Critical Thinking Required: Recent Episodes
LBW Wealth Management
Welcome to Critical Thinking Required, hosted by LBW Wealth Management. Our goal is simple: we want to challenge you to think differently about finance and business. Join us, and start the journey today!
Investing can often feel like walking a tightrope. Balancing risk mitigation and return maximization is essential for any successful investment. Should you take a high risk in the hope of a high return? Or should you aim for safety and expect less? In today’s volatile market, which one should take priority?
Nathaniel talked about how high interest rates impact your investments previously. In this episode, Tim discusses how interest rates impact daily financial planning, from mortgages, car loans, and credit cards, to savings and budgeting. Tim said it so well: the point of planning is positioning. It allows you to put yourself in a good position to take advantage when an opportunity presents itself!
As you may have already heard, the Federal Reserve announced that it plans to hold interest rates steady amid high inflation, and forecasted just one cut in 2024 instead of three to six. In this episode, Nathaniel discussed what that means for your investments. And why did the market keep going up in a high-interest rate environment when in theory should have gone down?
Today we're diving into a topic that's crucial for self-employed individuals: investment account types. Whether you're a freelancer, consultant, or small business owner, understanding these options can be a game-changer for your financial future and retirement. So, let's get started.
This is our 2024 first-quarter commentary. Nathaniel discussed 3 main topics: US stock market performance, and why the S&P 500 doesn’t truly reflect the overall stock market; inflation, and how it impacts your investments; and lastly, the 2024 presidential election and how it may affect your financial planning.
If you are planning to have a child, or you just had one, there are some financial preparations that you may find extremely beneficial in the long run:
- Cash Flow: Create a realistic budget and increase your emergency fund;
- Estate Planning: Pick your guardians, create a trust, or at least complete the free estate planning templates your state provides;
- Life Insurance: Now that you have (or are about to have) another person who depends on you, please review your insurance needs. It's a risk management tool, not an investment!
- Education Planning: Utilize 529 plans and other useful investment vehicles for your child;
- Tax Breaks: Talk to your advisor and CPA about child and dependent care credits, FSAs, and other tax benefits.
In this episode, Nathaniel and Tim discussed what the S&P 500 index is, its performance, and does it truly represent the overall stock market. From January 1 to June 20, 2023, the S&P 500 increased 14.3%. That's well above the 10-year and 20-year averages through that same time period of 3.6% and 3%, respectively. "The markets must be doing really well this year then!", you may think. But why are your 401(k)/retirement accounts not doing as well? Did you know that the top 9 companies of this index (Apple, Microsoft, Amazon.com, Nvidia, Tesla, Alphabet, Meta Platforms, Berkshire Hathaway, and UnitedHealth Group) accounted for almost 31% of the market capitalization? And if you exclude these top 9 stocks, the index would be up about 3% in the same time frame, making it a very mediocre year. Nathaniel talked about what drives the 2023 jump, and the volatility of the short-term market.
In this episode, Tim and Nathaniel discussed estate planning for digital assets. This is a relatively new concept for older generations. Most of us are familiar with wills and trusts for cash, real estate, and other investments. But what about digital assets like Bitcoin, online bank accounts, etc.? If you are an influencer or work in the media industry, what about your social media accounts, movie/music rights? Nathaniel and Tim also discussed password management. We understand that estate planning is always difficult because we don’t want to face our mortality. But please give it a try, and do the hard work on estate planning, so that your loved ones can focus on mourning your passing and building a meaningful life afterward, instead of stressing out about where everything is.
In this episode, Tim and Nathaniel discussed private investments: what're their qualifications, why they have income/assets restrictions, and how should one view them. A couple of research filters to go through: define your goals, understand the vehicles, consider the risk, know the management/leadership, and pay the right price. Nathaniel made a great point: if you have a small business or part-time side business, the best private investment could actually be your own company. You know the industry well, you understand the product/service, and you are in control of the execution. When it comes to investments, new and shiny may not be the best option. Why not put your money into things you know best?!
Threads is Meta’s latest social media app. It’s a Twitter-like product with short missives you can share with followers. It lets you post text, photos, links, and videos. It reached 100 million subscribers in a record time: within 2 days. In comparison: it took ChatGPT 2 months, TikTok 9 months, Instagram 30 months, cell phones 15 years, and telephones 75 years. Tim and Nathaniel discussed from an investor’s perspective, what Twitter’s and Thread’s (really Twitter and Meta’s) pros and cons are and what the future may hold for them.
For this episode, Nathaniel and Tim discussed investments within the music industry. The earning method has changed in the past decade with streaming services. Nathaniel used Taylor Swift as a perfect example of how top artists can change the power dynamic with corporate giants. There are many different types of organizations in the music industry (artists, music production, recording companies, publishing companies, agencies, etc.); which ones will Nathaniel choose to invest with? He gave his answer and reasoning.
In the last episode, we discussed some frequent spending habits we’ve seen, and how we should interpret them. For this episode, we are going to discuss budgeting. Before we start, understand that this is going to be an emotional and hard exercise. Ask yourself, are you really ready to make a lifestyle change if needed? Be realistic about your expectations and numbers: if not, you are going to fail again and again, and create a negative emotion feedback. Dan and Tim discussed delayed gratification, outliers, and the importance of understanding the value of your dollar: both quantitatively and qualitatively. How you feel matters a lot when it comes to budgeting.
This is part one of our spending habits discussion. Dan and Tim listed what people call “spending red flags”: frequent small expenses like coffee and restaurants; unused subscriptions and memberships; impulse purchases; and trying to keep up with your friends. We are not disagreeing with these points, but it’s also important to understand this: our spending is not about the objects/services that we pay for, but more about the emotions behind the purchase. You have to ask yourself: why did I buy it, and does it bring me the maximum happiness?
The crypto ETFs are not doing too well for the past year. The fall of some leading players like Tierra/Luna and FTX hurt investors greatly, and the potential criminal fraud investigation is even more alarming. And now, with the rise of ChatGPT, you can clearly see that crypto is no longer ETFs’ favorite new baby; the money is moving to the AI world. Investors are piling into shares of graphics chip maker Nvidia, Microsoft, Google, and other stocks that they think stand to benefit from AI technology. What can we learn from the crypto fallout, and should we jump on the new AI investing wagon? Nathaniel and Tim discuss the four main reasons why investors lost millions over crypto and their thoughts on how to approach the new AI investment trend.
In this episode, Nathaniel discussed 4 hot industries that he won’t invest in, and what his exceptions are:
1. No commodities like oil, gold, and silver, etc., but yes to commodity royalties.
2. No Bitcoin, but yes to blockchain technology or other related industries.
3. No real estate as a landlord, but yes to professional real estate investment groups.
4. No cash-heavy and cyclical industries like shipping, but yes to utilities and railroads in the US.
Overall, you can find a pattern: Nathaniel doesn’t like asset-heavy and high-risk industries, and he doesn’t like investments that require a lot of upfront capital-intensive work either. But overall, that’s not what ultimately stops him. What Nathaniel truly cares about when he invests, is his circle of competence. Kobe Bryant, LeBron James, Warren Buffett, Dr. Dre, what makes them successful? They all stick with what they are good at: their own business, their strength, their core values. When it comes to investing, most of the time “safe and boring” is good! It’s not worth it to chase the next “sexy new thing”.
The U.S. government has never defaulted on its debt, and it’s unlikely it will default this time either. But if it were to happen theoretically, it would have severe consequences for the country's economy and global financial markets, from rising interest rates to lower stock market prices, and from higher inflation to the end of the U.S. Dollar dominance. What can one do to prepare for such a disaster? Academics have differing opinions, but in real-life practice, our one golden rule is: position yourself well with complete and consistent financial planning and actually execute the plan. Don’t deviate from your ongoing investment contributions or distributions, be it your 401k or other retirement accounts. CONSISTENCY IS KEY. Nathaniel gave an example of 2011 when the U.S. came close to default, and what would have happened to your investment if you had sold everything in a panic vs. holding your position and riding the turmoil out.
Charlie Munger and Warren Buffett are Nathaniel's all-time favorite investors. As always, they offered a lot of wisdom (and a couple of zings) at the 2023 Berkshire Hathaway annual meeting. Tim and Nathaniel discussed the duo's take on: 1. Why are they against "diversification" when everyone else thinks it's the golden rule, and the importance of building up your circle of competence; 2. The pair called Elon Musk a "brilliant, brilliant man", but may "overestimate himself" sometimes; and 3. This is one of Nathaniel's favorite quotes: "You should write your obituary and figure out how to live up to it." Overall, their take on life is simple, and yet requires a lot of self-discipline: "You spend less than you earn. Invest shrewdly. Avoid toxic people and toxic activities. Try to keep learning all your life. And do a lot of deferred gratification. If you do all of those things, you are almost certain to succeed."
For this episode, we asked ChatGPT and Google Bard: "Write a podcast outline on how will ChatGPT/Google Bard change the financial planning industry?" Here is the second part of each chatbot's outline.
Discuss potential concerns and limitations of using ChatGPT in financial planning:
o Make mistakes that could lead to financial losses.
o Be biased in its advice, which could lead to people making poor financial decisions.
o Not be able to understand all of the nuances of a person's financial situation, which could lead to bad advice.
Overall all, we believe that AI technology is good at gathering, processing, and analyzing raw data. It will help advisors to scale their practice rapidly. But as always, a brilliant plan is only great when executed correctly. Until the machine learns to feel (oh man, we hope not), we will always need a human touch in the financial planning industry. Because most of the time, people choose not the best plan, but the one that makes them feel complete, relaxed, and happy.
For this episode, we asked ChatGPT and Google Bard: "Write a podcast outline on how will ChatGPT/Google Bard change the financial planning industry?" Here is the first part of each chatbot's outline.
From Chat GPT:
I. Introduction
A. Introduce the topic of how ChatGPT is poised to revolutionize the financial planning industry
B. Briefly explain what ChatGPT is and its capabilities
II. Background on the financial planning industry
A. Discuss the traditional model of financial planning
B. Identify the limitations of the traditional model
C. Explain how technology has already begun to disrupt the financial planning industry
III. The role of ChatGPT in financial planning
A. Explain how ChatGPT can improve upon the traditional model of financial planning
B. Highlight some of the specific ways ChatGPT can help financial planners and their clients
1. Streamlining data collection and analysis
2. Providing personalized investment recommendations
3. Automating routine tasks
4. Improving communication and customer service
Google Bard:
I. Introduction
Introduce the topic of Google Bard and how it can change the financial planning industry.
II. Discuss the potential benefits of using Google Bard for financial planning.
A. Save more money by creating personalized budgets and investment plans.
B. Make better financial decisions by providing access to unbiased information and advice.
C. Reach their financial goals sooner by taking advantage of automated investing and other features.
In the second part of the episode next week, we will discuss the rest of the outlines created by ChatGPT and Google Bard, which focuses more on potential problems and challenges.
In this episode, Ying and Nathaniel discussed the fight between Disney World and the state of Florida. Back in 2022, the state of Florida passed the Parental Rights in Education bill, aka “Don't Say Gay” law. Because of Disney World’s pushback, the Governor of Florida sought to take away Disney’s special tax district until he realized that the abolishment of the district would require taxpayers in Orange and Osceola Counties to pick up the tab for services paid by Disney World like fire protection and road maintenance, and more than $1 billion in debt. Instead, a new bill was passed to take control of the special zone’s board. The Governor also implied that the government wanted more control over Disney’s content within the parks. In response, Disney passed a Declaration which essentially took control away from the future board and gave it back to Disney, the company. There is a unique time period term “King Charles III clause" assigned to the Declaration, which makes the new Declaration valid virtually forever. We believe any company has the right to make a stand on social matters; but at the same time, the power balance between the government and corporations is quite delicate. It will be interesting to see how this event will continue to unfold, mostly at the cost of Florida’s taxpayers and Disney.
Many studies have been done from quality and quantity perspectives on whether money can buy happiness. It can, to a certain level. Caroline recommended reading the book: "Happy Money: The New Science of Smarter Spending" by Elizabeth Dunn and Michael Norton. The authors discussed 5 ways to actually increase happiness with money: 1. buying experiences; 2. buying time; 3. making it a treat; 4. paying now and consuming later; and 5. investing in others. How does all that tie in with financial planning? We don't care where you spend your money (well, as long as it's legal). What we do care about is whether you understand your spending patterns? Is it sustainable? Do you have enough cash to be prepared for unexpected life changes? And lastly, is your spending matching your ultimate life goals?
In today's world, with social media's help (or curse?), we are beyond "keeping up with the Joneses." Billions of people on the internet are our "neighbor Jones" that we are trying to keep up and compete with, from the five bedrooms house in the Valley to the new Porsche, from traveling to Naples on a whim with some friends to the new Birkin special order. Social pressure spending can get out of control fast. Dan gave some chilling data: did you know 40% of millennials have gone into debt to keep up with their friends? Oh my... Gary gave some tips on keeping your FOMO ("fear of missing out") spending in check. One of my personal favorites: practice gratitude!
Nathaniel and Tim discussed the collapse of Silicon Valley Bank: what happened and what went wrong. First, unlike most banks, most of SVB's clients are not retail individuals/small businesses, but VC-funded tech/crypto startups. As you know, they are having a tough year. They are burning through cash and thus taking significant deposits out of SVB. SVB had to sell its long-term bonds/Treasuries at a loss to cover its withdrawals. The snowball started to roll from there. Because most of its clients are VC-funded startups, the average account is a whopping $4.2 million, far over the FDIC's threshold of $250,000 per account per bank (the definition is more complex than this). Therefore, when the snowball got going, depositors had a legitimate worry that they may not get their money back, creating a feedback loop that exacerbated the situation. We believe this is an isolated situation because of SVB's unique client base and its management's apparent risk management oversight. Of course, nothing is risk-free (not even U.S. Treasuries), but the average person's accounts are likely safe.
Caroline and Tim discussed some highlights of SECURE ACT 2.0 and how it impacts us:
1. The age changes of RMDs (Required Minimum Distributions).
2. Allowing direct transfers from 529 plans to Roth IRAs under certain circumstances.
3. Changes with 401(k)s.
4. 401(k) catch-up contributions.
5. New Roth SIMPLE/SEP IRAs for small businesses and self-employment.
6. Employer's match for emergency savings.
All these new rules have nuances/circumstances built around them; please consult an Advisor and see if they make sense for you.
1.Free estate planning documents.
2.Guardianship for minor children (or your pets!)
3.Is Trust right for me?
4.Burial instructions.
5.End-of-life instructions (Living Will).
6.POAs.
7.Asset distribution.
8.Knick-knacks.
9.Communicating with your loved ones about where you store your documents.
10.Routine review.
Some people say that with today's technology, there's no need to have a financial advisor anymore. Robo/AI advisor has its uses: it's relatively cheaper, it can work 24/7 without any vacation, and the algorithms make objective investment decisions without bias. But does this mean we no longer need a human touch in financial decisions? Absolutely not! We are the information generation, and there's certainly no lack of data or information. But then what? How do I interpret the data? How do I apply the solution to myself? How do I put all the different pieces together and compile the complete financial picture of my household? And most importantly, how do I FEEL about my money and my life? Robo/AI advisors can't tell you these answers. The algorithms can calculate data and present you with possibilities, but it's still up to a human who is capable of empathy to interpret the data and advise.
For part II of the episode, Dan and Kennidy discussed how to manage your financial routine as a couple/partner. Do you join finances? Do you consolidate debts? How do you define the roles of finances? Is one of you taking the lead? Do you value your partners' non-monetary contributions? How to effectively discuss financial goals such as college planning, retirement, inheritance, charitable giving, estate planning, etc.? How do you navigate conflict and what happens when your income changes significantly? As much as we don't want to admit it, finance can often make or break a relationship. Consistent communication is always a key component. Talk finance to your partner!
This is part I of the episode where we discuss how can a couple/partners talk about finances. A survey showed that 41% of divorced Gen Xers and 29% of Boomers say they ended their marriage due to disagreements about money. Talking about money is important for any couple, whether you are dating, are domestic partners, or are married. “Even at the dating phase?” you ask. Yes! Money means different things to different people. It may be about security, reward, ability, a means to an end, or to a lot of first-generational wealth: empowerment. So it’s a good idea to ask yourself and then your date, what does money mean to you? That answer may significantly impact your dating pool. Second phase: now you are in a steady relationship, you need to build a routine together: Do you want to join finances?; Should you have prenuptial conversations?; How do you feel about gifting/charity? As we always say, it’s better to have these awkward but critical discussions when everything is good. For part II of the episode, we are going to talk about the third phase: managing your finance routine as a couple.
