​When I was 11 our family moved from Southern California to Toronto, Canada. My dad was promoted to run the new Canadian division of the defense contracting firm he worked for. There were 10 kids in our family at the time so moving was a huge project.
 
My dad was a highly organized production manager so he put his skills to work preparing for our move. I remember carefully boxing all my clothes and possessions under his watchful eye. He insisted that every box be filled to absolute capacity. The boxes were then weighed, labelled, and sorted by size so the truck could be packed as tightly as possible. Watching him put it all together was a great education. We teased him a little, especially when he would ask for a box or item perhaps the size of a toothbrush, to fill a small gap. He said, “If you want any project to end well the most important thing is to start well.” He let us know that if the early packing was sloppy, we would never be able to fix it at the end.
 
I still have a picture of me holding the very last item, my very thin hoola hoop, and trying to fit it in the back of the truck just before closing the sliding door. There wasn’t an inch to spare. My Dad’s careful packing paid off in two ways. We were able to bring all our belongings, and when we arrived in Canada four days later everything was still in excellent condition because it was packed so tightly.
 
The principles that lead to a well-packed moving truck apply just as well to building a proper retirement account. If your early saving years are sloppy or careless, then it becomes very difficult in later years to clean up the mess. It is hard to retire well if you start poorly. In fact, I don’t know if I’ve ever seen it happen. At the same time those who start early and are careful with their finances, are able to build a solid portfolio that holds together during that lifelong trip. A modern-day example might be the famous Warren Buffet. People view him as one of the worlds smartest investors. What I see in him is a guy who started buying stocks methodically at age 11 and never stopped. Yes, he made some smart moves along the way but the smartest thing he did was get off to a good start.
 
I have watched young investors, even some of my kids, follow the path of Mr. Buffet. Because of their good start and consistent practices, I have no doubt that one day people will look at them and say, “Oh what great investors they have been.” But the truth of it is they got off to a good start and they are sticking with it. Next week I will go into more detail about what a good start in retirement savings looks like.

I needed help from a major company that I have done business with for years. They have always provided the highest level of service. When the virus hit, this wonderful company struggled to continue the high-quality service upon which they had built their reputation. It wasn’t their fault. The changes the virus imposed made it impossible for them to function normally. So, they struggled along and did the best they could and as a customer, I accepted the new normal. After all, “we were all in this together.”
 
Now it is late 2021 and the virus remains with us, but our approach to it has changed. Humans are great at adapting and yesterday’s unbearable risk becomes today’s normal life. We move on. As we have adjusted to our changed world, I see a new opportunity arise for investors. This column is written to investors, but also directed at the companies who want to attract their dollars.
 
Recently I called the company mentioned above and was bounced around for more than 20 minutes without getting an answer. Two years ago, this would have been completely unacceptable for this firm. As my frustration became apparent, the person on the phone commented about how sorry they were but “due to the virus situation,” they were working with limited staff and resources. I must say I have heard that excuse for 20 months and quite frankly, I am tired of it. I am tired of contractors, fast food restaurants, accounting firms, car dealerships and every other business blaming their lack of service on the virus. It has become the universal excuse for not doing a good job. Don’t get me wrong. I am not saying they are lying about their challenges. We all know businesses are struggling with labor problems, supply shortages and health issues. I am only saying I am personally tired of “hearing” the excuse.
 
An important principle of business is that if you are having a negative, or positive, experience with a business, it is likely other customers are having the same. Using your personal experience can be a valuable tool for assessing an investment opportunity. Great businesses know this, and it is why they strive to make every customer experience positive. So, if you are tired of hearing businesses blame their bad service on the virus, many others are tired of it too. Again, it doesn’t mean they are not being truthful, but it does mean companies that move on from this excuse have an opportunity to stand out.
 
The economic tragedy of the covid virus may turn into an opportunity as it will give the greatest companies the chance to rise up and provide great products and services in spite of it. To investors I say, seek out businesses that stop blaming the virus for their bad service, whether it is justified or not. To businesses I say, recognize that your customers are tired of the virus excuse, so stop using it and you will stand out. In our office we will be searching for these industry leading companies.

​I needed a new car and if you haven’t shopped for one lately let me just say, good luck. After a couple of weeks, I found myself wondering if I was living in cold war Russia. Each salesperson said some form of “You want a new car? Yes, we can get one in three months. You must take whatever features and color it has and pay whatever price it is at the time.”
 
