Saturday, December 24, 2011

When Will the Wall Street Firm Abuse End?

If this is not proof of a Wall Street firm's shenanigans, then I do not know what is. Wal-Mart Stores, Inc. was sued in the U.S. District Court for the Western District of Missouri over Wal-Mart and certain employees who allegedly violated their fiduciary duties by selecting retail mutual funds as investment options, rather than lower fee institutional class funds. In addition, it was alleged that these same defendants breached their fiduciary duties by failing to disclose certain fund expense and revenue sharing information. In layman's terms, this means that the mutual funds being sold to Wal-Mart employees were loaded with 12b-1 fees that paid the Wall Street firm and its advisors excessive trail commissions.

Unfortunately, today there are a ton of 401(k) and Profit Sharing Plans that do this very same thing. This is your wake up call if you own a business. You cannot do these kind of shenanigans any longer. Every attorney in the country will take notice of this case and brother you better believe it when I say they will be looking at every 401(k) and Profit Sharing Plan that they can find to see similar violations of fiduciary duties. If you have yet to be sued over your 401(k) and Profit Sharing Plan, then get ready. The litigators will find you. All 401(k) and Profit Sharing Plan information is publicly available to anyone. All they have to do is look up your 5500 forms on

If you are a business owner with a 401(k) and Profit Sharing Plan, or 403(b) or 457 Plan, then you better take notice of what I am saying here today. Good practices include:

  • Retaining an investment consultant who can acknowledge ERISA fiduciary status in writing and that this investment consultant be reviewed annually for conflicts of interest;
  • You should make available web-based investment education resources to Plan participants;
  • You should eliminate any investment options that include mutual funds that pay 12b-1 fees, and funds that provide revenue sharing or similar fees to any party at interest, including the Plan's trustee or recordkeeper;
  • You should consider adding passively managed funds as investment options; and
  • You should comply with the Department of Labor's participant disclosure regulations.
There are more important issues than those mentioned here, but this is a good start.

When I was the Branch Manager for Charles Schwab several years ago, I had a retirement plan guy come in to talk to me and my team. He told us how wonderful his firm was and how they could put all these really good mutual funds in the 401(k)'s that they wanted to be the third party administrator on. I asked him how much it costs and he told me that it was all taken care of with revenue sharing and 12b-1 mutual funds. The guy never would tell me or disclose his fiduciary duty to me and my team. This is how these Wall Street types sold the 401(k). They would tell the employer that it "doesn't cost you a thing. It is all internal to the funds." In other words, screw the employees. I never did business with him, because I knew that what they were doing was a clear breach of fiduciary duty. Looks like it is business as usual some eight years later. Nothing much has changed, especially when you have a Wall Street firm in the mix.

If you are a business owner and want to talk about how to protect yourself from breaching your fiduciary duty, then give me a call. If I cannot help you, then I will refer you to someone who can. I promise you it will not be a Wall Street firm.

Wednesday, December 14, 2011

Blinded by Wall Street

A so called "Vice President of Investments" recently responded to an article online trying to state his position as a Wall Street Broker and how he was just as "fiduciary like" as Independent Registered Investment Advisers. What a bunch of baloney! He claimed his advice was suitable and he looked out for his customers. What a joke! Do you realize that most all Wall Street Brokers are Vice Presidents of Investments? This title in and of itself is totally misleading.

Fiduciary like? There is no such thing as "fiduciary like." This shows how blind these Wall Street Brokers are when it comes to doing the right thing. They have actually convinced themselves that selling products from the inventory of their Wall Street brokerage firm is perfectly okay. They have also convinced themselves that selling a client a Variable Annuity in a IRA account that pays them 6 to 8% commission and locks the client in for 10 years or more is perfectly okay. That is instead of opening a regular brokerage IRA account without a 10 year or more penalty for early withdrawal. Further, they convince themselves that it is okay to sell mutual funds that charge a 5.75% sales load, when no load funds are available to them to offer to clients.

A read an article online recently that said over 90% of the Registered Investment Advisers out there today are also affiliated with a Wall Street firm, a Bank or an Insurance Company. This means that there is only 10% of us true fiduciaries out there. So, look out. Nine out of ten people out there today giving financial advice is doing so in their firm's best interest, not yours.

In my humble opinion, the battle the fiduciary standard is going to end with Wall Street brokerage firms, Bank and Insurance Company clients getting the shaft. There is already talk on the street of how the fiduciary standard is going to be watered down to allow the same Wall Street revenue generating brokerage machine to continue. Banks and Insurance Companies will continue business as usual. People will continue to be given financial advice that favors:
  1. The Wall Street firm first, or the Bank or Insurance Company first.
  2. The Wall Street Broker, or excuse me...I meant Vice President of Investments.
  3. I interrupt this list for an important message. I just realized that if you get your advice from a Wall Street firm that is owned by a bank and you are sold a Variable Annuity, then the Wall Street firm, the Bank and the Insurance Company all benefit before you. Yikes!!
  4. Last on the list unfortunately is you.
It astounds me that anyone would ever obtain their investment advice from either a Wall Street firm, a Bank or an Insurance Company when the cards are stacked against them from the get go. Do you get your financial advice from a Wall Street firm, a Bank or an Insurance Company? Why? They do not care about you and they are not on your side. More importantly, they do not do what is in your best interests.

The good news is that there is a better option. Independent Registered Investment Advisers who have no affiliation with a Wall Street firm, a Bank or an Insurance Company. Sadly, we do not have millions of dollars that we take from clients and pay to Congress in order to get our way. We simply just keep plodding along hoping that one day, the people of America will wake up and realize that doing business with an Independent Registered Investment Adviser is the only place to obtain your financial advice.

Keep Your Assets. Take My Advice. Seriously.

Merry Christmas, Happy Hanukkah and Happy New Year. God Bless.

Monday, November 28, 2011

Multiple Seminar Attendees Get Bad Advice

It is amazing that even when you lay yourself out there for all the world to see, people still gravitate towards the advisors (don't make me laugh) who claim to protect seniors. I recently held a seminar where I showed people my background right in the seminar. I showed them how to look up my background in several different places on the web. Further, I explained to them that I am compensated by fees. Apparently some people do not care if you are honest and upfront to them. They would rather someone lie to them and take them for as much commission as possible.

Recently, I received a call from someone who attended my seminar and they wanted to know how to get a hold of one of my competitors. This senior person was confused about who she was calling and could not remember whether my competitor worked for me or the people that ran the other seminar that she went to recently. If she is already confused, sadly this means that my competitor will likely have a field day and take her for everything they can.

This competitor is not licensed as a financial advisor but rather only as an insurance agent. They blatantly promote on their web site that they sell annuities. They also claim to offer financial planning. Here is a news flash. You cannot say you do financial planning unless you are a Registered Investment Adviser. This firm is breaking this rule big time. ( I always wonder, why is it so easy for me to find these snake in the grasses, but the regulators never can seem to find them?)

They also have video testimonials on their web site (which the last time I checked were illegal.) It is very obvious in these video testimonials that the seniors in the videos were "coached" to say certain wonderful things about the annuity sales person. The whole purpose of these video testimonials is to establish trust and credibility for the seniors that view them and sell more annuities, of course.

This firm of annuity sales people claim to have an office, but I know their office to be one of those that you just rent when you have a meeting. The sad thing is that they will not tell the seniors that they are advising that the office is not really their office. Nor will they tell them that the mailing address to this rent by the appointment office is there to imply that this really is their office.

I have an ethical question for you: Do you think it is alright to operate your business in this manner and not tell prospective clients that this is really not your office?

My answer is not no, but h**l no!

A senior who needs help planning for long term care will have a problem when they have a portfolio of annuities. Most of these annuities will have a 10 year surrender charge. This is because they pay the agent the most commission when they have a 10 year surrender charge. A lot of these annuities can be converted into a guaranteed income stream, but if they are trying to qualify for public benefits, then they will have a big problem. A lot of the annuities sold out there have a minimum of 10 years that you can annuitize. However, if an Elder Care Attorney advises that the annuity can only have a 5 year term, then this will disqualify the senior from public benefits. This means that they will have to spend their all of annuity money for their long term care needs BEFORE they can qualify for public benefits. Do you really think the annuity sales person is going to admit this potential problem when they are looking at commissions of $7,000 to $10,000 or more? Keep your assets. Take my advice. They will not tell you about this at all, because if they do, then they would lose the potential commissions.

I will keep telling people my background, disclosing all conflicts of interest, explain my fees and delivering great advice while I am up against competitors like the one described above. You see what guys like me are up against? I do not mind competition, but come on man! At least be legal and ethical competition.

Stay safe out there. Watch out for your mom and dad.

Monday, November 14, 2011

Should You Invest in a Hedge Fund?

If you are an individual investor, then in my opinion, the short answer is no. The question is why should you invest in a hedge fund? It boggles my mind why people continue to want to invest in things that they cannot see, touch, feel, hear or taste. Well maybe I am going a little overboard, but most people want to invest in a hedge fund because of one of two reasons.