There's increasing discussion about Central Bank Digital Currency (CBDC) - don't confuse it with Bitcoin or other cryptocurrencies. CBDC is not a new crypto. It's still US dollars released by the Federal Reserve, just in the digital format. The benefits are clear: more efficient and low-cost; faster access to assets and financial systems; it can also continue to strengthen USD as a global currency. However, the drawbacks and risks may also be potentially astronomical if not planned carefully: cybersecurity risks to not only your savings but the stock market, investments, banking, etc.; how can people get access if they live remotely?; privacy concerns for citizens from the government, etc. Overall, with blockchain and other technologies, some type of digital currency is coming, one way or another. It will be very interesting to see how will the Federal Reserve sets it all up!
Because the U.S. has been running on a deficit (less tax revenue than the total spending) for the last few decades (with a few exceptions), we have a debt problem. The U.S. national debt hit $31.51 trillion as of Jan. 26. 2023. Our current debt ceiling is $31.4 trillion. What happens then? Nathaniel and Tim discussed how Congress can increase the debt ceiling (once again), how the dollar being a global reserve currency plays an important role in our national debt issue, and what happens if the country defaults on its debt. Overall, the odds of default are unlikely now. But for the long term, it's definitely something that we should keep a pulse on, for the consenquences will be catastrophic.
Why is it important to talk about finance in the family? Because money is not just about money. It’s particularly hard to discuss finance with your aging parents/loved ones because it makes them feel vulnerable. In addition, you can be 60 years old, but your 88-year-old father still views you as a child. Some important topics you should cover with your parents: estate planning (parents, please don’t leave the terrible burden “should we pull dad’s tube?” to your kids. Have a Living Will!), inheritance, college planning, business succession, etc. Dan offered some tips: do it together as a family, don’t play telephone between the siblings; be sensitive, be patient and be calm; make it a routine because things may change and evolve; and last but not least, communicate, communicate and communicate! It's the crucial ingredient in all relationships.
How's the first week of your 2023 so far? Dan and Tim discussed the 2023 new year's resolutions for personal finance. First, before you start creating your list, take a step back, and think about two questions: what does money mean to you? What does enough mean to you? Some great financial resolutions are: get your taxes done earlier; plan your medical/specialty visit earlier; adjust account allocations if needed for 401k, 529, stock option/RSUs, etc.; make contributions to your retirement accounts: Roth, back-door Roth, conversion, 401k, etc.; understand SECURE Act 2.0 which may greatly impact your retirement savings; think about making gifting/charity donations earlier; income planning and how to allocate it. Overall, the most important thing is to set realistic and achievable goals so that you can create a positive feedback loop within your personal finances. What are your new year's resolutions?
There are some investment vehicles that allow you to save and invest for retirement with tremendous tax benefits: 401(k)s, IRAs, Roth IRAs, etc. Basically, traditional IRAs allow you to take the tax deductions today, but you will have to pay income taxes in the future when you take out distributions; meanwhile, Roth IRAs make you pay your taxes now, and grow tax-free for the rest of your life. Nathaniel and Tim discussed the power of compounding and how you may benefit from long-term planning and investment strategy. Remember, Social Security was never meant to cover all of your retirement expenses, and retirement account contributions are critical to almost everyone. Discuss with your advisor and see if you should put more towards them.
A Roth conversion refers to taking all or part of the balance of an existing traditional IRA (or 401(k), 403(b), 457(b), etc.) and moving it into a Roth IRA. The point is to pay the tax now so that the assets can grow tax-free for the rest of your life. One of the myths we frequently hear from people refusing to do a Roth conversion is that: I will be in a lower tax bracket when I'm retired and I will pay my taxes then. Dan and Tim discussed it and explained why this may or may not apply to you. In addition, if you are lucky enough to have other assets for your retirement, you may also want to consider your children's earning potential to know if a Roth conversion makes sense when they inherit your assets. Overall, as with most financial tools, there is no absolute good or bad, only if it suits your situation or not. Talk to your advisor and see if a Roth conversion is beneficial to you!
In today’s market, where interest rates are high, but sellers still think they can get premium prices, people are often more hesitant to invest. However, as legendary investor Warren Buffett once said, “be fearful when others are greedy, and greedy when others are fearful.” There are always great deals if you understand the fundamental mechanics of the business and have a margin of safety. As with any investment, the price you pay matters the most. Plus, Jorjio also pointed out so insightfully, why sometimes the higher interest rates may be an advantage for the investor. Tim asked about the potential risks and things you need to consider before investing in real estate.
We invited Jorjio from MLG Capital back to the podcast and discussed more on real estate investing. How does real estate fit in people’s overall portfolio, compared with equities, fixed income, etc.? How can we build our real estate portfolios from scratch? Jorjio talked about the advantages and disadvantages of passive and active real estate investing. Tim asked what should one consider when investing in real estate in today’s inflationary environment. For next week, Jorjio is going to talk more about the current housing market: growing interest rates and yet still sky-high prices.
FTX went from a crypto exchange leader with a $32 billion valuation to bankruptcy in a matter of days, with potential criminal investigations and class-action lawsuits pending. What happened? FTX is a crypto exchange that was started by Sam Bankman-Fried (SBF). Prior to FTX, he started a hedge fund Alameda Research, which the main purpose was to "act as a liquidity provider on FTX" according to Sam himself. In early November this year, a CoinDesk report showed that Alameda's investment foundation was in FTT, the token that its sister company had invented, not a fiat currency or other cryptocurrency per industry best practices. In addition, due to the sharp price decrease of most cryptocurrencies, FTX lent about $10 billion of customers' assets to Alameda. All this bad news created a "bank run": FTX got over $5 billion worth of withdrawal requests within one day. After Binance, the world's biggest crypto exchange refused to buy FTX out, it had no choice but to start the bankruptcy process. Is this the end of crypto and blockchain? Of course not! But as always, understanding your investments is crucial. If you want to make an asymmetric investment where the amount is insignificant to your overall assets and you don't mind losing it all, go ahead and have some fun. Otherwise, please don't risk a big chunk of your assets on something trendy, and yet most of us don't truly understand.
2022 has been a crazy volatile year for the stock market. In the US, the S&P 500 index is down more than 20% year-to-date. Considering the fact that the index had a positive 26.61% annual return for 2021, this certainly has been a roller coaster. In this episode, Nathaniel and Kennidy discussed the emotions of an investor. We had clients pressuring us to buy trendy tech companies at the end of 2021 when they were at historical highs; we also have clients begging us to sell everything when we entered the bear market. What do we do? Now don’t get us wrong, all our clients are more talented and smarter than us in a certain way, but keeping emotions in check when investing is kind of Nathaniel’s specialty! Kennidy introduced some relaxing techniques in moments of high anxiety and stress. Let’s all take a deep breath, and practice some self-care in this crazy world!
Today we are going to discuss the high-trending event: Elon Musk's Twitter purchase. Musk offered to purchase Twitter back in April 2022 and waived due diligence. Then in July, he attempted to back out of the deal due to a spam bots claim, and Twitter sued. The acquisition was closed on October 2022. Nathaniel spoke of Musk's Twitter debt and cash flow (spoil alert: virtually nonexistent), and why he thinks that Musk may have overpaid for the deal. Now that Twitter is a private company without needing to report everything to the public, where is Musk taking the company? He promised a "platform of freedom", and yet days later assured the ad sponsors "business as usual"; he claimed that he bought Twitter to "help humanity", and yet threatened to fire 75% of employees and believes working-crazy-hours-culture. This is just the beginning. We can't wait to see where the future lands for Twitter.
As you know, here in LBW we have four partners: Dan, Tim, Nathaniel, and Ying. None of us are mind readers. How do we ensure we are on the same page? How do we communicate? First, talk about what you want, constantly. Not just business needs, but sometimes personal/household needs. Have an operating agreement (even if your partners are your family & friends) before things go bad, not after. Second, value each other's role on the team regardless of whether that puts you in the spotlight. For example, Nathaniel is our CFO. He handles the tedious finance and operations behind the door. No client really cares about that. He's not the face of the company. But the team literally can't survive without him. Third, have compassion and empathy towards each other. Dan said it well: just like a marriage, your business partners deserve your respect, care, and love.
Most of the people we work with are first-generation wealth. This means many of them, even though they're rich now, are still developing their relationship with money. How can they help their kids have a healthier relationship with finance, without the "taboo" feeling associated with wealth? Dan and Kennidy spoke about their respective childhoods, and how they negatively impacted their feelings about money. Dan talked about how he will teach his daughter Leyora differently to better understand the value of the dollar and have better financial habits. Please remember, just because you felt it a certain way growing up, doesn't mean this has to be your kids' experience. Break that generational curse, and help them grow into a financially-literate person.
Treasuries have been a trendy product for investors recently due to inflation and higher interest rates. Nathaniel explained what U.S. Treasuries are: bills, notes, and bonds. They're considered relatively risk-free investments (as long as the U.S. government doesn't default on its debt). So if you want a fixed income portion within your investment portfolio, and don't want to expose all your assets to the volatile stock market, they could be a useful tool. Even though people say Treasuries are risk-free, there are still some concepts you need to explore before investing: duration (interest rates), opportunity cost, credit risk, liquidity risk, inflation/deflation risk, maturity risk, etc. As always, what may make sense for others, doesn't necessarily make sense for you. Speak with your advisor to see if Treasuries are a good choice for you.
In this episode, Nathaniel discussed with Kennidy why he's a firm advocate for "buy and hold" long-term investing instead of market timing, and short-term trading. Do you know that if you had invested in the S&P 500 starting in 1930 and never touched that money again, your total return by the end of 2020 would have been a stunning 17,715%? And yet, if you went in and out of the market, and missed only the 10 best-performed days of each decade, your total return would have shrunk to merely 28%! Nathaniel gave more data to support the power of long-term investing. Understanding your investment time horizon is extremely essential before investing. If you need the cash in the short term (within 5 years), maybe the stock market is not the ideal choice. If you are investing for the long run, then: 1. understand your investment, understand its business and leadership; 2. buy it at a reasonable price with a margin of safety; 3. be consistent in your strategy; 4. review your investment periodically; 5. stay the course through market volatility.
We invited Danan Kirby from Ariel Funds to join us and discuss investing in sports. Danan started with some interesting data: for the past 25 years, what do you think is the average return for an investment in the average sports team? The answer is a whopping 19.9 times! And that's just the average team. Even though investing in sports teams usually is for the ultra-rich, the general public can invest in the related ecosystem, sports media, for example. With younger generations consuming sports via vastly different mediums, it comes with different investment opportunities. Nathaniel is interested in Danan's view on the sports bundle streaming business. Ultimately, the big players are more likely to win with consolidation, adaption, and technology upgrades. The team also discussed the fact that there's a big valuation discount at many publicly-traded companies related to sports and media, and what that means for the investors. Overall, if you are a sports and investing enthusiast, this is a must-watch episode.
Two weeks after Nathaniel talked about his homebuying journey where he said they hadn't found "the one" yet, Ying and Nathaniel bought a beautiful condo with a gorgeous view. So, we invited them back to talk about their journey of finding their forever home. They talked about how they locked in an amazing 2.25% mortgage rate, their emotional journey, what they considered a true "purchasing budget", the "stress test" exercise, and what their future plans are regarding splitting time between Madison and Shanghai. Ying shared her thoughts: express your feelings to your partner always; but let the numbers guide you to the final decision. Nathaniel can't stress enough the importance of financial planning and positioning: to prep for their dream home, they have been positioning themselves ever since they are adults, even before knowing each other. They didn't start to get ready when they wanted to buy a house; they were ready before they got to that point. They waited for the fat pitch, and swung, hard.
This is a reaction video to some financial advice we found on TikTok recently. "Don't put a down payment on your house, always put down as little as possible", "Buy crypto here, sell it there, and you will be rich". Say what????? Let's take a look.
For LBW Book Club, the team read Annie Duke’s “Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts” recently. A couple of concepts really stood out, and impacted our daily planning decisions greatly. First, think about your best decision for the past year, and then think about your worst decision… Ready? I bet you didn’t think about the best and worst “decision”, but the best and worst “outcome/result”. The resulting bias is everywhere. Just because you have a positive outcome (you came home safely), doesn’t mean you made a good decision (you decided to drive while drunk), and certainly doesn’t mean you should repeat that decision over and over. Secondly, the concept of backcasting and premortem: this is a planning method that starts with defining a desirable (or failed) future and then working backward to identify policies and programs that will connect that specified future to the present. Oh man, isn’t this why we do financial planning precisely?! Third, the power of group thinking and decision pod. Don’t just talk to people that you know will confirm your belief, but have a decision pod with different knowledge, cultural background, and skill sets, to review your decision from different angles. Again, don’t discuss the result, but talk about the decision: how did we get here? Overall, we recommend this book to anyone who strives to make better decisions in life!
Estate planning is a crucial part of overall financial planning. And yet, people often dismiss it because, well, no one wants to face their mortality. In addition, death and money are two very difficult and awkward topics among most families. But, if you are a long-term thinker, and especially if you have first-generation wealth, we can’t stress enough the importance of estate planning. To start, think about the following questions: what are your assets & liabilities? Who’s going to receive what? Who do you want to protect? Share your thoughts with loved ones. Some of the basic estate planning documents are: last will and testament, living will, POA for finance and health, burial instructions, trust, etc. Dan added one more thing: what about your digital assets? Consider that as well, especially for younger generations. Estate planning is not just for the “old and rich”. You should start thinking about it; the sooner, the better. It will not only help you preserve your legacy but also prevent your loved ones from suffering difficult decisions when they are mourning the loss of you.
Clients ask us about socially responsible investing, or ESG funds (a mutual fund, index fund, or ETF that is constructed using environmental, social, and governance criteria to inform its asset mix) all the time. We love the concept very much. As a matter of fact, before this concept became trendy on TikTok, our portfolio manager Nathaniel always believed that two of the most crucial factors that need to be checked before any investment are the company management's integrity and talent; and whether its employees are happy with their jobs. However, we also firmly believe that as an investment strategy, this concept is not practical. What is "socially responsible"? The answer varies greatly from person to person due to their personal beliefs and political views. Should we exclude a great performing company that has happy employees, and donates millions of dollars every year to underserved communities, but produces a product (e.g. cigarettes, alcohol, etc.) that goes against your personal values? If socially responsible investing is not practical, then what should we do? Dan and Tim's suggestion: go local. Eat local, buy local, and help to build your local community! It's much more precise and more executable.
Currently, there is $1.75 trillion in total student loan debt, including federal and private loans. 55% of students from public four-year institutions, and 57% of students from private nonprofit four-year institutions took on educational debt. At the current pace, “outstanding student loan debt could top $3 trillion by 2035,” according to one expert. It's not just young graduates - many people carry their educational debt well into middle-age, and even retirement: 2.4 million borrowers aged 62 or older owe $98 billion in student loans. That’s why we want to talk about student loans: they have become an increasingly important issue in most people’s overall financial picture. Tim and Dan discussed the history of student loans, the types of loans, the Public Service Loan Forgiveness, and what it means from a financial planning perspective. As always, talk to us or your financial advisor if you are interested in learning how this may impact you.
We get this question a lot from our high-income young clients - especially the ones who work in the creative industry: should I start an LLC, S Corp, or C Corp for my side business/1099 contract? In this episode, Nathaniel and Tim discussed the following questions: When does it make sense to set up a business entity? What types of structures are there? What are the first steps in determining the type of entity you should set up? What is the difference between entity structure and taxation of the business? Overall, understanding what are you trying to achieve is crucial. Is this a lifestyle business or an enterprise entity that you want to grow and maybe raise funds from outside investors someday? Are you thinking long-term, perhaps even generational? Talk to us, or your own advisors if you wish to learn more about this topic.
The recent 2021 Social Security Trustees report finds that in 2034, retirees will start receiving a reduced benefit (78%) if Congress doesn’t fix funding issues for the social program. That sound scary and urgent. What then? In this episode, Caroline and Tim discussed the following questions: What do we think Social Security will look like in the future? At what age or milestone in life should one take Social Security? What does that conversation look like? What are some reasons to take it earlier vs. later? How does that impact your investment? Can one take it while still working? How is the benefit calculated? Taking Social Security is not just what makes sense mathematically, but also in terms of lifestyle. Like Tim said, the value of happiness matters just as much as the value of dollars!
In this episode, the trio discussed Series I Savings Bonds (“I Bonds”). We have had so many conversations with clients about it recently due to the high inflation. I Bonds are a type of U.S. savings bond designed to protect the value of your cash from inflation. With inflation hitting four-decade highs of 8.6% in May, investors are more interested in something that is higher than the inflation rate, but still relatively riskless, and this fits the bill. The initial interest rate on new I Bonds is now 9.62% annualized, and that rate readjusts every six months. And you can only purchase up to $10,000 in I Bonds each calendar year. Tim discussed the pros and cons of this product. If you are interested in I Bonds, please talk to your financial advisor to see how it could fit into your overall financial picture.
