Outside Economics

Last week I wrote about Leadership and Self Reliance with the idea that this week I am following up with how this works with a particular professional business. First let me explain a little about self-reliance. The idea is for people to become self-reliant or to rely on themselves, their own powers, resources, etc. This does not mean that a person does not use the services of other people, but it means that they have prepared their lives in such a way that those services add value to what they are doing on their own. The concept is the opposite of the entitlement mentality wherein people believe that they deserve something without any effort on their part.

It should be part of everyone’s vision to become self-reliant in this world. I love my children, and I am thrilled at their successes, and I love helping them succeed, I am most proud when they accomplish their goals on their own. Each one is a great person in their own right, some are more self-reliant that others (they are all at different and stages in life where we would expect this). The vision is to help them become self-reliant in their own family unit. That does not mean they won’t need help now and then, it means they are figuring things out for themselves and then seeking help with their own plan.

As a Personal CFO, using the composite leadership principles, over the years I have worked with clients who are chiropractic physicians, (while this works with all businesses in this article I am going to reference chiropractors). I like working with them because, as part of their medical training, they are taught that the body has incredible healing powers on its own, it needs a little adjusting now and then to keep it going. They also realize that other complications arise and a person may need medical care beyond their specialty. The chiropractors I have had the pleasure of working with have a sincere desire to make people’s lives better. They are, for the most part, self-reliant.

In my work as a strategist, helping chiropractors fulfill their vision, often starts with defining what their long-term vision is, (the direction they want to go), complete with all their ideas, which generally goes beyond ten years or more. This may include building a self-sustaining practice that helps patients improve their health. A practice with all the right policies and procedures in place, so if a team member is missing for a few days or out on maternity leave, others know how to fill in. Implementation and monitoring can provide a more profitable stress free practice. After all only when a business is profitable can it continue to provide the services necessary to the public. The vision also includes the most important benefit of all, a quality family life with time for the spouse and children. Remember that ALL businesses are family businesses.

What makes the vision, come about is setting and accomplishing specific measurable goals. These goals are more mid-term in nature answering the question: what specific things can we do to accomplish the vision? The change agent is active in this role, defining these goals and designing measurable ways to accomplish them. Implementing certain strategies to bring about greater success in the practice. In the case with a chiropractor, it may involve additional marketing, to see more people at certain times of the day. Writing the policies that employees need to follow to make that patients receive the level of service and care they are seeking. Establishing an office budget to better manage the office’s financial resources. Designing strategies to minimize taxes. Risk management and how to protect against exposed risks. Many of these goals can be implemented in as little as a few months to a year.

As items are implemented in a manner of priority to the chiropractor, the practice begins to change in the practice and home life. Stresses are reduced as items on the “to-do list” are accomplished. The Manager (in this case the Chiropractor) sees the things that are necessary to accomplish day in and day out to accomplish the goals set. This direction provides a charted course that ultimately makes the practice easier to manage. Employees know what to do in their areas of responsibility as well as understand the responsibilities of others, thereby creating a cohesive team effort.

A challenge that has always occurred is the monitoring of what is happening. Through constant outside monitoring, small lapses are able to be caught and corrected. As financial issues arise they are dealt with right then. Providing counsel at that time is easier than trying to fix a problem months later. We can’t predict the future but we can be prepared for what may come. Monitoring the practice allows the chiropractor to focus more on patient care, which helps the practice become more profitable.

In all of these areas the chiropractor and Personal CFO work closely together to accomplish the vision. It is through long-term goals, mid-term implementation, day to day work and continuous monitoring that accomplishes the goals. Together we are able to review progress, maintain the course, and accomplish the vision. This is how the chiropractor shows leadership in their practice. These principles can be applied to any business that wants to get ahead.

A couple weeks ago I went to a dinner meeting where Dean Lee Perry spoke, he serves as the dean of the Marriott School of Management at Brigham Young University. Moral and Ethical Leadership was his message, specifically, issues around a composite view of leadership. This message was of particular interest to me because assisting business owners and professionals to become financially self-reliant, is what I enjoy most about my work.

The composite view of leadership breaks the rolls down into three separate, but equally important types of leaders: the strategist, the change agent, and the manager. This applies directly to my business of helping small business owners/professionals get more out of their businesses and secure their future happiness by engaging sound financial principles that lead to self-reliance. As a Personal CFO to business owners/professionals I help them find and address the right questions and answers to financial issues they face.

The Strategist

The strategist has a long term view with a vision, typically two to five years out. Some financial issue extend well beyond five years. The strategist works closely with the owner/professional to develop a vision for their business. This is where, for many clients, questions about business planning strategies, income tax strategies, retirement planning or estate planning come into play. These events are usually off in the distance, sometimes so far off that we cannot see them over the horizon, but the date will come sooner than we may think.

What strategies should be employed to make this season of life well prepared for, planned, and most of all enjoyed. The abundant life is possible for each of us; long term planning is necessary to obtain the fruits of our efforts. An apple tree must be planted before we can harvest apples years later.