  1. Performance
  2. Hedging a portfolio against a shock to the market.
Number one is clearly bad. You should never and I mean never invest with anyone based on their performance. Suppose a hedge fund manager had great performance for the last year. This does not mean that they will have great performance for this year. Performance is the world's worst reason to invest with anyone.

Number two can be accomplished in other ways. You do not have to give your money to a superstar hedge fund manager (who is basically a gambler with your money) because there are now other options. Hedge fund managers take positions that they believe will be profitable in the future. Sometimes they are right and sometimes they are wrong. It is like investing in general. You can have good years and bad years.

I can show you 5 different examples to hedge an index like the S&P 500®. By the way, do not do this at home. This is not investment advice, rather educational in nature.

  1. If you believe the S&P 500® is going to go up, then you might buy 100% S&P 500® index.
  2. If you think the S&P 500® is going up, but you do not feel real strongly about it, then you could do a 130/30 long short on it. That is 130% long and 30% short the S&P 500® index.
  3. Or, if you are not sure of which way the S&P 500® is going and you just want to preserve capital, then you could go 50/50 long and short. You will not make anything nor lose much besides trading costs. Your portfolio value should stay close to where it is currently valued.
  4. If you are a bear on the S&P 500®, but not a total bear, then you could go 130/30 short long. Or 130% short and 30% long S&P 500®.
  5. If you are a real bear on the direction of the S&P 500® and firmly believe the market is going straight down, then you can go 100% short the S&P 500® index.
What is the right answer? There is no right answer.

Obviously, there is perfect timing for each of these strategies, but also significant risk to each of them if you are wrong. Hedge fund managers do more than make these type of decisions. I wanted to explain to you the various options available to them in simplistic fashion. When they invest your money, they are making a bet similar to one of these five strategies. When they are right, they are heroes. When they are wrong, they are goats.

There is more risk to investing in hedge funds than meets the eye. The SEC recently charged two Minnesota based hedge fund managers and their firm for facilitating a multi-billion dollar Ponzi scheme. (Not again.) See this link below.

Here is something that I want to get across to readers. Stay with visible, publicly traded investments. Do not fall for the sales pitch for non-publicly traded, exotic or offshore investments. Know where your assets are custodied. Compare your statement to that of your custodian. Be clear on who is managing your money. Know what a feeder fund is and how it functions. Most importantly, know what you do not know.

Stay safe out there.

Wednesday, October 26, 2011

Endless Supply of Fools

In the category of believe it or not, I am just dumbfounded that people continue to give money to "hedge fund managers" without doing the least bit of due diligence on their background. The latest supply of fools apparently invested at least $1.7 million dollars, before the SEC stepped in and put a halt to the alleged fraudulent behavior. Supposedly, this hedge fund manager told his victims that he graduated from Harvard and also got his graduate degree from Harvard. Truth be told, he flunked out of Harvard and had to withdraw because of failure to perform academically. He was only at Harvard for 3 semesters. Hardly enough time for both an undergraduate and a graduate degree.

This piece of work implied to investors that he was managing as much as $16 billion dollars, Ernst & Young served as the fund's auditor, Credit Suisse served as the fund's prime broker and custodian and the fund was a business incorporated under the laws of the British Virgin Islands. He promoted his fund as an offshore hedge fund. All of these fraudulent claims can be verified if you took the time to investigate. How many of your friends have Credit Suisse as their custodian? That in itself is a big clue. The British Virgin Islands has a web site where they list the businesses that are domiciled on their islands. Noticeably absent is guess who?

He was selling the sizzle. Once again an endless supply of fools lined up and gave this piece of work their money. They can forget about getting much if any of it back. I do not feel the least bit sorry for them. They were fools to invest with this piece of work. Luckily, the regulators stepped in before this piece of work could steal more money.

It may surprise you to learn that you can actually very easily find out about this guy's background with a few simple web searches. The smart investors do the work. They check the backgrounds of the people that they do business with before investing. The endless supply of fools do not.

The moral of the story is check the background of your financial advisor. If you need help doing so, call me at 904-262-0888. If you are at a computer when you call, I can walk you through the process. It is not hard and only takes a few minutes. You can risk it if you want to, or you can be smart and protect yourself.

 Be a fool or be smart. It is your choice.

Monday, October 3, 2011

Sad But True

It breaks my heart when I see people getting taken advantage of by registered representatives (RR) and insurance agents. Especially, the elderly. I had a prospective client come in and I reviewed their (I hate to even say this) portfolio. Forty percent of their portfolio was in Non-Publicly Traded REIT's. Readers of this blog know how I feel about these (again, I hate to even say this) investments. Of course this is what the registered representative (RR) had sold the client. When an RR puts people in these Non-Publicly Traded REIT's, it is out of pure greed. These investments pay 7 to 10% in commission to the RR while locking in the client for 10 to 12 years or more. Apparently, this RR sees no problem in selling someone in their eighties a non-liquid investment that may or may not give them their money back before they turn 90 something. Nor does this RR see any problem with locking up 40% of an elderly client's money for 10 - 12 years. Is steam coming out of your ears? It is mine.

I thought that I would look up the background of this RR on the FINRA Broker Check site. Seems like he had a complaint for selling...guess what? You guessed it...Non-Publicly Traded REIT's. As luck would have it, he won the complaint against that client by saying that he had three meetings with that client where he explained the risks and that client knew and signed off on the risks. You see this is how Suitability in the world of Wall Street broker-dealers works. RR get away with this kind of behavior all the time.

But wait, it gets worse. I have not told you about the insurance agent and their antics yet. The rest of this prospective client's portfolio was in...guess what? You guessed it...Annuities. Several of these annuities, I know for a fact, pay 10% commissions to the insurance agent and have 14 year surrender charges for the prospective client. So, I am looking at this situation and I see the whole portfolio locked up for between 10 to 14 years for someone in their eighties. Insurance agents are subject to similar Suitability rules. As long as the prospective client is explained the risks and signs off on the risks, then this is perfectly legal to do. Legal maybe, but ethical, no stinking way.

So, I carried my background search a little further. I decided to look up this insurance agent's background. Seems like we have a few issues with this (dare I say it) professional. Apparently, this person had their securities licensed revoked and also had served two years probation on their insurance license for...guess what? Right again. Complaints about selling annuities.

This prospective client had paid roughly $60,000 in commissions to these two professionals.

I know what you may be thinking, but this kind of activity is so common amongst RR's and insurance agents that it is not worth complaining about it. Think about it this way. If each of them are making $30,000 off of this person, then they are probably doing the same with everyone. Therefore, the likelihood of them making several hundred thousand dollars a year is a very high possibility. As a result, they can easily pay for their legal defense to fight any complaints. This would just be a cost of doing business.

Like my title says...sad, but true. With a caveat from me, don't let this happen to you or someone you know. Do not do business with banks, insurance agents or Wall Street firms. Their first priority is to generate commission revenue for themselves. Clients are of little concern.

Monday, September 26, 2011

Routine Advice Makes for Difficult Choices Later

For the record, I am not an attorney and I do not provide legal advice.

I still meet people who have no wills, or worse wills that they have not updated in over a decade. Then, of course there are the people who have gone to an attorney's Living Trust Seminar. Generally, they get a Living Trust completed and think everything is fine. I am amazed to see these client's of local attorneys who have Living Trusts, but have not transferred any of their assets into their new Living Trusts. There is a reason for this that I will discuss later. Wills and Living Trusts that are properly designed and implemented are useful tools for the "what if you die" scenario. However, what if you do not die, but rather have a prolonged illness that requires Long Term Care?

The choices to pay for Long Term Care are simple.
  1. Long Term Care Insurance.
  2. Use your own money.
  3. Public benefits like Medicaid or VA that you have to qualify to receive.
I dare to say that none of these choices are choices that anyone really likes. Most people do not buy Long Term Care Insurance, because of the costs. Most people do not want to use their own money to pay for Long Term Care costs and expenses, either. Finally, most people do not want to think of themselves as having to take handouts from the government. Nevertheless, these are the choices. You can plan for it, or not.

Sadly, if you do not have any Long Term Care insurance, then you have to use your own money, unless you can qualify for Medicaid or VA benefits. In order to qualify for Medicaid, you can have about $2,000 in cash. If you have more than that, then the state that you live in expects you to pay your own way.

Here is the inescapable truth: If you do not plan, then you will pay out of our own pocket.

With proper planning however, there are things that you can do to protect your assets.

A lot of older Living Trusts and Wills were what is known as "I Love You" trusts or wills. This means that the husband leaves everything to the wife and the wife leaves everything to the husband, then when they both die, everything goes to the kids. There may be reasons why leaving everything to your spouse could be a bad idea. Especially, if your spouse has qualified for Medicaid and is in a nursing home. Suppose the healthy spouse dies and leaves everything to the Medicaid patient husband in the nursing home! Yikes!!! This would be an irrevocable scenario where the family would receive nothing until after Medicaid was fully reimbursed.