Horizon Kinetics is one of the mutual funds that follow the value investing strategy. In this episode, we invited one of its Co-Portfolio Managers James Davolos. James first explained how he entered value investing: everyone can read a list and see what the cheapest stock price is. But why it’s cheap, and how does that apply to your portfolio? That’s the million-dollar question. James then talked about inflation, and how to invest in inflationary periods. Dan asked James about the downside of passive investing (aka indexing), and James said it so well: the problem with indexing is that for the past decade, millions, if not billions of dollars got thrown into the same pot. Using the S&P 500 as an example: Apple, Microsoft, Amazon, Meta, and Alphabet constitute 23% of the index, and the tech sector overall was 29% of the index by the end of 2021. And yet, energy, one of the most important things in our daily life – especially during inflationary periods – only constitute less than 5% of the index. James also discussed crypto, and Kinetics’s largest investment: Texas Pacific Land (TPL), and why it’s a great investment during inflation. Overall, if you are interested in investing, and want to learn more about value investing, you will enjoy this episode.
We invited Joe Austin and Lloyd Hussey from The William Warren Group to talk about investing in self-storage units. Compared with general real estate, self-storage has light capital expenditures and is relatively easy to operate. More importantly, the month-to-month short leases enable landlords to adjust prices quickly and thus perform better during inflationary periods. In addition, demand for storage units is usually caused by life events, not economic reasons, making it a recession-resilient investment. Lloyd and Joe then talked about the potential pros and cons of this investment, and how the pandemic shaped the industry. Overall, self-storage is low volatility, produces steady cash flow, has a long history of capital appreciation, and yet is still kind of "under the radar". If you are interested in real estate investments, but worry about the current housing market, and don't want to be bothered with the "hello landlord, the bathroom pipe just busted" call, self-storage may be a candidate for you!
Meet our newest member: Caroline Kahl. She's a modern Wisconsin girl through and through. She loves fishing, riding a boat on the lake, gardening, and her darling boy: a yellow lab named "Dash". Caroline wanted to be a teacher growing up and had worked as a part-time tutor for first and seventh graders. After exploring more career possibilities in college, she changed her major to Personal Finance. She was born to be a planner. Why? A) she's a natural educator, and if you truly do your job right, a big part of the financial planner's job is actually educating their clients; B) she's an organizer. Take a look at her office space, and yes, we know that she will excel in this position. In this interview, Caroline discussed her school life, her advice for college students, her mentors in life, and her LBW experience thus far. Do you know what she picked for her "last meal"? The answer will crack you up! We are so excited to have you join our team - welcome aboard!
This is Part 2 of the episode where we discuss real estate private equity investing with Moses Kagan. Southern California, in particular Los Angeles, has a great advantage for real estate investors: Proposition 13. The law limited property tax rate increases by 1 percent of assessed value in year one, and the assessed value can't increase more than 2 percent afterward regardless of the market value. Now, that means the property tax (which is usually the highest cost for real estate investors) is increasing dramatically slower than rent growth. Thus you have almost guaranteed margin expansion. Nathaniel is curious about Moses' opinion of the zoning issue in LA. Moses feels strongly that to fix the supply shortage in big cities in the U.S., the authorities have to limit or lose the zoning restrictions. Not only do they create social living inequality, but they also affect national economic growth. But you know what? Supply-demand unbalance is exactly what makes investors money... Talk about incentives! Two pieces of advice Moses has for first-time investors: find a reliable and experienced operator and use leverage very, very carefully.
This is Part I of the real estate private equity investment chat with Moses Kagan. Real estate investing has always been on the top of our clients’ inquiry list. Normally, for real estate investors, they try to buy, fix, and then sell the property as fast as they can. But Moses is doing this differently: he has a true value investing mindset. He firmly believes that when investing in real estate, one way to lose money is to be forced to sell in a downturn. All markets swing up and down in the short term, but if you have a long-term investing horizon, through generations, the power of compounding is extraordinary. To achieve this goal, Moses has two rules: he only looks for long-term investor partners that are willing to invest longer than a typical 3-10 years private equity cycle; in addition, he uses debt leverage very carefully so the bank can’t force him to sell. In Part II’s episode, we will dig deeper into the LA real estate market with Moses.
This is an interview with our newest team member Kennidy Briggs. Growing up, Kennidy found that she loved puzzle-solving, identifying patterns, and being creative. Her favorite outlets were drawing, designing clothes, and playing games. Kennidy studied at Florida State University where she received her Bachelor’s in Sociology along with a minor in Anthropology and a certificate in Leadership Studies. In the interview, Kennidy shared how her seems-to-be-irrelevant major is exactly what a financial planner requires. She talked about her motivations, her advice for colleges, what failures did she cherish, her greatest mentors in life, etc. When asked "what have you sacrificed along the journey of speaking true", her answer was so real and impactful. Kennidy, we are so excited to have you join the LBW family!
What does a car mean to you? To some, it is just a tool they use to get from A to B; but to others, it’s a passion, it’s a hobby, it’s a lifestyle. Today, we invited one of our team members, car enthusiast Gary Grosskopf to join us and talk about cars. First, what to look for in a car? Gary talked about different cars’ sizes, drive types, seating, quality, and brands. And then, the forever “gas vs electric” argument. Gas definitely gives cars more of a “Vroom-Vroom” experience. However, if you are “team environment” (and that’s great), please do the research and understand where the electricity is coming from in your local area. Because if it’s mostly from coal, maybe an electric car is not nearly as clean as you think. Gary also talked about where to find your dream car and financing options. If you love cars as much as Gary, as a collector, he also explained how to view luxury cars as an investment, and the expected work that you need to pour into them.
This is our first quarterly commentary for 2022. The team discussed:
1) the potential SECURE Act 2.0, and how will it impact retirement.
2) Inflation & interest rates, and where will they go?
3) Student Loans getting deferred again, and the potential loan forgiveness for some.
4) Taxation on goods over $600.
5) The Ukrainian/Russian conflict.
How was the first quarter of your year?
The U.S. House passed the SECURE Act 2.0, which includes provisions to boost retirement savings. In this episode, Nathaniel and Tim discussed the bill, and expressed their mixed feelings about some of the provisions: 1) Increase catch-up contributions; 2) Increase RMD age from 72 to 75 by 2033; 3) allow employers to place their match into the Roth portion of your 401(k) (Nathaniel is beyond excited about this one!); 4) allow employers to make matching contributions if you choose to pay your student loans over retirement contributions; 5) expand saver’s credit; 6) auto-enrollment into employer-sponsored plans; 7) annuities can be offered in employer-sponsored plans (oh no… this is asinine…). Overall, other than the annuity one, we are onboard with most of the legislation. It will be interesting to see how the government executes if it becomes law.
In this episode, we had a conversation about private real estate investing with real estate guru Jorjio Hopkins. Jorjio first explained the pros and cons of three different types of investment vehicles: crowdsourcing, syndication, and funds. A real estate fund can close a deal much faster than crowdsourcing and is more diverse than syndication. In terms of choosing between a publicly-traded REIT vs a private REIT fund, liquidity is a key difference. Typically, a high-income earner who's looking for a relatively low-risk way to diversify their investment portfolio is a good candidate for private real estate investments. The most important thing in Jorjio’s opinion, without commiserating with LBW (drumroll please!), is asset allocation. (Please listen to/watch our last episode “S3EP12 How To Invest "F**k You Money? - Personal Financial Asset Mapping” for an in-depth discussion.) Contact Jorjio at jhopkins@mlgcapital.com if you are interested in learning more about private real estate investments.
People ask us very frequently: "I have $ amount in cash, where should I invest it?" Hold your horses - before you start, let's go through the personal financial asset mapping process. First, what are your true investable assets? Investable assets = net income - lifestyle cost - emergency fund - primary home. Second, where do you invest the money first? Some people are more interested in private equity because it's trendy and sexy. Will, before you do that, you might want to max out your 401ks, IRAs, and other tax-deferred accounts. Third, think about your life priorities: if you want to pay for your kids' college, fund your 529 plans; if you want to buy a beach house, save for that. Lastly, if you still have some cash left, and it won't affect your lifestyle/retirement, even if you lose it all: that's your "F**k You Money". Invest in whatever you want (preferably still within your circle of competence) and have some fun. Overall, the goal of the personal financial asset mapping process is to make you anti-fragile. Investing in speculative/trendy ideas is not necessarily harmful if you go through the mapping process and limit your risks.
People ask us a lot about borrowing from their 401(k): “Why would I want to borrow from banks and pay them interest when I can just borrow from myself?!” Well, it’s more complicated than that. It is true that if your 401(k) plan allows it and if you are fully vested, you may borrow from your own account. But like everything else in the world, nothing is free. First, you need to pay it back with interest, and the payments are not deductible as interest payments or contributions. Second, for most plans, your employer will cease all contribution matches until you pay the loan back. Not only are you losing out on free money from your employer, but you are also missing the investment earnings from the market. Third, if you leave your job before you are able to pay the loan back, you will be forced to either pay back the entire amount in one go, or consider the loan as a distribution. That means, if you are younger than 59 ½ years old, you will be hit with a penalty on top of ordinary income taxes. Tim gave a great example of how you may lose $450,000 in 25 years from a small $50,000 loan even if you pay it back within 5 years. Oh man, that hurts! Overall, please remember, a 401(k) is not designed to be borrowed against - it is meant to be a long-term investment vehicle for your retirement. There are better borrowing alternatives out there.
In this episode, we invited our friend, realtor Lindsay Koch to talk about the housing market, especially in the Madison, WI area. Madison has been voted one of the top places to have a family, best cities to live, etc. many times. People choose Madison for the healthy job market, surprisingly diverse restaurants, vibrant yet still cozy city feel, and the ever-beautiful lake views. For years, the supply and demand have been quite off in the Madison housing market due to a couple of reasons: people are moving from bigger cities to Madison since remote working seems to be a permanent thing for some of us, and this has brought some “big players” to town. In addition, baby boomers are buying in cash to downsize, and their demand has clashed with most first/second-time millennial buyers. As a result, the housing prices have increased massively, and don’t seem to want to slow down. Waiving all kinds of contingencies and having 30+ offers are still very much a daily occurrence. The team asked about Lindsay’s experience with buying vs building. If you want to have a custom-built house right now, expect 18-24 months of construction time, and know that a construction loan is very different from a traditional mortgage. Your final building price may be uncertain until your closing date. Tim and Lindsay closed the episode with this: in this crazy market, if you are a buyer without an unlimited cash budget, the only weapon you have is – patience. Understanding that you might need to wait a while, and you may not get 100% of what you want, are crucial in this emotionally-draining process.
In this episode, we invited our dear friend Jon Crawford back to talk about oil and gas again. As you may know, the Ukraine-Russia crisis has had an enormous impact on oil prices recently. We were curious: how would this crisis affect supply and demand, both qualitatively and psychologically? Tim asked, why are oil prices so volatile, and where are the prices going in the foreseeable future? Unlike most eye-catching new titles that make you feel like we are facing this extreme oil/gas catastrophe, Jon was actually fairly optimistic about the oil prices knowing the capacity of OPEC, U.S. oil reserves, and the potential Iran deal. As Jon mentioned, an extreme oil crisis usually doesn't last more than 6 months. So around Memorial Day, we might be in a very different spot, and possibly seeing lower oil prices. Nathaniel asked Jon's opinion on green energy, especially his take on Germany shutting down their nuclear power plants: is the world truly ready for green energy production and utilization? Overall, the oil industry is a very complex ecosystem. It's highly sensitive to geopolitics. However, in the long term, the biggest price deciders are still the market forces of global supply and demand.3
In this episode, we invited one of our friends Michelle Vande Hey to talk about how to cope with losing a loved one, and what should others do/say to offer support. First, where do you even begin? Michelle strongly suggested people not be afraid of reaching out. If you are the one who is experiencing the loss, set a clear boundary and state what you want from others. If you are the one offering help, the key is to be consistent, even after the funeral. A lot of people wonder: “I don’t even know what to say to them?” Just simply say "hi", say "I love you", or even better, offer a homemade meal, invite them over for an activity. Don’t exclude them from your life. In terms of the financial side, do your estate planning as early as possible. It’s going to be a tough conversation, but a necessary one. Dan also added that in our line of work, we see a lot of guilt from survivors. They feel guilty for being alive, spending their inheritance, or moving on. Michelle said it so well: your loved ones will want you to move on, to be happy, and to find more joy in life. Experiencing loss is not an easy journey, but we can do it if we have each other’s back!
This is Part 2 of our Self-Imposed Financial Tragedies series. As we stated last time, almost everyone makes at least one of these mistakes in life, regardless of whether you are the wealthiest person, a scientist with a 180 IQ, or a financial expert. It's important to be aware of these behavioral tendencies so that we can avoid long-term disasters. Some self-imposed financial tragedies are: saving too much and never enjoying your life; FOMO/herd mentality; following other people's actions when the scenario doesn't apply to you; never figuring out "what is enough" for you; and spending because you couldn't have anything when you were young. As Dan and Tim said, to defeat these self-imposed tragedies, it's important to raise awareness of the issues, don't rush yourself, and take a pause when making a decision!
In this episode, we talk about self-imposed financial tragedies. Unlike the inherited tragedies that are caused by things you can't control: race, religion, socio-economic issues, etc., self-imposed financial tragedies happen because we make wrong decisions. Now, we are NOT saying that you did it because you are stupid - as matter of fact, we made a lot of these mistakes on this list when we were younger. This is precisely why we made this episode: to talk about the facts and issues so that you don't repeat the same mistake. Some of the most seen self-imposed financial tragedies are: buying a vacation home because that's what you do when you "made it"; jumping into rental real estate without understanding that this is a full-time job; buying things for egotistic fulfillment; spreading yourself too thin on your asset diversification; and trying to catch every "hot investment". Like Dan and Tim said, sometimes, you buy/invest in some things, not because of their true value, but trying to keep up with your friend, to find yourself, or to recreate some feeling that you really can't recreate. Please don't create a long-term financial tragedy just because it gives you a brief boost of endorphins. We will talk more about this in the next week's Part II episode.
In this episode, we invited one of our friends David Clark-Sally to talk about his and his husband’s experience of having their daughter Ellie through surrogacy. David talked about why they eventually did it by themselves after an unsuccessful agency experience. It’s like online/app dating, you go through hundreds of digital profiles and try to find “the one”: what eye color do you want, what music does she like, education, height, so many aspects to consider. David talked about what all parties’ involvement looks like during the pregnancy, and how COVID-19 made it even harder. Nathaniel and Dan were curious about any unexpected complications. According to David, most of them came from the healthcare and insurance systems. We appreciate David sharing such a personal journey with us, and courage you to learn about it so that we can build a system to better support people going through this emotional and costly process.
Starting from the end of 2021, the U.S. stock market has been quite volatile. We have seen some mini corrections here and there. Many people have asked us: is the market going to crash in 2022? If so, what should I do? When the Federal Reserve indicated that it was strongly considering raising the interest rates to ease inflation, the market reacted, especially some of the hot, trendy, but highly-overvalued stocks. In addition, another big reason for the recent volatility is that the index funds are more concentrated than ever, and thus play an important role in the market ups and downs. Back to the original question: what should one do facing a potential market downturn? In Nathaniel's personal opinion: stay the course, don't change your investment strategy. Continue making periodic contributions to your investment accounts (especially tax-deferred retirement accounts) to capture the lower prices.
We get asked a lot about Self-Directed IRAs (“SDIRA”). An SDIRA is a type of individual retirement account (IRA) that can hold a variety of alternative investments that regular IRAs can't. For example, it can hold precious metals, crypto, commodities, and most people use it to hold real estate. In terms of the annual contribution limits, it works just like any other Traditional IRA or Roth IRA, the “self-directed” part the ability to invest in alternative investments. Please remember, not all custodians allow for SDIRAs, as a matter of fact, most major custodians do not. Please pay attention to the fine print of rules and hidden fees. Some important details to know about SDIRAs: 1) it’s strictly for investments; if you use an SDIRA to buy real estate, it can’t be your primary residence or any type of personal use; 2) are you comfortable with the concentration? People usually are not OK with spending $500k on a single stock, and yet, when it comes to real estate or trendy new investments like NFTs, or crypto, they suddenly don’t think of concentration and risk; 3) if the SDIRA owns real estate, it's going to have to act like an operating account - if the real estate in the SDIRA needs a new roof, do you have enough cash in this account to cover it? It might be too late for you to make a contribution to cover it because of the $6000 annual limit ($7000 if you are 50 or older); 4) There are tax consequences, depending on how you structure it; please learn about UBTI and if it affects you before you jump in and purchase assets. Overall, like Nathaniel and Tim said: read the fine print! Just because SDIRAs are super popular with billionaires right now, doesn’t necessarily mean it’s for everyone. Please do your own research!
