Reflections on 2016 and the future

As a year ends, it’s a time to reflect, as well as look forward.

This year has been strong for nearly all stock asset classes, despite some dramatic downturns which occurred earlier in the year.thinking

This year again reminded us that the only certainty is uncertainty.

We recognize the uncertainties in the world and in the financial markets. We recognize that no one has a crystal ball or the ability to predict the future. Thus, as your financial advisor, we must be rational and focus on what we can control, in planning for your future.

We better ourselves as financial advisors by learning from the past. We read, study and understand the financial markets and the successes and failures of others to provide you with better advice and guidance.

We continually encourage you to be rationally optimistic and to focus on the long-term. Doing this will enable you to be happier and financially more successful.

We do not know when the next downturn will occur. We do know there will be temporary declines in stocks, as the broad stock markets of the world continue to move higher and higher.  We want to help you be emotionally prepared for the downturns, in advance. We will be here to help you handle the volatility of the financial markets, when the storms show up.

We are very fortunate for our very loyal clients and the strength of our firm. This was a year of significant growth for our firm. We truly appreciate all of our clients and especially thank those of you who showed their trust in us by referring their friends and relatives.

We are very passionate about what we do. We care. We strive to provide our advice and service with integrity. Our guidance, on all kinds of topics, is always given with your best interest in mind.

We appreciate that so many of you continue to involve us in your lives, to ask us questions about things which are important to you, to help you plan for your future, as well as to deal with the difficult issues and events which challenge each of our lives at times. All of these various conversations are important and we appreciate the trust you have in us.

As we start a new year, we hope that 2017 is healthy and happy for you and your family.

Brad’s 2016 Book Recommendations

One of the passions that I bring to my role as a financial advisor is being a continuous learner. I read extensively, particularly non-fiction. I’ve read most of the books below during the past year.

I strongly encourage reading Good for the Money: My Fight to Pay Back America,by Bob Benmosche. This book surprised me. I thought I knew the AIG story. I knew why they failed, but this powerful book tells how the CEO of AIG (after the government bailout) battled many forces to enable AIG to pay back the US government all its money and billions more. Memorable and more than a business book. There is way more to the AIG comeback than you probably good-for-the-moneyknow. 

The Moral Case for Fossil Fuels, by Alex Epstein, should be read to understand the impact which fossil fuels play in our lives. A must read to understand our world, whether you agree or disagree with the author.

Michael Lewis’ latest book, The Undoing Project, tells the story of two psychologists who have greatly impacted psychology and behavioral economics. I’m not finished with this book yet, but it’s fascinating and very readable. It is much more than economics and decision making and filled with treasures of information.

As Lewis is also the author of Moneyball and other books, it is clear why his book is much more readable than Misbehaving, by Nobel economist Richard Thaler, which I started and have not finished. The latter is good, but a much more challenging book.

Essentialism, by Greg McKeown, shows you how to live by “less but better.” One of my favorite books of the past few years. Great concepts. essentialism

Deep Work, by Cal Newport, explores being more productive by really focusing. While relevant to many, I encourage you to recommend this to college age students or others who are addicted to our culture of short attention spans and multi-tasking.

An ongoing theme of our firm is that we are rationally optimistic, especially in the long term. Part of this philosophy comes from The Rational Optimist, by Matt Ridley, a dense and not always easy read, but an excellent analysis of progress throughout civilization. I have recently started Progress by Johan Norberg, which appears to be a more readable account of progress in 9 categories, such as poverty and the environment.

If you are interested in personal change in any aspect of your life, Triggers, by Marshall Goldsmith, or Get Momentum, by Jason and Jodi Womack** are both excellent. If you want to live better with a positive attitude about your success, I really enjoyed Million Dollar Maverick, by Alan Weiss. Despite the title, this is not about money.

One of the biggest influences of all the books and my learning over recent years has been the 4 book series by Ari Weinzweig, co-Founder of Zingerman’s Community of Businesses. I have started his just released fourth book, The Powers of Beliefs in Business. His books are long, dense and very worthwhile. I highly recommend all four of the books. They do not have to be read in order. (Available only from or their locations).

I began the year by reading Reagan, by H.W. Brands. It is a very readable and seemingly balanced history of his life and Presidency. I did not finish it, but only because wonderI kept buying other books. This is an example of learning from history, which is important, and the perspective which time, research and an excellent author can provide.

For children and young adults, I recommend Wonder and 365 Days of Wonder, by R. J. Palacio. The former is a wonderful novel and the latter is a daily book of sayings based on the original book. Both are outstanding.

To learn more about social media, technology trends, business and life perspectives, I really enjoyed #AskGaryVee, by Gary Vaynerchuk.

