mired in a secular bear market since April of 2001. Secular bear cycles produce little or no gain to many investors, but it doesn’t have to be that way. Here are five keys to investing in this type of environment.

1.) Invest Against Gut Instinct: The average investor has inflicted far more damage to their portfolio than the market has. On an annual basis the research firm Dalbar does a study that compares investor’s earnings to the average investment using the Standard and Poors (S&P 500) as a proxy. Over the past twenty years ending in 2010, the average equity fund investor made 3.83% while the (S&P 500) Index made 9.14%. Why the difference? It’s because people tend to buy and sell in extremes at the very worst time, systematically selling their losers to buy yesterday’s winners when they should be doing the exact opposite.

2.) Diversify, Diversify, Diversify: From April 1st, 2000 to the end of 2011, the S&P 500 has made a paltry .37% annually over this time frame. However, the S&P 500 alone is not a diversified portfolio. If you also invested in stocks of smaller companies and emerging markets, commodities, real estate investment trusts and bonds, you would have done a lot better than solely holding large company stocks over this time period.

3.) Employ Tactical Underlay Using Volatility and Valuations: Forward looking returns for an asset class isn’t stagnant in nature; it depends on valuations. If an asset class goes down, you should only expect higher forward looking returns (the opposite can be said if an asset class goes up in value). Below is an illustration of how this works. This graph is courtesy of the Hussman Funds and was part of their Weekly Market Comment on August 29, 2011. This outlines the projected 10-Year S&P 500 Annual Returns based on historical growth rates and the level of the S&P 500 Index. As you see, the further the market drops (horizontal line), the higher the projected rate of return (vertical line). Although the past can’t always predict the future, valuations have provided a good forecast of what to expect.

How can you take advantage of this? Rather than having a set percentage towards each asset class, allow yourself a range and tactically under or over-allocate depending on where valuations lie. For example, you can target 60% towards stocks, but allow yourself to be in a range of 50% to 70%. If stocks are historically undervalued, allocate towards the high end of the range, if stocks are overvalued from a historical perspective then target stocks on the low end of the range. To avoid timing the market, systematically review and make any necessary changes on a set time interval such as quarterly, semi-annually or annually.

4.) Acknowledge How Bad it Can Get: The chart above notes something that all stock investors should be aware of. The range of the S&P 500 in the graph depicts the historical range of valuations based on today’s fundamentals. With secular bear markets, valuations usually fall to a point where they usually end up in the lowest one or two deciles. This would suggest an S&P level of 400-600. Back in March of 2009, we reached the 665 level. Maybe 2009 was the bottom, but if we re-test lows this would be a significant decline from a current S&P 500 of around 1365. If you can not stomach the loss potential, it may be a better time to dial down your risk now while we are in historically high valuation territory than in the middle of turmoil.

5.) Invest According to Your Goals, Not the Market: Everyone has a targeted rate of return needed from their investment strategy to meet their goals. This required rate of return is dependant on the current and projected level of income, expenses, assets and debt. This return need translates into an allocation of investment classes and sub-classes. Unfortunately most people spend little time trying to figure this out – and the best way to do this is through financial planning. Instead most people let the markets dictate their investment strategy, which is relying on something that can’t be controlled. If more investors began investing on their needs rather than the winds of current market conditions, they would be a lot better off in the long run.

If you follow these steps, it will not avoid losses. But what it will do is help mitigate losses, accelerate the recovery in your portfolio and give you a better opportunity to make positive real rates of return over the long haul. For more information on market valuations, I suggest visiting Robert Shiller’s website and the CAPE Research Catalog.

Secular Cycles and Valuations

My last entry discussed how volatility is a common element in a secular bear market. The second common denominator involves valuations. Secular bear markets tend to start when an asset class has abnormally high historical valuations and a tipping point occurs where valuations begin reverting to the mean. Often times this mean reversion carries enough pessimism where the momentum depresses prices to historically low valuation levels.

For stocks, the price earnings ratio (PE) is a common way to determine valuations. Below is a chart depicting the past secular cycles in the stock market since 1901.

As indicated above, most secular bear markets ended when the PE ratio was in the single digits. The only exception was in 1941 when the PE ratio bottomed out at 12. During this secular bear cycle, the PE ratio hit a low of 13 in March of 2009. Was this the bottom? It’s possible. But with the current PE ratios at 22, I would err on the side of caution. In my next entry I will discuss the keys to investing in this type of environment.

Secular Bear Markets & Volatility

My last entry discussed how investment asset classes and sub-classes go through long term upward or downward trends called secular cycles. Within a secular bear market like we are currently experiencing now in the stock market, there are two key characteristics you need to understand and accept to be able to effectively navigate through this market environment. I appropriately call these characteristics “The Two V’s.” In this entry, I will discuss the first predominant characteristic: Volatility.

