Dreaming...

It's been a while since my last post! No, I have not been on a mega road trip although I've dreamed about completing the Trans America Trail and The Great Loop. 

At nearly every client meeting, the issue of "market noise" comes up. The client hears that Bitcoin is taking off (or falling off the cliff), oil prices are increasing, the market is overvalued, or taxes have changed significantly. While some of this may be true, market noise can get in the way of your financial and emotional health.

Take the 2017 market expectations. At the beginning of 2017 I presented my clients with the following chart, as everyone wants a crystal ball and one gauge is using the gurus expectations. Unless you have been on one of the mega trips noted above, you would know the market has well exceeded these expectations.

Does this mean I want you to ignore news and "experts"? No, but the news and these gurus need to be treated for who they are - non fiduciary, and non financial professions who are not in your best interest (their goal is to sell ads and books). One method I use is to confirm all information. The Jerusalem based marketing consultant Joseph Sherman (who happens to be my brother) has taught me to always read the original source material and compare multiple opinions of the source material. I'm not sure if he ever reads the news and instead gains information from official government and business reports and derives an opinion free from market noise - this might be an extreme example, but imagine if we did do this.

If you do have an important news item please forward it to me! Like this article by Scott MacKillop of First Ascent Asset Management, who covers this topic further. 

Market Response - Do I Read The News At All?

Investment Portfolios

As you are good, independent thinkers, you should ask the question of market response. And yes, I do read the news! One could take a market timers approach, however as research shows this does not work in the long run. You could also stress out about your portfolio, which would keep you up at night and cause nightmares. Instead, I have two basic rules:

1. Confirm your asset allocation, adjust based on new goals
2. Create an ideal portfolio model to base decisions on
3. If possible, utilize dollar cost averaging (and make it automatic!)
4. Determine a percentage you are willing to adjust your portfolio away from your asset allocation and ideal model
5. And finally, make any adjustments with great care

While you can make adjustments based on economic conditions, these rules will get you further without loosing sleep! You too will be dreaming of the world's greatest road trips! 

Business Matters

If you are a business owner, the December 2017 tax legislation commonly referred to as Tax Cuts and Job Act. It's 185 pages long, yet is linked at the bottom of this post if you desire to read it. Through this there are a few items to note:

1. Understand the basic political process: Congress writes and passes laws, IRS (via the executive branch) implements, and the Court interprets. Often Congress is not clear on the law, requiring the IRS to issue procedural rulings on the law. As the IRS has had a month to review the new tax law, they have not issued rulings or advice on how to implement the new law. Until the IRS rules on certain items, there will be uncertainty. 
2. Itemized Stacking. One certain item is the increased standard deduction. Most of my clients (as well as the majority of returns I prepare) itemize with a few thousand dollars over previous standard deduction. The new standard deduction is $12,000 per person - $24,000 per couple. For those who will not meet this amount each year, consider stacking your deductions in a single years. This might not be ideal for the charity's cash flow, but it will help your taxes.

Recommended Reading

  I'm doing my best to use actual source material to not contract myself!

1. Research shows hedge fund managers who drive fancy sports cars are more likely to fail at their jobs than those who do not drive sports cars. For a summary see this news article. Note - my wife and I drive vehicles that are 17 years old and paid for $5,000 each, neither being sports cars. But if I did purchase a sports car it would be a 20 year old Miata!
2. The actual December 2017 tax reform, direct from Congress. Note it's long, and at times ambiguous, but the only place to ensure what you read and hear is correct. 
3. Research from institutional investors, such as this one. While this may not be considered a "primary" source, I put more faith into that done outside of the media. There are plenty, however Vanguard is solid and is open to the public. 
4. For my non-financial item: my good friend Gary Kurtz makes wine in the middle of the Arizona desert. His instagram feed is a glimpse into the life of a wine maker and vineyard manager. We may have opposite job tasks, but we both aim to provide the best product possible. I have dreams of buying an RV and moving to the wilderness. I could manage Gary's work for a week...he might last two days doing mine.