As adult children, we assume that our parents have hired the right attorney, the right financial adviser and the right accountant and everything should be in order. I can tell you that in most cases, everything is not in order. The main reason is that the attorney wants to earn their fee and generally does not work with the financial adviser or accountant. The financial adviser does not want to have roadblocks like attorneys and accountants to get in the way of their advice. The accountant does have any time as it is since most people wait until the last minute to file their taxes. The last thing the accountant wants to do is chase down some attorney or financial adviser on April 15th and tell them what they are filing on behalf of their client. The point is that there is a strong likelihood that your parents financial situation is not in order like you may think. It is worth it to take a look see.

Of course, some people do not have attorneys, accountants or financial advisers at all, but are do-it-yourself-ers. These people go to Legal Zoom® for legal documents, online brokerage firms to manage their own money and they use Turbo Tax® to file their taxes. I can guarantee you these people have not properly planned for a prolonged illness.

We have a process to help you through this complex area of life. Instead of using an attorney to sell you a Living Trust, a financial adviser to recommend investments or an accountant to file your taxes, you might want to think about using someone like us to help you navigate the complexity of what happens if you or a loved one has a prolonged illness requiring you to spend all of your hard earn money. In conjunction with an Elder Care Attorney, we can help devise a plan to protect your assets.

Our next seminars are October 6, 2011 at 2 pm or 6 pm at the aloft Tapestry Park Hotel at the Southeast corner of Southside Blvd and Gate Parkway (across from Claude Nolan Cadillac) in Jacksonville, Florida. R. Kellen Bryant, Elder Care Attorney who is a member of the National Academy of Elder Law Attorneys, WealthCounsel, Medicaid Planning Systems and who is a VA accredited attorney will be the guest speaker. You can RSVP to 800-769-8516.

Monday, September 19, 2011

Beware of Misleading Seminar Invitations

I received an invitation to a steak dinner over the weekend! It happens to be at a very popular place here in Jacksonville and it is not cheap either. I told my wife when I received it that..."what do you want to bet that this person does not even have an office of his own, is not licensed as an investment adviser and probably not licensed with a broker-dealer either?" She did not want to bet me, because she knew that I was probably right.

The postcard invitation implies investment expertise. The name of the firm listed is "__________ Financial Strategies" There is a slogan for the firm that uses the word "Wealth" in it, which again implies investment expertise.

One of the bullet points on the postcard says the following:

If I can stop you from paying taxes on money in Stocks, Bonds, Mutual Funds and CD's by redirecting - you would keep more of your money.

The other bullet points told me that this was probably an insurance agent. Being a compliance oriented person, I know how to check people's backgrounds. First I went to the SEC site, located at An investment adviser search for the firm name and the "advisor's" name (don't make me laugh) turned up nothing.

Then, I thought, surely this guy is affiliated with a broker-dealer. So, I went to the FINRA Broker Check site located at and did a search for this "self annointed advisor" who is going to advise people on when to "redirect" their stocks, bonds, mutual funds and CD's. Again, I was sadly disappointed to not find any record of this advisor.

Lastly, I knew that I could look up his insurance record to see if he is insurance licensed. Sure enough, he is licensed with a boat load of insurance companies a lot of whom are in the annuity business. Now, there is nothing wrong with earning a living. However, I do not take to kindly to people who break the rules while we ethical people in the business adhere to the rules.

An insurance agent cannot advise people whether or not to sell their stocks, bonds, mutual funds, or any other investments. They are NOT LICENSED to do so. Apparently though, they have no problems implying that they are licensed to do so.

Sadly, several people will go to this seminar. This advisor will get some appointments out of it and most likely will convince some of these people to sell their stocks, bonds and mutual funds and buy the annuities that he has as his end game. In doing so, he will violate the rules around investment advice in Florida, but he will probably get away with it.

When I was the former branch manager at Charles Schwab, we used a location in the same building as our Schwab office for client seminars and meetings. Strangely, this advisor has this same address as his office. I recognized the address on the postcard right away as the same address. This office and meeting complex is one of those places that rents offices to business people for their appointments. The postcard implies that this is his office which is not true. When you go into this office and seminar complex, you will think that this is his office, unless you are like me and have been there before. Is it just me, or is this just a tad bit misleading?

Let's evaluate this, shall we? If he is misleading on his postcard about his licenses and qualifications and he is misleading on his office location, or lack thereof, then what else might he be misleading about? He has no qualms about implying investment expertise. He has no qualms about implying that he has an office in a four star office building. Can you really expect ethical objective advice from someone like this? I'll let you answer that question.

My wife was smart not to bet with me on this one. I was right on with my analysis. No investment adviser license, no affiliation with a broker-dealer and no registered representative license. Further no office! Only an insurance agent trying to sell everyone he meets annuities. This is just a wee bit of a conflict of interest, don't you think?.

Readers of this blog will know that doing business with banks, insurance agents and Wall Street firms benefits them, not you. The best choice is to use a registered investment adviser who does not work for a bank, who is an insurance agent only (not licensed to give investment advice) or who works for a Wall Street firm. Even if it is not me!

I will be able to look across the street and watch the herd go in for their steak dinners this week. The restaurant is right out my office window. If only they did a little research ahead of time, then they would have stayed away. Perhaps, they would have saved themselves a lot of headaches, too.

Until next time.

Wednesday, September 14, 2011

Brainwashed Thinking

I was at a meeting recently and I had some conversations with some insurance agents, some bank representatives and registered representatives. This was just idle chit chat about what I do and what they do. I was very surprised how brainwashed these people are by their affiliations. They have no clue what it means to be a fiduciary and deliver advice in a client's best interest.

The SEC is currently evaluating how to apply a fiduciary standard to these type of professionals. I can tell you, the SEC is facing an uphill battle.

One of the people I spoke with in my idle chit chat was an insurance agent. I told this person that I recently had a seminar with planning ideas to help seniors qualify for Medicaid Planning and Veterans Benefits. This person's first question was ..."what products do you sell to them?" Those of you who have read my book, or seen my latest brochure will know that insurance agents are compensated by product sales. Unfortunately, this is all they know. They know that they get paid by product sales. When someone asks..."what product do you sell to them?", then that tells me what they focus on with their clients. They focus on themselves. This of course, is contrary to a fiduciary standard of care.

My answer to to this person was that I did not sell products to them, but rather I did what was in their best interest and only charged a fee for my services. This person persisted with...'but, you have to be selling some products. What products are you selling?" I was really taken aback about how the blinders over this person's eyes are affecting their objectivity. I may be reaching a little bit here, but the concept of charging a fee and doing something in the best interest of a client seemed to be so far removed from this person's thinking that it was not even a remote possibility.

Quite frankly, I was astonished. Sadly, most of the people in my business work at banks, insurance companies or Wall Street firms. They have all the marketing dollars and political power. They are so brainwashed into the product sales mentality that they cannot even imagine what it takes to do something in a client's best interest. Like I mentioned earlier, the SEC is facing an uphill battle.

Another person that I chatted with wanted to know if I was in the Financial Planning Association. The FPA is made up of CFP's and other professionals who are mostly people who work at banks, insurance companies and Wall Street firms. Take a guess how excited I would be to run around with a bunch of people like these folks.

This person saw my CFP lapel pin and said that I should join. I then said, "Why?" He said, "because you are a CFP and the FPA is for CFP's." I said to this person, "you are going to have to do better than that." The attorney standing next to me laughed when I said that. This person, who was a bank representative by the way, went on to try and convince me of the wonderful educational opportunities and continuing education available. As a courtesy, I gave this person my business card, but I have to admit that I am kind of like Groucho Marx in this area. I will not join any organization that wants me to join. The truth is the FPA is in decline and they are losing a lot of members each year. Every time I run into one of these people, they are trying to convince me to join the FPA. If it truly was a good organization, then no one would have to recruit for it. This tells me that it is a lobbyist organization with a bunch of fat cat salaried people trying to justify their existence. I will not be giving them any of my money.

The last thing I want to do is go to a meeting where insurance company home office people are telling me how great their products and commissions are for insurance agents.

I am very comfy in my own little world of the fiduciary standard and doing what is in the best interests of my clients, thank you very much.

Later my friends.

Wednesday, September 7, 2011

Investing Pundits

I am always fascinated watching these "investment advice givers" on television and their view of "what to do now." In addition, there are a group of people who routinely appear on television and in the Wall Street Journal and other print publications. The producers and journalists have their trusty list of contacts and they always seem to use the same people. The question is always the same. "Where should people put their money now?"

The answer is usually targeted to the kinds of clients that the person being interviewed has in their business. Rarely ever, is the advice good advice for the general public. There is a reason for this fact. This reason is that there is no good advice for the general public. Each individual's circumstances are different and the advice should also be different.

