There is no better time to reexamine where you are financially than the new year!  Along with the more common goals to lose weight, work out more and take up some new hobby, planning for your financial future (or at least reviewing that plan) should be on everyone's list of the goals or priorities for the new year. 

Strangely, it is not all that common for Americans to have such planning.  According to the website Spendmnot, only 1 in 3 Americans have some kind of long-term financial plan.  According to the same site, 70% of Americans say their financial planning needs work.

Here at InTrust Advisors, we recently updated our financial planning software to RightCapital from another provider.  The switch was quite frankly about lowering our annual software cost, but RightCapital has won us (and the clients that we have worked with it so far) over.  It is simple to use and highly visual/intuitive.
 
The software provides clients with a clean looking dashboard/snapshot outlining important KPIs related to their finances including:

• The probability of success for the proposed plan.
• Their net worth.
• Their effective tax rate.
• A balance sheet of their assets.
• An asset simulation of their proposed plan.
• A tax allocation summary.
• Their current investment allocation.
• To dos/notes.

 
All in a clear one-page snapshot or dashboard.
 
Either with our help or in some cases on their own, you/we can then dig into each of these areas, make changes as appropriate for changing goals or circumstances, come up with action plans and more.    Here is what those Snapshot looks like for a sample client:

​Once the software profile information is updated for asset values, expected income, savings, financial goals and expenses, it gives the user a clear understanding of the probability of achieving those goals seen above at the Probability of Success or below as the Retirement Analysis (Current Plan).

In this sample case for a pre-retirement client, the current plan has a lower than acceptable probability of success than one would like at just 46%.
 
However, we made a few changes to the plan and, just like that, the probability of success rose to a more acceptable level of 84%.  
 
The action items tab above pulls down and here is where those changes are made in real-time while sharing information back and forth between the client and the advisor.  These changes are shown as the Proposed Plan below.

​In this sample case, the following changes were made to the base case:

• The monthly retirement expenses were cut from $8,000 to $7,000 on the back of less travel or maybe consolidating autos or any number of reasons.
• Pre-Retirement taxable savings assumptions were raised by $10,000 per annum. 
• Retirement ages were raised from 62 to age 67.
• The investment allocation was adjusted to a balanced approach. 
• Social security was optimized for the maximum benefit.
• A customized tax strategy was implemented.
• An updated Education strategy was also implemented.

 
The result was a clear plan and peace of mind for this client, and this is just a small subset of the capabilities of the software as we can dig deeper into such strategies as:

• Roth IRA conversion strategies
• Distribution strategies
• Social Security claiming strategies
• Insurance coverages and the adequacy of such coverages
• Savings strategies
• Spending strategies in retirement
• Investment allocations
• Estate planning
• and more.

Maybe we can help you gain the same peace of mind that a clear plan brings?

Click here to reach us and find out more

Ready to get started with RightCapital now?  It is free and easy to get started.  Click the link below to get started.

Sometimes blog posts come easily and sometimes they do not.  Over the summer, I seem to struggle with things to write about plus market volatility tends to pick up, which keeps me busier managing money. 

Remember this when you are taking your vacation.  Think of me as I am lugging my laptop wherever I go because Mr. (or Mrs.) Market never seems to take any time off.  It's a good thing I love this stuff!

First up in this special blog addition is a couple market updates.  Let's start with equities and then move to fixed income (i.e., bonds).

Here is the situation with equities:

We have a rising trend.  A recent stairstep down and elevator up correction may not be the end of the volatility though.  Expect some volatility in the period leading up to the election maybe as early as September.

Once the election is decided and the loser taken their shot at the fairness of the election, we should see favorable seasonality into the end of the year and possibly into early 2025.

​​My guess is that 2025 is no picnic for whoever wins in November.  

We have weakening economic conditions and rising unemployment levels as big and small companies continue to shed jobs.  On the flip side, we still have strong liquidity from past government programs, a Federal Reserve that looks ready to start easing interest rates and a recent history of magically being able to kick the can down the road.

My guess is a mild bear market in 2025 with equities struggling and bonds doing better, especially on the short to intermediate side of the equation.  In fact, in years where interest rates decline, this has been the time to own bonds historically as falling yields move inversely to rising bond prices.

You may be saying, but Jeff, you said that about 2024.  That is true, but this is not easy, and my crystal ball is about as good as yours.  We generally try to work with what the market gives us.  We have an opinion on the future (like above), but only move as the market confirms such opinions.  You know, it is a process!