The Change Agent

The change agent works on more immediate mid-term goals, which are necessary to put the proper habits, tools and mental attitude in place to make the vision a reality. Goals that support the vision in a plan may have a dozen or so recommendations. Together the change agent and the owner/professional work through implementation and continuous monitoring of a comprehensive financial plan. Many goals can be accomplished in a few weeks to two years, each supporting the long-term vision.

Within two to six months most all recommendations of a financial plan are implemented, then the plan is monitored long term. An example of implementation may be setting up a particular retirement plan, or implementing an income tax strategy to help save tax dollars. The change agent’s work may finish in a few months only to start work again the next year as life events, business conditions, the economy, may require alterations.

The goals are best reached with regular monitoring, which keeps the whole plan moving forward instead of operating from financial one crisis to another. Bumps in the road happent, but they are often smoothed out with continuous monitoring and interaction with the business owner/professional and myself the personal CFO. Many issues are easily solved when dealt with immediately rather than trying to fix them after the fact, thus keeping the goals on target.

The Manager

The manager is critically important to the whole process of successfully completing goals and making the vision a reality. (Note: in this case the manager is not the typical middle manager in a company, the manager is the owner/professional.) The manager works the plan minute by minute, hour by hour, and day by day. The position of building profitable efficiencies into the operations of the business, is where the “rubber hits the road”! Particularly in small businesses where the owner may work closely with the employees, or often the case in professional practices, where they may do most all the work.

In a small business the owner/professional is often the manager, change agent, and strategist. The work of doing all three positions affectively is often overwhelming. My practice is centered on assisting the owner/professional with the strategist and change agent positions so they can spend more time focusing on what they are good at: growing their business, providing their customers the best service from the day to day operations of their business, and spending more quality family time.

Working closely with the owner/professional on creating a vision and the goals to accomplish that vision, we are able to make progress towards a life of financial self-reliance. Look for my article next week where I will look at how this works with a particular profession.

Everyone envisions great performance within their investment portfolio. Performance is one of the most sought after characteristics of any portfolio. However, evaluating the return only ignores risk and several other factors that affect performance.

Achieving a balance between the risk and performance or return is what a balanced investment portfolio is all about. In a balanced portfolio the stocks generally provide the greater return and the bonds are there to help minimize the overall risk; risk management techniques are important to consider, providing a balance between two distinct asset classes, stocks and bonds.

These two major asset classes are often broken down between many other asset classes. For example, bonds may be divided between US Treasuries, US corporate bonds, international bonds, inflation protected bonds, junk bonds, municipal bonds, etc. Stocks are likewise divided; there are the large cap, mid cap and small cap, international stocks, real estate stocks, retail stocks, commodity stocks, natural resource stocks, utilities, etc.

Risk is also broken down, as there are several types of risk that each stock and asset class are subject to. There are four major types of risk: technical risk, fundamental risk, interest-rate risk and inflation risk. Each of these risks can play a significant role in a stock or bond’s performance. All publicly traded stocks are subject to technical risk (a.k.a. macro or market risk). Many simply rise and fall with the market as a whole. While fundamental risk, (business or default risk) deals primarily with the company itself; is the management team running things right? Default risk can come into play if the company gets in such a spot that it needs to file bankruptcy; such is the recent case for Radio Shack.

So here are a few things to watch when evaluating performance…

Don’t forecast.

Many folks have a wonderful year in the market and then think all the succeeding years will be the same and they expect the same. They figure that they will hit a jackpot in 10 or 20 years based on what their account did last year after all it should continue to perform at the same level in the future, right? Just like farming, farmers have seldom perfect farming weather year after year. Some years there is a drought and others flooding!

Don’t work off averages

An average return only tells us if the fund has been positive or negative over a period of time is all. Each year is a story to itself; long-term averages don’t always tell the whole story, the average will hide down years. If a portfolio goes up from $10,000 to $11,000 great we had a 10 percent gain. However, if the account goes down by 20% it will take 25% to get back to break even. This is the math of losses, which often plays a major role in the emotional choices to sell at the bottom or get out when things are not looking “great”.

Keep a multi-year perspective

“Maintaining a multi-year perspective is vital to the mental and emotional health of an investor. Year-to-year returns are ‘noisy’ whereas 3-year rolling returns are more indicative of general performance patterns.”[1] One year’s return may not provide an accurate image of an entire portfolio model and may limit the investor’s vision.

While this may sound counter to the previous paragraph; it is not. The previous paragraph about averages is meant to keep the average return in perspective with the annual return. This section provides the reasoning to keep a long-term investment perspective; stick with the game plan for the long-term giving it time to work on your behalf. One year is not a sufficient amount of time to let a long-term portfolio model strategy work.