There are times, however, when advice can be consistent for all. In the year 2008, I had enough of the insanity going on at the time, so on October 6th, 2008, I went to 100% cash. This decision was easy for me. It is my job to protect my client's assets in the best possible manner. This is what I did back then.

Fast forward to the recent past. On August 8th, 2011, approximately one month ago, I sold all equity investments in our client's accounts. I kept short term bonds, gold, managed futures and commodities for those who already held these in their accounts. Some clients I kept 100% in cash, because it did not make sense to run up transactions costs. Nor did it make sense to buy assets classes like Gold when they had already run up so much.

So, why did I do this again?

I evaluated the world's economies, along with my partner, Stan Rosenthal and after validating what we believe to be happening right now, we made the decisions that we did. By evaluating the world's economies, this is what I mean:

Europe has shown an unwillingness to really address their fiscal problems and uniformity of austerity decisions seems unlikely. I believe that the markets will force their hand. United States institutions most likely hold European sovereign debt. Sovereign debt is debt issued by the country in question. Such as Greek debt, Italy debt and so on. If the U.S. is currently holding the sovereign debt of Europe, then there will be a domino effect on our markets. Do we know how much sovereign debt our institutions hold today? Does anyone really know for certain? No, I do not think so. Therefore, it stands to reason if Europe goes, then so goes the world economies, including the U.S. A double dip recession would be certain.

Another concern of mine is China. Can we really trust what the government of China says? I look at the U.S. economy and I see a stark lack of demand. The lament from all businesses is that we do not have the demand. It does not take a smart fellow to figure out that if our businesses are not seeing the demand, then can China continue to export their products to our economy without any demand? I do not think so. They have to be feeling the effects of our lack of demand.

In addition, in China, they appear to be having a real estate bubble. They have built and overbuilt buildings for the anticipated growth of their economy. I suspect that the Chinese government will institute some controls to slow things down a little, but being a true neophyte on capitalism, I doubt that they will be able to control things like they think. There is a business cycle of booms and busts and there always will be. It makes no difference if it is China, the U.S. or any other capitalism based country.

When you factor in the political implications of Washington, D.C. politicians, overly burdensome regulations, the government trying to "make the banks pay" for 2008, then you have all these things combine to make you want to call a timeout.

Now, they are talking about "writing down" mortgages to currently appraised values. This means that there are going to be a lot of losses if this happens. Who is going to decide whose mortgage gets written down and whose doesn't? I can see lots of real estate investors and banks losing lots of money if this happens. This will not be good if it does. Lawsuits will come flying from everywhere. You wait and see.

Technical analysis is something that I follow very strongly. I look at Technical Analysis on new housing sales, existing home sales, employment trends, retail sales, manufacturing, GDP and other areas. Other people look at the numbers. It is better to look at the charts, because you can clearly see the trends. Nothing in these charts gives me "turnaround confidence".

Further, when I look at the major indexes from a Technical Analysis standpoint, I see a waterfall in August and an attempt to establish a base in September. A waterfall is where the price of the index drops off a cliff similar to a real waterfall. A base in technical analysis terms is when the price of the index is going sideways. There appears to be a ceiling on the upside, or not enough buying volume to sustain upward momentum. In addition, we are into an uncanny period of moves up and down over triple digits. Contrary to popular belief, this is not the "new normal".

These investment pundits trot out there everyday and say "this is a good buying opportunity." Hogwash! They also talk about "missing out on a great return." More Hogwash! What great return has the market given us over the last 10 years?

Here is something to really think about. The Baby Boomers are getting into their retirement years. I doubt very seriously that they will be holding 80, 90 or 100% stocks as they get closer to retirement. This means that they will be selling. There will be lots of selling. In my mind, in order to be successful in a selling environment, (like this country has never seen before), you are going to have to pick your spots. Sometimes, you have to go against the status quo of advice you hear on television and read in publications.

I'm afraid that in order to be successful at advising clients on their investments, then you are going to have to be prepared to sit on the sidelines sometimes. So, what if you sit in cash for a few months. You will still have that cash after a few months. The trick, as I discuss in detail in my book, is to not take big losses. Also, you never want to hold 80, 90 or 100% in equities.

Keep Your Assets. Take My Advice. It is Easier to Climb Out of a Shallow Hole.

Good advice for all.

Tuesday, August 30, 2011

Really? You Cannot Be Serious?

This kind of stuff just boggles my mind. I cannot understand how people continue to fall for this garbage. Once again, another team of alleged Ponzi schemers in Florida took investors to the tune of $22,000,000. Their sales pitch centered on annual returns of 14% to 124%, according to the SEC.

It turns out that one of the alleged Ponzi schemers spent 11 out of the last 21 years in jail. These characters fabricated account statements that showed their high returns. They allegedly spent the victims money on jewelry, gifts and property. They also paid themselves millions of dollars in phony management fees.

Apparently, the Ponzi schemers are getting wise to the fact that they cannot post their investment offerings on a web site. These people allegedly told investors that these investments were based in Bermuda and audited annually by a firm based in Bermuda. They also guaranteed in writing that investor funds would be protected.

I'm sorry, but I do not feel sorry for these victims. Here are the immediate red flags that should have told any investor to stay far away and also to pick up the phone and report people like this to authorities.

  1. No background check was done on these so-called advisors. Without much effort, they could have easily discovered the criminal background of one of these advisors.
  2. The returns being touted were way out of line. Listen to me people. If someone is telling you how high their returns are, then they are more than likely crooks. If you are investing your money based on the returns of any advisor, then in my opinion, you are a making a big mistake.
  3. They claimed their strategy worked in both bull and bear markets. Pure unadulterated BS.
  4. These so-called funds were based in Bermuda. Are you kidding me?
  5. These funds were audited in Bermuda. Oh right. Bermuda is a hot bed of investment auditing activity. Here is a clue. Have you ever been to Bermuda and seen all the auditing busineses on every street corner?
  6. These funds were guaranteed in writing by the person selling them. Come on, man! People cannot be this dumb, can they?
  7. I have not seen the account statements, but I am certain that it would have been easy to see that they were fake.
  8. The offering documents were also made up apparently. This is another strong clue as to something being wrong. If it is not publicly traded, then this is an immediate red flag and a big red flag at that. If it is sold by an "offering document" then watch out!
Unfortunately, there never seems to be a shortage of people who line up to invest their money with thieves and Ponzi schemers. With all these red flags, I'm sorry, but I simply cannot feel sorry for these people who fell for this garbage. I'm sorry they lost their money, but I blame them for making the mistake to invest with these Ponzi schemers in the first place. There were just too many red flags.

Readers of my blog know better.

Wednesday, August 24, 2011

Health Insurance News That You Need to Know

There are some recent developments that everyone needs to be aware of regarding health insurance for pre-existing conditions. This PCIP (Pre-existing Conditions Insurance Plan) is available right now in 23 states, my home state Florida being one of these states. The qualifications are fairly simple.

  1. You must be a U.S. Citizen or living in the U.S. legally.
  2. You must have been uninsured for the last six months.
  3. You have a pre-existing condition that can be documented by your doctor or doctors.
The plan has three options. These plans are Individual Only Plans. No Family Plans.

  1. 80/20 with a $2,000 deductible.
  2. 80.20 with a $1,000 deductible.
  3. 80/20 with a $2,500 deductible and a Health Savings Account.
There is a web site on PCIP. It can be found at At this web site, you can found out all about the coverages available, brochures, rates and you can even sign up for it online. There is also a $100 referral fee for Brokers (like me) who refer clients to PCIP and they accept and enroll in the plan. If you know of someone who is uninsurable and feels left out in the cold, please tell them about this option. If they happen to live in Florida, then tell them to let me put in a referral for them, so I can receive the small one time $100 referral fee.

We all know Health Insurance is expensive, but these rates seem to be fairly reasonable as compared to regular Health Insurance. I can see a huge benefit for the age 55 to 65 age group. Some of these people may have uninsurable conditions and they have been paying out of their own pocket for health care expenses. Now these uninsurables have an option.

Another category where this would be beneficial is for younger people who may have not had any Health Insurance and were in a tragic accident of some kind. Perhaps they have some long road of rehabilitation ahead of them. This would normally bankrupt a family having to pay these kind of expenses. At least now there is a option to help them.

So do the right thing and let your friends and family know that there is now this option available. It may be a good deed indeed for you to make them aware of PCIP.

Monday, August 22, 2011

Investors Beware

I am starting to get more and more emails from investment firms based in New York, New York. These emails are always touting the performance of their investments and for some reason, they always seem to based in NY, NY. No slam on you New Yorkers, but this is a fact Jack. Usually the email looks similar to this:

Dear Investor,

The "Promoting This Fund Illegally" Fund, LTD returned +.80% in July 2011. The 2011 YTD return is +3.91%.

Please find the performance sheet attached. 


Ima Idiot that does not know compliance rules (not a real email address)

For one thing, you cannot send out an email like this to investors. This is considered advertising and all fund advertising has to be approved by compliance. I guarantee you this was not approved by this firm's compliance department.