​This is the Federal Reserve Dot Plot or where they think the Fed Funds interest rate is heading.  In case you cannot tell, follow the orange line and/or the blue dots.  
​

​​Next Up, Let's move onto some good news for those affected by Hurricane Debbie.  Your kind, much gentler IRS has granted you a series of filing and payment extensions.

Of course, at the same time they are hiring more auditors to make your lives, I mean the lives of the rich, more miserable.

Here is the skinny: 

Finally, a few financial lessons that I learned over time, but wish I would have put into practice a bit earlier.  You know a few thoughts from my younger me.

1. Start Saving Early: Begin saving and investing as soon as possible. Even small contributions can grow significantly over time due to compound interest. The earlier you start, the better.
2. Create a Budget: Establish a budget to track your income and expenses. Knowing where your money goes helps you make informed decisions and avoid overspending.
3. Avoid Debt: Debt can be a financial burden. Whenever possible, use cash, debit cards, or prepaid cards instead of credit cards. Prioritize paying off high-interest debts promptly.
4. Invest in Financial Education: Learn about personal finance, investments, and money management. Knowledge is power, and understanding financial concepts will empower you to make informed choices.
5. Pay Yourself First: Before paying bills or spending on discretionary items, allocate a portion of your income to savings or investments. Treat your future self as a priority.
6. Live Within Your Means: Avoid lifestyle inflation. As your income grows, resist the urge to increase your spending proportionally. Save the extra income instead.
7. Emergency Fund: Build an emergency fund equivalent to at least three to six months’ worth of living expenses. It provides a safety net during unexpected situations.
8. Invest Wisely: Diversify your investments across different asset classes (stocks, bonds, real estate, etc.). Consider low-cost index funds and long-term strategies.
9. Prioritize Retirement Savings: Contribute to retirement accounts like a 401(k) or IRA. Take advantage of employer matching contributions—it’s essentially free money.
10. Focus on Experiences: While material possessions are nice, prioritize experiences over things. Travel, learn, and create memories—these enrich your life more than possessions ever will.

​Remember, financial planning is a lifelong journey. Start early, stay informed, and adapt as needed. 

I know I am preaching to the choir with most of you, but maybe someone you know could benefit from these ten financial lessons that I preach every day to my girls and Godchildren.

Can we help you with your investments or planning? 

Or why not get a Free Second Opinion on your planning? 

​Just contact us.

I recently have been reading a book by Bob Carlson called Where’s My Money?  The book is all about the exciting topic (sarcasm) of Social Security claiming and getting the most out of this important retirement benefit.
 
One of the topics of the book is the importance of checking your Social Security wage history. Bob Carlson makes the case that you should do so for two reasons:

1. To make sure your wage history is accurate and complete; and
2. To see if there are ways you can influence that history to maximize your Social Security Benefits.

 
Let us start with why your history is important.
 
Your earnings history is a record of your progress toward your future Social Security benefits. The Social Security Administration (SSA) uses your highest thirty-five years of earnings to calculate your benefit amount when you sign up for benefits.
 
If there are errors or omissions in your earnings record, you may not get credit for money you paid in payroll taxes, leading to lower future Social Security benefits.
 
You can maximize your benefits by:

1. Working at least 35 years and ensuring you have at least 35 years of earnings to maximize your benefit calculation.
2. Earn more if possible: Higher earnings contribute to a larger benefit amount.
3. Consider delaying claiming until age 70: Waiting to claim benefits until age 70 can significantly increase your monthly payments.
4. If you are eligible, consider claiming spousal benefits based on your spouse’s earnings history.
5. Know retirement earning limits: Be aware of how working during retirement can impact your benefits.
6. Remember, your Social Security benefits play a crucial role in your retirement planning.

 
After reading this section of the book, I checked my wage history and even developed a spreadsheet to see my 35-year average wage history (very nerd-like indeed). From here, I factored in my expected wages over the next several years to see how they will impact this average wage history.
 
I then logged into the Social Security website and on the home pages is a feature where you can see how future expected income through retirement affects your monthly social security payout.
 
To be honest, my expected income did not really move the needle of either my benefit in the future or my average wage base. My wages have been pretty consistent.
 
However, when I did this same exercise for my spouse, I found a different story. Because she was a stay-at-home mom for a number of years, her social security could be greatly influenced by a few changes to our plan.
 
