Wonder-ful book and quotes

Two years ago, I wanted a book to read together with my teenage daughter. Wonder, by R.J. Palacio, was recommended to me by the late Lisa Adams, a wonderful writer, blogger and friend who passed away this winter from breast cancer.Wonder

Wonder is a fantastic book that can be read by adults or children above grade 3. It is about a young boy who has facial abnormalities and the issues that he confronts.  It is a book that will stay with you. I highly recommend it.

This winter, my daughter gave me a book by the same author, 365 Days of Wonder. The author R.J. Palacio has compiled daily “precepts,” which he explains are “words to live by.”  While the author says these precepts are focused on themes for kids, they really apply to kids of all ages. The themes are kindness, strength of character, overcoming adversity or simply doing good in the world.365 days of wonder

We hope sharing some of the following “precepts” from 365 Days of Wonder provide you some positive inspiration.


We carry within us the wonders we seek around us. ~Sir Thomas Browne

Life can only be understood backwards; but it must be lived forwards. ~Soren Kierkegaard

Not all those who wander are lost. ~J.R.R. Tolkien

Be the change you want to see in the world.  ~ Mahatma Gandhi

The difference between ordinary and extraordinary is that little extra.  ~Jimmy Johnson

It’s not whether you get knocked down, it’s whether you get up.  ~Vince Lombardi

You can complain because roses have thorns, or you can be grateful because thorn bushes have roses.  ~ Ziggy, Tom Wilson

Don’t wait until you know who you are to get started. ~Austin Kleon

A single act of kindness throws out roots in all directions, and the roots spring up and make new trees. ~ Father Faber

It’s not the load that breaks you down. It’s the way you carry it.  ~C.S. Lewis

Winners never quit and quitters never win. ~Vince Lombardi

If your ship doesn’t come in, swim out to it. ~ Jonathon Winters

Interest Rates: Our View and What You Should Do Now

Interest rates are still very low. The Federal Reserve, which controls short-term interest rates in the US, continues to keep these rates at near zero, which it has since December 2008.

What is the future direction of interest rates? Are changes imminent in the near term? What steps should you be taking now?

The future direction of interest rates

The future direction of both short and long-term interest rates is likely to be higher than now. The key question is when will the increases occur.

Short term interest rates have been near zero since 2008. In early 2015, most economists and Wall Street analysts predicted the Federal Reserve would begin raising short term rates by June 2015. Based on Fed minutes released this week from their April 28-29 meeting, and other economic data, it appears that the Fed will not begin to raise interest rates at their next meeting, June 16-17.

Many analysts are now forecasting that short term interest rates will not begin to increase until September, or even later. When the Federal Reserve does begin to increase short term interest rates, it will likely be very gradual. The one year US Treasury bill currently yields 0.19%. We expect it will still be below 1.00% in early 2016.

The Federal Reserve has less control of longer term interest rates and the bond markets cause longer term rates to move more independently of the Fed.

During early March, the 10 year rate was above 2.23%, dropped to almost 1.83% in early April and has been around 2.20% throughout most of May.

We would expect longer term interest rates, such as 10 year US Treasuries, to increase over the next few years. The changes in these rates may be much more volatile and sudden than for short term rates.

During 1996 2002, 10 year US Treasuries were generally between 5-7%. From 2002 – 2008, 10 year rates were between 3.5%-5%. Since then, these rates have been between 1.65 – 3.75%. We expect that 10 year interest rates to increase from the 2% range during 2015-2016, but we would not expect these rates to increase to 5% or above for at least a number of years.

What should you be doing now?

  • If you are thinking about buying or selling real estate, we would generally recommend to act sooner rather than later. When interest rates do eventually rise, mortgage rates will go up as the 10 year Treasury rate increases.
  • If you have not refinanced a mortgage and your rate is higher than 4.5%, you should look into refinancing at these near historically low interest rate levels.
  • We generally recommend that you not pre-pay mortgages, as current interest rates are so low. When interest rates rise, having a very low rate mortgage will be to your benefit. We do not recommend adding additional principal to your monthly mortgage payment. For further information, see our prior blog post, click here.
  • On the investment side, we recommend owning a diversified portfolio of very safe and conservative bonds (or CDs) for the fixed income part of your portfolio that is appropriate for your specific situation.
  • Other than for 401(k) or smaller portfolios, we discourage investing in bond funds. See our prior blog post on this topic, click here. When interest rates rise, bond funds will incur permanent losses (and more than most people realize). We recommend individual bonds, as appropriate.
  • We recommend owning bonds or CDs with short-intermediate maturities, meaning 2-10 years, depending on your specific situation.
  • We do not recommend owning bonds with very long maturities, such as 15-30 years, in what will likely be a rising rate environment.