Expect Losses

According to Dalbar investors earned less than ½ the rate of return over the past 30 years that the market earned. Again, money is emotional, it is not math. This lack of return is due in part to investors pulling money out at inopportune times; the market is down, need college funds, down payment for a house, and other major unexpected expenses. The biggest looser is fear when the market tanks.

Yes it is wise to minimize losses, hence a properly balanced portfolio, but the best thing to do is have a game plan for when the market reverses. Ask that question now and make a plan. Are you going to hold on? Sell when the market is down by X% and get back in when? What if the market drops to your target sell level, we sell, and then it does not continue down, but reverses the next day and shoots back up! These bounces are devastating to portfolios; create a logical plan and agree on the plan with your advisor. The old adage of: “Buy low and sell high” might be part of your plan, when the market drops, should you buy more instead of selling?

Two Parts to Climbing a Mountain

If a person is not retired, then they ought to keep adding to their investment/retirement accounts, this will help immensely. (Many folks switch jobs and rollover their 401K to an IRA and let it sit never adding another nickel! To the extent possible keep adding.) This part of mountain climbing referred to as ascending, and when referring to investing, it is accumulating. Going up the mountain is typically easier, and less stressful on the body. Be an accumulator of assets and shares.

On the other hand, if a person is retired, then they are heading back down the mountain, descending or de-accumulating. It is always more trick getting down the mountain than up, for one it is much harder on the knees! There are far more accidents going down a mountain than up. It uses different tools and techniques; in this phase having some market exposure is good, but a person will want to develop greater security in their payouts too. Similar to having a sure footing with every step down.

Check emotions, make a plan for when the market does go down, and manage risk in a balanced portfolio and things should go alright. Most important keep a positive outlook, ask questions, do not be mean and nasty with advisors – they really do want to see investment accounts go up and up! Most advisors I know stress and lose sleep over client’s accounts and their performance.

[1] Craig L. Israelson, PhD. Architect of the 7Twelve Portfolio Model, Professor of Financial Planning at Utah Valley University (UVU).

With 2014 wrapped up a new year started many people are inclined to ask questions – it sort of reminds me of the old game “20 Questions”. All sorts of questions get asked at this time of year – often I wish I had all the answers; but when looking forward I soon realize that no matter how much experience anyone has in the market or investing professions no one has the answers to how a particular investment portfolio or market will behave – we just don’t know the future!

Sometimes people may think they have right answers, only to realize that they answered the wrong question. I remember once in college, sitting in the testing center, taking a timed exam getting to the bottom of the Scantron answer sheet (where you fill in the bubbles with pencil and the machine grades the test in seconds) and realizing I had miss placed one answer, thus making all the subsequent answers wrong. That would have been an epic failure!

Fast forward thirty years and I still am amazed at the answers people give to questions asked. Maybe we really need to look at the questions better. I have learned that asking questions helps to crystallize your thinking or another person’s thinking.

“The art and science of asking questions is the source of all knowledge” Thomas Berger

“A focus on questions recognized the ambiguity associated with economics, markets and investing – there are rarely “specifically” right answers, but more commonly, there are “generally” right answers. Investment answers may materialize abruptly, but often answers occur on a timeframe independent of consensus. Thoughtful questions point us generally in the right investment direction. In our view, “generally right” is a worthy, sustainable, long-term objective. On the other hand, “specifically right” investing is rarely repeatable and too often leads an investor onto unrealistic and unattainable market paths. We also recognize that sometimes we don’t know what we don’t know, so the “right” questions may not even be on our radar.”[1]

Recently we have seen Germany’s central bank lower rates on its 10 year bonds to 50 basis points and Japan has lowered their rates to 25 basis points, while the US is around 2.0 percent. This begs the question how long can these governments keep rates so low? At some point won’t Germany and Japan have to raise rates somewhat closer to the US? Or will we have to lower our rates? After all, we could theoretically, borrow money from Japan and loan it out in the US and make 1.75 percent.

In the past six months oil prices have been cut in half. I was in a meeting listening to an oil analyst during the summer where he expected oil to hit $140+ per barrel before the end of the year. Perhaps he was not asking the right questions? Are the geopolitical assumptions we have been using the past five to ten years going to hold out for the next five years? What could cause a shift in the geopolitical environment that would cause a drop in the price of oil? Will the current oil prices remain low? What impact does a stronger dollar have on current commodity prices? Are derivatives going to be impacted by the low oil prices? Will the U.S. be able to continue producing oil from shale as prices continue to fall?

With all that is going on in the world the United States looks pretty good, but how long will that last? China is boasting that their economy is now larger than that of the U.S. Is the U.S. economy really picking up steam or are we still sputtering along? While our political leaders battle things out in Washington, leaving us in a solid gridlock (thank goodness), is the market advancing because of real value or because of central bank manipulation? The gridlock in many ways has kept lots of laws from being passed, thus creating new regulations, which have given us a bit of a break from the constant barrage of endless new regulations we must follow. I believe this has been a blessing to the economy and businesses in general.