Secondarily, Non-Public Limited Partnerships are investments that can only be sold by prospectus. There was no link to any prospectus document in the email. Only a two page fact sheet showing performance numbers. You cannot tout performance without full disclosures. It makes no difference whether the performance is good or bad. You cannot tout performance without compliance approval and lots and lots of disclosures.

Thirdly, and more important, Non-Public Limited Partnerships are on My Do Not Buy List. These investments are highly illiquid. They are kind of like "The Hotel California. You can check in, but you can't check out." They will gladly take your money, but you can forget about getting it back. Did I say they were illiquid? If not, they are illiquid.

Non-Public Limited Partnerships, in my opinion are a legally filed way of taking your money similar to a Ponzi scheme. If an investor puts money into it, then the Ponzi Scheme, or excuse me, I meant to say Non-Public Limited Partnership, then takes some of the money that they raised and return it to investors in the form of dividends. These dividends are usually very high based on market conditions. All they are doing is using money coming in to pay investors, like a Ponzi scheme. This means that they are using principal to pay investors. After the money flow stops, then guess what? They cannot pay your principal back.You would have lost it. Of course, readers of my blog do not fall for these bad investments.

Alternatively, I see a lot of Non-Public Limited Partnerships, or L.P.'s as they are sometimes called, touting the latest hot thing, like solar, wind power, or gold mining. Truth be told that solar and wind power companies are being subsidized right now until 2012. Most of these are failing miserably. Just take a look at the stock prices for some of these companies. They are in the tank. Investors who believe in the false hopes of riches are the ones who fall for these tactics. Instead of believing in this garbage, they should believe in God.

I Google'd this fund just to see what I could find and lo and behold, it does appear to be one of those funds that they are trying to suck everyone into based on trying to post glowing articles about it on different stock touting web sites. I knew this before I even began to Google it, because no ethical firm would promote their fund via email without full disclosures. There are a lot of these email promoting, web site promoting companies out there trying to steal money, or excuse me, I meant to say raise money from investors. Don't you be one of them.

The moral to the story is always the same as far as I am concerned. Never invest in a Non-Public Limited Partnership period, especially one promoted by some web site or email. These are on My Do Not Buy List for a reason. There are plenty of people out there trying to steal your money. Stay away from them.

Friday, August 12, 2011

Is a Black Swan Event Coming?

I do not normally mean to be a doom and gloomer type, but there is something that concerns me about the Standard and Poor's downgrade of the United States Government. There are a plethora of mutual funds out there that have as their investment objective something similar to the following:

Under normal circumstances, the Fund invests at least 80% of its net assets in securities issued by the U.S. government, its agencies or instrumentalities or securities that are rated AAA by Standard and Poor's, AAA by Fitch, or Aaa by Moody's, including but not limited to mortgage securities such as agency and non-agency collateralized mortgage obligations, and other obligations that are secured by mortgages or mortgage-backed securities, including repurchase agreements. Under normal circumstances, the Fund maintains an average portfolio duration between one and 4.5 years.

Now that the U.S. is no longer rated AAA by Standard and Poor's, then this means that a fund like this one with a similar Investment Objective, would have to sell all securities that are not AAA rated by Standard and Poor's. If they are forced to sell, then this means that there could be a flood of U.S. Government securities that hit the market.

There is an out for these mutual fund managers and that would be one of two things. If they have built into their prospectus already that they can continue to buy Standard and Poor's AA rated U.S. Government securities. The other out is if the current U.S. Government securities that they own just so happen to be rated AAA by Fitch or Moody's. If this were the case, then they would not have to sell these U.S. Government securities. However, if for example, they were holding U.S. Government securities that were previously rated AAA by Standard and Poor's, but Fitch and Moody's did not have a rating on those particular securities, then the mutual fund manager would be bound by their prospectus to sell.

This could be a problem for a lot of mutual funds out there. This problem would be exacerbated if Fitch or Moody's were to also downgrade the U.S. Government. If that happened, then all of these mutual funds would have a major problem. If they all had to suddenly dump U.S. Government securities, then this would cause a shock to the market and thus my worry of a Black Swan event.

For those of you who do not know, black swans were never known to exist. Swans were always thought to be white, until some black ones were found. These black swans are rare indeed, but are an example of something that was previously thought impossible, suddenly was very real. Author Nassim Taleb wrote a book about Black Swans and thus applied the terminology to the markets. I am paraphrasing here but, he basically described sudden and swift shocks to the markets as Black Swan events.

My use of the term is related to this issue of having to sell U.S. Government securities, because of the requirements of these mutual fund charters, or prospectuses. This issue is eerily quiet to me right now and I am not sure why these mutual funds are being so quiet about a very significant issue. I suspect that they are busy preparing proxy changes to their prospectuses. This requires votes by the shareholders and this takes time. In the meantime, I am not sure how they will address this issue.

Imagine if U.S. Government securities would have to be sold which would certainly cause yields to go up. If these yields suddenly shoot up, this could cause panic selling of treasuries. The problem is that because of this week's Federal Reserve statement that they will keep rates low through mid-2013, this has caused bank CD rates to go down. Money Market Funds at brokerage firms and mutual fund families may actually have to start charging people to hold cash as evident by JP Morgan Chase's recent announcement. All of these issues lead us to a nowhere to hide our money situation. People are probably less likely to put their money in stocks if all this happens. The result of all this in my humble opinion, could be a Black Swan event, or a shock to the markets.

Add in other factors like no clear plan for job growth. Possibly no permanent reduction in tax rates for a time. Continued unemployment problems. Continued housing problems. Overall, we may be looking at an extended period of malaise.

Investing on your own may not be such a good idea right now. Tread carefully.

Tuesday, August 9, 2011

CBO Paints a Bleak Picture

The Congressional Budget Office has painted a bleak picture of the two alternative views of the nation's debt crisis. They have presented a summary that is only 4 pages and incorporates a graph of their two alternative scenarios. You can find it here:

Neither scenario is very good. One seems not plausible and the other is kind of scary. I think the middle ground on the chart is more likely. This middle ground would be awful nevertheless. The point is that "Houston, we have a problem." Which reminds me of the kind of teamwork and leadership we need right now. The Apollo 13 crew was faced with an impossible task of returning to earth after an oxygen tank exploded causing limited power, loss of cabin heat, shortage of potable water and the danger of too much carbon monoxide taking over the spacecraft. They did not waste time blaming the engineers for the oxygen tank explosion. They all got together and worked to find a solution to the problems they faced.

Right now, all I see out of Washington is a blame game. The President continues along with the blame game. The Democrats are blaming the Tea Party. The Republicans are blaming the President and the Democratic controlled Senate. The House Republicans have tried to do something by passing legislation, but Harry Reid has blocked the Cut, Cap and Balance Plan.

Imagine if Jim Lowell, the Captain of Apollo 13 would have spent all of his precious time blaming the engineers, instead of working with them to try and solve the problem. He probably would be still floating out there in space somewhere if he played the blame game. Instead, the great American that he is, he worked with his crew and the engineers and everyone else in Houston to solve the problem. I had the pleasure of hearing Captain Lowell tell his story in person and it was truly amazing. His leadership was very evident.

There comes a time when the politics have to go. We need cooler heads to prevail along with some leadership. I have a saying that I have told my son often. "Always positive. Never negative." When you feel compelled to be negative. Look for the positive.

Right now, this is what we need from the President and Congress. Everything that comes out of their mouths needs to be positive. Nothing negative.

Monday, August 8, 2011

Twitter Followers

Either I am getting real popular or there are a lot of people using an automatic Twitter following service. Today alone, I have a half dozen new followers and the day is not yet over. Sorry, if I do not acknowledge the fact that you are following me on Twitter. If I acknowledged everyone, then I would not be able to get anything done.

I have to believe that although I have a few friends and enjoy a little popularity, I doubt that I am as popular as Twitter followers are making me out to be.

Wednesday, July 27, 2011

Remember When I Said...

I know that I am beginning to sound like a broken record, but I keep finding vindication for items on My Do Not Buy List. This time it relates to Structured Products. I do not like them for a lot of reasons, but the SEC Staff Report gives even more reasons not to buy them. See the SEC Staff Report via this link:

When I have more time, I am going to have to do a follow up Blog article on how many items on My Do Not Buy List have been vindicated by regulator scrutiny or financial media articles. I think it will match up pretty well. In other words, I think we will find that there are good reasons for the items on My Do Not Buy List. In case you missed it, here it is again below:


The following investments are on our Do Not Buy List. Although all of these investments are legal to be sold, it is our opinion, that these investments are not appropriate for most investors. Not all of the investments on the Do Not Buy List have all of these bad characteristics, but they have one or more of them.

The Do Not Buy List and their Bad Characteristics

(The numbers following each item refer to the Bad Characteristics listing below.)