My biggest book purchase of the year weighed in at 17 pounds. What Does it Sound Like When You Change Your Mind is 800 pages of compiled blog posts by Seth Godin, whose daily blog posts are required reading for me every day of the year. This book will likely be in the office, so take a look when you are here next!


With our best wishes for a happy holiday season, filled with good times with your friends and family (and maybe a good book or two!).



**Jason Womack is my executive coach and we have a long-time personal relationship.





Fed Reserve: Why rates are increasing

The Federal Reserve this week finally did what they have not done since last December, increasing the federal funds rate to ½ to ¾%. This increases very short term interest rates by .25%.

The Fed Reserve action trails the actual rise in interest rates which has occurred since the Presidential election.

The trend in interest rates since December, 2014 is as follows:
  • Most interest rates rose during 2015, both long and short term.
  • During 2016, short and longer term interest rates were expected to rise, but actually declined significantly from January, 2016 through the fall, 2016.
  • After the election, short and long term interest rates have increased significantly, especially in relative terms.

Irrespective of the Federal Reserve, the financial markets moved interest rates higher based on increased future expected economic growth and Federal spending as a result of the election.

See the following chart for how interest rates have moved over the past two years:


The Federal Reserve can heavily impact very short term interest rates. The financial bond markets, and really their expectations of future economic activity, controls the future of mid-longer term interest rates.

While it is important to understand the thoughts and forecasts of the Federal Reserve, you should realize that financial markets control much of the interest rates that really matter, such as the corporate debt, mortgage rates and longer term US Treasury debt.

The Federal Reserve provides economic and monetary projections quarterly. While these projections have generally been inaccurate during the past few years, they are still important to consider.

The following are the projected federal funds rate data from the forecasts of December, 2015, September, 2016 and December, 2016. You should note that while the forecasts for short term interest rates have increased from September to December 2016, those forecasts are still much lower than as forecasted 12 months ago.


The major change from the September, 2016 to December, 2016 median forecast for 2017 is raising rate hike expectations from two .25% increases to three .25 increases.

Conclusion: Less emphasis will be placed on the Fed in the next year. Expectations of policy changes have caused interest rate increases since the election. As policy and legislation are enacted and implemented by the new administration, their impact on the economy will have much greater influence on the movement of interest rates.

If the economy grows faster than expected, employment continues to be strong or stronger and if inflation becomes greater than 2% annually, for whatever the reason, then interest rates will likely rise greater than the Fed’s forecasts.


Dow 40,000

The DJIA (Dow Jones Industrial Average, or “Dow”) is nearing 20,000. It currently trades around 19,570, which is an all-time record high.

Will it go higher? Will it reach new highs? Absolutely yes!

How about Dow 40,000? Yes, that will occur. And we would not be surprised if that occurs within the next 10-15 years. (See below for our analysis).

For a firm which does not make predictions, this may seem like quite a bold statement.

We are not really making a forecast or bet, but providing an example of our confidence in the future, the continued ability of companies to grow their earnings over the long term, as well as relying on historical economic data and the power of compounding.

In 2012, with the Dow at 13,000, Seth Masters, the chief investment officer of a Wall Street firm, “boldly predicted” that the Dow would reach 20,000 by 2022. When the Dow reaches 20,000, you will likely read lots of stories about his prediction.

However, on closer examination, Master’s prediction was not really that bold. It may have taken some guts, but he was just being positive and logical. The Dow needed to grow by just 4.75% per year, which is below the historical annual return rate of US stocks, for the Dow to grow from 13,000 to 20,000 over the 10 year time period. So, it was actually conservative for him to predict that the Dow would reach 20,000 by 2022.

The Dow is composed of just 30 stocks, which are all US large companies. The companies that make up the Dow change over time, as companies and the economy evolve. GE is the only company of the original 12 DJIA stocks.

So back to our prediction of Dow 40,000.

* If stocks in the Dow grow at 5% on average per year, the Dow would reach 40,000 in 15 years, around the end of 2030.
* If the Dow grows at 7% on average per year, the Dow would reach 40,000 in around 11 years, in 2026.

Those are actually very realistic forecasts, as the annual historical return of large US company stocks is around 8%. We can guarantee that the future direction of stocks will not be straight up. There will be months or years of huge, temporary market declines which may challenge you to continue to stick with your stock allocation. Helping you during these periods is another value we will provide to you.