This is another episode in our LBW Family series. Ying is our Creative Director and has been recently promoted to partner. In this episode, she talked about her wonderful childhood memories growing up in Shanghai, China, her creative talent, her struggle with depression as a teen, and how her mentor helped her, her work experience with a domestic violence victim protection program, her experience living in the U.S. as a foreigner, her opinion of Nathaniel, her greatest joy in life, etc. It's fascinating to listen to her talk about life because she certainly has a different perspective, coming from a very different culture. As Ying said, not going according to the plan is not necessarily a bad thing - if you embrace it, work for it, and if you are lucky enough to have a great partner, life will take you somewhere even better than your wildest dreams!
This is our quarterly commentary for Q4 2021. Inflation is a hot topic right now. What's going to happen? What will the government do? What does that mean for me? The U.S.' year-end 2021 inflation is just almost 7%. At 6.9%, inflation will be at its highest in almost forty years. The Federal Reserve has eyed a faster timetable for raising interest rates this year, potentially in March, in a recent meeting. What do rising interest rates mean for us? Generally speaking, when interest rates rise, asset prices go down. That includes stocks, real estate, bonds, etc. Tim talked about specifically how that impacts people who are in the market for a home. Looking back at 2021, there are also things that didn't happen: back-door Roth contributions and stepped-up cost basis didn't get chopped off (phew!); student loans didn't get forgiven (oh well), but they did get deferred again. As Tim and Nathaniel said, modern human society is a colossal network that consists of differing complex miro-systems. Not just governments, but billions of individuals' decisions affect the overall network. We can make it, but only as a whole. 2022, let's treat each other kinder and better!
This is our year-end episode where the trio talked about their favorite podcasts of the year. We invited some pretty awesome guests to talk about business, finance, investing, art, space, healthcare, personal growth, and so much more. What's your favorite? Also, what topics are you interested in? Let us know! Have an incredible 2022!
It's the Christmas season again! If you want to gift something, either cash, stock, cars, or property to someone your love, or for charity, please watch this episode. People assume they can gift others whatever they want, because "well it's my money!" But you know the IRS, they want to tax you for everything. You can't, as a matter of fact, just give out free money/gifts however you want. For 2021, you can gift any individual $15,000 per year without paying gift tax. For example, if my parents want to help me buy a condo, my mom and dad can each gift me $15,000, and then each gift my husband $15,000. That's $60,000 in total. Anything above that, they can: 1. count it out of their lifetime exclusion limit (which is $11.7 million per person right now), 2. they can pay the gift tax, or 3. they can consider it a loan, and charge me interest. Dan and Tim talked about how to gift assets in kind, what the arm's length rule is, and what the 5-year lookback rule is. For Part II of this episode, we will discuss gifting businesses and investments, and the rules of charitable giving.
This is Part II of LBW's Journey. Oh dear, do we have some crazy and silly stories for you! What happened to the office parking lot? Why did Nathaniel meet a client with a pink towel wrapped around his waist? Why did Ying come to the office with no pants? This has been a fun and fruitful 6 years, and we can not express our appreciation enough. With all of your help and support, we will continue to grow and thrive!
LBW just had its 6-year birthday. What's our journey been so far? Let's go back to 1982 when Dan was born... Just kidding! We started LBW together back in 2015, well, let's be honest because we hated our industry: we didn't want to sell unnecessary insurance products to our clients to fill our pockets, we didn't want to tell our clients to "take 4% distributions" and call it "financial planning", and we didn't want to work in an unfair toxic environment. We knew we could do better. About 90% of startups fail, but we made it. Why? As Nathaniel and Dan said, preparation is key, and willingness to communicate, change and adapt is also critical. From the very beginning, we have decided, we are a family. What's good for the family is what's good for the business, and what's good for the business is what's good for the family. The team also shared what the transition points were for LBW to upgrade itself to a new level: we are confident in saying that we are not afraid to challenge the norm, we are leaders in the financial planning industry, and we can't tell you how many times we've heard our prospects and clients say: "oh wow, I thought this is what my advisor would do..."
Almost never, will you hear someone say: I wish I could pay more taxes. Today, we are going to break down this bias and try to explain why sometimes, it's a better choice to pay a little bit more tax in the short term. Tax bias is everywhere. For example, we often see some advisors holding onto a stock just because they don’t want to trigger a tax event, or selling a stock prematurely because “you are in a low tax bracket this year” or "it's not doing so hot this year." However, as Nathaniel said, we firmly believe that if you buy an investment, you should understand the fundamentals of the business, and you sell an investment because it has reached its fair value. Considering tax consequences is not a bad thing, but it’s not why you invest! Dan talked about the pros and cons of popular "tax-efficient" choices like stock options, 1031 exchange in real estate, retirement accounts, etc. Nathaniel explained why it makes no sense in most cases to do so-called "tax-loss harvesting." As always, read the fine print, understand that taxes are only a small portion of your overall financial picture, and don't sacrifice your long-term life goals for a short-term "tax win!"
Meet our new team member: Financial Planning Analyst Gary Grosskopf. Growing up in Waunakee, Wisconsin, just north of Madison, Gary spent most of his time outside of school helping his dad take care of his classic cars and boats. Learning about how to fix these machines and solve problems formed his early understandings of the world. In the interview, Gary talked about why he switched his major from engineer to personal finance and what he dislikes about our industry. He also shared a lot about his personal favorites: food, games, life mentor, etc. We are so excited to have Gary as part of the LBW family. Welcome aboard!
In this episode, Nathaniel and Tim shared their home purchasing journeys and discussed the emotional aspect of it. Nathaniel and Ying have decided to stick with the urban condo concept for its convenient lifestyle. Tim and Becca have chosen the traditional house route for the extra square footage and family BBQ time in the backyard. They all went through the emotional roller coaster, and have so far come up empty-handed in today’s insane housing market. Nathaniel has a couple of coping tips to share with you: one, look at your current living situation and ask yourself: what kind of square footage do I really need and/or want; two, make a “life events priorities” list, and see where the “new big house” sits; three, understand that if the listing price is already on the top end of or outside your budget, in today’s market, the selling price will likely be even higher. That will leave you little to no room for life's accidents like pay cuts, losing your job, unexpected kids, other investment opportunities, etc. Don’t make illogical decisions because of FOMO. Tim also added that it’s important to start this journey with the right expectations. The market is tough for buyers, don’t expect an easy search unless you have unlimited cash to burn. We always stress to our young clients the importance of financial planning before you are ready to buy: you plan well today to position yourself so that you can buy better tomorrow.
This is Part II of “Personal Household Merger – Communicate and Conquer!” There’s not a “one right way” to do this: it doesn’t matter who pays what; but there’s certainly a “wrong way” to do this: not communicating your financial decisions or hiding your spending. As Tim said, regardless of you wanting to combine your finances or not, sometimes it might be a good idea to have one person take the lead and pay closer attention to your household finances. The keyword is “lead”, not “control”, not “takeover”, but “lead”. Because what you don’t want is to go to the other extreme: one partner completely takes over the finances, and that person, unfortunately, passes away first, leaving the other partner unaware of their finances. On top of losing a loved one, they have to face the unbelievable stress of learning and sorting out their household finances. For our team, Dan and Carey choose to keep their finances independent, and Nathaniel and Ying choose to combine their household - they each shared what their tricks for teamwork are. Finance is often an emotional topic, but please communicate with your partner, see the big picture, don’t miss the small details, and enjoy your life together!
This is Part I of Household Finance Merger: To Combine, or not to Combine. We have been asked quite frequently whether people should combine their finances if they get married, or commit to a long-term relationship. You can go either way really, there’s no wrong answer. But what really matters is to truly understand what it means and what it takes to combine (or not) finances. Dan and Tim talked about the rights and responsibilities from an estate planning perspective. What FDIC insurance can do for you, and how Community property (aka Marital property) states and Common law property states affect your decisions. In the second part of the episode, we will talk about the importance of communication and the emotional impact of your decisions.
For more information, visit us at WWW.LBW-WEALTH.COM
For this episode, we are going to discuss technology in the financial industry. Tim just came back from the Money Experience Summit presented by MX, and he was eager to share his thoughts. He talked about the state of the Financial Services tech and Wealth tech landscapes. Just like the healthcare system, the financial industry has so much data, but the old infrastructure and tech systems have slowed the industry down in terms of using this data more efficiently and ultimately helping clients. Nowadays, there are more and more so-called "financial planning" apps available, and people ask us, why do I need you? Because what the apps can give you is just raw data, but how do you understand the data? What does it mean? How do they apply to you specifically? My best friend and I both have the same income, but she might need to help with her parents' retirement and I don't; having a house is a must for her, but I'm happy with my 2B/2B condo for the long term. Dollar value means absolutely different things to everyone. Financial planning is an intimate process. Spoiler alert: LBW is ahead of the industry, and we are determined to break down the old infrastructure and build a whole new world！
This episode is for investing DIYers, and/or you are interested in learning about portfolio management. Nathaniel and Dan are going to talk about 6 Dos and Don’ts about investing.
- Do have a long-term investment time frame. Please do NOT invest, for example, your down payment if you plan to use it in the short term.
- Don’t time the market, give it time. Nathaniel had some shocking but not surprising numbers regarding market timing.
- Do set parameters before you invest. And don’t overweight your positions in one shot.
- Don’t chase the next “fad”. Trends come and go. Don’t let FOMO (fear of missing out) get the best of you.
- Do understand the tax consequences. The advantages of qualified accounts (for example, Roth IRAs and 401ks) should never be underestimated. In taxable accounts, once you realize your gains, even if you lost it later in other investments (very common for short-term traders), you will still need to pay the capital gains taxes on your gains!
- Don’t forget about the commissions. Don’t let the “$0 commission” slogan fool you, there are so many hidden commissions and fees. Do your research before you invest.
Dan said it well, trading is not investing – if you want to invest for the long run, please follow these do’s and don’ts!
Learn more about us at www.lbw-wealth.com
This POD is a highly requested episode from our clients: understanding the equity package that tech companies and startups offer nowadays as part of an employee’s compensation. There are different types of equity - some of the most common ones are RSU (restricted stock units), NQSO (non-qualified stock options), and ISO (incentive stock options). How should one decide what package to choose if the company offers multiple combos? Tim pointed out that it really depends on whether the company is publicly traded or privately owned. There are so many things to consider: what your spending vs. your cash flow looks like, do you need to live off the equity in the short term, do you need to bring cash to exercise the equity, and what are the tax consequences for each option…? Another “option craze” perspective is that younger generations switch jobs more frequently than their parents. That means you are building your own little investment portfolio with all the tech/startups’ stocks/options/units. As Tim said, a long-term mindset is especially important if you want to take full advantage of these packages.
With more and more talented females entering the workforce and playing important leadership roles, stay-at-home dads and nannies are becoming the new normal. Today, we invited Katie Provinziano, the founder of Westside Nannies and is based out of Los Angeles, to talk about her industry. As you can imagine, because of COVID, the demand for nannies has grown exponentially (school/daycare are closed), and yet the supply has remained quite low. As a result, pricing has increased greatly. Katie explained the scope of work a family can expect from a nanny, the “nanny & house assistance” combo, and the importance of confidentiality. Nathaniel was curious about how does one decide between a nanny or daycare, and Katie gave her inciteful opinion. She also gave some tips on how to create a successful relationship with your nanny: express your appreciation, be kind, pay them well, treat them right, and set reasonable boundaries. As Katie said, your house is the nanny’s workplace now - you can’t just walk around naked anymore! She pointed out some big mistakes she has seen when parents hire nannies on their own. Overall, welcoming a complete stranger into your house to take care of the person you love the most can be a stressful process. Do your due diligence - it shouldn’t be a shameful thing to admit that, hey, we need a professional's help to do this right!
In this episode, we invited one of Dan’s friends Skip Schrayer, a 3rd generation business owner to talk about insurance, not so much about the product, but more about the industry and its culture. Tim started the conversation by asking about the history of Skip’s family insurance business. Dan was interested in the changes over the year in the industry. Skip thought technology played an important role in changing and evolving insurance companies. Nowadays, anyone can go onto an online platform and get insurance in minutes. So giving customized consulting to a more complex insurance need is his specialty. As for the future of this industry, Skip said that the definition of “risk” will continue to grow. For example, cyber risk, reputation risk, etc. In terms of business operations and management, Skip cannot emphasize enough the importance of hiring the right people that fit your company’s culture: care about your job and clients, learn from your employees, be curious, and learn to say “no.” As Skip said, running a business is not easy, but it should also be fun.
This is Part II of the episode where we talk about private equity investment with Brent Beshore from Permanent Equity. Nathaniel asked about Brent’s definition of a successful acquisition and what his due diligence process looks like. Ah well, as you may imagine…it sucks. It’s going through never-ending papers, statements, double-checking all information, and investigating any potential frauds. Brent added, running a business is a different skill set from understanding finance or investments. It’s not what you know that kills you, but what you don’t know (and that you don’t know that you don’t know it) that kills you. Nathaniel also asked Brent what he’s seeing now across the small business marketplace during COVID. Overall, for any business, it’s crucial to find your niche and grow from there. And remember, business is not just skill sets, but more importantly, it’s about relationships. So, treat people well!
This is Part I of the episode where we talk about private equity investing with Brent Beshore, the CEO of Permanent Equity. Brent's firm Permanent Equity is quite different from most private equity investors in the market: instead of buying a company and then selling it to the highest bidder within a few years for a quick return, Brent's investors have a long initial 30 years lockup period. Everyone is in this for the long term. What kind of business does Brent like to buy? Underappreciated and underserved, stable growth (interestingly, not a rapidly growing company because too rapid of growth actually creates a lot of scaling issues), heavy cash flow, and capacity for reinvestment. Brent then talked about how a business should prepare to sell itself. He pointed out that owning a well-run business is ALWAYS more profitable than selling it. So if you are selling the business because you think this is the way to get richer, you are wrong. Brent summed it up brilliantly: the best route is to get rich slowly, over a very long period of time!
For this episode, we invited Cece Delgado from Fairway to talk about reverse mortgages. Dan started the conversation by asking about the history and milestones of reverse mortgages. Cece then explained some typical misconceptions: some people think once you sign the reverse mortgage, the house is no longer yours, or that they will leave their heirs a lot of debt. On the contrary, reverse mortgages can be useful tools for some seniors. You are basically utilizing the value of your house while you still live in it. Like any product, they are not for everyone: if you consider the house your legacy or your heir has an emotional attachment to the house, or you only plan to stay in the house for a couple of years, maybe this is not the route for you. Nathaniel was curious about what the underwriting process looks like. Cece talked about the three key factors that determine how much credit the homeowners will get: their age, the value of the house, and the expected rate. Cece said it brilliantly: the biggest hurdle is for people to change the "debt-free is the only way for retirement" mentality. Talk to a professional before you say "no way!"
This is the third installment in our “Buyer Beware” series, and we are going to talk about 529 plans. A 529 plan is a tax-advantaged investment vehicle in the United States designed to encourage saving for the future higher-education expenses of a designated beneficiary. Once you make the contributions to the account, like a Roth IRA, all the growth is tax-free if its funds are used for the beneficiary’s education. And it’s highly flexible when it comes to what is considered “education”: tuition, fees, off-campus housing, food, books, computers, etc. Tim also read off the l-o-n-g list of “family members” that you can transfer from one beneficiary to another. Of course, like any financial product, it’s not without its cons. If your beneficiary (mostly your kids) decides not to go to school, and you have no one else to transfer it to, you will need to pay income taxes and a 10% penalty to take the money out and use it somewhere else. Dan and Tim talked about how a 529 plan would affect your applying for financial aid, and what the logistics are for using the account. Overall, a 529 plan is a great tax-advantaged vehicle for education. If you have kids, we courage you to talk to your advisor and/or CPA about it!
In the last episode, we talked about 0-3% down payments. In this episode, we are going to talk about everything else about a mortgage: interest rates, closing costs, points to pre-pay interest, cash offers, and waiving contingencies. Dan and Tim talked about fixed interest rate vs ARM (Adjusted Rate Mortgage) vs interest-only mortgages, and under what circumstances each of them makes sense. The cash offer is something we see more and more often in this crazy market. Other than some ultra-rich, some people are able to do a full cash offer by refinancing their first house, take the equity out and buy the second one in cash, with the hope that they are able to sell the first one ASAP in this hot market. Although a cash offer certainly gives you an edge, it is not without risk. Waiving contingencies is another thing we see quite regularly now. As someone who is considering buying a house himself, Tim said he will "never waive certain contingencies like a house inspection." If that means he can't get the dream house fast enough, then "so be it." Like every other major purchase, before you start the house-hunting journey, educate yourself, and be financially prepared so that you can position yourself and optimize the possibilities.