A secular bear cycle typically results in flat cumulative returns when you look at the market indices levels from beginning to end. However the path of a secular bear cycle isn’t in the least bit smooth and subtle. Secular bear markets are roller coaster rides with extreme levels of upside and downside volatility. Below is a chart depicting how the Dow Jones Industrial Average fluctuated during our last full secular bear cycle, which occurred from 1965 to 1981:

Graph Copyright ©2012,

The market action of the last secular bear market is eerily similar to the current one. The cyclical bear markets with the greatest drops in this chart could easily been mistaken for 2001-2002 and 2008-2009. The largest cyclical bull runs that followed are similar to what we experienced in late 2002-2007 and early 2009 to early last spring. I’m not suggesting that the current secular bear market will pan out exactly like the one depicted above as each secular cycle will have its unique course of action. But I would continue to expect similar market action over the course of the cycle.

The main takeaway from this is that volatility is normal market behavior in this type of regime. The more than you are able to understand and accept this, the more you can use volatility to your advantage rather than falling victim to it. In my next entry, I will discuss the second of “The Two V’s.”

Time to Fund Your Retirement Account

The two biggest factors influencing how much money you will accumulate for your goals is time and the amount that you will save over this time; this far outpaces the influence investment returns have on portfolio values. For those saving for their retirement goals, the recent market decline provides a great opportunity to fully fund your retirement accounts for 2011. Rather than waiting until the tax deadline in April of 2012 to fund their Roth or Traditional IRA now may be a more opportune time to take care of this.

For those who participate in an employer sponsored retirement plan and want to maximize their contributions, this is a good time to determine if you are on target. Not only to optimize contributions for this year, but also to determine what deferral percentage you will need to maximize contributions for next year. This month, the IRS will announce if any changes will be made as employee contribution limits are adjusted over time with inflation. We haven’t had any changes over the past couple of years so I suspect that we will see some sort of increase for 2012.

Also for those who participate in an employer provided plan where the employer has matching contributions, in most cases you want to make sure you stretch out your employee deferrals throughout the year. By doing so, it optimizes the dollar amount of the employer match. Often times I will see people maximize their employee deferrals way before year end. They think they are doing the right thing, but unfortunately they end up leaving employer provided money on the table. Employees who are subject to large bonuses and/or commission have the most trouble with this as it’s hard to predict incoming earnings. Some employers are now offering programs where they will assume you are making deferrals throughout the year – providing a full match even if you maximize your contributions before year end. You usually have to sign up for this so I would take advantage of this if your employer offers this.

Finally, don’t forget about Roth Conversions. In an off-hand way, the taxes that are paid from the conversion could be considered an additional contribution. Again, with the recent drop in the market, this makes this strategy more attractive and if the market continues to drop throughout next year, you always can re-characterize the conversion before October 15th. Roth conversions usually only makes sense if you have the cash outside the IRA to pay the tax. Just keep in mind that conversions don’t make sense in all scenarios so be careful and fully think this through before executing.

Meeting goals in a low return environment requires one to save more – simple but true. In the long run it’s a lot better to employ strategies that you can control rather than relying on things outside our control (like the financial markets). If any of my clients would like to fully fund their retirement accounts or explore their options, please feel free to call or e-mail.

Thoughts on the Downgrade of the U.S.

On Friday, Standard & Poor’s lowered the credit ranking of the United States from its most creditworthy status of AAA to AA+. This is the first time in history the United States has been lowered. As a result, the stock market tumbled with the S&P 500 down roughly 6.7% for the day. Here are my thoughts on the situation:

• The announcement of the downgrade by Standard & Poor’s simply reflects what is already known. The creditworthiness of the United States is still strong, but we have structural issues with our fiscal policy that need to be addressed. The only new news was the announcement. This created no surprise to me.

• The ramifications of a downgrade would suggest that interest rates would increase as buyers of United States bonds would require a higher interest rate as compensation for more risk. Ultimately the market would decide this, but given the weak economic conditions around the world, I doubt that rates will rise quickly in the near future. Japan was downgraded earlier this year and no one flinched.

• The other concern would be the loss of the dollar as the reserve currency of the world. But it begs to ask, what would replace the dollar? The only remaining “real” AAA rated countries are too small to handle the volume or do not want to assume this implied leadership. The Chinese want our dollar strong so they can continue to sell stuff to us at affordable prices. The Euro is worse off and there is not enough gold in the world. The United States economy is weak, but it is still the largest and strongest economy in the world and our largest companies are still quite profitable. Ironically Treasuries rose yesterday because they are still the safe haven of the world.

• The real risk is uncertainty. The announcement of the downgrade was nothing within itself. However, the consequences of the announcement and combination of reactions could potentially create a tipping point or Black Swan event, creating capitulation similar to the fall of 2008. We won’t know if this will create a tipping point or if this is a tipping point until we are looking back at this in the future. The risk of these events is always present in both good and bad times.