As the 30 Dow component companies are very large US stocks, it is reasonable to assume their future growth and stock performance may be less than smaller companies. We believe it is in your best interest to own a globally diversified stock portfolio, with the stock allocation of your total portfolio based on your individual circumstances and needs. We recommend holding a significant portion of your stock allocation in stocks which are not included in the Dow, such as US small value companies, foreign stocks and many other stocks which are not in the DJIA, as discussed in last week’s blog post, click here. Thus, broader indexes of stocks, such as the S&P 500, small cap and International stock indexes are much more important than the growth of the DJIA.

As the future certainly cannot be forecasted, the success or failure of the 30 stocks within the Dow cannot be predicted. Also, no one can predict or know which stocks will be added or deleted to the Dow over time.

Thus, we think it is more relevant to look at the future growth possibilities of broader indexes, such as the S&P 500.

* The S&P 500 currently is around 2,240.
* If the S&P 500 grows at 5% on average per year, the S&P 500 would reach 4,650 in 15 years, around the end of 2030.
* If the S&P 500 grows at 7% on average per year, the S&P 500 would reach 4,700 in around 11 years, in 2026.

These figures don’t seem as exciting as Dow 20,000 or Dow 40,000, but the future of broader stock indexes, both in the US and globally, are more relevant to your financial future than just the 30 stocks which make up the DJIA. We could provide forecasts for small company stock indexes or International indexes, but the same concepts apply to those; they will go up and down at various times, with a long-term positive trend.

Be positive.

Be patient.

And it will be interesting to review this essay with you in the future!

Note: Sources available upon request.

Surprise or not a surprise?

The financial markets in the US have been strong so far in 2016.

With the S&P 500 up 9.6% through November 30th, it may be a distant memory that the year began with 6 down weeks. By February 1slide011, 2016, the S&P 500 was down 11%, due to concerns about Japan’s economy.

While these figures may surprise you, our focus on the long-term, not on short-term movements and predictions about current events, is to your benefit. In structuring investment portfolios, we generally invest more in small, small value and International stocks than many other financial advisors, who emphasize mostly US large company stocks.

Through November 30th, 2016, US small and small value stocks have vastly outperformed US large company stocks (per the S&P 500). Small value returns are greater than twice the S&P 500 returns. Does this surprise you? Have you benefited from this?

International stocks are positive for 2016, but trail the S&P 500. Emerging markets (smaller, non-developed foreign countries) have also outperformed US large company stocks, even though they have done poorly in the last two months.

In developing portfolios for our clients, we first focus on the proper allocation between stocks and safer, fixed income securities. This allocation is critical, as it provides a foundation to have the willingness and ability to remain invested when the stock market goes down. We provide the emotional foundation to remain invested in stocks.

Once that allocation is determined, we recommend that the stock portfolio be much more broadly diversified than owning primarily US large company stocks, such as the S&P 500.diversification

Why do we recommend this type of diversification? Because many decades of academic evidence and real world experience show the following, over the long term:

* Risk and return are related.
* Small stocks outperform large company stocks.
* Value stocks outperform growth stocks.
* International stocks outperform US stocks.
* Emerging Market stocks, which are the riskiest, outperform International and US stocks.

To receive the financial benefits of these expected returns, you need to be patient. There may be many years that the above does not occur, then the trends can turn when you least expect it. In the late 1990s, large company stocks outperformed small company stocks for many years, which were then followed by years of huge outperformance by small and small value company stocks.

So far this year, investors have been rewarded for their patience, as many of these expected returns have shown up.

Successful investment experiences require the proper strategy, planning and advice.

Be sure that you are properly diversified in the right asset classes. (If you are not a client, you are probably not adequately invested in certain asset classes.)

You may be surprised by some of these stock market results. While we do not know when these returns will occur, we are confident in our long term investment strategy, which is structured to benefit from these type of stock market moves.




Giving Thanks


Warren Buffett has often cited what he calls “winning the ovarian lottery,” which he feels Americans win the day they are born in the US. In lengthier speeches on the same topic, he cites the many aspects of your life which are determined at birth: the political and economic system you are born into, your health, gender, skin color and your level of intelligence.

While our country is certainly not perfect, we are thankful for its many virtues and the opportunities it has provided to so many of us.

As we will soon celebrate Thanksgiving Day, we hope you appreciate the good fortune that so many of us have, simply by being born and able to live in the US.


We are truly thankful for our clients, who have placed their trust in our firm.

We are very thankful for the referrals that our clients and friends have made, as we have been able to assist their friends and relatives.

We are thankful for the clients who have requested our advice for matters beyond investing and financial planning, such as helping them with life transitions, estate and charitable planning, real estate transactions and the sale of businesses.

We are thankful that our clients understand the importance of focusing on their long-term goals, and not on short-term market swings, as this will provide them better long-term investment results.