• Private Placements – 1, 2, 3, 5, 6, 7, 8

• Structured Investments – 1, 6, 7, 8

• Non-Publicly Traded REIT’s – 1, 2, 5, 6, 7, 8

• Non-Publicly Traded Limited Partnerships – 1, 2, 5, 6, 7, 8

• Promissory Notes – 1, 2, 3, 4, 5, 6, 7, 8

• Regulation D Offerings – 1, 2, 3, 5, 6, 7, 8

• Exchange Traded Notes (ETN’s) – 1, 6, 7, 9

• Precious Metals – 1, 2, 3, 6, 7, 8

• Floating Rate Bank Loan Mutual Funds – 1, 5, 6, 7, 8

• Consumer Credit Funds – 1, 2, 3, 6, 8

• A Shares Mutual Funds (unless commission waived) – 5, 6, 7, 8

• B Shares Mutual Funds – 1, 5, 6, 7, 8

• C Shares Mutual Funds – 1, 5, 6, 7, 8

• Variable Annuities – 1, 5, 6, 7, 8, 10

Bad Characteristics

1. No liquidity, limited liquidity or penalty for early withdrawal.

2. Not publicly traded.

3. Not regulated.

4. Structured like Ponzi Schemes.

5. Excessive commission charges.

6. Higher risk of principal loss.

7. Excessive expenses and management fees.

8. Aggressively marketed.

9. Unfavorable taxation.

10. No tax deferred benefits if in IRA or Roth IRA.

If you currently own any of these investments, or have questions about them, then please feel free to contact me at 904-262-0888 or via email at

Keeping your informed and as always, at your service.

Thursday, July 21, 2011

The Future of Financial Advice Delivery

There is no idle time as far as I am concerned. I am always reading, researching or writing when I have a little free time. Today is no exception.

I watch what other people and companies are doing to be successful in the financial advice delivery field. There is a very important and significant trend developing. It is still in the early stages, but shows a lot of promise for those smart enough to take advantage. Being one of the first to the market is also important. A case in point: The Mutual Fund Store. Although, I have never been in one of these stores, I understand the concept behind it very well. The founder of this firm had an idea to franchise retail investment advice via his Mutual Fund Store concept. The keys here are the retail store aspect and the franchise aspect which I will get back to in a moment. First we need to take a look at what the big boys are doing today.

Normally, you would not think of financial advice being delivered by a Registered Investment Adviser (like my firm) in a retail store. However, most people have seen Edward Jones, Fidelity, Schwab, Scottrade and TD Ameritrade retail branch offices in their cities. These firms are all brokerage firms and they each have their own niche. These are all my own opinions that follow:

Edward Jones has over 10,000 branch offices I believe. They kind of remind me of when I was in college as a Sigma Alpha Epsilon Fraternity member. We always used to joke, "if you can't go greek, go TKE." The TKE's had a fraternity chapter on every corner it seemed. Edward Jones kind of reminds me of TKE. They offer full service in a retail setting, although you will pay full price in more ways than one.

Fidelity has their own mutual funds with very high management fees by the way and they are a leader in pension plans. They also act as a custodian for Registered Investment Advisers. In addition, they have active trader tools that a lot of traders like. Also, they have really nice retail branch offices, but they are  mostly in high net worth cities.

Schwab is the biggest retail brokerage firm from an assets under management standpoint and they are also the biggest custodian for Registered Investment Advisers. Their branch offices are second to none. Schwab has long sold financial advice to their customers in a retail environment. They have their own mutual funds and ETF's, too.

Scottrade caters to active traders and has recently tried to become a force in the custodian business, too. I believe they have more branch offices across the U.S. than Schwab or Fidelity or TD Ameritrade.

TD Ameritrade is highly regarded as being on the side of Registered Investment Advisers, but like Schwab, they also have retail branch offices where they sell financial advice and encourage active trading.

Enough of my opinions. I need to get to my point on retail financial advice delivery.

I have watched as The Mutual Fund Store has grown from nothing to over $6,000,000,000 in assets in a very short period of time. That is billion with a B. This proves without a shadow of a doubt that financial advice can be delivered in a retail fashion by Registered Investment Advisers.

Recently, Schwab has come out with a new branch office concept where they convince Registered Investment Advisers to become independent branch offices for Schwab. Their plan is to bring on board experienced investment advisers who already know how to add new clients and pair that with the Schwab brand and give them an independent office to attract new customers. I truly believe that this will be hugely successful as they work through the kinks.

The Mutual Fund Store uses Schwab as their custodian, or one of their custodians at least. I cannot help but wonder if Schwab did not see the success that The Mutual Fund Store was having and developed this new retail branch office based on the using Registered Investment Advisers as the branch managers, like The Mutual Fund Store was doing. I bet that I am correct about this fact.

Nevertheless, I see a financial advice delivery trend developing. Registered Investment Advisers delivering financial advice via a retail setting. Today, almost all guys like me are in nice office complexes similar to a lawyer, accountant, or doctor's office. However, I now believe that this may be indeed changing to a retail environment.

Guys like me, however, cannot just go move into a retail strip mall and setup shop. You have to have a concept that matches the retail setting. There needs to be a lot of planning and a neat retail idea.

Speaking of ideas. I do believe I have one! In fact, I am working towards one right now. Of course, I would love to tell you about it, but if I did that, someone might steal my ideas and beat me to the marketplace. So, unfortunately, you are going to have to wait. The good news is that I will keep everyone updated as to my progress via this Blog.

Stay tuned for exciting updates.

Tuesday, July 12, 2011

Derek Jeter May Actually Owe Taxes on Historic Baseball

There was a story out today that Christian Lopez, the guy who caught and returned the ball to Derek Jeter may owe approximately $14,000 in taxes. He apparently received approximately $50,000 in return for the baseball in the way of season tickets at Yankee Stadium, some bats, and other memorabilia. However, in my opinion, Mr. Lopez is getting some bad tax advice, because actually it is Mr. Jeter who may owe the taxes.

Under IRS rules, people are allowed to barter or exchange collectibles. The IRS expects that when two people barter and exchange of collectibles, then the one who has a gain in value has to report that gain on their tax return.

Let us look at this case a little more carefully. In this case, Mr. Lopez caught the ball, therefore he was the rightful owner of it. After the baseball game, Mr. Lopez met Mr. Jeter and gave him the historic baseball. In exchange, Mr. Lopez received several items.

  1. Four Champion Suites tickets for the remainder of the season.
  2. Three autographed baseball bats.
  3. Three autographed baseballs.
  4. Four front row Legends seats for a game at Yankee Stadium.
This was a typical barter transaction that is done in the baseball memorabilia world all the time, albeit with different items being exchanged.

When you really look at this from Mr. Lopez's standpoint, the value of the baseball was probably worth more than the four items received in exchange. If it was worth say $100,000 for example, then Mr. Lopez needs to give Mr. Jeter a 1099 B for the difference in value. According to a New York Times article on this subject, the four items received by Mr. Lopez in exchange from Mr. Jeter was worth approximately $50,000. Therefore, Mr. Lopez could possibly give Mr. Jeter a 1099 B for the $50,000 difference in my example. Also, Mr. Lopez would not owe any taxes. Instead, Mr. Jeter would owe the taxes.

Here is the New York Times article link.

Only if the baseball was valued at less than the items Mr. Lopez received in exchange for the baseball, would he then owe taxes. The Pawn Stars show star, Rick Harrison was quoted as saying that he would have given him roughly $30,000 to $40,000 for the baseball. In this case, if Mr. Lopez sold it outright, then he would owe taxes on whatever he received for the sale. However, a sale never took place. To me, this was clearly a barter exchange of collectibles. Also, I fail to see how Mr. Lopez would owe taxes on this barter exchange, because the baseball would easily be valued at $50,000 or more.

I believe people are jumping the gun a little bit on sticking Mr. Lopez with a tax bill. It is surprising to me that a Derek Jeter fan who is also a tax professional has not offered to step in and help Mr. Lopez file the necessary forms for this barter exchange. Come on people. I cannot be the only one in the country who knows this fact. If you happen to know Mr. Lopez, then maybe you might want to do him a favor and forward him a link to this blog.

I have a Niekro brothers autographed baseball that I might do a barter exchange with Mr. Lopez for one of those Derek Jeter baseballs. I could even throw in a Colorado Silver Bullets women's autographed baseball too. That sounds like a fair barter exchange value for value.

Friday, July 8, 2011

A Contrarian View on High Unemployment

What great timing! The dismal Unemployment numbers dovetail right into this time period when the Obama Administration and Congress are in the middle of negotiations on the debt ceiling. This is absolutely perfect timing to "force" these people to make some significant changes.

Yesterday, I was a little disturbed by some rumors floating around that there will be no legislation done, because there simply is not enough time. The rumor was that they will all agree to something in writing. This is a manipulative tactic in my opinion to get one side or the other to back down. What concerns me about this is that the piece of paper that it would be written on would be technically worthless. The other side could simply exclaim that the terms of the agreement were violated and they are not beholden to it any more. Let us hope this kind of shenanigan does not happen.