In this mini-series “Buyer Beware”, we are going to give you our brutally honest opinion on a lot of financial products/services that are so common nowadays, but we believe the buyers should think twice before they get into it. The first one: mortgages. We have heard so much from our LA clients: “My realtor told me that I only need to put down a 0-3% payment, and get that 2 million house, is that true?” Yes, it’s true, but most people probably shouldn’t do it. It looks very attractive: instead of saving for $400K, now you only need to save for $0-60k. But, there’s a couple of things to consider: you are mostly aiming for a house that’s too expensive for you to begin with (otherwise why only a 3% down payment?), so the monthly mortgage is going to be very high for you. Your cash flow will get so tight - say bye-bye to family vacations, restaurants, gifts, that new BMW you’ve had your eye on, or any other “fun stuff.” Second, with so little equity in the house, if there’s a real estate price correction, say the market price drops 5%, you are now underwater on your mortgage. If some emergency happens right when the market drops, you have to come up with enough extra cash to sell the place, or you could end up in foreclosure. Third, if you lose your job/income, you certainly can’t afford those high monthly payments anymore - you may get into a vicious cycle of late payments and penalties. Dan briefly went over what banks consider when they approve you for a mortgage. But please remember, what the banks see is only what’s on paper! They don’t know that maybe you need to pay a medical bill for your mother, maybe vacation is a “must” for you considering how stressful your job is, or maybe the house you’re about to get has some “surprise” waiting for you to be fixed. Sometimes the banks may approve you for more loans than you can truly afford. 1-3% down payment may work for Jeff Bezos because he has other assets to back it up. But if you are doing it because you can’t afford the house, please be careful!
Starting from July 15, 2021, and for the next 6 months, some families with child(ren) will receive monthly cash as an advanced child tax credit so that you can start spending it. Some people are either confused about what’s going on or are worried that taking the credit now will hurt them later in the year when they pay their taxes. Here’s a breakdown (assuming one child):
2020 Child Tax Credit: $2,000 per qualifying dependent child under age 17
2020 Max Child Dependent Care Tax Credit: $1,050
2020 Total Credit: $3,050
2021 Child Tax Credit: up to $3,600 ($1,800 advanced to you for the next 6 months) per qualifying dependent child (depends on the child’s age)
2021 Max Child Dependent Care Tax Credit: $4,000
2021 Total: up to $7,600 (depends on the child's age)
Income restriction: The IRS estimates your 2021 income by your 2020 (or 2019) tax return, so if you know your 2021 income will significantly increase and breach the top ceiling, you might want to opt-out of the advanced credit check. Otherwise, after you file for the 2021 tax return, the IRS will take the money back from you.
For more information on the credit’s differences due to the child's age and your income level, please go to the IRS website: https://www.irs.gov/credits-deductions/2021-child-tax-credit-and-advance-child-tax-credit-payments-topic-c-calculation-of-the-2021-child-tax-credit
DISCLAIMER: We are not CPAs; above is just a breakdown of the numbers. As for what’s the best practice for each individual and/or household, please contact your CPA or IRS for further advice.
For this episode, we invited Robert Sheck, the general manager of Weinstein & Piser Funeral Home to talk about funeral planning. It’s a difficult topic for most people of course, but it’s also a very necessary one. Tim started the conversation by asking what should one consider when they begin burial planning? And what do people miss in the process? Robert pointed out that funeral planning is not just about the financial aspects, but more about releasing your heirs from making emotional decisions at their saddest moment such as “What casket would dad like?”, “What dress would my wife like to be buried with?” Robert also mentioned that funeral costs usually double every 10 years and getting an insurance policy from a funeral home may be a smart move to lock in prices. Tim was curious how the millennial generation has changed the industry? Robert said that they are less into the traditions, and they prefer to treat the funeral as a celebration of life, rather than a sad, quiet event. Dan asked how Robert copes with all these sad emotions on a daily basis, and how COVID has changed the industry. Being afraid of your mortality is a very real thing, but no matter how difficult it is, please have the courage to talk about it, and make arrangements for yourself.
This is our quarterly commentary episode. Are we facing inflation? If so, what does that mean, and how does that impact our daily life? The team put in their two cents. Real estate has been crazy for a while now, but for the past couple of weeks, we have seen a fast rise of buyers not only paying way over the asking price but waiving all contingencies including inspections. Tim himself is looking for a house right now, and he said he for sure will not waive inspections. The potential downfall is just too severe for him to stomach. If you don't absolutely NEED a house right now, we encourage you not to get swept up by this "housing tornado" just because all your friends are doing it. Lastly, we discussed fractional shares. Nathaniel likes the idea of being able to afford a tiny part (less than one share) of a giant company. Dan, however, worried that this will encourage self-trading individuals to view the stock market even more so as a casino, not a properly-educated long-term investment. As Nathaniel said, like most financial products (services), they are designed for good reasons, it's when people get too greedy that everything turns into an uncontrollable mess. Educate yourself, do the research, and have a healthy amount of anything!
For this episode, we invited Abby Rosenblum, the founder of “The Social: Modern Matchmaking”, to talk about dating and matchmaking. Abby switched from her career as a TV producer to a professional matchmaker three years ago. She said that for both jobs, the key is to ask the right questions, and make your audience feel comfortable. Dan asked what Abby doesn’t like about this industry - her answer: lack of authenticity. Abby talked about how matchmaking is not just finding the right person for you, but more about helping you understand what you want, and then coaching you on how to interact with people. Abby asked Tim, Nathaniel, and Dan if they would be open to a matchmaking service if they were single as there is a surprising trend in her industry to work primarily with men, but not women. Tim was wondering what questions should one ask if they are interested in the matchmaking service. Like Abby said, if you are ready for love, get out of your comfort zone, and give it a try!
This is Part II of the episode. We mainly talked about the barriers and risks involved in the industry and what the future could look like. As a scientist, Echo wished she could do research freely, across state lines, and without having to come up with creative ways to dodge unnecessary regulations. Josh thought one of the biggest issues is money: the best product no longer wins the market. It takes a lot of money to just get permits, and even more to deal with regulations to run the business. Nathaniel and Josh discussed how the current cannabis industry resembles the alcohol industry after Prohibition. Dan and Tim were interested in what competition is like. Josh mentioned that the distribution channels are where major competition occurs. Interested in where cannabis' future lays? Watch the full episode!
This is Part I of the episode, where we invited Toxicologist Echo Rufer and Cannabis expert Joshua Hoffman to talk about the cannabis industry. Back in 2018 and 2019, we couldn’t have a conversation with clients without them asking about cannabis. But for the past two years, the new “hot baby” seems to be cryptocurrency. What happened? According to Josh, due to regulation, and the fact that the cannabis industry just went from illegal to partially legal, the market is extremely fractured and has been cut into thousands of small pieces. This fracture naturally makes investment dangerous and volatile. Echo agreed that not having standardized regulations is problematic. Josh pointed out that the federal reclassification of cannabis and more stable banking is crucial to moving forward. As a scientist, Echo stressed the importance of listening to science in order to make the right policies. Josh completely agreed: having more “Echos” in the cannabis industry is going to lead to a better consumer experience and safer business operations. In the next week, we are going to continue this topic, and talk about what other hurdles this industry is facing and what the future holds.
This topic fires us up quite a lot because we LOVE and are PASSIONATE about our job, yet our industry overall is not up to our standards. We kicked off the episode with the brief history of “financial advisors”: from being the platform (back then, individuals couldn't trade stocks without a broker), to selling products (that’s what the majority of today’s brokers and dealers are selling: insurance, annuities, funds, etc.), to selling performance and service (RIAs charge you a percentage of assets under management), and to what LBW is doing and what the industry is slowly turning towards: selling advice and knowledge. We broke down what different types of “advisors” are available today, what roles they each follow, and how they are incentivized differently and charge you differently. It’s crucial to understand the difference between the suitability rule (followed by brokers and dealers) and the fiduciary rule (followed by RIAs) and how they will affect you. Tim passionately explained why he has a problem with our industry and where he sees the future unfolding. As Dan said, the change is coming, regardless if you want it to or not. You can either lead the change, follow the crowd, or be left behind. We, at LBW, choose to lead the change, push the change, and be a part of the change!
In this episode, we invited our former intern and current summer employee Jerard Stoegbauer to talk about how his academic life prepared (or didn't prepare) him for the real world. Jerard graduated this past May from UW-Madison with a degree in Personal Finance. He believes that other than academic learning, the most important experience in one's college life is to learn how to meet new people, have a relationship, figure out who you are, and how you fit in this world. Nothing will prepare you fully for the real world, but an internship will link the gap if you are able to find one that teaches you more than how to use the copy machine. Jerard entered the Army ROTC program (Reserve Officers' Training Corps) in college because he wanted to be a part of something bigger than himself. We discussed leadership, and how he would like to help follow young soldiers' finances with his knowledge. As Jerard is preparing to start his active duty with the Army in August, we wish him all the best and thank him for his service!
Light a candle, pop the cork, and relax - we are going to talk about wine today! We invited Wollersheim Winery & Distillery owners Philippe Coquard and Céline Coquard Lenerz to talk about their family business. We kicked off the podcast with a brief overview of Wollersheim's story, how it started and how it has since grown. As the 13th and 14th generation of a winemaker family, Philippe and Céline drink, dine, talk, and breathe wine all day long. As a family business, Philippe stressed the importance of love and family first. As for their succession plan, Céline still remembers going to the family meetings as a kid when the winery was transferred from her grandparents to her parents, and how those "why do I have to be here for these boring meetings?" moments have become so important to her now as it has prepared her mentally for future successions. As the father-daughter duo said, for a multi-generational family business, always remember: family first, and communicate the uncomfortable "money talk" regularly!
In this episode, we invited sociologist, relationship & online dating expert Dr. Jess Carbino to talk about dating apps and online dating. Dr. Jess moved to L.A. for her Ph.D. in sociology and got onto dating apps to make friends and find her special someone. Instantly, she got interested in how people present themselves online, and how they define “attractive.” She talked about the massive data and how she studied them. Tim was curious: other than brand reputation, what’s the most important thing for a dating app to thrive? In Dr. Jess’s opinion, it’s the technology innovation. The industry hasn’t had a meaningful innovation since Tinder. As for the future of online dating, she can see Al and VR playing crucial roles. Advice from Dr. Jess if you are interested in online dating: this is a numbers game; you will experience emotional highs and lows, but it’s important to keep going and give it another try!
This is Part II of “So, You Want To Start A Business!?”. As Nathaniel mentioned, it’s extremely important to choose the right structure for your entity (LLC, Partnership, C-Corp, S-Corp, Sole Proprietorship, etc.) Not only will it affect your taxes, but more importantly, it will also ensure or obstruct your company’s future growth. Other things that are necessary: a business plan, a continuity plan, a succession plan, and an operating agreement/bylaws. Dan talked about where to find financing, banks, investors, investment firms, etc. The team discusses where and how to find resources that may benefit you greatly. As Tim said, you need to start networking the day you can speak! How true. To sum it up, owning a business is hard work, but it’s worth it. You will experience rapid personal growth alongside the business. Be prepared, be rational, and don’t be afraid to ask for help!
In this Part I of “So, You Want To Start A Business!?”, we talked about the cornerstone of starting a business and the preparation phase. Before you start a business, it’s important to ask yourself: why am I doing this, and who is my audience? Almost as soon as you start your business, you need to know how you are going to exit. Why so early to think about exit strategy, you ask? Because how you exit depends on whether you run it as a lifestyle business or an enterprise business. As for the preparation, go through your daily financial life with a fine-tooth comb and figure out what you need to make, and what you hope to make. Know this: for the first couple of years, your business may not be as rosy as you want it to be and something (if not most things) will go wrong. In LBW’s experience, entrepreneurship is a family affair - even if your significant other is not actually a part of the business. Without their support, you can’t make it, at least not without sacrificing your personal life. Selecting the right business partners are another critical piece. Dan, Tim and Nathaniel couldn’t have been more lucky to have found each other. We have different skill sets, and the same understanding that what’s good for the team, is what’s good for the individual! For Part II’s episode, we will talk about positioning (how to actually set up the business) and resources.
Nerd alert! In this episode, we are going to talk about how to create a framework that not only works for investing but can be also applied in every aspect of life. Dan first introduced the concept of “Circle of Competence”: imagine a big circle, that’s all the things you don’t know; within it, a slightly smaller circle, that’s all the things you think you know (but you don’t); and then in the middle, there’s a dot, that’s all the things you truly know. Keep all your big bets within that dot, and continuously grow that dot if you can. Nathaniel and Tim gave a couple of blogs, books, podcasts that they have benefited from the most in the past couple years. In terms of applications and implementations of the framework, it’s important to: 1.) Draft your parameters and stick to your little dot; 2.) Know that the longer a timeframe you have, the bigger the possibility you will succeed; 3.) Understand probability and outcomes; 4.) Compound your knowledge. As Nathaniel pointed out, create a framework that works for you; be persistent, be consistent, give it a long enough timeframe, and you will succeed!
For this episode, we invited Dan’s former classmate Francis Son to talk about his photography career. Francis is a Chicago-based photographer who works in commercial photography with corporate/non-profit events and fashion photography. We kicked off the podcast by asking Francis what makes a good photographer? He thought that one of the most important elements is understanding how light works in a photograph. He then explained his inspiration and style, and how he found them. To be a professional and reach another level, other than having basic photograph skills, communication is also crucial to success. In addition, Francis mentioned that knowing how to take great pictures doesn’t equal knowing how to run a good business. All you can do is to put yourself out there, do the hard work, improve and grow non-stop. In the end, as Francis pointed out, finding something that you enjoy doing, is the key to everything in life.
In this episode, we learned self-leadership from our friend Zach Ketterhagen. Zach is a self-leadership coach, blogger, meditation teacher, and healthcare strategist. First, we started the conversation with how Zach got into this practice, and what is self-leadership. Self-leadership is about defining success on your own terms. It has three layers: define what you want, know how to get there, and lastly, understand how to maximize your time. Zach then recommended some techniques: meditation, yoga, and optimal breathing. Tim was curious how these concepts and techniques tie into a sustainable relationship with money and finance. Dan and Zach discussed how U.S. healthcare is really “sickcare”, and what we are missing here. If you want to try any of these, as Zach said, balance and consistency are the keys! For more information, follow Zach's blog and access resources to advance your self-leadership at ZachKetterhagen.com.
This is our quarterly update episode where we talk about the trendiest financial topics from the past quarter (if we haven't already covered it in a separate episode). We started the conversation with people's concerns regarding inflation and rising rates. Tim and Nathaniel discussed the potential impact on the economy and the market if inflation occurs. However, as Nathaniel said, we don't live in a simplified system; in reality, we probably are going to experience some sort of mix: some deflation in the tech industry, some possible inflation in asset-heavy industries. As for how that impacts our investments, we usually gravitate towards companies that have pricing power so that they will most likely perform better under all phases of the economic cycle. Tim then gave a general rundown of the newest stimulus package and its impact. Non-fungible tokens (NFTs) are another topic that we got asked a lot about in the past quarter. Why would someone pay $500k for an original meme? Dan and Tim said it well: it's like collecting baseball cards, the paper card itself doesn't have any value, its value only exists in the eye of the collector. If you want a collection because you like it, go ahead. But as an investment, they are only worth what others are willing to pay.
Are you a car enthusiast? In this episode, we invited Alex Schremp to talk about luxury cars. Alex is the owner of Autohändler, a service-based car dealership. As always, we started the conversation with "why this industry?", and then asked what are the most important factors in buying a luxury car? Interestingly, Alex said it's about how it makes you feel and who you want to be. Dan was curious what types of cars hold their values best, and Alex introduced us to the "25-years-cycle" rule. I guess most people hold on to their teenage dreams! We also covered how one should determine which car is the right fit for them, the subscription-based rental experience concept, the cost of owning a luxury car, and how to get a limited-released vehicle. Alex put it so brilliantly: owning a luxury car is about how it makes you feel, and what story you want to tell about yourself. If you like it, go ahead and rock it!