Human nature can always make the markets rise and fall by how we react to news and information and mostly by our own emotions. We are susceptible to irrational behavior and emotional responses to “what just happened.”

All of these things can impact investments, markets and returns. However successful investing requires that we not only question what is going on in the markets, but also ask ourselves in an effort to seek greater understanding. Have we selected an investment approach that makes sense, is disciplined, and sustainable? Next – am I willing to follow this approach over the long term? Giving up is a challenge we all struggle with in the face of up or down markets or account values. Up, because we should have more of the return, we think “the strategy just isn’t working right”; down, “because the account should never go down, where is the downside protection!”

This is why long term investing is so difficult, sometimes it is better to just forget about it and let someone else worry about it. “Investment success is most likely to be achieved when finding the appropriate combination of diversified market risk and tactical strategy risk.”[2]

As an advisory firm, we worry plenty about our clients’ investment portfolio; we appreciate working with you and remain devoted to your overall long-term success. We are happy to answer questions about what is important to you. We wish y’all the greatest success in 2015.

If you want some basic questions to ask yourself about how you invest, check out our short investor profile - click the button below to get a copy.

 

 

 

[1] John Lunt, Lunt Capital Management, Inc.

[2] John Lunt, Lunt Capital Management, Inc.

In an effort to make life insurance policies more appealing and fit more of a family’s financial needs, measuring the risk, insurance companies have included insurance riders that cover terminal illness, critical illness, and chronic illness. The idea being, that the insured may develop an illness that causes great financial stress on a family, which could be covered by their life insurance. Should the person eventually pass away, why not accelerate the benefit a few years and pay something now? The policy rider may or may not be a great benefit.

These accelerated benefits, also known as “living benefits” are defined as follows:

— Chronic Illness: an insured is unable to perform two out of six activities of daily living, such as bathing or toileting, walking or transferring to or from a bed or chair.

— Critical Illness: an insured is diagnosed with a major illness such as cancer, heart attack or stroke.

— Terminal Illness: meaning a life expectancy of less than 12-24 months, depending on state limitations.

Acceleration of Benefits and Policy Maximums

These riders give you the option to access your policy benefits prior to death in the event of terminal or other life changing illnesses, when the need for additional funds may be crucial. This can be done either as a partial acceleration, meaning a part of your death benefit may remain in force, or a full acceleration. If you elect full acceleration, your policy will be terminated.

Generally there are limits on these policies, the maximum death benefit available for someone under age 65 is $2,000,000 and the maximum death benefit for those over age 66 is $1,000,000. The living benefit is based on the insurance amount; should you use the living benefit, you will not be paid the total amount of the death benefit.

How it works

If a 45 year old insured male becomes ill, for example with prostate cancer (common cancer for men), this person is insured with a ten year term policy for $1,000,000. The insurance company will look at how long the policy has been in force, age of the insured, type of illness, chance of recovery, policy death benefit, etc., they will look at everything related to this person and their current situation, then the actuaries will perform an analysis and make the insured an offer. This offer may be only a fraction of the total death benefit – maybe only $100,000 or less; or it could be more. Each person and their illness, stage in life, and how long the policy has been on the books are all considered when making the offer to the insured. In the end, it may or may not be worth it to give up the insurance policy for a living benefit.

Some policies state that they will pay up to 60% of the death benefit, some more, but the bottom line is that it all comes down to what the insurance company will offer considering all factors.

Typically, in the case of a terminal illness, the insured will get a higher pay out because it may be a matter of months until the insurance company will have to pay the full death benefit. The great advantage to this type of rider is for someone in business they can use the living benefit to help settle their affairs with their business partner(s) before death, leaving their heir(s) free of such complicated burdens. They may also choose to use some of the funds to travel or engage in other activities before they become too incapacitated by their illness.

While these benefits may be valuable for many people, they do not solve all the problems, nor replace the need for good medical insurance, long-term care insurance, life insurance or disability insurance. If the rider is used, the policy may be terminated and may end the possibility for a person to obtain additional life insurance in the future. The rider is an important extra benefit hopefully not in a position of last resort.

There are "stand alone" critical illness policies, which may be better for you for more information on the limits of thes policies, click below.

A small business owner typically has a relationship with a banker, a lawyer, insurance agents, and an accountant or tax adviser. But what about a wealth manager or what I call a Personal CFO? Further, what is a wealth manager and why would a small business owner want to have one working on his behalf?

In a business a CFO manages the finance side of the business; he will pull the banker, lawyer, accountant, insurance agents, and investment advisor, together on behalf of the business owners and make sure they are all working toward the same goals. A good wealth manager will save the business owner time as well as help him address issues that will create the most value. This is different than a typical investment manager who manages assets such as stocks, bonds, cash and mutual funds towards a specific future goal such as retirement or college funding.

Some areas of focus a wealth manager would address would be a privately-held business, personal residence, vacation property, insurance, loans, taxes, employee benefits, estate planning, investment advisory, cash flow, debt elimination, the needs of beneficiaries and so on; basically anything that impacts an individual's net worth.