I would like to think both sides have their "feets to the fire" now with these dismal Unemployment numbers. Hopefully, we can get some tax simplification legislation passed. In addition, instead of the cuts in Social Security, Medicare and Medicaid, or "throw granny off the cliff" as the Democrats try to claim the Republicans want to do, I would think that they could do things like raise the retirement age and perhaps raise the earning limits for paying into Social Security. The earning limit right now is $106,800. They could easily raise this a little bit and help shore up Social Security. Further, raising the Social Security retirement age a year or two is not going bother anyone. These steps do not entail throwing granny off a cliff, either.

In addition, they may be able to lower corporate tax rates, granted while eliminating loopholes. Further, there may be some risk to personal returns on eliminating some deductions, but this should also tie in with lower tax rates. Regardless of what the Democrats say, lowering tax rates is what will get us out of this economic malaise. We need tax simplification and clarity!

Stay tuned. It is about to get very interesting.

Tuesday, July 5, 2011

Its the Jobs Stupid

One of the Blogs that I follow,, that is fantastic by the way, just published a table of recent Employment Statistics. The table was a comparison from the month when this recession started, December 2007 and the latest month of data, May 2011. These numbers are staggering to say the least.

A few that popped out at me were that on population growth alone, we are down 6.157 million jobs. In December 2007 the unemployment rate was 5.00%. Today it is 9.1%. There are 6.2 million people unemployed for 27 weeks or more as of May 2011. This is in comparison to December 2007 when it was only 1.3 million. That's worth saying again. 6.2 million vs. 1.3 million!

The true unemployment rate is 15.8% today, which includes the Unemployed, the Part-Time for Economic Reasons, the Marginally Attached to the Labor Force and the Discouraged Workers. In December 2007, it was about half that number at 8.8%.

In order to get back to December 2007 levels, we need to add 6.94 million jobs. Not Part-Time for Economic Reasons, not Marginally Attached to the Labor Force, but Full-Time Jobs!

You would think with numbers like these, the Obama Administration and Congress would be burning the midnight oil trying to come up with some solutions. They seem to be squarely focused on kicking the can down the road and going on summer vacations.

The voters really have to clean house in the upcoming 2012 election and also for a long series of elections to come. We need some people who will put America first, rather than those who only care about their own self interests. The only kind of legislation that we are going to see from this group is ideologically correct legislation. In other words, the Democrats will only agree to things that benefit their electability and the same holds true for the Republicans.

No matter what. Get out and Vote!

Wednesday, June 29, 2011

The Banks Are In Bed With The Obama Administration

Normally, I try not to delve into political issues, but this latest injustice is too much to take. Just the other day, businesses across America won a reprieve from the high swipe fees charged by the Banks and Credit Card firms. The swipe fee was $0.44 per transaction. This may not seem like much, but it really hurts small business people who allow their customers to use their debit cards for small transactions.

For example, a retail customer buying only a cup of coffee would take a big bite out of the retail business owner's profit potential. Let us assume the cup of coffee costs $1.99. The retail business owner would have to pay $0.44 cents out of that $1.99 to the Banks and Credit Card firms. This is a 22% fee to the retail business owner for allowing his customer to use the debit card. This is why you have seen some businesses institute a minimum amount of purchase before they will let their customers use a debit card. On a cup of coffee transaction like above, the retail business is most likely losing money on the debit transaction. They cannot continue to do this and stay in business. Something had to change.

The retail business owners successfully pushed through Congress a limitation on the swipe fee reducing it to $0.12. This obviously made the retail business owners very happy, but not the Banks and Credit Card companies. They fired up their lobbying machine and went to work on the Obama Administration.

Today, the Federal Reserve is instituting some kind of special rule allowing the Banks and Credit Card companies the right to charge up to $0.24 for a swipe fee. Keep in mind, legislation was just passed making the maximum fee $0.12. Who cares about the law these days? Obviously, the Obama Administration does not care about it. The Banks and Credit Card companies obviously lobbied the Obama Administration for some relief to this legislation. Does it really surprise anyone to know that the Banks and Credit Card companies have pulled a fast one on the retail small business owners?

Why are we Americans allowing this to continue? These Banks are responsible for the recession that we are in. They are responsible for the federal funds rate being little or nothing so they can borrow free money to shore up their balance sheets for the mistakes that they made. Of course, all this is at the expense of the American public who are earning 0.01% on their money. Now, the retail small business person is getting the shaft on swipe fees, even after getting a law passed in their favor!

The Banks get what they want whenever they want and it is blatantly apparent that average Americans and retail small business owners are handed the bill.

This next election cycle is more important than ever. Do not assume that everyone will show up at the polls and vote the way you would have. You have to show up and vote. Otherwise, more injustice will continue at your expense.

Remember When I Said...

Remember when I said not to buy Non-Public REIT's? Once again, yours truly has proven without a shadow of a doubt that Non-Publicly Traded REIT's have several issues and deserve being on my Do Not Buy List.

Here is an article link from today's Wall Street Journal proving my point.

What disturbs me is they always seem to find someone who put in a lot of money into these investments. This particular couple, bless their heart, put in $200,000. Unfortunately, according to the article, this represented a substantial portion of their savings. If only they had read my book, Keep Your Assets. Take My Advice., then they would have known not to ever invest in Non-Publicly Traded REIT's in the first place, especially for retired people with no working income opportunities any more. Further, they would have known not to put more than 20% into any one investment. Apparently, they put way more than 20% into this investment.

The problem here is the business model of FINRA broker/dealers. They are in business to:

  1. Generate revenue for the brokerage firm. Did I say this was this first priority? Well, if I did not, it is worth repeating. Their first priority is to generate revenue for the brokerage firm.
  2. Generate revenue for the FINRA registered representative. Notice the first two choices neglect the client or investor.
  3. Last but apparently least is the client or investor.
Why would anyone want to do business with a FINRA brokerage firm, especially if number 1 and number 2 take priority over clients or investors? It blows my mind after the 2008 Wall Street market melt down.

I keep trying to hammer these three points home. Why? The Wall Street Journal article's last paragraph is telling. These are the quotes from the investor:

"I should know better," he said. "I more or less relied on what the investment people were telling me."

These FINRA registered representatives are only giving advice based on their business model and their priorities listed above. This was all perfectly legal, because these FINRA registered representatives have this "suitability" loophole where they can do this all day long.

Why people do a nickel's worth of business with FINRA brokerage firms and their FINRA registered representatives is beyond me. Especially when an independent registered investment adviser firm will do things in a client's best interest, and who has a fiduciary liability to give their advice in a client's best interest.

Are you learning anything yet? I hope so.

Friday, June 24, 2011

Medicaid & Elder Estate Planning

Nobody wants to end up in a nursing home and nor do they want to spend their money on a nursing home. Sadly, without proper Elder Estate Planning, this happens all too often. Most people make the mistake of assuming that they are just going to keel over one day and that will be how they die. However, the reverse is more apt to happen, where you live longer than expected with an extended illness. These extended illnesses often are unexpected and put a substantial burden on financial assets. People who do not plan for this possibility are likely to see their financial assets gone rather quickly. When you read these numbers, I want you to think about your financial assets or those of your family and consider how long it will last with these kind of expenses. Do not forgot about other expenses that will continue, such as mortgage, utilities, phone, etc. Keep in mind the expenses below are in addition to those.

In the Jacksonville, FL area, these are the Annual Costs for Long Term Care according to Genworth Financial, Inc.:

Home Care
Homemaker Services = $41,184
Home Health Aide = $45,760

Adult Day Health Care
Adult Day Health Care = $ 15,600

Assisted Living Facility
Private, one bedroom = $39,000

Nursing Home
Semi-private room = $76,238
Private room = $89,790


Home Health Aides help those who are elderly, disabled, or ill to live in their own homes or in residential care facilities instead of nursing homes. Typically used when family members do not have the time or resources to provide.

Homemaker Services make it possible for people to live in their own homes by helping them with household tasks that they cannot manage on their own such as cleaning house, cooking meals or running errands.

Adult Day Health Care provides service at a community-based center for adults who need assistance or supervision during the day, but who do not need round the clock care.

Assisted Living Facilities are living arrangements that provide personal care and health services for people who may need assistance with activities of daily living, but who wish to live as independently as possible and who do not need the level of care provided by a nursing home.

Nursing Home Care is for people who may need a higher level of supervision and care than provided by an assisted living facility. Skilled nursing care is provided 24 hours a day.

The Process of Aging

  1. Healthy and can take care of oneself.
  2. Healthy spouse or other family members takes care of ill spouse or parent.
  3. Ill person needs more care than family members can provide, so a Home Health Care Aide comes to the home.
  4. Ill person makes the move to an Assisted Living Facility to retain some independence, but still have nurses available for their health care. This option is not available for Medicaid patients.
  5. Ill person's condition now requires 24/7 round the clock care provided only by a nursing home.

What is Elder Estate Planning?