In this episode, we invited Dan's close friend Jônatas Chimen to speak with us about the art world. If you are an artist or in the marketing/creative industry, you have to watch this episode! Jônatas is a Brazilian-American Symbolist artist, author, academic, and public speaker. Jônatas started by explaining how his inspiration came from his own family's history of migration, adaptation, and cultural hybridization. He said it really well: I understand "urgency" in life, that one day my flesh will go back to the dust, but my art will outlive me. To answer Nathaniel's question about novelty art and how to value art, Jônatas said that scarcity and rarity are very powerful. He told us the famous Miami "taped a banana to the wall and sold for $300,000" story. It's quite an "American phenomenon" that out of nowhere, one can suddenly call themselves an "artist" and sell a piece at such an unexplainable price. It rewards "hype", but not "depth." Jônatas stressed the importance of creating your own narrative, like Picasso, Andy Warhol etc. As Jônatas said, being a good artist is not enough, you need to know how to present and promote your work to succeed.
In this episode, we invited our close friend Saran Ouk. Saran is the Founder and CEO of conNEXTions, a non-profit organization that guides underrepresented young adults to achieve their financial, educational, and career goals through mentoring, networking, and professional development. Born in a refugee camp in Thailand, Saran and her family were able to come to the U.S. as refugees thanks to a non-profit organization. The seed of giving back to her community grew from there. Saran talked about how to set up a non-profit: define your "business model", learn to tell your story, and differentiate yourself from others. We discussed the difficulty in fundraising, networking, and the lack of manpower. Tim asked a brilliant question: how does Saran define success for conNEXTions? And we loved her answers: everyone should define their own success, and don't follow other people's goals. Dan closed the episode well: Sir Isaac Newton once said: "If I have seen further, it is by standing on the shoulders of giants." Thank you Saran and conNEXTions for being the "giant" for our community!
Diane Seder has had a very inspiring career. She joined the valves manufacturing family business "Milwaukee Valve" against all advice back in the late '70s when the industry was "not suitable for women", and worked her way up from the very bottom. We invited Diane to mainly talk about the sale of this multigenerational family business. Diane was clear about two key points: plan your selling strategy long before you are ready to sell, and communication within the rest of the family is critical. Tim asked about what one should consider when planning to sell the business. Diane recommended the following: check the company's legal structure, review all owners' trusts, set up a functional voting system long before selling, and go over the succession plan and tax consequences with professionals. She then stressed that it's vital to think ahead, hire the right professionals, and most importantly, to have constant communication. Like Diane said, for a family business, what's good for the business is what's good for the family, and one should never forget that.
We are honored to present this episode with Betsy Hughes. Betsy has spent her entire career, nearly 40 years, as a student of philanthropy. Just in the last 20 years, she has raised more than $500M—for universities, museums, and human services organizations. Nathaniel started the conversation by asking in the U.S., who's your typical major donor, and where does their money go? Without any surprises, religious groups are the number one charitable recipients. Betsy then respectfully debunked the myth that most NPOs spend too much money on administrative operations. She further explained that "passion" is the biggest reason people donate, so it's important for you to vet the organization by understanding its mission and trusting them to utilize your donation. Volunteering may be a good way to start. We then discussed how the face of philanthropy has changed, especially during COVID-19. Betsy is excited to see much more involvement from women, people of color, and the younger generation. As Betsy said, over 70% of donations come from small individuals, and every bit counts! We highly courage you to start today if you can, whether to improve your own community or to help a cause that you believe in! Thank you!
In this episode, we invited Will Robus to speak with us about cybersecurity. Will is the CEO of Outpost Security, a company that provides a revolutionary approach to managing cyber threats. We kickoff the podcast by asking Will to give us a broad picture of the cybersecurity space, and why it's not talked about that much. Will explained the two sides of the industry: public-facing security to protect private information (i.e.: Target breach 2013), and business data protection. Will talked about the dilemma the industry is facing: if one doesn't invest in cybersecurity, the business is obviously in danger of potential breach; but if one is protected too well, they ask themselves: "Why am I spending so much money on this? Nothing has ever happened to me!" Tim asked about Will's thoughts on quantum internet, and we discussed what information decentralization means to the industry: Will believes that no matter how advanced the technology, as long as there's a human element to it, mistakes will always be made. Overall, data is the new gold, and since our daily life, business and even government operations rely on data more than ever, cybersecurity is not a preference, but a necessity.
If you want to learn about how to increase your credit score and what credit cards to get, don't miss this episode! Dan started the video by talking about the 5 key elements of building your credit score: paying your bills on time and in full, capacity, credit history, new credit, and credit mix. It's always a good idea to establish your credit history as early as possible. Dan then debunked some myths about credit scores and taught us how to track them. Nathaniel is the main "credit card" man in the house. He talked about things that one should consider when getting the right credit cards. The most important thing, in Nathaniel's opinion, is "to find the cards that fit your spending, do not fit your spending to the cards that you want!" He also discussed how "cash rewards" and "points" work differently according to your lifestyle and spending habits. If you are a credit card nerd like us, you will love this episode!
Our most popular guest Tony Bickmore is back! In this episode, we discussed one of the all-time favorite topics: real estate investment. Tim first asked about house flipping, and Tony cautioned our audience not to try to outsmart the numbers. He explained his real estate investment framework: for short-term investments, it's about being in touch with the neighborhoods, understanding their value, and getting in the market at the right time. And for long-term investments, the volume is everything. Tony agreed with Dan: real estate investing is a full-time job, and it only makes sense for part-timers if: a.) you can do the fixing and maintenance yourself, or have a big enough portfolio to hire a team, and b.) have a steady funding source that won't affect your daily life. To sum it up, HGTV is meant for entertainment, not real estate investment advice!
In this episode, we discussed the recent "King of Performance" GameStop's maniacal rise and social media's role in the new investing world. After briefly explaining what happened to GameStop's stock price, Nathaniel pointed out that the stock price is nowhere close to what the dying company is actually worth, and it will not last in the long term. Dan revealed a different side of the story: GameStop has been trying to sell itself for years. But they couldn't find a buyer when it was trading for $3 per share, and they certainly will not get a buyer for $300 per share now. These retail traders that consider themselves "heroes that help the company by bidding the price up" are actually hurting the company: the employees and other shareholders. Nathaniel also added, as much as you may dislike capitalism and short sellers, just like a forest fire, they exist for a reason: they clean the dying companies out of the market so that new startups can have the space to grow and thrive. Tim expressed his frustration with social media's role in this sh*tshow. People who brag about their gains on social media "oh I put $10k in, and made more than $2m!", but never disclose that they may be millionaires to begin with, and that that $10k investment is merely 0.5% of their total portfolio. People who are late to the party and put their entire net worth into it are most likely the ones who will suffer the downfall and lose everything. As always, be rational and realistic. If you want to invest for the long run, research the company's fundamentals; if you want to gamble and make (or lose) some quick money, don't put in every penny you have!
The opinions expressed in this program are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual, on any specific security, on any specific Broker-Dealer or custodian. It is only intended to provide education about the financial industry. To determine which investments, Broker-Dealer or custodian may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional. All opinions expressed by podcast participants are solely their own and do not reflect the opinion of Leach, Bickmore & Weiss Wealth Management, LLC.
Leach, Bickmore & Weiss Wealth Management, LLC is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Leach, Bickmore & Weiss Wealth Management, LLC and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Leach, Bickmore & Weiss Wealth Management, LLC unless a client service agreement is in place.
In this episode, we invited one of Dan's friends Brian Levenson to talk about his new book: Shift Your Mind: 9 Mental Shifts to Thrive in Preparation and Performance. Brian works with major athletes in the NBA, NHL, and MLS as well as business executives. After briefly introducing how Brian got into his executive and mental performance coaching business, we discussed the concept of achieving greatness by shifting from a preparation mindset to a performance mindset. Brian mentioned that one of the most important steps is to create self-awareness. Understand who you are so that you can decide where you want to go. To answer Nathaniel's question, throughout the journey of creating the right mindset, being present is the most difficult step, and thinking about the future is the most misunderstood one. Brian stressed the importance of "turning it off and resting" and have the "how much money is enough for me?" conversation with oneself. As Dan pointed out, "time" and "money" are two of the most misunderstood topics that we don't discuss openly and honestly enough.
The opinions expressed in this program are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual, on any specific security, on any specific Broker-Dealer or custodian. It is only intended to provide education about the financial industry. To determine which investments, Broker-Dealer or custodian may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional. All opinions expressed by podcast participants are solely their own and do not reflect the opinion of Leach, Bickmore & Weiss Wealth Management, LLC.
Leach, Bickmore & Weiss Wealth Management, LLC is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Leach, Bickmore & Weiss Wealth Management, LLC and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Leach, Bickmore & Weiss Wealth Management, LLC unless a client service agreement is in place.
This is a fun episode. We invited Tony Bickmore, the owner of Bickmore Construction, to join us and talk about remodeling/building your primary home. After Tony briefly introduced how he got into the business, Dan asked where people should start in terms of remodeling and building. Tony's answer was very straightforward: have a realistic budget. Know what's important to you, and understand the difference between "What is my budget?" and "What should my budget be?" are keys to a smooth process. Nathaniel asked what the one most important thing for clients to be aware of during this process. Tony thought that understanding the true scope of the entire project is crucial. So many of our clients ask us: is my primary home a good investment? You have to remember that asset ≠ investment. A house is not a bad asset but in no way a liquid investment. Tony summarizes it so well: the house is usually a person’s biggest asset, so it shouldn’t be an emotional decision; and yet, when it comes to doing anything with one's home, for most people, it is 100% emotional.
The opinions expressed in this program are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual, on any specific security, on any specific Broker-Dealer or custodian. It is only intended to provide education about the financial industry. To determine which investments, Broker-Dealer or custodian may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional. All opinions expressed by podcast participants are solely their own and do not reflect the opinion of Leach, Bickmore & Weiss Wealth Management, LLC.
Leach, Bickmore & Weiss Wealth Management, LLC is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Leach, Bickmore & Weiss Wealth Management, LLC and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Leach, Bickmore & Weiss Wealth Management, LLC unless a client service agreement is in place.
Here we go again, this is our quarterly "Trendy Talk" episode for 2020's 4th quarter. In this episode, we talked about IPOs, why do companies try to do IPOs, how are the prices determined (the truth might shock you), and what happened with Airbnb's IPO. Tesla is one of the companies that we get questions about almost daily. Do you know that most of Tesla's profit doesn't come from selling its own products, but from selling the tax credits of being a "green company" to other big auto companies? Do you know that Tesla is selling at a multiple of 420 times free cash flow - not an ideal buyable price after all? As for Bitcoin, another insanely popular topic, as Tim said, if you want to invest 1% of your money and have some fun, by all means. But if you want to gamble your entire assets on it... well, don't! We remember how popular marijuana was in 2019, but no one ever asks us about it anymore. You know what, trendiness passes, only value remains!
The opinions expressed in this program are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual, on any specific security, on any specific Broker-Dealer or custodian. It is only intended to provide education about the financial industry. To determine which investments, Broker-Dealer or custodian may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional. All opinions expressed by podcast participants are solely their own and do not reflect the opinion of Leach, Bickmore & Weiss Wealth Management, LLC.
Leach, Bickmore & Weiss Wealth Management, LLC is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Leach, Bickmore & Weiss Wealth Management, LLC and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Leach, Bickmore & Weiss Wealth Management, LLC unless a client service agreement is in place.
This episode is all about one of the most fascinating topics: space. Our guest is Rick Tumlinson, the co-founder of several space companies and non-profits, and one of the most influential people in the space industry. Rick kicked off the episode by talking about the book The High Frontier and how it inspired him to get into the industry. He then gave us a rundown of the space industry from a business lens. Tim followed up by asking how the space industry was funded. It was absolutely interesting to hear Rick speak about private vs government and China vs the U.S. in this new "space competition." We were intrigued by Rick's description of what a settlement could be like in space, and where he predicted those places may be. Nathaniel asked Rick's opinion on what Elon Musk's and Jeff Bezo's passion for space could mean for Telsa and Amazon, respectively. Rick's closing speech was powerful: to bring lives to dead space, to redesign our civilization and culture in a new era, that's our job, and that's where our future lies.
The opinions expressed in this program are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual, on any specific security, on any specific Broker-Dealer or custodian. It is only intended to provide education about the financial industry. To determine which investments, Broker-Dealer or custodian may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional. All opinions expressed by podcast participants are solely their own and do not reflect the opinion of Leach, Bickmore & Weiss Wealth Management, LLC.
Leach, Bickmore & Weiss Wealth Management, LLC is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Leach, Bickmore & Weiss Wealth Management, LLC and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Leach, Bickmore & Weiss Wealth Management, LLC unless a client service agreement is in place.
For the very first episode of 2021, we open our show with Drew Brown, the rhythm guitarist of the pop-rock band OneRepublic. We kicked off the podcast by asking what got Drew into music, what artists inspired him, what his favorite concert was, and what his shower/carpool song pick is (cue the “Beauty & the Beast” theme song plz!). Drew revealed that he almost joined a metal band, and as Nathaniel pointed out, that would not only have changed his career but his entire life because he would never have met his wife. Tim and Nathaniel explored with Drew his feeling towards the music industry, and how it has changed for better and for worse. Drew talked about how he finds creativity not just in music, but also in business. He further discussed his opinion on streaming in the music business. As for COVID, Drew expressed his worries about young artists being unable to start their careers due to the lack of live performance opportunities. We were all very impressed by Drew’s commitment and vision. As Dan said, never underestimate the power of passion!
The opinions expressed in this program are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual, on any specific security, on any specific Broker-Dealer or custodian. It is only intended to provide education about the financial industry. To determine which investments, Broker-Dealer or custodian may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional. All opinions expressed by podcast participants are solely their own and do not reflect the opinion of Leach, Bickmore & Weiss Wealth Management, LLC.
Leach, Bickmore & Weiss Wealth Management, LLC is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Leach, Bickmore & Weiss Wealth Management, LLC and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Leach, Bickmore & Weiss Wealth Management, LLC unless a client service agreement is in place.
This is our "Get To Know LBW" mini-series where we interview each of our team members so that you will get to know us better. Our third interviewee is our Portfolio Manager Nathaniel Leach. He explained that despite what some people may think, he's not a robot. He talked about how he explored many different subjects before landing on his history degree, and how that greatly influenced and helped his current job as our Portfolio Manager. He went in-depth talking about his reasons and feelings for joining the U.S. Marine Corps, and what he has learned from it. Dan and Tim asked Nathaniel about his greatest joy in life, his views on leadership, favorite place, game, food, etc. As Dan stated, most of our clients don't know Nathaniel as well as the rest of the team because his job requires him to read and research rather than to talk and socialize. We hope this episode helps you understand Nathaniel better and see the caring, loving, and passionate person that we proudly call "friend!"
The opinions expressed in this program are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual, on any specific security, on any specific Broker-Dealer or custodian. It is only intended to provide education about the financial industry. To determine which investments, Broker-Dealer or custodian may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional. All opinions expressed by podcast participants are solely their own and do not reflect the opinion of Leach, Bickmore & Weiss Wealth Management, LLC.
Leach, Bickmore & Weiss Wealth Management, LLC is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Leach, Bickmore & Weiss Wealth Management, LLC and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Leach, Bickmore & Weiss Wealth Management, LLC unless a client service agreement is in place.
This is our "Get To Know LBW" mini-series where we interview each of our team members so that you will know us better. Our second interviewee is the Director of Client Relations, Dan Weiss. We talked about his childhood, his education, and his minor (well, not so minor) obsession with geography and maps. He explained why he co-founded LBW Wealth, and what pushes and encourages him in life. Dan shared with us why community involvement and giving back to charity are so important to him personally. And of course, the interview isn't complete without an embarrassing life story! We hope you enjoy this episode.
The opinions expressed in this program are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual, on any specific security, on any specific Broker-Dealer or custodian. It is only intended to provide education about the financial industry. To determine which investments, Broker-Dealer or custodian may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional. All opinions expressed by podcast participants are solely their own and do not reflect the opinion of Leach, Bickmore & Weiss Wealth Management, LLC.
Leach, Bickmore & Weiss Wealth Management, LLC is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Leach, Bickmore & Weiss Wealth Management, LLC and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Leach, Bickmore & Weiss Wealth Management, LLC unless a client service agreement is in place.
This is our "Get To Know LBW" mini-series where we interview each of our team members so that you will know us better. The first interviewee is our master of planning, the Director of Financial Planning: Tim Bickmore. We talked about his childhood, his studies at Lawrence University, and his feelings and thoughts about our industry. We also explored his personal life, what his biggest joy is, inspirations, and hobbies are. In addition, Tim gave his two cents regarding how his degree relates to his work (spoiler alert: "not really!" Finance in real life is a different monster altogether.) He offered his suggestion to people who are studying his major or want to enter our industry, where to start, and what to do. We hope you enjoy this episode.