They did have plenty of used cars available but prepare for a price shock. When I finally found a suitable car, it was a slightly used vehicle that happened to have the original window sticker in the glove box. I asked why the current used price was thousands of dollars higher than the new sticker price. The salesman’s answer was, “Do you need a car or don’t you?”
 
Inflation is a nasty thing. When operating in full force it can eat away at your finances faster than taxes. In essence it is the worst kind of tax, hitting hardest those who can least afford it. Middle class Americans are paying a heavy price, and most recognize it is much higher than the 6.2% the government claims. The only inflation numbers that matter are the ones you pay personally.
 
Gasoline, healthcare, food, clothing, and toilet paper (if you can find any) are all tracking significantly higher than the official rate. Supply shortages are part of it but not to be overlooked is massive government spending. Printing new money dilutes the current supply, driving up prices. Another overlooked source is marketplace competition from the government itself. Years ago, the owner of a large paving company taught me that when he receives a contract from the government, he is required to pay his employees what is known as the “prevailing wage.” At the time this was more than double the private sector wage.
 
With the passage of the very expensive infrastructure bill, contractors on private projects are going to be competing for employees who have the option to work on government contracts at a significantly higher wage. One financial outcome of this scenario will be rising costs of construction across all sectors. If you think houses cost a lot today, wait until contractors are competing with over a trillion dollars to be spent on new public projects.
 
There are only two options for dealing with inflation. Keep up, or watch your buying power diminish. Fortunately for my friend, the government was willing to pay more to cover the higher wages, but for private contractors the price squeeze gets passed on to the customer.
 
Planning for retirement will always face many risks, but I believe the greatest risk today is inflation. You can’t stop it and you can’t get around it, so the best solution is to invest to stay ahead of it. Own assets and companies that have the flexibility to raise prices along with inflation. Then when you find yourself needing a new car, you will have your own inflated dollars to pay for it with.

​My Dad grew up in an orphanage from age five. It wasn’t a pleasant life by today’s standards but with the depression going on he recognized the blessing of having a warm bed and three meals a day. At the age of 13 he “graduated” from the orphanage and was sent out to make his own way in the world. His life on the streets of Detroit as a teen was totally foreign to me. My teen years were a carefree, wonderful time. His were all about survival.
 
Because of his life, my dad always had a soft spot in his heart for people in need, even those that many avoid because of their harsh look. He understood them in a way we kids of the roaring 70’s never could. One day my dad came home from work with a homeless man named Woody. This was not an uncommon occurrence in our home. To help Woody out he offered him food, a place to stay for a while, and odd jobs around the house.
 
One project he hired Woody to do was putting some new molding on our kitchen door. He worked on it for many hours, then proudly called us all in to see the finished project. Immediately, even the youngest of us noticed he had mounted the molding backwards, and I started to blurt out the obvious when my Dad shushed me and said, “It’s beautiful Woody.”
 
Later that day our dad taught us that Woody’s life was much different than ours, and that he probably didn’t know how to mount a door molding because he never had a home. He decided not to fix the door but left the molding backwards as a daily reminder that others see the world differently than we do because their experience is different. When my parents moved eight years later the molding was still backwards.
 
The situation in which a person grew up has a great effect on how they invest. Depression era investors often shunned risk, focusing on bonds, CD’s and large cap value companies. Their baby boomer children had easier lives, so they became more ambitious investors, using investing as a tool to become rich as soon as possible.
 
Millennials have grown up in a digital world. They care more about their online social life than material goods. Thus, they love to invest in new technology and in companies they believe will change the world, not just make money off it. As a result, in increasing numbers they are asking for investments that are environmentally, socially, and politically responsible, known as ESG investing. They want to own businesses that are also good citizens.
 
For older generations who focused on earnings this may seem like millennials are putting the molding on backwards. But as this growing group is gaining more economic power, it may be wise and profitable to pay more attention to how these new investors see the world. Their parents invested to make money. Millennials invest to make a difference. It’s possible to do both.