The most obvious is she is now working in a job paying her more than when she was a stay-at-home mom ($0 in wages). Just by working a few additional years raises her wage base and average wage for those 35 years. Strangely enough, my wife did not like that idea since we had previously agreed she will stop working early in a little over a year from now.
 
In fact, it got quite chilly in the room when we discussed working longer!
 
Another option is to earn more. However, this is easier said than done in many cases.
 
I thought of a third option and that is, if you are self-employed, consider adding your spouse to the payroll so she can boost her Social Security wage record.
 
In my case since I am not a fan of additional taxes, I considered paying my spouse my salary and taking no salary. It would boost her wage record and have minimal impact on mine. The problem is I work in a regulated industry, and I could see myself facing possible scrutiny over wages, work, and licensing (i.e., she is drawing wages and is not a licensed adviser).
 
I ultimately decided to leave well enough and just hope my spouse finds some kind of part-time paying gig that might push her Social Security wage record up further before she reaches her full retirement age (FRA) at 67.
 
Let me quickly demonstrate the math here. Let us suppose your social security record says that based on your current wage record you will receive a benefit of $1,982 at your FRA. However, by raising your wages or working longer before retiring, the SSA projects your benefit can increase to $2,039 per month at your FRA.
 
You might say “who cares, that is just $57 more per month. That does not move the needle, Jeff.
 
However, I want to point out that that $57 per month over an estimated 23 years (to age 90) at 8% (what the SSA pays you in extra benefits for delaying) totals to more than $44,957.67 in extra benefits over that hypothetical period.
 
That in my opinion is real money and worth exploring!
 
Let us know how we can help you.

I finally got around to putting out a new blog post, I must say I struggled to come up with just the right topic that would both interest me and our readers.  I wanted to do a financial planning related post, but over the weekend I changed my mind. I was drawn to a video debate between Macro specialist Raoul Pal of Real Vision and Peter Schiff of Euro Pacific Asset Management.

This rather long video is posted, below. I thought the discussion was so important for investors over the next 6+ years that I would make it part of my discussion and forecast on what is coming in this very strange time in our country and economic future.  
​

​In case you don't have 3 hours to spend watching this video, let me give you the highlights.

The primary topic of this discussion was Bitcoin and its role in the current economic landscape. Let’s delve into some key points from their debate:
​

1. Bitcoin’s Role: Raoul Pal views Bitcoin as a solution to the challenges posed by inflation and currency debasement. He praises its scarcity and network effects as valuable attributes.
2. Skepticism from Peter Schiff: On the other hand, Peter Schiff expresses skepticism towards Bitcoin, citing its lack of intrinsic value. He questions whether it can truly serve as a reliable store of wealth.
3. Blockchain Technology and Stablecoins: The conversation also touches on the potential of blockchain technology for tokenizing assets and creating stablecoins.  Here again, Raoul Pal is constructive.  Peter Schiff is skeptical, especially of stablecoins.
4. Economic Landscape: They discuss the impact of debt, the economy, and the fear of worst-case scenarios.  Specifically, both men agree that we are pretty much screwed, but that the politicians will continue to do what they do best and that is kick the can down the road with more currency debasement and the Federal Reserve with more purchases of the related debt generated from that deficit spending.  They will try to mask the related inflation through yield curve controls and other means, but there will be inflation and it may become hyperinflation eventually.  
5. The Case for Crypto: Raoul Pal makes the case that the reason they will continue to print is that the Baby Boomers have all the assets.  If asset prices go down, this will kill the Baby Boomers and create a big problem for society.   He further makes the case that we had a very similar issue at the end of World War II with large debt relative to GDP and we worked our way out via productivity and savings gains.  He believes AI (i.e., artificial intelligence) will provide the productivity gains this time around.  Peter Schiff was not quite so sure and argued that the demographics and debt levels are quite different this time around from the period in history.
6. Crypto is the Only Option: Interestingly Raoul Pal believes the only assets that will outpace inflation will be technology stocks and crypto.  Crypto he believes has the best historical returns and therefore is the Big Opportunity for investors over the next 6 plus years to make big returns before the structure changes.  Specifically, Raoul Pal believes 2030 is when things change. 
7. Bitcoin Price Prediction: While Raoul Pal sees the potential for Bitcoin to reach $1 million, Schiff remains cautious and more constructive on gold and silver as a store of value.

So now let me put in my 2 cents. 