Practical Tips for Online Security

Online security is a growing problem, and will continue to be. The suggestions below are intended to be helpful and practical. Implementing them may seem overwhelming, but are strongly recommended. Even if you take a gradual approach to implement these ideas, you will be more secure.

  • You should never use the same password or just a few passwords for all of your online activities.
  • You should try to use as many unique passwords as possible.
  • Your passwords should be strong, which means they should contain at least 8 characters or more, and have at least one of each of the following, as permitted by a specific website: capitalized letter, lower case letter, number, other type of item (such as @, #, $, %, *, &)
    • Bad passwords: 1234567, password, Mary123
    • Better passwords: g8*RT@wj, RtyU&3#5
    • See the difference?
  • You should change your passwords at least 2 times per year. As many people use the change to and from daylight savings time to check their smoke detector batteries, the same can apply as a reminder to change your passwords two times per year.
  • When asked for security questions, you should not use the same questions and answers over again across multiple websites. If a website was hacked, this backup security provision would then be worthless at other websites.
  • Do not store your passwords on a piece of paper or sticky notes. Do not carry them around in your briefcase or purse.
  • For security questions, be creative. It is not a quiz. You don’t need to use real answers. For example, if the question asks you what street you grew up on, you don’t need to use the real name of the street. Make up a different street name, and keep track of it.
    • This strategy is recommended, as many of the questions ask for items that could be public knowledge or easily searchable by someone else.
    • Sample question and answers:
      • City you were born in? Bad answer: Detroit
      • Good Answers: Costco, Macy’s, red, Middlebelt
  • These recommendations may sound complicated and difficult to implement. If you use a password manager program, such as 1Password or LastPass, implementing these suggestions is much easier and realistic. These applications can store and enable you to retrieve all your passwords, security questions and other data. These programs can be added to your computer, laptop and mobile devices such as an iPad and cell phone.
    • I have used 1Password for a number of years. It takes a little learning, but it is incredibly worthwhile and a huge timesaver.
    • See my prior blog post on using 1Password, Click here.
  • If you get an email notification from a website or financial institution, you should not click on the link in that email, as it could be fraudulent. It is better to go the website directly yourself and login to handle the matter. This way you will know that you are actually going to the website you intend to.
  • If you go to a website and you need to have them send you a new password, username or security question, be sure to then change that item again, after you have logged on. Then you should delete the email they sent to you, with the new information.
    • For example, if you forget your password to wsj.com and they email you a new one, you should logon to wsj.com, use the new password they just provided, then immediately change it to a completely different password that you have not previously used.
  • Do not ever respond to requests for money or wire transfers, even if sent from a good friend or someone you know, stating it is urgent or an emergency. If you get an email request from a friend for money, always call the person. Verify the authenticity of the request, but not via email or online. This account may have been hacked and the person you are replying to may be a hacker, even though you think it is someone you know.
  • Do not email your social security number, your birthdate, or credit card numbers and security code.

I recently attended a conference that featured cyber security experts from Charles Schwab. One of the speakers was formerly with the FBI’s cyber security division. They explained that online hacking and obtaining your passwords, user names, etc. is a huge business. These hackers know that most people (73%) use the same passwords across nearly all the websites they log into.

Hackers may obtain your login information from something like espn.com (non-financial) or your e-mail account.  Once they have one piece of information, it may be useful to them to start to gathering other data and eventually accessing your bank, credit card or more personal websites. This is why I’m recommending all these steps above.

I hope you take the time to implement these recommendations.  Change a few passwords today!

A Current Reminder For the Future

This is a reminder for the future. This is an essay you should save, to tuck in your back pocket and pull it out when the financial markets are going through their next down period.

Today, the weather is good and so is the stock market. Like the weather, the stock market  can, and does, change suddenly.

The financial markets have been generally positive for the past few years. We do not know when that will change.  We will not try to time the markets or try to predict the next downturn.  That is not the point of this essay.

The main point is there will be future downturns in the market. They may not all be as severe as the October, 2007 – March, 2009 crisis, which caused the U.S. S&P 500 to be down over 50%.

But significant declines in stock markets occur more regularly than most people realize. Their occurrences are the norm, not the aberration. Declines of greater than 20% occur on average once every five years, since the end of World War II.

Within a given year, since 1980, intra-year declines have averaged over 14%. This means that while a calendar year may end up positive, at some point during most years there is a decline which averages 14%. This is volatility at work.

The key is that the overall progression of worldwide stock markets is upward, with temporary declines along the way. This should be your focus, especially when markets are heading temporarily downward.

Having the ability to handle the volatility of these market declines, and to stick with your stock allocation, is a key to successful investing. It is clear that those who understand this long term message, and have remained invested throughout the declines of the past, have been well rewarded.

So enjoy the good weather while it lasts. And enjoy the good stock markets, as they will return after the next decline passes through.