In 2013, after a rapid climb to glory, the world of cryptocurrency was rocked by its first major downturn. The internet lit up with chatter from largely millennial investors trying to decide what to do with their newfound, but rapidly shrinking wealth. On December 18th, in the midst of the social media back-and-forth, a poster by the name of GameKyuubi, wrote regarding his crypto positions, "I AM HODLING." He explained that since he was not as smart as professional investors, the only logical course was to not sell into a market that he did not understand. His rambling post was filled with many other spelling errors but the one that immediately became an internet sensation was the misspelled word, HODL.
 
The expression is common today in online chats and has even made its way into a couple of movies. Posters use it to encourage others to hold a stock “forever” in order to not be out traded by the smarter or more connected elites of Wall Street. When the Gamestop frenzy hit the markets earlier this year, online chat rooms were filled with investors encouraging each other to HODL, “all the way to the moon” if necessary.
 
It sounds similar to the traditional “Buy and Hold” philosophy but HODL goes further. It has become almost a modern-day battle cry among Wall Streets’ newer investors in their battle against the establishment, as was the case with Gamestop. The strategy is in some ways considered honorable, and a sign of loyalty to fellow investors that one is willing to buy a position and hold it regardless of what happens.
 
I admire the commitment of millennial investors, and their loyalty to one another. I also respect that sometimes it can be very profitable to buy and hold through the tough times. But I also feel compelled to share a little market history lest they get so carried away in the HODL mentality, that they put their financial future at risk.
 
The most commonly used measure of market activity is the Dow Jones industrial average. Created nearly 125 years ago, it was designed to contain the largest and most recognized businesses that represented the direction of the country’s stock market. The initial members would have been the strongest of the strong.
 
Today, none of the original Dow members remain in the index. The final one to drop off was General Electric in 2018. The message is simple. Capitalism provides the opportunity for great ideas to turn into great companies. But it also allows for those businesses to be replaced when even greater ideas come along.
 
Buy and hold (or HODL) strategies have value, but they also carry risk. This is clear if you look at the great companies of today and realize how young most of them are. Likewise, many of today’s most recognized brands will not exist in future generations. Investors who HODL just for the sake of HODLING may one day find themselves left out when the next great idea comes along.

​When asked what the greatest risk to investors is, I usually answer, “Themselves.” Whether it be greed, fear or impatience, humans are very creative at finding ways of sabotaging a good financial plan. Let me begin this discussion in my youth when I decided to join a high school debate team.
 
My first assignment was to debate in favor of a position that I was personally opposed to. I initially protested but my new coach insisted it would be a great learning opportunity. After a week of diligent preparation, not only was I able to skillfully debate the position, but I gained a greater appreciation for the other side. I also gained respect for the people who I initially disagreed with, recognizing that they had good reasoning on their side as well. It was a basic lesson in life, but one that is sorely lacking in today’s society.
 
We were once a nation that thrived on the free and open exchange of thought, but in recent years the polarization has become so severe that it’s almost impossible to have a cordial conversation on difficult topics. Viewpoints have become so narrow that decisions are often based on what groups we identify with rather than what makes the most sense. It’s like our lives have become a continual contest of “us” versus “them,” with a dozen different iterations of who us and them are.
 
I mention this here because this unhealthy attitude has found its way into investing. When people ask me about the economy or current investment options, the questions are often tangled up in the same “us and them” conversation. From the outset their language makes clear that they view the issues through the lens of whatever group they belong to. As a single example, I get many questions about the backlog of cargo ships in California, and the accompanying effect on our supply chains. These questions are usually couched in polarized language which blames politicians, unions, and others for the problem. There seems to be more focus on assigning blame, than on looking for solutions, or in an investors’ case, finding opportunity.
 
I have done some research on the topic and found, to the surprise of many, that during the recently completed fiscal year the Port of Los Angeles recorded a 112-year record for the amount of cargo unloaded. That sounds much more like an overload than a slowdown and is amazing considering the pandemic. For investors, one might say that is actually good news. The supply problem investors see as a huge political mess (because that’s what they are looking for) is largely because America is on a buying spree. Investors, caught up in polarizing blame games may be missing an opportunity to invest in the companies Americans are so anxiously trying to buy from.
 
And this is just one example of how polarizing thought is hampering investors. My debate teacher was right. You can learn a lot more (and potentially profit more) if you take the time to understand all sides. 