A good wealth manager will pay attention to the estate planning, a critical part of a business owner’s conservation strategy; because he knows that the owner’s family is a part of the overall picture and they need to be provided for. If these crucial elements are avoided or ignored, the end results can be devastating to the business as well as the family members.

A case in point that hits home for me, happened with my oldest brother who was an architect. He along with his two business partners owned an architecture firm for over thirty years. When the business was initially set up they put a stipulation in place that would be activated upon the death of any of the partners. It was modified and updated about 35 years into it, however, the modifications were short-sighted and not set up well. Two years ago my brother passed away suddenly, activating the stipulations. Unfortunately, what they had thought was a wise plan ended up not providing for the business or the two remaining partners in a way that would enable the doors to remain open.

A personal CFO could have foreseen the fall-out of the short-sighted stipulations and made the proper provisions. He would have factored in the legal considerations, taxes, accounting and insurance considerations, and any other assets or special conditions that would be impacted with the death of a partner and ensured that the family heirs, business, and remaining partners would be provided for when faced with such a loss.

There are many details that come into play when one considers net worth and the best way to manage it. Business owners often do not have the time nor the expertise to handle all the details well. If a business owner is working 80-hour weeks, how much time can they really spend considering how assets are titled, or whether there are methods of shifting tax burdens to family members in lower tax brackets, or whether there's too much risk in an investment portfolio?

The needs of a business will vary significantly from one business to another. For example, a family farm can utilize a family limited partnership, where a publicly traded tech firm cannot. On the other hand, the shareholder of a publicly traded firm can sometimes gift stock options to an irrevocable trust. There are hundreds of income and estate tax strategies. The job of a wealth manager is to assist in the decision making process so the right approach may be selected for each individual situation.

Besides the varying needs of a business, business owners each have very different wants. Wants, such as what does the owner want to do with his business? What is important to them? Do they want it handed down within the family or do they want the business to go public? How do they create lasting value in the business, so it can be sold in the future? These answers are more about the individuals owning/running the business rather than the economics of the business.

A wealth management strategy cannot be implemented all at once. There are a number of gradual steps that must take place because it is a process, not an event. It takes years for a business owner to build a company, as the company gains wealth, strategies are implemented. By the same token, it may take years to properly enhance and protect that wealth. A good wealth manager will take the time to evaluate all the issues, then he will start with those things that are easy for the client to do. At the same time, a wealth manager should emphasize the strategies that are most critical for the client whether they are easy to accomplish or not.

A Personal CFO needs high levels of expertise and an ability to work alongside other professionals who are currently serving business owner's legal and financial needs. He needs to understand the cash flow of the business, their tax bracket, cash-flow projections, and the risk involved in the business as well as other assets. Business owners will come to value a Personal CFO's advice as they see details of the business resolved and the wealth and sustainability of the business protected.

During the final days of 2014, the government issued a report stating that the GDP had grown by 5% in the third quarter of the year. Many are cheering the news, but there are also many who are calling slight of hand! I have three articles that I will reference to dissect this report, one supports the government's claim, and two oppose.

The first article is called “Why Aren't We Thanking 'Gridlock' For Saving The Economy?” written by David Harsanyi. His reasoning for the 5% jump is that for the first time in the Obama administration, no one was 'tinkering' with the economy. To be fair, he doesn't give credit to Obama for turning it around, nor does he give congress the credit. Rather he says that because of gridlock in D.C., no one was able to accomplish anything, and just the mere fact of letting the economy maneuver for itself, allowed it to begin to pull out of this long recession.

By John Hendrix

From Harsyani, ““People often don’t realize that a political system is sometimes effective when it does not do certain things.” Pietro Nivola, a senior fellow in governance studies at the Brookings Institution, argued in 2013. “You can’t just measure the things it does, the actions it takes; you also have to measure the actions it does not take.” Nivola’s study was impressed by how gridlock has the ability to stop the Republican House from cutting spending too abruptly for the economy.

“And perhaps he’s right. Gridlock has caused an odd, but pervasive, stability in Washington. Spending has been static. No jarring reforms have passed — no cap-and-trade, which would have artificially spiked energy prices and undercut the growth we’re now experiencing. The inadvertent, but reigning, policy over the past four years has been, do no harm.”

I have always thought that if congress could only pass one new tax law, (one that raised revenue to the Federal Government in any way), every seven years, the economy would be much better off. This would give the public time to absorb the law before a whole new set of rules and regulations come out to hit us again.

Harsanyi also mentions that the congress has issued fewer laws during the last few years. While there may have been fewer laws passed, he overlooks the fact that the ones that have passed have been so large that the congressmen don't have time to read them before they come up for a vote. To quote Senetor Pelosi, “We won't know what is in the law until after it has passed.” A foolish way to govern and far from the do no harm policy Harsanyi claims.