First, I am in agreement with both Raoul Pal and Peter Schiff that politicians will continue to print currency and tax us as a way of kicking the can down the road on the United States rapidly growing debt problem and poor demographics.  They will always do what is easy and gets them reelected.  Printing, spending and then taxing us is the easy path vs. austerity measures to fix our debt to GDP imbalance.

Second, I believe Bitcoin and Crypto are part of the solution, but not "the solution."  Why?  a) Bitcoin is correlated to the equity markets and is a very volatile asset type.  Pushing all your chips into this pile will definitely cause you some sleepless nights.  b) There is governmental risk here.  Any day we could wake up and the government has either outlawed crypto or mandated a conversion to a newly issued Central Bank Digital Coin (or CBDC); and finally, c) I still believe diversification has value and crypto is not a very large, or liquid market.

Third, I would make the case that 2030 is an important year in Raoul Pal's mind, even if he never explained why.  Allow me to speculate, it is the year that the World Economic Forums (WEF) 2030 Agenda is supposed to be in place.  This could mean a new economic system is in place by 2030 that changes/saves the developed world from a new universal problem with debt relative to GDP and poor demographics.

In case you are not familiar with the WEF 2030 agenda, here are the highlights:

1. Climate Action and CO-topia:
   • By 2030, they aim to win the fight against climate change. Imagine a world where CO2 emissions are significantly reduced, the air is cleaner, and nature is recovering.
   • In this vision, cities are green and live able. Private cars are banned, replaced by efficient mobility services. Electricity is entirely green, and single-use plastics are a thing of the past. Citizens have more free time and better quality products.
2. Reducing Violent Crime:
   • Over the next decade, they believe there is an opportunity to dramatically reduce violent crime.
   • To achieve this, they need the same energy and dedication that eradicated killers like smallpox.
   • Understanding how violence is distributed in time and space is crucial. By addressing lethal violence, society can halve most forms of violence by 2030.
3. UN’s 17-Step Plan:
   • The United Nations has resolved to end poverty and hunger everywhere by 2030.
   • Their agenda includes combating inequalities, building peaceful and inclusive societies, and promoting human rights and gender equality.

You can click on any of the links for more information.

Here are my thoughts on this WEF 2030 Agenda.  Basically, the WEF is composed a who's who of global leaders that think they know better than us or any individual government what is best for us and them.  It is the "them" part that worries me the most.

The above agenda sounds great in a vacuum, but the primary purpose of this agenda is the separate the elite from the serf (i.e., you and me) and make us subservient to the corporate elite.  The result will be a highly advanced, AI based society where every move you make, financially or otherwise, is scrutinized.  Every word or deed out of line with the thoughts of the elite will be penalized (i.e., social credit scoring).

My belief is that by 2030 a CBDC or series of CBDCs will be rolled out globally.  These CBDCs may not be universally utilized, as is now the case in China, but the infrastructure will be there.  Given that the backbone of the CBDCs will be blockchain based all activity will be captured, stored and reviewed using AI.  The only thing missing will be an event, a crisis pushing everyone into CBDC or the global system.  This I believe is the change that Raoul Pal sees in our future but was unwilling to speculate on it as I have done.

So why do I present this video, agenda and hypothesis to you? 

The answer is simple and that is so you can take advantage of what is available today to create wealth and provide yourself a greater runway to operate in a possible new financial system to come.  Further as a Christian believer, it is a bit of a warning as the Christian Bible talks about such a time where there is both a one world currency and a one world leader.  No one knows the timing on this stuff, but I can certainly see the seeds of what is potentially coming.

So now how do you prosper in the next six plus years to come?  

Here is my take:

1. You must have crypto in your portfolio.  Raoul Pal is correct it has generated and may yet continue to generate returns well in excess of inflation, which I expect the latter will likely increase significantly through 2030.
2. Unlike Raoul Pal, I do not believe in this as a sole investment option.  There are just too many risks.  So, I would augment crypto with gold, silver, commodities and other hard assets that will also go up in value with inflation and possibly by more than that inflation rate.
3. Equities have historically prospered in a hyperinflationary environment.  Those that produce significant free cash flows have historically done the best, while those negatively impacted by higher borrowing costs via higher rates have suffered.  That has become technology to a large extent, and they will certainly benefit from AI.
4. You must get out of debt.  The bible says the borrower is servant to the lender.  That will become increasingly true as we move into the latter half of the decade.
5. You must own assets.  Just earning a good wage will not allow you to stay ahead of rising costs.  If you are not saving today, now is the time to get started.
6. Finally, I do not believe this will be a smooth ride.  The ability to have both passive or buy and hold assets and those that are traded out of significant declines (i.e., active investment management) for the markets or crypto will be an advantage.  Again, it's about being diversified by both the assets you hold and the way they are managed. 