We are thankful for our long-term business partners and relationships, which help us to be successful.

We are truly thankful and positive, and hope you are as well.

We wish all of you a very Happy Thanksgiving and hope you are able to share it with those who are most important to you.

Does your financial advisor….

….use a consistent and understandable strategy for investing?

….develop a relationship with you that helps to reduces your financial stress?

….help you feel more confident and financially secure? And especially about retirement planning and withdrawal strategies?

….provide you financial advice in many areas beyond just investing?

….realize that over many decades, small and value stocks outperform large company and growth stocks? Does your portfolio reflect this?

….own the same general type of investments that you are invested in?

….accept that you cannot time the financial markets and cannot predict in advance which money manager will consistently outperform others in the future, so their strategy is based on these concepts?

….explain their fees in a detailed and transparent manner, as well as the fees of any investments that they recommend?

….strive to minimize and reduce your taxes by using tax-managed mutual funds and take pro-active steps throughout the year, and not just at year end?

….always make recommendations which are in your best interest (as a fiduciary)? If you have an account with a bank or major brokerage firm, the answer is most likely NO and this really matters.

….lead by example and walk the talk, by having their own succession plan in place (planning) and by using a computer password management program?

….take the time and effort to write their own weekly essay to clients, to communicate with you?


If you are a WWM client, the answer to all of the above questions is YES.

If you are not a WWM client, YOU have some questions to consider. We welcome the opportunity to talk to you.


As next week is Thanksgiving, the weekly email will be sent on Wednesday, November 23, not on Friday. 

The Election Aftermath: The Financial Impact

In this post, we will provide our initial thoughts based on the outcome of this week’s national election and the implications to you financially. As we have said many times, you can only plan and focus on what you can control and know.

There is much uncertainty about the specifics of Trumps plans and how a Republican Congress will work to enact his forthcoming proposals.

Stock Market:

The huge election night drop in the stock market “futures” turned into a strong rally on Wednesday, with 1-3% gains for large company and small company stocks, respectively. The swing was astounding and remarkable. It shows again to expect the unexpected, and by owning a broad, globally diversified portfolio, you can benefit from unexpected positive market surprises.

After 9 straight days of losses (which in total were only down a few percentage points), broad US stock market indexes have increased significantly from last Friday afternoon and are now near all-time highs, going into Thursday.

Remember, in the long term, stock markets reflect expectations of companies’ future earnings growth. We remain rationally optimistic that companies will continue to innovate, adopt and succeed. That has been the long-term trend for many, many decades and we do not think that will change.

We remain very confident in our investment philosophy. During a period of change, our investment strategy may be even more valuable. We do not plan any significant changes to our core principles and investment strategy.

If you have questions about your portfolio, please contact us.

Income Tax changes:

The election of Donald Trump, along with the Republican Party controlling both the Senate and House, will likely lead to major individual and corporate tax changes.

Based on Trump’s tax plans, he will likely push for major tax cuts, which will mostly benefit upper income taxpayers. On Wednesday, House legislators already began drafting tax proposals which they plan to introduce in the first 100 days of Trump’s presidency.

The November 10th Wall Street Journal stated that Trumps plan was for the top individual rate to drop from 39.6% to 33%. The 39.6% bracket now starts at taxable income above $467,000 for married couples. The current 33% bracket, which would likely be reduced, now starts at taxable income above $232,000 for married couples.

Action step: If you think you would be in a lower tax bracket or your tax rate would be reduced in 2017, it would be advantageous to accelerate your payment of tax deductions like property taxes, state taxes and charitable contributions into 2016, rather than paying them in 2017. If possible, it may make sense to delay income into 2017.

For businesses, corporate tax rates are likely to drop significantly. The current 35% top corporate rate could be reduced to 15-20%, depending on the various proposals. Other tax rate reductions for pass-through entities and businesses are also likely.

Estate taxes:

Trump and many Republicans have advocated for a complete repeal of the Federal estate tax. We recommend that you do not make any changes to your estate plans at this time. Do not act in this area until proposals become laws and are effective, or certainly without consulting an estate planning attorney.

Spending, Interest Rates and Deficits:

Trump has talked about much greater infrastructure spending. This type of stimulus could benefit the economy, put people to work, as well as have other longer term benefits to the country, depending on the projects.

His planned combination of large tax cuts for individuals and corporations, along with increased fiscal spending, has led many to be concerned that the budget deficit will increase significantly. It will be interesting to see how traditional Republicans in the House and Senate balance these conflicting impacts on the Federal deficit.