This type of planning can only be done in conjunction with an Elder Care Attorney experienced in Medicaid Planning and Veterans Benefits. If you are very wealthy and have $3,000,000 or more in liquid assets, then you can pay for your own Long Term Care Costs. However, if you have limited assets, (less than $3,000,000) you are over age 65 and have done nothing to plan for an unexpected extended illness, then you probably need Elder Estate Planning.

As a Chartered Advisor for Senior Living™, I have specialized training and education around Elder Care issues. Further, I look out for people and their best interests. This is not only true because I am a fiduciary, but it is true because it is the right thing to do.

There are some things that can be done to protect financial assets with Elder Estate Planning. These typically revolve around a few options.

  1. If you are healthy, then you may want to look at purchasing Long Term Care Insurance. A new alternative is a new hybrid type of Long Term Care Insurance where you do not lose your money if you never need Long Term Care.
  2. If you are not healthy, then you will need to position your financial assets to protect them against having to use them for your Long Term Care needs. This requires significant planning by someone like me and the use of an Elder Care Attorney.
  3. If you have plenty of assets that you have set aside, or you have already planned for the possibility of an extended illness and been to an Elder Care attorney and Chartered Advisor for Senior Living like me, then you probably only need an Elder Estate Planning Review.
  4. If you are a Veteran, then you may be eligible for VA Aid & Attendance benefits that could qualify a married couple with up to $1,949 per month of tax free funds. A VA Accredited Attorney can help you determine your eligibility.
One thing to know is that Medicaid does not pay for Assisted Living Facilities, if you can even qualify for Medicaid in the first place. Qualifying typically means having less than $2,000 in cash and where you have not given your money away in the last 5 years. The state that you are in can claw back those funds you gave away by way of a penalty. This penalty is essentially a waiting period before the state pays a dime towards your Long Term Care Costs. This penalty period can last up to 5 years, depending on the amount of the gift.

Medicaid qualification is complex and very tricky. You cannot navigate these waters on your own. You must hire a CASL® like me, in addition to a competent Elder Care Attorney proficient in Medicaid Planning and who is also a VA Accredited Attorney. (I can help you.)

I am thinking about doing a Seminar in conjunction with an Elder Care Attorney here in Jacksonville. I think it would be a good educational and informative event for seniors and concerned family members. There is a proper way to do Elder Estate Planning and that is with tender loving care.

If you would like more information about Elder Estate Planning, then feel free to contact me at (904) 262-0888 or you can email me at

Friday, June 17, 2011

Investor Special Reports

Are you a believer in Solar Wind Power? Do you also believe that investing in solar companies is a good thing? Further, do you believe that you might become rich by doing so? Well, think again.

I received one of those "Investor Special Reports" in the mail from a so-called "expert on solar." This was like a 12 page or so newsletter formatted information sheet on this solar wind turbine maker. It was very convincing how they presented the company. The goal was for investors to rush out and by the company's stock. I am sure many people will, or should I say many people will foolishly do so, because this newsletter appealed to their greed.

Personally, I think it is foolish to invest in one stock. Nevertheless, I thought that I would do some research on the stock to see what I could find. The first thing that jumped out at me is that this was a penny stock trading for less than $0.60 a share. Major red flag.

The second major red flag came when I looked at their SEC filings. Their accounting firm had resigned, because they felt that the company was not "going to make it as a going concern." Another major red flag.

As I shifted through more SEC filings, I discovered that the company has $731.00 in cash on hand as of April 2011. Seven hundred thirty one dollars? Are you kidding me? Final major red flag.

Three strikes and you're out!

What is sad is that most people will make their investment decision based on two things.

  1. The price of the stock is so low, then will believe that they can buy a lot of shares and most likely will do so, thinking they can't lose much money.
  2. They will make their decision based on the newsletter without spending a minute researching the stock.
This appears to me to be the new twist on an old classic; the "pump and dump" of a stock. The idea is for the newsletter to bring in the greedy fools. The insiders wait a little while, then dump their stock at a profit. After that happens, then the stock crashes down to probably less than $0.10 and most of the the investors will end up losing over 80% of their money.

Remember the name of my book?

Keep Your Assets. Take My Advice.

If my book title is not more apropos in this situation, then I do not know when it would be.

Tuesday, June 7, 2011

How is it possible for an RIA not to work in your best interests?

I have always been a big fan of Socrates and the Socratic method of arriving at decisions. Socrates would always ask questions of people to try and get them to justify their positions. In all cases, Socrates would act less informed and question his pupil repeatedly to teach them that they were actually ill informed and the position that they have taken was without merit. Most times these people took the advice of someone else and did not really have a position of their own. With this in mind, let us ask some questions to see if we can arrive at the answer of how it is possible for an RIA (registered investment adviser) not to work in your best interests.

I have to wonder about some of these big registered investment adviser firms out there who are getting other registered investment advisers to outsource their investment management to their mega firm. There are several of these big independent firms that manage billions of dollars of other investment advisers' clients. The thing that goes against the grain for me is all of the extra fees involved.

I was looking at the Form ADV 2A and 2A Appendix of a large $14 billion dollar firm which is growing like a weed and attracting a lot of registered investment adviser money. In effect, it is the feeder fund concept that several registered investment advisers got into hot water about in regard to Bernie Madoff. They referred their clients to Bernie Madoff and did not do their due diligence. That is another story altogether. Today, I wanted to forget about the feeder fund aspect for a moment and just focus on the fees.

This big $14 billion dollar registered investment adviser firm has several different programs available, such as mutual fund asset allocation, ETF asset allocation, strategic ETF asset allocation and so on. Their fees are as high as 1% on some of these accounts for smaller investors with less than $250,000. Then, you have to add whatever the adviser who referred the client to them charges on top of that figure which is usually in the 1% - 1.5% or more range. Do not forget the actual expenses of the investments themselves. According to the Investment Company Institute's latest FactBook, the average equity mutual fund has an expense ratio of 0.99%.

So, if the big mega firm charges 1%, perhaps the adviser goes easy on you and only charges 1%, then you are in the mutual fund portfolio that charges another approximate 1% in expenses. It doesn't take a smart fellow to figure out that this is about 3% a year. I've actually seen worse than 3% believe it or not.

It is great for the adviser who refers his client to this big fourteen billion dollar outsourcing firm. The adviser no longer has to mess with a bunch of back office headaches and can probably cut his overhead. Further, it probably frees up more of the adviser's time. They do not have to worry about how they are going to invest their client's money any more. They hired someone to take that off their plate. Did you notice how beneficial it was for the adviser?

Conversely though, how beneficial is it for the client? Could another adviser not offer a similar mutual fund asset allocation portfolio that they manage for 1 - 1.5% instead of outsourcing to the big mega firm? It would seem to me that the client would reap the benefits of a 1% savings if this was the case.

What about if the adviser managed a portfolio of ETF's on behalf of the client? ETF's have lower expenses and may actually save the client another 0.50 to 0.75% in expenses if the adviser managed these ETF's on behalf of the client, instead of outsourcing it to a mutual fund portfolio at the big 14 billion dollar mega firm.

But, there is a problem by going with a local adviser who picks the investments his or herself. What happens to the client's money if the adviser is injured or disabled? This obviously presents a problem. Sometimes this is the advisers justification for going to the big mega adviser. This does make some sense, however I beg to question if there are other big mega advisers who perhaps charge a more reasonable fee for outsourcing money management to them? The answer is yes. I can think of one in particular that charges a maximum of 0.41% for their money management expertise and that fee grades down from there depending on the total assets managed. They are a big mega money manager who does an excellent job. So, with this alternative, you may be able to get a client's portfolio of ETF's to be roughly around 1.5% to 1.75% all in. This alternative would save the client of the other big fourteen billion dollar mega firm about 1.25 to 1.5% a year, would it not?

So when the title of this blog asks how can an RIA not work in your best interests, then I have provided an answer. When an RIA knows full well that he can find a comparable mega firm for significantly less per year, but chooses to still use the higher priced mega firm, then this is a undisclosed conflict of interest. Unless of course, they explain that there are other mega firms who may charge lower fees in their disclosure documents and you as a client know this and agree to this in writing.

Also, if an adviser can manage the money themselves for their clients instead of outsourcing it, then they will save the clients money in fees. Granted a backup plan is necessary if something were to happen to the adviser, but this can be planned like anything else. A local adviser should have a repeatable process of investing that most any other adviser can look at and implement. (We do.) If not, then you probably do not want to do business with that adviser. Especially if they are just shooting from the hip.

So, the bottom line is when you are advised to go with a big fourteen billion dollar mega firm, you might want to shop around for other mega firms if this is the direction you want to go in. You could save yourself a lot in fees and get a comparable service, if not better.

If you want a big mega firm managing your money for a reasonable fee, then let me know. I can help. Of course, you will receive full disclosure in advance. This offer is only available for clients in states that we are licensed in or maintain an exemption from licensing. Contact me at for full details.