Where can we help?  We can help you with all of the above as well as financial planning.  Let's ConnectWant to start a conversation, click here to contact us.

In our last post entitled "Why Understanding Up and Down Capture is Important to You?" we talked about both up and down capture and how they fit with secular periods of market consolidation.
 
We also discussed that the ideal manager has both a lower down capture and a high up capture ratio.  As an example, a 60% down capture means that you only lost 60% of what the benchmark loses in periods where it declines on average.
 
Further, we noted that InTrust’s historical up capture is about 86% on average for our active investment strategies.  Our down capture is about 56% in round numbers for the same active strategies.1
 
The real secret to such metrics is when markets are volatile, like we had in the last secular bear market that lasted from 1966 to 1982 or 2000 to 2009.
 
In my opinion, we are now in a secular bear market, and I believe it will be a brute, like the one that spanned the 1970s.  It will not be identical to the 1970s as no two periods are alike, but it will have a number of similarities.
 
The reason secular bear market and cyclical cycles are important is that differing investment strategies perform differently during such cycles.
 
Passive or buy and hold performs best in secular bull cycles.   This is because they do not practice risk management other than via diversification, they are low cost and do not make significate changes to the portfolio holdings or exposures.  In other words, they are very lean and efficient.
 
Active strategies perform best in secular bear cycles.   This is because they do practice risk management including diversification but also changes to exposure, positions and more.  What is a drag on performance in the secular bull period helps enhance and protect returns in a secular bear market.
 
We mix active and passive strategies because we never really know what markets will do but we obviously can make educated guesses or assumptions.
 
Let’s take a look at an example of what happens to return in a secular bear market cycle when proper risk management is applied, and market exposure is adjusted for the market environment.  In other words, the manager captures only a reasonable percentage of up market returns and/or a low-down market capture ratio.
 
In this case, I applied our average up and down capture to benchmark returns for the period 2000 - 2010 where Actively Managed Large Blend strategies outperformed.  This is not a perfect comparison, but a majority of our active strategies use this index (i.e., the Dow Jones Industrial Average) as at least part of the blended benchmark index.
 
So, what did we discover?

​The average performance increase was 2.7% per annum over just buying and holding the index over this period.  Again, we may have captured less up market performance, but we avoided more of the down-market under-performance and in this period, there was a great deal of market volatility.
 
Let’s go back a bit further, let’s say we have a repeat of the 1966 – 1982 secular bear market that included the volatile 1970s.  What does that look like?

Even during this volatile period, applying InTrust’s historical up and down capture rations resulted in an average 3.1% per annum performance pick up for this period over just buying and holding the index.
 
Now these are all proforma or hypothetical results, but I do believe we can draw a few conclusions. 
 
First, there are definitely periods for markets where just buying and holding (i.e., passive management) will underperform.  See Hartford’s chart of Active and Passive Outperformance Trends in the post, Understanding Up and Down Capture of Returns.
 
Second, from a probability perspective, we are likely due for one of those periods based on Hartford’s chart of Active and Passive Outperformance Trends.
 
Finally, you need to be prepared for such periods.  Most American’s suffer from recency bias and overweight what has been working to the detriment of what has not been working as well.  This bias can really hurt investors when Mr. Market flips the switch and decides to benefit the active managers by making markets more challenging for everyone.
 
My guess, my friends, is that we started such a period at the beginning of 2022.
 
Let us know how we can help you be ready for Mr. Market flip of the switch.
 
Disclosures/Footnotes
 
1 Excludes our modified buy and hold or passive strategies.  This statistical is based on historical data from inception through July 2023 for each active strategy.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJI was invented by Charles Dow back in 1896.
 
The up-market capture ratio is the statistical measure of an investment manager's overall performance in up-markets. It is used to evaluate how well an investment manager performed relative to an index during periods when that index has risen.
 
The up-market capture ratio can be compared with the down-market capture ratio. In practice, both measures are used in tandem.
 
The down-market capture ratio is a statistical measure of an investment manager's overall performance in down-markets. It is used to evaluate how well an investment manager performed relative to an index during periods when that index has dropped. The ratio is calculated by dividing the manager's returns by the returns of the index during the down-market and multiplying that factor by 100.