Due to anticipated increased government borrowing and economic growth, interest rates have risen relatively sharply since the election, as the 10 year US Treasury bill broke above 2% for the first time since January 2016. The rate was below 1.5% in July.

We view the increase in interest rates as positive, as corporations and individuals have had long opportunities to refinance their debts at very low interest rates. For savers, higher interest rates will be welcomed and we think the economy can easily continue to expand with modestly higher interest rates in the near term.

Action steps:
* If you were considering refinancing an existing mortgage, don’t wait.
* You should generally not pre-pay current low rate mortgages, as they will become more valuable as interest rates on fixed income investments rise, both in the near and long term.
* In general, if you have a large fixed income portfolio, you should avoid bond funds. When interest rates go up, bond prices go down. In a rising interest rate environment, bond mutual funds will incur losses, as bond prices decline. If you hold individual bonds, the impact of this inverse reaction is more muted than if you own a bond mutual fund. We generally will hold individual bonds to maturity, so you should ignore the fluctuation of the bond prices.


This will certainly be a time of change. There will likely be increased stock market volatility, as proposals and unexpected events occur.
* Volatility is a part of stock market investing.
* As I wrote last week, declines are temporary on a long-term upward move.
* There will be periods of declines, usually at some point in every year. And major declines occur on average every 5 years.

Our views in this essay are non-political and are to provide analysis for you to understand the impact of the election, based on Trumps proposals. Through these weekly blog posts, we will keep you informed of policy changes which affect your financial lives.

We remain rationally optimistic, as we have stated many times. We are committed in our role as financial advisors to help you and your family meet your financial goals, in a secure manner.

As always, please contact us to discuss any specific questions you may have.

The next stock market move

It could be up.

It could be down.

For down stock markets, the question is not if, but when.

Stock markets will go down. You have to fully accept this reality.

But this is the KEY:

          Down stock markets are only temporary.

The stock market goes down frequently. Sometimes the declines are short and don’t hurt much.

Sometimes the declines are long and painful. These are the hard ones to endure and are the times when we, as your financial advisor, can be most valuable.

Worldwide stock markets have always gone back up. Downturns get recovered. New highs are reached.

Since the declines are temporary on a long-term upward move, new historical highs will be reached.

New market highs are not an if, but a when.

We don’t know when new market highs will be reached, but we know they will be.

Many times and at higher and higher levels.

You need the patience and confidence to reap the rewards that the financial markets can provide.

And we can help you have the confidence and ability to reap these rewards, as you plan for your financial future.

So remember, declines are temporary. This will be valuable advice again in the future.

Inspired, Positive and Helping

Our clients’ interest comes first. Always.

Trust. Transparency. Being a fiduciary.

Learning to be a better listeners and communicators. Being authentic and present.

Life is not perfect, but we are fortunate to live in the US. We should be much more positive about the future, despite all the negativity which surrounds us.


These were some of the major themes at the 2016 BAM Alliance Annual Conference, which I attended earlier this week, for the 14th straight year.Attending this conference every year reinvigorates and motivates me. It reassures me that we are doing the right thing, in the right way, for our clients.

We all should be prepared for the unexpected. Unexpected events will occur, some of which can be major and life changing. How each of us prepares for, and how we handle these situations, can have a significant impact on our future. We can help you with this.

You need a team around you. A support system. Trusted advisors. Friends. Partners. Relationships.

We have great long-term business partners, such as:

  • DFA (the 6th largest mutual fund company in the US with over $445 billion in assets under management, whose stock funds we use extensively),
  • BAM Advisor Services, our back-office firm, and
  • Fidelity Investments, the custodian for most of our client accounts.

We are proud that we selected each of these firms and our investment philosophy in 2003. These very important decisions have withstood the test of time and challenging financial markets.

We are truly grateful and appreciative of the clients and relationships we have developed.

We are always continuing to learn and improve ourselves, for your benefit. That is why attending conferences like these are so valuable.

One of the most moving speakers I have ever heard was John O’Leary, who survived a horrendous fire which he set when he was 9 years old. on-fire-book

That he is alive and thriving is almost unbelievable. He has taken this unexpected, life changing event and turned it into a transformative experience, which he shares with others.

John now motivates others to have more inspiring, meaningful and impactful lives. Because a number of people showed up, cared and took action in the days and months after his tragic fire, he reminds each of us that one person, one action, one decision and one right relationship can make a real difference.

John challenged each of us to ask the following question everyday…..

What more can I do to help you (and others), to ensure that you (and others) have a better tomorrow and a better future?
How can our firm help you to have a better tomorrow and a better future?

For more information on John O’Leary, please see and his book, On Fire. I have not yet read the book, but plan to do so in the near future.