Further, while the number of laws issued may be less than in other years, the amount of regulations pouring out of D.C. have been more than most people can keep track of. There were over 3,000 that were ready for take-off the week of Thanksgiving alone! There were just as many issued back in the spring. While congress can't take credit or blame for these, they certainly do impact the economy in big ways.

For example, the energy sector is being regulated out of their current system into a coal-free one. We can debate all day what is the most earth-friendly method of creating a stable energy network that will serve our population needs in the most cost effective and efficient manner. However, in the past, the free-market and innovation led us to new advances, not regulations and red tape.

As a matter of course, it used to be that laws were presented by congress, to be enforced by the executive branch and appealed to through the judicial branch. Regulations by-pass our entire system of checks and balances, leaving us with a penal system that is deaf to any appeals. I submit that regulations are more damaging to a free economy than a president's policies or legally enacted law.

The next article, “Q3 GDP Jumps 5%; Ha! The Crap Behind the Numbers” written by Tony Sagami of Mauldin Economics. In this article he doesn't necessarily cry foul, but he raises some doubts about the integrity of the 5% claim because of other numbers in the economy that don't add up to a jump. He outlines four points:

“Fun with Numbers #1: The biggest improvement was in the Net Exports category, which increased by 112 basis points. How did they manage that? There was a downturn in Imports.

“Fun with Numbers #2: Of the 5% GDP growth, 0.80% was from government spending, most of which was on national defense. I’m a big believer in a strong national defense, but building bombs, tanks, and jet fighters is not as productive to our economy as bridges, roads, and schools.

“Fun with Numbers #3: Almost half of the gain came from Personal Consumption Expenditures (PCE) and deserves extra scrutiny. Of that 221 bps of PCE spending:

Services spending accounts for 115 bps. Of that 115, 15 bps was from nonprofits such as religious groups and charities. The other 100 bps was for household spending on “services.”
Of that 100 bps, the two largest categories were Healthcare spending (52 bps) and Financial Services/Insurance (35 bps).

“The end result is that 85% of the contribution to GDP from Household Spending on Services came from healthcare and insurance! In short… those are code words for Obamacare!

“While the experts on Pennsylvania Avenue and Wall Street were overjoyed, I see just another pile of white-collar manure and nothing to shout about.

“Fun with Numbers #4: Lastly, the spending on Goods—the backbone of a health, growing economy—declined by 27 bps.”

With this in mind, let's move on to the third article posted on December 26, 2014 by John Hinderaker in Economy, Obamacare, & PowerLine called, “About that 5% GDP Growth Rate…”. Citing another economist, Tyler Durden at Zero Hedge, Hinderaker helps uncover the sleight of hand being played out and points the finger assuredly on Obamacare spending as the main reason for the jump in the economy.

“Back in June, when we were looking at the final Q1 GDP print, we discovered something very surprising: after the BEA had first reported that absent for Obamacare, Q1 GDP would have been negative in its first Q1 GDP report, subsequent GDP prints imploded as a result of what is now believed to be the polar vortex. But the real surprise was that the Obamacare boost was, in the final print, revised massively lower to actually reduce GDP!

Of course, even back then we knew what this means: payback is coming, and all the BEA is looking for is the right quarter in which to insert the “GDP boost”.

Don’t worry though: this is actually great news! Because the brilliant propaganda minds at the Department of Commerce figured out something banks also realized with the sub “kitchen sink” quarter in November 2008. Namely, since Q1 is a total loss in GDP terms, let’s just remove Obamacare spending as a contributor to Q1 GDP and just shove it in Q2.

Stated otherwise, some $40 billion in PCE that was supposed to boost Q1 GDP will now be added to Q2-Q4.

And now, we all await as the US department of truth says, with a straight face, that in Q2 the US GDP “grew” by over 5% (no really: you’ll see).”

While the exact quarter predicted was incorrect, the overall scheme was called out back in June with 'Obamacare' spending accounting for two-thirds of consumer spending. We can only hope that increasing Obamacare costs don’t drive “personal consumption” any higher in future quarters, and also that integrity can somehow return to our public servants.

So we come to the final question: what really happened to the numbers? Anyone want to guess – let me know what you think?

As this year is opens, now is a good time to reflect on some of the things that worked and didn't work in your financial life. What may be holding you back from living on a budget? What would it take to finally be serious about getting out of debt (renting money is very expensive)? Or when will you finally get around to setting up an estate plan that will ensure your family will be provided for if something happens to you? And remember procrastination is a very bad and expensive habit.

Here are the Top 10 – Out With the Old Excuses, to kick for 2015:

Don't have time

This is the big one! While many Americans are stretched to the limit when it comes to their time, making sure your financial life is in order is more about priorities than it is about time. We make time for things that are important to us, like watching TV or our favorite game. Getting your financial house in order means that with all your efforts to provide for your families, we are also ensuring that long-term their needs will be met.