• Keep in mind that a country with a sovereign debt issue that can control its currency can never fall into actual default. When you control your currency, all you need to do is start printing currency and devalue the debt away. Unfortunately the cost of this is high inflation.

• A political silver lining? I think our elected officials thought they were going to get off easy last week. They thought they could do some political posturing, defend their ideology and make a last minute deal to avoid chaos and save face. Ironically it backfired because as their inability to address our debt problem in the long term created a ripple in an already fragile global economy. It’s time to address the situation rather than kick the can down the road – remember – we are the ones that vote them into office.

• The ratings agencies don’t have a great track record. A few years ago, Standard & Poor’s gave solid credit ratings to Lehman Brothers, AIG and plenty of those toxic mortgage backed securities. None of these exist anymore. Billionaire Warren Buffett, the world’s most successful investor, said S&P erred and the U.S. should be rated “quadruple-A.” I don’t know about you, but I’d trust Buffett more than Standard & Poor’s. Moody’s today also rebuked S&P’s downgrade.

• Unless there is some unforeseen tipping point as discussed above, I believe the reaction of the markets were more emotion and animal spirits than based on fundamentals. And the financial press does not help quell that fear because sound investing principals don’t generate great ratings. As discussed the other day, if the market continues to give you trouble, one of the best things that you can do is periodically rebalance your portfolio. This is nothing sexy, but rebalancing forces you to buy low and sell high.

Finally, no matter how scary it might seem, this is atypical market behavior. If you allow yourself to be swept away by Mr. Market every time a blip occurs, you will not be very successful over time. If you allow yourself to work with the things that you can control and be opportunistic of what the market brings you, a contrarian investment strategy can be very rewarding.

What If We Don’t Raise the Debt Ceiling?

This is the question that clients, friends and colleagues having been asking me over the past several weeks. Here is my take on the subject:

Will They Reach a Deal? At this point, I feel that the likelihood of a technical default is low and that some sort of reconciliation will be made prior to August 2nd. The one thing that I can count on is politicians wanting to stay employed. I suspect the only reason the politicians have been posturing so long is because the financial markets haven’t over-reacted to this point. There is a sense of caution out there, but it is definitely not panic. If Washington felt votes were on the line, this would be a done deal.

Will There Be Panic if Congress Fails to Make a Deal? There have been some catastrophic predictions of what would happen if we failed to raise the debt ceiling. Most notably, Bill Gross of the PIMCO funds in a recent letter stated: “default would still be a huge negative for the U.S. and global financial markets, introducing fear and unnecessary volatility into the economy and global trade. The market situation might resemble what happened after Lehman Brothers collapsed in 2008.” A post Lehman situation is always a possibility, but I would think it would take a combination of negative events like more trouble from the Euro zone or sudden weakness in China’s economy along with a technical default to set off a contagion like event. Just keep in mind that the probability of a “Black Swan” event is always a possibility and usually comes out of the blue from some combination of catalysts that nobody can foresee. Given there has been quite a bit of doomsday talk about what would happen here, I’m skeptical that contagion would be created solely from technical default; there would have to be more out there.

The Long Run: My main concern focuses on the long run implications of what will happen if we don’t get our financial house in order. The U.S. federal debt to GDP ratio is closing in on the 100% level. Once we go beyond this mark, it begins to have a detrimental effect on economic growth. If the confidence of buyers of U.S. debt wanes, this would erode our status as the reserve currency of the world. With more perceived risk in us meeting our obligations, this would result in higher interest rates, inflationary pressure and would undermine our ability to grow economically. Although it wouldn’t be pleasant, I would even accept some short term anxiety if action was taken to fix the problem in the long term. The days of kicking the can down the road should end.

The Reality of It All: Our problem is far from being unfixable. However it won’t be fixed overnight either so I think it’s absolutely silly for our politicians to be dangling the debt ceiling and deadlines as a bargaining chip. In the big picture the reality is that the plan will take years of gradual implementation to eventually right the ship, while not blowing up the economy in the process. Both sides are going to have to compromise. If a politician discusses deficit reductions without talking about entitlement reform, they will never fix the problem. The same thing goes for those that think that permanent changes in our tax system are not a necessity. Everyone will have to experience some pain in the form of paying more or getting less. It should not be “us versus them” in this debate. In reality it’s just us. I would rather be able to address the problem while it is still manageable, rather than creating a crisis that probably my kids would need to fix. Greece is now stuck and has no easy choices anymore. We don’t want Greece’s problem to be our problem as well.

Recently Quoted in Boston Globe

On May 15th I was quoted in the Sunday Boston Globe concerning my thoughts on Boston mutual fund company Putnam Investments. Putnam was a mutual fund darling during the late 90’s, but fell from grace when growth stocks fell out of favor and were tarnished by the mutual fund scandal in the early part of last decade. In Putnam’s Progress, the article discusses management changes, new product offerings and improvement among some of their mutual funds, but as you will see, I remain skeptical.