The opinions expressed in this program are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual, on any specific security, on any specific Broker-Dealer or custodian. It is only intended to provide education about the financial industry. To determine which investments, Broker-Dealer or custodian may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional. All opinions expressed by podcast participants are solely their own and do not reflect the opinion of Leach, Bickmore & Weiss Wealth Management, LLC.
Leach, Bickmore & Weiss Wealth Management, LLC is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Leach, Bickmore & Weiss Wealth Management, LLC and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Leach, Bickmore & Weiss Wealth Management, LLC unless a client service agreement is in place.
In this episode, we invited one of our friends Zach Galin to talk about education, especially college applications. Zach has spent almost two decades working independently with students and families in the college admissions process. From test preparation to college matching, applications, and financial aid, Zach has helped students gain acceptance to their top-choice schools. We started the conversation with the obvious: when should you start preparing for the college application? Averagely speaking, start high school freshman year. Other than doing well in school academically, you also need to explore outside school activities and/or AP classes. Zach revealed one secret element colleges are now tracking to decide whether they want to accept you and/or give you a scholarship. We talked about what to expect for the process from 9th-grade year-by-year, and how the test-optional trend has changed and affected students. Zach later talked about incentives and costs. Overall, it's critical for you to have a plan, and start planning early. It will give you and your children more options, and flexibility.
In this episode, we talked about going virtual for events with our friend Rachel Werner. Rachel is faculty for Hugo House and The Loft Literary Center. She has contributed print, photography, and video content to Fabulous Wisconsin, BLK+GRN, BRAVA, Madison Magazine, and Entrepreneurial Chef. As we all know, not everything goes well virtually. Rachel explained three factors to consider before you do so: understand who's your audience, what's your purpose, and what results you are expecting from the event. Some industries are better-suited and equipped to go virtual than others. As for how to keep your audience engaged, Rachel's suggestion is: you have to be entertaining to capture people's attention. Tim asked about the time, marketing, and cost difference for a virtual event compared with an in-person one. To sum it up, you have to give it a try and adapt to the current situation. After all, we can't become what we want by remaining what we are.
In this episode, we invited our friend Max Zimon and his attorney Peter Salerno to talk about Max's journey of applying for residency status in Canada. Max started his application in late 2016, and Dan started the conversation by asking "why Canada?" Max feels that he's more comfortable with Canada's overall policies on taxes, healthcare, and its social atmosphere. As for others who are interested in looking into this process as well, Peter recommended they start with taking the language exam and getting the education report to properly calculate your eligibility. Once you score above the minimum, your profile will be placed into a pool for selection which will then start the process. Max then talked about the cost, tax impact, some (very minor) mistakes he made, and people's reaction to him actually going through with it other than just joking "oh I should move to Canada" like most people. Overall, Peter told our audience that this is a fairly easy process that is designed to be done not necessarily with a lawyer. If you follow the checklist and instructions closely and rigidly, you should be just fine.
This is our quarterly commentary episode. We discussed student loan forbearance, the Federal Reserve and interest rates, the second Stimulus package, and the Trade War with China. Tim talked about the student loan forbearance ending this coming December. This policy is very advantageous for people that have lost their job or got a pay cut due to COVID-19 by freeing up a couple hundred or even a couple thousand dollars of cash flow monthly. If you are still able to pay for your student loan, then all the payments will go directly to the principal instead of the interest. We then moved on to the Federal Reserve and interest rates. The Fed has announced in the past quarter that they will let the inflation rate go above 2% in the short term so that it will level out to an average of 2% in the longer term. As for the second stimulus package, Dan and Tim briefly talked about the difference between the two parties' proposals. Nathaniel added that most of the money small businesses got from the PPP loan is now just sitting in the bank because small business owners are scared to use it since the forgiveness policy is constantly changing and still not clear. It has not been invested in the market to stimulate the economy as it was designed to. Finally, we mentioned briefly that the Trade War is basically at a standstill due to the pandemic. What are your top stories for the past quarter?
In this episode, we discussed the concept of an index. Regardless if it's the Dow Jones Industrial Average (“DJIA”), S&P 500, or the Nasdaq, they all serve the same function: to track a portion of the stock market. Dan and Tim briefly introduced the history of indices: who created them, who is operating them, and why we have them. Nathaniel added, like anything else, it's important to understand the companies’ incentives that manage these indices for you: they are not doing a public service to offer some performance comparison; they are businesses. The companies that own their respective indices are making money off of them. Tim explained the eight criteria for a company to be included in or excluded from the S&P 500 index - some of them turned out to be very subjective. Nathaniel gave some examples for some recent changes in the DJIA: Salesforce got selected mainly because its stock price at the time fit a specific gap that was created by Apple's stock split. As for Telsa's recent failed attempt to make it into the S&P 500, it was because their cash flow includes tax credits that they got from the government and then sold to other auto companies. It doesn't truly reflect their earning ability. The trio talked about how inclusion or extraction in an index impacts a company. And as always, understand what you buy, and be rational.
In this episode, we talked about the stock split. Dan and Nathaniel started the conversation by battling over who gives a better metaphor for the concept of a stock split (BTW, the editing team voted for Nathaniel). Basically, you have one one-dollar bill, and after the stock split, you now have four quarters. The price per unit has changed, but the value has not. Then why do companies do stock splits? Nathaniel explained that on one hand, it's a marketing tool to stimulate the market and give the illusion that the price is more buyable; and second, it gives small investors a chance to own a small piece of the company at a cheaper-per-unit price tag. Dan talked about people's misconception in thinking that they get more value and more ownership due to the stock split. The trio discussed a similar concept: some big custodians now offer the ability to purchase fractional shares of highly-liquid large companies. You can buy, for instance, 1/10 of Berkshire Hathway Class A shares if you can't afford to buy a whole share. Nathaniel likes the idea because he wanted to buy Berkshire's A-shares when he was 15 but didn't have the money, and the fractional shares' option would have given him a chance. Dan and Tim, however, worry that this allows more non-professional retail traders to enter the market and create much more unnecessary price volatility. Overall, in the short term, a stock split may create some buzz and the price may go up, but in the long term, the company value will not change because of a stock split.
P.S.: who's metaphor gets your vote?
In this episode, we invited Tim's father Tony Bickmore to talk about his adventure of moving to Nicaragua for retirement. After he retired from the fire department as a fireman, Tony had a successful tiling business up until 2008 hit. After some extended research and a trip down south, Tony fell in love with Nicaragua: it had the same vibe as Cosco Rica, but at half the living expense. He filed for bankruptcy and sold one of his condos in Utah, sold most of his personal belongings, got a rental in Nicaragua, and moved after the bankruptcy was finalized. Tony talked about one of the most important elements in retirement: the healthcare system, the cost comparison, and his first-hand experience there. Dan asked about what difficulties he faced when he first moved down there - Tony said his issues were primarily with the language barrier, government instability, and the lack of job opportunities. It's critical for you to have a steady income like a pension or a remote online business before you make the jump. Tim discussed with Tony about his experience with downsizing: from multi-properties to two suitcases. Tony said that it's important to overcome the feeling of "giving part of your life away", and recognize that it's just "stuff." What do you think of the idea of retiring abroad?
Recently a lot of our clients have asked us what the November election will do to the market and what they should do to prepare for it. The short answer is: for the long term, nothing; for the short term, buckle up, and be ready for some market volatility regardless of the election result. Even in the short term, if you observe past presidential elections, out of seven times that the market decreased post-election, the U.S. was either in the Great Depression, a recession, WWII, the tech bubble, or the 2008 financial crisis. The election itself wasn't necessarily the direct cause of the market volatility. Nathaniel added that market volatility doesn't equal risk. Furthermore, Dan and Tim showed us some interesting data. Regardless of having a Democratic or Republican-controlled government, the market return is pretty close. However, when we have a divided government fighting for power, which is most of the time, the market return was only a third compared to a united party government. Nathaniel explained that even though certain policies like trade, taxation, and the Federal Reserve may change due to an election, some sectors like energy and healthcare may be more affected than others. The president is only a small part of the puzzle to the grand picture of our entire economy and markets. To sum it up, long-term speaking, one presidential election won't fundamentally impact the stock market.
In this episode, we talked about the real estate market in the Midwest, specifically the Dane County area. Lindsay and Leslie both talked about how the low inventory and low-interest rates are going to keep the market active and crazy for a while. Lindsay further explained what causes the low inventory in this area: a combination of baby boomers downsizing and buying smaller homes, and millennials are ready to enter the market for their first purchase. We talked about EPIC's effect on the real estate market here, more so on the rental sector. Leslie discussed with Dan about the current trend of people buying a second house or land up in northern Wisconsin to get a piece of quiet and escape, and how that seems especially appetizing during COVID. Lindsay and Leslie shared some of their tips for buyers and sellers to gain some advantage points, and can't stress enough the importance to have a professional alongside you during this process. Yes, you should shop around for the right realtor for you, but do get one, and trust their professional opinions.
In this episode, we discussed one of people's all-time favorite topics: real estate. Growing up in a family of realtors in the Bay Area, it was only natural Tiffany developed an early and intense interest in homes and got her license in 2007. Tim started the conversation with a question everyone wanted to know: will the real estate market hold? And Tiffany's answer is yes, at least for the short and midterm. The current low interest rates and historically low inventory in LA create a very active and competitive market. Dan wanted to know if COVID-19 has changed people's searching criteria? Not surprisingly, single-family homes and condos with outdoor space is on top of everyone's wish list. Nathaniel asked about the biggest opportunity and threat to the LA market. In Tiffany's opinion, the biggest opportunity is to re-purpose the utilization of commercial space and maybe convert them into multi-units residential housing to help with the home shortage issue. As for the threat, Tiffany is worried about foreign investors pulling their money out due to COVID-19. We also discussed what mistakes people make as a buyer or a seller, and Tiffany shared some of her tips to gain advantages in this market. In the end, we all agreed that buying and selling real estate is a big stressful project, and one needs to plan it out with the proper experts and NOT rush the process.
The Federal Reserve recently announced that it will allow inflation above the 2% cap for the time being without increasing the federal funds rate. What does that mean to us? Tim first explained a couple of concepts: first, the Fed's dual mandate policy, which is price stability and maximum sustainable employment; second, the federal funds rate doesn't equal interest rates you get from the bank or mortgage. Nathaniel added that please do not assume that just because the Fed said they won't increase the federal funds rate that interest rates are for sure going to stay low. The Fed doesn't have complete control over this matter; after all, it is Mr. Market that has the ultimate say. Tim agreed and introduced a couple of tools the Fed has in its pocket. We further discussed the impact on the stock markets. Nathaniel emphasized the importance of having a margin of safety when you invest. To sum it up, try to understand the fundamentals, and see both sides of the story and potential impact before you jump on any new financial opportunities.
In this episode, we talked about Employee Stock Options. On one hand, they incentivize the employee to work harder since now their interests are tied with the company; on the other hand, they help the company to hire faster and better without hurting its cash flow. Tim introduced the different types of stock options, their associated terms, and how their different structures result in different income and tax consequences. Dan and Nathaniel talked about the value stock options bring both quantity and quality-wise. Dan said it very well: understand that stock options are real money, real assets, and they are best utilized when you put a purpose behind it and give it a great value. Treat them just like real dollars. And as Nathaniel always says, be rational!
In this episode, we talked about long term care insurance with Fred Thorban. Fred started his career in the insurance industry in 1990 and has been working with MVP Financial Services since 2007. We started the conversation by asking: what is long term care insurance? Fred gave a brief history lesson and told us that when it all started back in the '70s, because it was so new, insurance companies didn't know how to price it correctly. They used life insurance for reference as for the data and model. As a result, clients who bought back in the '70s and '80s had a 40-50% premium increase later in life. However, right now, according to Fred, is the golden age of long term care insurance. It’s priced fairly well, and all benefits you will receive later are tax-free. He talked about the traditional long term care policy and the new combo version and the benefits of it. Dan and Fred discussed how to use your policy when you need to. Tim mentioned the ever-increasing health cost, and Fred gave us some numbers to think about. To summarize it all, Fred said, you need to start the conversation and planning now, no matter how difficult and scary it is.
This is our mini-series "Ready... Go!" where we talk about the top financial topics of 2020 so far. In this episode, Tim talked a little bit about the FED's interest rate cut and why this was a high-impact move. Nathaniel discussed the PPP/EDML loans and how they are supposed to help employers retain their employees and businesses during the pandemic. He also mentioned the challenges the banks and applicants were facing due to the government constantly revising the details. Tim briefly talked about the home mortgage and student loan deferments, and stressed the importance of doing your own homework as all institutions have different rules on deferring payment. Dan talked about how the stock market is not matching the economy and how stock prices are not matching the actual values (we had two episodes dedicated to this topic "Price Vs. Value FIGHT!" & "Am I Really Underperforming VS the S&P 500?".) Lastly, we put our two cents into the hot topic of anti-trust cases for the tech giants.
In this episode, we discussed the effective use of leverage AKA debt. We started the conversation with the recent "hot" topic: home refinancing and interest rates. We also discussed whether potential inflation is on the horizon due to the stimulus package. Nathaniel explained how he played the credit card game. Dan asked: is there such thing as good debt? Tim said debt is neither good nor bad, it's about your utilization of it. Before you use any leverage and take advantage of debt, you have to make sure that you have steady, consistent income streams, and have savings in the bank first. A complete financial plan and understanding of your cash flow is the foundation of using debt properly. Nathaniel talked about how to utilize leverage in the investing world. He mentioned that the key to analyzing a company's debt on its balance sheet is to understand how the debt’s due dates are staggered and whether the company’s FCF can support the future debt payments or not, and how the company plans to use that debt. Dan summarized it very well: use leverage in a moderate amount, understand it, and remain disciplined.
In this episode, we had a chat with Ryan Grant. Ryan has been working in the mortgage industry for 15 years and has been ranked among the top 50 Mortgage Consultants in America each year since 2013. Dan and Ryan discussed how they love their industries, but also find it distasteful that the industries are being marketed as commodities. Tim asked about mortgage refinancing and whether the interest rate will continue to drop - Ryan's answer is: possibly yes. With the high demand for refinancing and high risk for more job losses and overall economic decline, the interest rate may not be at its lowest point. Nathaniel asked Ryan's opinion on the landlords for commercial real estate not being able to collect rent due to COVID-19. Tim mentioned people's concerns about home value dropping, and Ryan explained why that's not likely. Unlike post-2008, millennials are now at the right age to buy real estate, and baby boomers are ready to downsize which creates insanely high demand. Dan and Ryan introduced the app "Art of Home Ownership", which "provides a suite of valuable services, at no cost, designed to help current and prospective homeowners take more control of their real estate."
In this episode, we had a chat with Mike Gibbons about our healthcare system. Mike has been in the Healthcare field for 33 years and has an extensive background in healthcare administration. Tim and Dan started the conversation by asking: what's wrong with our current healthcare system, and what can we do as a consumer? Mike told us, first of all, it's important for us to take care of ourselves better as a nation. The U.S. is the biggest consumer of healthcare, and we need a healthier lifestyle and habits; second, educate yourself so that you can have better communication with your health provider; lastly, price transparency is a must, and we must understand the charges vs cost vs what you actually end up paying. Dan asked an interesting question: with our baby Boomers getting older, is our healthcare system ready to take on the population? The answer is “no." Mike explained that with COVID-19, it's a good indicator of what are we looking at in the near future. Our healthcare is running at 3-6% profit margins using its 95-98% capacity. There's very little wiggle room for more demands. Tim was interested in Mike's take on what changes have been made due to COVID-19. Mike said there's a rapidly escalating speed of growth in the telehealth area, although people have raised concerns over privacy and payment methods. Nathaniel asked what would Mike do if he's in charge of rebuilding our healthcare system. Mike said that insurance reform is on the top of the list, and it's crucial to truly understand the cost of our healthcare. Without that, we have nothing to base it on. Overall, for us, as consumers: be educated and be reasonable.
In this episode, we discussed the benchmarks, especially the S&P 500. Dan was blunt about his feeling about it: it makes people think off the mark, and not consider the greater risks of chasing the market. Tim gave some interesting data: YTD, the top 6 stocks of S&P 500 have +16.61% return (as of 5/31/2020), but excluding these top 6 stocks, S&P 500 as a whole is down, with a -9.20% return. So, when you compare your portfolio with the benchmark, and thinking that you are underperforming, no, you are not really behind the "market", you are just behind the top 6. Dan asked: well, why don’t we invest in the top 6 stocks then? Nathaniel gave the example of Microsoft. It took almost 17 years for it to get back to where it peaked last time (1999). So if one of your top 6 stocks' price drop due to another market downturn, do you have the discipline to hold it for 17 years and wait for it to bounce back without panicking? Nathaniel went into details about Amazon. Overall, Nathaniel doesn't invest in it because its stock is overpriced, and there's no way of knowing where it's going as a company in the next 10 years. In the end, we gave advice on how to not get sidetracked by comparing yourself to benchmark: be rational, and understand what you are investing in.