Here is one I like:

We are all busy people and perhaps busy is the number one reason people don’t take the time. This is typically how it goes: “Its tax season and once I can get past April 15^th then I will have more time!”

What’s next after tax season: “It’s the end of the school year and my kids are in all the different activities and between that and sports, we are just too busy, maybe during summer?”

Summer yes the kids will be out of school and we will have more time…how does this go: “We are so busy getting ready for summer vacation with the family, we just need to get past the vacation then we will work on our finances!”

After summer then what? “We are getting ready to get the kids back in school – after the kids are in school things will settle down and we will have time.”

The kids are settled in school and doing well, but then: “It’s the holidays and we are swamped with family coming and going and work end of year things to finish, I am sure we will be able to have the time after the holidays!” Right!!

And after the holidays: “Its tax season again and life is just too crazy right now!”

Don't have money

It is far cheaper to live on less now, and ensure that our financial life is sound, than it is to continue on a frivolous path and reap the consequences later. The old adage of “living on less than you earn” really is the wisest path. Either way there will be a day of reckoning. Consider ways that you can do more with less, and cut back in wasteful spending in order to make room for a sounder future. It is amazing what people do with a just a little money.

My spouse isn't on board

There are many reasons spouses may not be united in a family budget. It is your job to initiate the conversations that are required to become one in this area of your marriage. It will take patience, time, and probably a change of behavior from both spouses as well as some negotiations in order for both spouses to be united on the budget. While it might seem like an uphill battle now, many couples have accomplished the trek and have found greater peace in their marriage and power in their financial life. It is well worth the effort! This is a place where spouses need to be unified.

I don't know how, I was never taught

This may be true, but it is never too late to learn! Start now, make the commitment to learn how to manage your finances. Find a good financial advisor whom you trust and ask them to mentor you. Don’t let your ego get in the way – there is no shame in getting help! Everyone needs help now and then.

That is for other people, not me

This is a true case of denial. It doesn't matter how rich or how poor you are, your financial life affects you. Consider the truth in the statement that your choices will determine your destiny.

I don't care

Unless you are a welfare recipient, than perhaps you do care, but don't want to admit it. If you care enough to get up and go to work each day, then you ought to care enough to see that your hard work is not squandered.

I'm too lazy

This is probably at the heart of most of our excuses as to why we don't do the things we ought to do- whether in finances, diet & exercise, or any other should or ought to's in our life. It is probably the most honest excuse as well. People rarely change until they get sick and tired of being sick and tired. Short of that, it often takes some type of severe wake-up call before meaningful change ever happens.

I have more than I need so I don't worry about it

If this is you then congratulations on being financially comfortable! While this is a nice place to be, it is a short-sighted response in a world that is ever changing. Beware of being too comfortable for your own good!

The Bible says money is at the root of all evil, so I ignore anything that has to do with money

Yes, I have actually heard this excuse in others before! It is folly and a sheer refusal toward any type of financial maturity. If this is you or your spouse, some therapy might be in order to help you through your issues. We also have a responsibility to use our talents wisely.

Money, what's that?! I use the barter system for all my needs

While the barter system may be useful to you in some regards, it can only go so far. While the current world we live in may allow for some bartering, it also requires money. Both skills are likely necessary in order to get along in it. Consider enhancing your financial skills this year- perhaps you can barter for a good financial mentor!

They say that “insanity is doing the same thing over and over and expecting a different result!” If you want to really make some changes then you have to reprioritize your time and make the time to get it done. You may also have to reprioritize your spending too as well as other things you like in life, but it all starts with “time!

J. Pierpont Morgan said, “A man generally has two reasons for doing a thing; one that sounds good, and the real one.” What other reasons regarding your financial life keep you from success? I'd like to hear about them! Leave a comment and let's discuss it! In the meantime, Happy New Year and best wishes for 2015!

At this time of the year I hope we all take time to pause and reflect on our many blessings. There are two things I would like to point out this Christmas season. 1. Is the Gifts and 2. Is gratitude for the blessings we have been given.

We all try to surprise people in our circles with gifts, family members, some from work, and other friends, all hoping that we have provided the perfect surprise gifts. I happened to watch a short video this year titled He Is The Gift you can watch it here. It is just less than 3 minutes. It is one of the most powerful examples of gift giving there is. And it sums up the reason for Christmas in the first place. It sets things in priority.

On to gratitude for blessings. All gifts are blessings and therefore deserve our most humble gratitude to the giver of the gifts. This year is a bit different for me. My oldest son returned home from his mission to Brazil for two years, my next oldest daughter is currently serving a mission in Brazil and should return home in May, 2015. As a parent of great children, I am profoundly grateful for them and particularly their mother – my wife, she is amazing.

Here is a different twist. My son decided that one way to pay for his college was to join the military, a decision I did not expect him to make. I suggested the Air Force because you get to fly planes and he, like me, has always liked airplanes. He had something else in mind – the Marine Corps. I said son those are the tough guys and the first ones sent in! He said yes but they are also the best trained. He did a bunch of his own studying and homework and felt that that is where he should be, so he joined up.