One form of financial fraud that is particularly painful to discuss is advisor fraud. What if the financial advisor you have trusted, turns out to be the one stealing from you?
 
I regularly track the SARS (Suspicious Activity Report) issued by the banking industry through the Consumer Protection Bureau. A recent report found that 25% of financial crimes against seniors were committed by a family member and a disturbing 7% by a financial advisor. It also revealed that when those two groups are involved, the financial loss is usually greater.
 
We are all cautious of unsolicited emails, phone calls from foreign countries, and strangers in the parking lot, but when friends or family are involved, we naturally put our guard down. In my career I have seen many cases of financial crimes committed by family, often children against aging parents, as well as by neighbors, friends, and even fellow church members. These are sad events, and the best defense is to be aware that where money is involved, you should always be careful. We should also watch out for each other because when friends and family are the perpetrators, victims are often reluctant to take action even after they discover the crime.
 
As for financial advisors, sadly, there are bad actors in every profession. There is no guaranteed integrity test and sometimes wolves lurk under the most innocent looking sheep’s clothing. Despite our best efforts, some slip past the protections that are put in place. So, what do you do? In my meetings with potential clients, I don’t just discuss the money we plan to make for them. That’s the fun part. But I also talk about the various things that could go wrong. As part of that discussion, I ask them to consider a very pointed, and necessary question. “If someone in our office, or at our brokerage firm should find a way to steal your money, what protections do we have in place to protect you?”
 
This usually surprises them but since we cannot know for sure the integrity of all the people around us, I find this question to be of utmost importance. I encourage anyone who deals with others on a financial level to ask a similar question. I encourage anyone with a financial advisor to ask them this question. You may not like the answer some of them give you.
 
In addition to following stringent best practices for client account security, legitimate investment professionals like ourselves have various insurance policies in place to protect clients from fraud. (Not to be mistaken for normal market losses). Insist on knowing what those policies are, and their limitations. Demand to know, if your money is stolen, will it be replaced and under what terms.*
 
I am a firm believer in receiving professional financial advice. I also have seen enough trouble to know that you should never trust your money to anyone until you know what steps they have taken to protect you, even potentially from them. Good advisors will welcome these questions.

* For answers on how we protect our clients from fraud please contact our office.

Flight instructors often remind new students that take-offs are optional, but landings are mandatory. This axiom reminds pilots to think carefully before they push that throttle forward to head down the runway.
 
Once in the air, the most difficult part of flight is usually the landing. At any other time, the plane can be very forgiving of mistakes or inattention. The miles of distance between you and the ground, and other airplanes, allow for a wide margin of error.
 
On arrival at the destination airport, as you get increasingly closer to the ground, things change quickly and safety margins shrink. During this phase of flight pilots must pay careful attention and fly with precision. This is when pilots have been taught to use very small adjustments to keep the plane on course. The rule is, make small adjustments, give the plane time to respond, then adjust again as needed. Following this rule is a challenge as there is a natural tendency to overreact to the rapidly changing world of a landing airplane.
 
When I was struggling to learn how to land, an instructor wrote on a sticky note, “Look Up,” and stuck it to my windshield. He wanted me to quit looking at the runway below me and instead focus on the horizon. This was counterintuitive to me since the numbers on that runway were what I was trying to hit. And hit them I did, sometimes with great force. My instructor assured me that if I would focus on the horizon, my small control corrections would become smooth and accurate, and the airplane would land gently on those numbers all by itself. When I was finally able to trust his advice, I found it to be true. For many years I left that sticky note on my windshield.
 
A landing airplane is going very fast. Trying to control it by chasing the rapidly moving ground below you leads to excessive movements with constant over corrections. Looking to the horizon gives you a better perspective resulting in more accurate control as a pilot.
 
Investing follows a similar principle. Some people watch the news very closely and react financially to every up and down in the rapidly changing world they see. This results in knee-jerk investing moves that put them in a constant state of overcorrecting. Like a pilot watching the runway directly in front of them, the results can be disastrous. If they could only learn to look up, and focus their attention on the distant horizon, their movements would become smoother, and their course more steady. Like an airplane, their investment portfolio would become more stable and the financial destination more solid.
 
Investment portfolios do best when we make small corrections, watch to see how things perform, then correct again as needed. This is especially true close to retirement. All this is possible only when we keep our eyes on the horizon. The next time you find yourself stressed over the current days’ political or economic crisis, get out your sticky pad and write yourself a note. Look up!