In this episode, we discussed concentration and risk in both investing and financial planning. Nathaniel started the conversation by asking: why would anyone invest in your 20 fair ideas if you can invest in your best 5 ideas? The key is to understand your circle of competence. Like Nathaniel always says, I know what I know, and I know what I don't know. Dan added, the most dangerous investment is when people think they know something, but they truly don't. Using Coca-Cola as an example, Nathaniel explained how PRICE and VALUE, RISK and VOLATILITY, are not the same things. Understanding their differences, doing deep research, studying the company, plus having a margin of safety, are the tools to minimize risk while concentrating an investment's weighting. Dan explained why over-diversification in investing can harm you. Tim added that the reason why we are comfortable with concentration, other than Nathaniel's ability, is that we have done financial planning to a T and thus understand our situation and goals. Like in life, you have to concentrate on your primary job/investment, so that everything else is achievable later in life. Don't get caught up and get sidetracked by "but my friends are doing XYZ" - just focus on what you are good at.
Today we talked about the bandwagon bias. It is a tendency to want to conform, be part of the crowd, to do things because others are doing them or believe in them. It’s also known as herd mentality and is similar to groupthink. This is a bias we see daily in investing and in financial planning. It happens so often because it's natural. Nathaniel gave a couple of examples in investment history of how that bias has caused some investors' losses. Tim discussed how that impacts clients' financial planning: they want us to tell them how are they doing compared to our other clients. The answer is always: it doesn't matter because everyone has different goals and lifestyle preferences. You may fancy your neighbor's new BMW, but do you know if they took on heavy debt to buy it? Do you still want to follow in their footsteps? As to how to fight back against bandwagon bias, Dan suggested that we should take time to think and think critically. Tim added that you should not be afraid of asking questions, and to be the dumbest person in the room. Nathaniel reminded us to try to be rational and be honest with yourself as to what YOU want in your life. Tim's conclusion is simple but straight to the point: understand who you are and what you value.
In this episode, we invited Mike Steadman, a fellow Bunker Labs veteran entrepreneur, to speak on topics ranging from race to entrepreneurship. Mike is the Founder of IRONBOUND Boxing, a veteran-owned company whose core purpose is to “change lives through boxing.” We started the conversation with his experience in the Marines as an African-American infantry officer, and how he grew from there to become an entrepreneur. He talked about his non-profit part of the business and how the boxing coaching experience transforms and benefit youth. Tim asked Mike where he got his drive to start all of this, and Mike spoke about his mother's influence and his family's tradition of "giving back." In Mike's opinion, when we discuss race, we focus a lot on social injustice, but not enough conversation on economic drive. It's important to build an economic environment that every race can thrive within and to achieve that, education and consistency are key. We hope you enjoy this episode. Talk soon!
It's part 2 of the Price vs Value fight! We discussed how a different narrative can shape the price of the same company so differently, and thus the importance of understanding the fundamentals of the company rather than the stories that you’ve been told. Dan asked a very interesting question: with more and more non-professional “do-it-yourselfers” entering the market, will that enlarge the disconnect between price and value? Now, remember we recorded this podcast before COVID-19 hit us and, at the time, we were in one of the longest bull markets. It’s incredible to hear Nathaniel’s answer because when he predicted what people will do when the market turns 20% down tomorrow, he was dead on! As Dan quoted, price is what you pay, and value is what you get.
In this episode, we talked about stocks' Price vs Value. Price is simply what the market is willing to pay today, at the moment; price is arbitrary and value is fundamental. Nathaniel explained why they are often different, and the disconnect between these two is what a good investor looks for: a cheaper price for a higher value. It doesn’t matter what kind of investor you are: growth-focused, value-focused, international-focused...in the end, the goal is the same, just with different applications. Nathaniel gave great examples of how irrational markets could be, and Tim added that you shouldn’t replicate other investors’ portfolios without understanding their reasons for buying and selling.
In today's episode, we talked about loss aversion. In cognitive psychology and behavioral economics, loss aversion refers to people's tendency to prefer avoiding losses to acquiring equivalent gains. Tim asked Nathaniel two questions: 1. what would you choose: guarantee to get $900, or a 90% chance of getting $1000, but a 10% chance of getting nothing? 2. what would you choose: guarantee to lose $900, or a 90% chance of losing $1000, but a 10% chance of losing nothing? Nathaniel gave his short and simple answers to both questions and explained how that affects his behavior in investing. Dan's suggestion to break this loss aversion bias in the daily financial decisions is to stop viewing only what's in front of you, but looking at it from a more long-term, and holistic view. Tim stressed the importance of having a process and structure, not to let your instincts jump to a conclusion, but think it through, and let the numbers guide you.
In today's episode, we talked about the restaurant industry during COVID-19 with one of our local restaurant owners Lance Ratze. Lance is the owner and creative force behind Yola’s Café. He reaches into the heart of the community with community events, local non-profit support, and strong business networking. He briefly talked about what kind of difficulties restaurants are facing during this time, and what they are doing to cope with it. He discussed the PPP loan, where it helped, and where it was lacking. Nathaniel asked an interesting question about "ghost kitchens", and Lance talked more about that and the importance of collaboration within the industry. Dan and Tim asked as a consumer, what can we do to help our beloved local restaurants and cafes. Lance's suggestions are short and simple: be patient and kind to the staff and owners for they are trying to figure out what's the best and safest way to serve you. Dan urged all local restaurant owners to reach out for help: it's time for us to lend a hand to each other.
For Part 2 of “What is a Financial Planner”, we talked about our view on some industry credentials and what they provide. Tim, who has both CPA and CPWA credentials, shared his experience on both courses. While they were helpful, he said, nothing trumps self-teaching and life-long continuing education. He added, the most difficult, and yet most fascinating part of financial planning, is the qualitative side. It’s not just about money and numbers, it’s also about your goals and lifestyle that you are willing to pay for. We believe that the key in financial planning is a forever changing, agile process. Like Dan brilliantly pointed out, as life changes, so should your plan. A financial plan is just a snapshot of a period of time - it should always evolve with your life.
In this episode, we are going to talk about what a financial planner is. Tim briefly explained the history of how the financial planning industry evolved from passive planning to actively giving out advice. Dan mentioned that here in LBW, we believe a proper financial planner's role should be both a financial consultant and a family office manager. With that in mind, we actively choose not to sell products but sell services. Nathaniel later pointed out that it's crucial to understand your Advisor's incentives. How they get paid can make all the difference in what they would do for you. In addition, we discussed the disconnect between the public's view of our industry as a financial planner versus what we truly can provide.
In this mini-series, we are going to talk about five cognitive biases and how they affect us in our financial decisions. Anchoring Bias refers to when a person latches onto the first piece of information they see or hear and end up being an "anchor" for new information that follows. Nathaniel mentioned how that effects him then it comes to investing in the stock market. To combat this bias: analyze historical data, but don't hold onto those historical conclusions. As one of our favorite quotes goes: "history doesn't repeat itself but it often rhymes." A cousin of the Anchoring Bias is Recency (Availability) Bias. This is a tendency to overvalue the latest information available. Dan pointed out how people are overly optimistic, and assume the market will always go up when times are good, and then go to the opposite extreme when times are bad. The key to avoid both biases is to gather information from different sides so that you can have a more comprehensive understanding. Tim explained how we can actually utilize these biases to our benefit when negotiating salary, buying a house, etc. We ended the podcast by recommending some of our favorite authors' books on these cognitive biases.
In this episode, we did some self-reflecting exercises with each other. Dan shared his experience regarding being at home for over a month and a half, he got the chance to figure out what's important to him, and what shocked him in terms of "I didn't know I used to spend that much on ABC!" Tim agreed and mentioned that it's extremely important for us to think about our financial needs when times are good so that we can plan and even take advantage of bad times like these. As for our half-machine-half-human friend Nathaniel, his message is loud and clear: when it comes to investing, have self-discipline, think long-term, and be rational. In the end, Dan added the following: please be aware of what you are good at, and what you are not. Do not be ashamed to ask for professional help when it's outside your expertise, and do not hesitate to give a hand to the less fortunate.
Stay tuned, and we will talk soon.
In the second part of the "Doctor is In" episode, we asked Dr. Ross Goldberg a couple of questions about COVID-19: Will the cure be worse than the disease? What is herd immunity and will it work? What's the future for our healthcare system and medical facilities? Can tech change the industry or is it bigger than that? Not only has he been working the healthcare system for over 20 years as a doctor, but Ross is also the President of the Arizona Medical Association, as well as an Associate Professor of Surgery at both Creighton University School of Medicine and The University of Arizona College of Medicine-Phoenix. These roles give him the opportunity to view the current situation from a more macro and long-term perspective. Tune in and listen to Ross' fascinating thoughts!
In this episode, we invited one of our good friends Dr. Ross Goldberg, M.D., FACS, who is the Specialty Ambulatory Medical Director and Vice-Chairman of the Department of Surgery at Valleywise Health in Arizona. With his 20 years of experience working in the U.S. healthcare system, Ross discussed the impact of COVID-19 both economically and health-wise, and how they are tied together. Even though hospitals are about saving lives, they can't do anything if they don't have proper business operations to keep them afloat. Ross then addressed the potential changes within the healthcare system and his expectations regarding the reopening of the economy. Stay tuned for part 2 of the "The Doctor Is In" episode!
In part 2 of this episode, we continue speaking to our dear friend Jon Crawford, who owns and operates a third-generation family business in the oil and propane business, about the most recent ups and downs in the oil industry. We talked about the oil price going forward; potential reverse effects of demand destruction, and the decrease in supply; the U.S.’s oil independence, and the effect on that, both good and bad. We also discuss his thoughts on whether he thinks the U.S. oil companies deserve a bailout from the government. Finally, we talked about propane and propane prices for our Midwest audience.
We hope you enjoy this episode, and talk soon!
In this episode, we invited one of our dear friends Jon Crawford, who owns and operates a third-generation family business in the oil and propane industry, to talk about the crazy oil market. He talked about the historical background of the oil price war between Russia and Saudi Arabia, and what role the U.S.'s oil industry played in the most recent oil price rollercoaster. Like everything else in the market, it ultimately boils down to supply, demand, and people's greed and fear.
We hope you enjoy this episode, and Part 2 of this episode will be available soon. Talk later!
Due to the recent market volatility, some people have asked us: why didn't you sell AAA when it hit $80? Why didn't you buy BBB when it collapsed to $1? Market timing sounds simple enough, but can it be done? Per JP Morgan Asset Management, did you know that from Jan. 3, 2000 to Dec. 31, 2019 (~almost 20 years, 5040 trading days total), if you were fully invested in the S&P 500, your performance would be a +6.06% annualized return; if you missed the 10 best-performance trading days, your return would be +2.44% annualized; and if you missed 60 best-performance trading days, your return would be -7.02% annualized. How crazy is that! Whoever tells you that he/she has the ability to pick those 10 or 60 days out of 5040 days and time the market correctly, is either lying or high. As Tim said, yes you may have a friend that has "timed the market" successfully in the past (for example, they bought lots of cheap but valuable stocks back in 2008), but what you don't know is that that friend may have done some very boring but thorough financial planning before 2008, set up their goals, and continued to save money every month. That made it possible for them to take advantage of the 2008 financial crisis. Their success is due to what they had done before 2008, not in 2008. Nathaniel summed it up perfectly: market timing doesn't work; it's luck, not skill.
In the past five weeks, unemployment claims have climbed to 26 million as panic flooded the market due to COVID-19 and an unpredictable future. A lot of business owners are in a pickle: on one hand, the business may not survive without some serious budget cuts, like laying off employees; on the other hand, without their trusted associates, no business can succeed and improve to the next level. What can we do? In this episode, we talked about the power of human capital. Tim and Dan explained the importance of planning for the long term when times are good. Drawing from his experiences in the Marine Corps, Nathaniel introduced the efficiencies of a bottom-to-top hierarchical structure.
We hope you enjoy this episode and talk soon.
A lot of clients and friends have been asking us recently: "I'm not worried about the market, I'm actually excited! But how do I take advantage of the crisis? I've heard that I should refinance my mortgage, is it true? Should I buy Amazon, Netflix or Zoom? What should I do?"
All very good questions. In this episode, we spoke about how to take advantage of a market downturn. Dan introduced the idea of Roth IRA conversions and mortgage refinancings. However, you should always understand the upside and downside of a concept. After all, there is no free lunch in this world. Nathaniel talked about his "filter process" when selecting investments, and cannot emphasize enough the importance of sticking within your circle of competence. As he brilliantly pointed out: "I know what I know, and I know what I don't know!" In addition, as Tim always says, without proper financial planning, you won't know how and when to take advantage of anything. A thorough plan puts you in the best possible position to face any challenge in the market and in life.
Enjoy this episode, and we will talk again soon!
As one said, small business isn't for the faint of heart; it's for the brave, the patient, and the persistent. This is particularly true in today's market: while COVID-19 affects almost every corner of the world, small business owners are getting more and more worried and confused about their future. In this episode, we talked about the importance of having a professional network (investors, CPAs, attorneys, bankers, etc.) for you to rely on since no one can be an expert in every area. As small business owners ourselves, our motto is: "trust but verify" so that we can make sound, well-informed, and rational decisions in this crazy market.
This episode is about "positioning." With the CoronaVirus pandemic, a lot of people are worried about their job security, health benefits, inability to keep a job, or having to go to work while your kids no longer have daycare. What do you do? We can not emphasize enough the importance of an emergency fund. With it, you can ride the market without sacrificing (too much of) your life standard, or even take advantage of a down market. Stay tuned, and listen to three guys speaking about how they utilize the emergency fund concept in their investments, their own personal finances, for their clients, and for their business.
When Mr. Market is depressed, our Portfolio Manager Nathaniel Leach always likes to say: “The British had it right during WWII: we just need to ‘keep calm and carry on.’” We appreciate his sentiment and couldn't agree more, but we wanted to give a brief update on some recent news.
In the last two weeks, we have seen a market sell-off. Fears of a Coronavirus (COVID-19) pandemic has placed the financial markets on edge. As many of you may know, the Coronavirus started in mainland China and has since spread across the globe. The industrial, travel, and tech industries have taken a beating as worries mount about global slow down. With China being the epicenter of the disease and being a primary supplier of goods across the globe, forecasters are worried about supply chain disruption and lower consumption with people not traveling and staying home from work (i.e., both a supply and demand problem). These concerns are now rippling across the globe, and the thought of a global economic slowdown is on the tip of everyone’s tongue.
Furthermore, the Federal Reserve declared an emergency rate cut, bringing the Federal Fund Rate down -0.50%. With the continued market sell-off, the 10-year treasury yield has hit all-time lows. To add to the pain, on Sunday night Saudi Arabia and Russia could not foster an oil production deal. Saudi Arabia’s response was to cut prices and increase production, sending oil prices crashing. Also, the markets are worried bonds backing the oil industry may be in jeopardy as over-leveraged energy companies could feel the pain from a significant drop in oil prices.
Mix all of this together, and you create fear. Fear leads to irrational behavior and market selling. Is the decline in prices warranted? To be frank, we do not know, nor does anyone else. And don’t just take it from us, in Howard Marks[1]most recent memo “Nobody Knows II” he stated:
“Will stocks decline in the coming days, weeks and months? This is the wrong question to ask… primarily because it is entirely unanswerable. Since we don’t have the answers to the questions about the virus listed on page two, there’s no way to decide intelligently what the markets will do. We know the market declined 13% in seven trading days. There can be absolutely no basis on which to conclude that they’ll lose another 13% in the weeks ahead – or that they’ll rise by a like amount – since the answer will be determined largely by changed in investor psychology.”[2]
Simply, with all of the news swirling and new recession fears on the table, our mindset has not changed. We will consider such factors when conducting our due diligence on the positions we have decided to purchase, but we will not allow them to dictate our investment decisions.
We will continue to observe such events and monitor the fundamentals of the companies we own. We intend to take advantage of the upcoming volatility. We will wrap up this series with a quote from Warren Buffett: “Only buy something that you’d be perfectly happy to hold if the market shut down for ten years.”
Sincerely,
LBW
[1] https://en.wikipedia.org/wiki/Howard_Marks_(investor)
[2] https://www.oaktreecapital.com/docs/default-source/memos/nobody-knows-ii.pdf