This is the gratitude part, being in the military with the chance that he could get shot does not excite me one bit. But knowing that he may get shot fills me with humble gratitude that he would put his life on the line for his country and thereby his parents. He is that kind of son. The Savior Jesus Christ said, “Greater love hath no man than this, that a man lay down his life for his friends.” John 15:13. I pray for his protection.

We are all blessed with so much in this great country, before you and your family unwrap presents tomorrow morning get in your knees and thank your Heavenly Father, the God of heaven and earth, for your many blessings. It will change your Christmas. I know because it continues to change and improve the Spirit of our Christmas’. May God bless you and keep you.

As this week is Thanksgiving, I thought I would write aboutone of our first settlers in America, whose influence on America has been profound. John Smith's impact has been felt both in the American spirit as well as in the American economy. We are all familiar with the story of John Smith being saved by Pocahontas, but this is just one of many examples of his narrow escapes and the influence these experiences gave him in becoming a great leader.

John Smith was born in 1580, near the bottom of the social scale in Willoughby, England. His father was a farmer, which was one level above being a peasant. He was able to attend grammar school in his youth. He had no desire to remain a farmer and even tried to run away when he was 13. His father eventually made him an apprentice to a merchant. He was miserable, and could see little way to break free of the feudal institutions so strongly in place in those days.

After a year or two of being an apprentice, his father died. This bittersweet event allowed John Smith to leave the merchant and pursue the one door open to his ambitious, adventure-craving spirit: the military. During his time in the military, he rose quickly to rank and earned the respect of the men he fought with and for. After a few years, he went home and studied military arts and eventually returned to fight again.

By the time he was in his early twenties, he had fought in many battles, rising to the rank of a captain, and honored by princes and kings for incredible acts of bravery; he had been robbed and beaten and left for dead in the forests of France; he had been thrown overboard a ship, Jonah-like, only to be rescued later by another ship whose captain happened to have friends in common with John Smith and therefore treated him well; he had toured Rome and met the Pope; he had been captured in battle and sold as a slave, and eventually regained his freedom and made it back to England just in time to sail to America.

Clearly John Smith had not only lived a life of adventure, but he had experienced every economic situation that is possible to experience! These experiences laid the foundation for him to be the right man, at the right time, in the right place to give success to the Jamestown settlement.

The bylaws of the Jamestown settlement were set by the financiers of the trip. They put in place a system, not unlike communism, whereby everyone was rationed the same, whether they worked or not. The environment was harsh and untamed. The provisions were meager. Many settlements had tried and failed in the hundred plus years between Columbus and Smith. If Jamestown had maintained these practices, it is probable it would have met with the same fate as so many settlements had previously. But there was something in John Smith that became the catalyst for success in Jamestown!

The settlement was in constant need of replenishing men and supplies from England. The first year saw a 60% casualty rate! The provisions were never enough, which led to a perpetual need to trade with the Indians, which had its own inherent risks!

As John Smith later reflected on those early days, he observed, “Glad was he (who) could slip from his labour, or slumber over his taske he cared not how, nay, the most honest among them would hardly take so much true paines in a weeke, as now for themselves they will do in a day.” He had keen insight into human nature and knew that, even though in theory equal pay sounded good, in practice it was leading to disaster! John Smith finally decided it was time to abandon the bylaws that had been instituted by the financiers of Jamestown. With a musket in hand, John Smith boldly declared that anyone who did not work, would not eat! This basic fundamental economic principle is why I call him the first Economist in America.

The financiers eventually realized the flaw in their bylaws and officially abandoned communism. In its place they allowed the settlers private property rights as well as the ability to live by their own initiative. Something amazing began to happen in Jamestown! All those who eagerly embraced these new laws began to flourish and prosper. They improved their situation so well that word spread back to England and America began to be settled!

When John Smith came to America, he realized the two profound opportunities this land had to offer: Freedom of economic movement and the ideal of liberty! These two principles were the basis for what made America great and were cannonized in the Declaration of Independence and the US Constitution.

“Here (in New England) every man may be master and owner of his owne labour and land; or the greatest part in a small time. If he have nothing but his hands, he may set up his trade; and by industrie quickly grow rich...

“Therefore let all men have as much freedome in reason as may be, and true dealing, for it is the greatest comfort you can give them, where the very name of servitude will breed much ill bloud, and become odious to God and man.”

This vision of what America could become for mankind was indeed the catalyst that allowed America to grow, flourish and prosper! At this Thanksgiving time, let us remember the ideals and visions of those who came before and as we give gratitude for the many blessings we have, let us also promise in our hearts to do our part to maintain their inspired ideals! Happy Thanksgiving!


Sources:
Love and Hate in Jamestown by David A. Price
The Majesty of God's Law by Cleon Skousen
Quotes from:
Description of New England by John Smith
Generall Historie by John Smith