​I’ve never liked the way many analysts refer to market headwinds as if they are always negatives. Let me explain. I had the pleasure this summer of going on a sailing trip with two of my boys. We left Newport Harbor and sailed 27 miles to Catalina Island, where we spent a couple days exploring. The trip across the channel took 6 hours, but we weren’t in a hurry. Sailing is all about enjoying the journey. Along the way we saw some wonderful sights, perhaps the highlight was a pod of Orcas that joined us for part of our voyage.
 
At one point while circling the island we passed an area where the wind increased to 20 mph, which is a stiff breeze for a sailboat. As the boat heeled to starboard and our speed increased, we all got excited. It was an exhilarating ride and a lot of fun.  For my son Jayden it was his first time sailing and he was thrilled to see we were actually gaining speed while sailing largely into the wind. I mentioned that on the way home the next day we would likely have direct 20 mph tailwinds, but that we could expect to be travelling much slower due to a phenomenon known as apparent wind. As a sailboat tacks into the wind, the boat’s own speed increases the speed of the wind hitting the sails, creating more lift and pushing it forward faster. When a boat sails with the wind, the speed of the boat causes less apparent wind to fill the sails and it slows down. On our way back to Newport we did indeed have those same strong winds, yet the experience was totally different. As expected, the ride was calm and our speed much slower.
 
I was speaking with a real estate appraiser some months ago and, referring to the stock market, he said in a negative tone, “With markets at all-time highs there is nothing good to invest in.” It was not a surprising comment given investing was not his profession, but it did give me cause to ponder. I thought about our sailing trip and how we experienced being able to travel faster against the wind than with it. Sometimes the very opposition that we think will slow us down, actually gives a skilled captain the opportunity to speed things up.
 
Yes, the market is near all-time highs, higher interest rates are threatening, and inflation continues to rear its ugly head. These may seem like headwinds to some investors. Remember though, as with sailing, it isn’t the direction of the wind but the set of the sails that determines your course, and often heading more into the wind can yield even better results. When someone tells you there is nothing good to invest in, maybe they just don’t know how to set the sail for the current economic winds.

​My home office has a program to help protect our company from fraud. They regularly send phony “scam” emails to all advisors, trying to trick them into falling for them. If we do, we joke about having to wear the “cone of shame” for our error. The effort has successfully trained us to question everything that hits our inbox.
 
A current real scam in my email took a twist that is uniquely dangerous. I received very realistic notice from “Amazon” telling me that the expensive phone I purchased had been delivered to my home in Florida. I did not order a phone, nor do I have a Florida home. It gave a phone number to call if I had any questions. Since it didn’t ask me to click on anything, my initial reaction was to call the number. I thought better of it and went to Amazon directly from my app and confirmed no such order had been placed. Had I called that number I am sure I would have encountered a master scam artist that would outmatch any timeshare salesman.
 
In another personal incident just this week, I was in a store parking lot when a man pulled up in a very expensive vehicle. He opened the passenger window where a young boy was sitting. The man wore what appeared to be expensive gold jewelry. He said he was a foreigner and had lost his wallet and passport and needed $300 to get a new one. He pulled a big ring off his finger and offered it to me for the cash so he could get home. Before he went on, I responded with a firm “no” and turned away, which led to the man yelling at me for not being willing to help.
 
It’s difficult to turn down requests from others in need. Criminals take advantage of this so if you want to be charitable, it’s best to do so using legitimate organizations and refer people in need to those as well. On the other hand, if his fake gold ring brings out the greed in you, maybe losing $300 will be a good lesson.
 
Some of the red flags that should alert to potential scammers are: First, if money is involved. Second, when the calls, emails or requests are unsolicited. Third, if someone or something is using emotions to rush you into a decision.
 
In all these situations, if you are in doubt, hang up, hit delete or walk away, and then go to the real source to find the truth. Find the website, email address or phone number using your own resources, not the ones you are given.
 
There is currently a growing wave of scams, and we must be always on our guard. Criminals are clever and they know what we watch for, so they keep changing the approach. If we follow a few simple steps, we can usually avoid being taken. If ever in doubt, our office offers a free fraud service, and we will also alert others to the risk.