The Korean Question

So far, the political tension between the United States and North Korea has been confined to a war of words and not much else. This week’s verbal threats and counter-threats, however, reached a new level. What might that mean for the financial markets? One could argue that North Korean dictator Kim Jong Un has had it in for the United States and for Donald Trump, in particular. North Korea has fired off 18 missiles in 12 tests since February, 2017. On July 4, he fired North Korea’s first Intercontinental Ballistic Missile (ICBM), which they claim could “reach anywhere in the world.” This was no accident. Less than six years into his reign, Un has tested more missiles than his father and grandfather combined. Most experts believe that the goal of North Korea’s missile program is to develop a missile topped with a nuclear warhead that is capable of reaching the United States. This week we discovered that this rogue nation is one step closer to that goal. U.S. intelligence analysts revealed that they believe North Korea is capable of producing a miniaturized nuclear warhead that could be placed on their newly-operational ICBMs. In response, President Trump threatened “fire and fury like the world has never seen” if they continue to make threats against us. Kim Jong Un immediately called the President’s bluff by announcing an operational plan to strike areas around the U.S. territory of Guam in the South Pacific, including the Anderson Air Force base. The statement also said that “a preemptive strike is no longer the monopoly of the United States.” So why Guam? Guam is a...

A tale of two charities

We are a country divided. Washington is paralyzed. Half the country considers our president a joke and any and all legislation is dead on arrival, according to the TV talking heads. Social media is filled with outrage and despair. As a result, Americans are supposedly wringing their hands, or worse, hiding under the covers. Don’t you believe it! To hear the media tell it, on one side of this nation are the ultra-left, tree-hugging liberals, who want government to do everything by taking from the rich and giving to the poor. On the other side, are the red-necked conservatives, who despise government and its welfare programs. They want to whack the Muslims, build “the wall,” put God back in the classroom, and generally “live free and die hard.” Granted, there probably are people who fit both stereotypes, but this isn’t a story about them. It is a tale about real Americans. It’s a story about getting off one’s butt, rolling up one’s sleeves, and helping others, sometimes even saving lives, regardless of your political affiliation or views. It begins deep in Trump country, but it doesn’t end there. The Mercy Clinic of Fort Worth, Texas, was founded back in 2013. Its goal is to provide free medical and dental services (including prescription drugs) to 35,000 residents in a particular zip code in the city. Last year, the entirely volunteer staff of 140 treated 1,700 patients, although they were only open two evenings a week. This year they plan to double the number of patients seen. Dentists, doctors, nurses, computer techs, business people, ranchers, farmers and everyone in-between are volunteering...

As of tomorrow, putting a client’s needs first becomes law

Despite a bitterly contested battle by brokers, banks and insurance companies to kill it, the on-again, off-again Department of Labor Fiduciary rule becomes effective June 9, 2017. Investors should cheer the news. That’s right; it is no longer just a slogan that slick marketers use to woo unsuspecting retail investors into their fee-based, commission-based, fee-sharing web of duplicity and immoral behavior. Since I am already a fiduciary, I tried over the years to advise readers on what is in their best interests since their advisers certainly were not. The new law changes all that. If your advisor, broker, wealth manager, banker, et al provides you retirement advice for a fee, they are required to act in the best interest of their client. This rule covers all tax-deferred investment accounts. Ordinary taxable investment accounts are excluded from the rule. “But hasn’t my broker been acting in my best interest all along?” you might ask. The simple answer is no. Previously, the law states that as long as he or she puts you in a suitable investment they were within the letter of the law. Suitable does not mean the lowest cost or best performing fund, stock or any other financial security. It just means they can’t put a 92-year-old grannie into a two-cent biotech stock that she knows nothing about. A number of brokers, annuity shops and others have already abandoned ship sending out letters to their customers that they will no longer be managing their IRAs, 401(k) s and other tax-deferred accounts. These notifications have distressed many elderly clients, for example, who have established long and trusting relationships with...

What happens to your pet after your death?

If you are one of the 70% of the population that considers their pet a member of the family, you should review your estate planning documents. Otherwise, there is a good chance your pet will either end up in the pound, or worse. This hits close to home for many of us. If my wife and I were to die, for example, who would take care of our chocolate lab, Titus? There are few people who we would trust to take care of him. Compounding the problem is the fact that he is eight years old and suffers from arthritis. I discovered that simply putting some instructions in a will was neither legally binding nor particularly useful. Unless we do something different, Titus could be condemned to imprisonment and a life without love. You must understand that legally a dog, cat, horse or any other kind of pet is not considered a human being. They are considered your property. As such, Titus is our “property” and the law states that you can’t leave property to a piece of property. Therefore (until recently and only in some states) your pet can’t be a beneficiary in a will. Your instructions within a will are not enforceable. I might state that Bri (our dog whisperer) gets Titus in the event we pass, but a will cannot instruct Bri to care for the dog, take him to the vets, etc.  Don’t forget, too, that your will is not enacted immediately. All wills have a waiting period, sometimes months, even longer if it is contested.  Who is going to care for your pet in...

Elections and the market

  After 18 months of waiting, investors will finally have their chance to vote both with their ballot on November 8th and with their money on November 9th. Given that this presidential contest has been one of the most unpredictable and volatile in modern history, many fear that the market’s response to the outcome will be equally as volatile. What should you do? The short answer is nothing. Long-time readers know by now that making investment decisions based on emotions are almost always the wrong decision. Selling or buying the markets based on next week’s election outcome would qualify as a highly emotional decision. You may argue that certain sectors, industries and even companies would most assuredly suffer if one or the other candidate won the White House. Hasn’t Donald Trump already promised trade wars while most economists predicting a global recession as a result? Just this week an open letter to the public signed by 370 economists warned that a Trump presidency would be “dangerous and destructive.” Hillary Clinton, on the other hand, represents “business as usual,” although she also has singled out certain sectors such as banking and pharmaceuticals as enemies of the state. She also insists she will resurrect Obamacare, a proposition that some believe will cost additional billions of dollars to fix. If one bothered to go back and research all the threats, reversals and changes the two candidates have promised the electorate over and over again, one might actually believe they have the power to single-handedly do what they have said. But simply saying something repeatedly does not make it so. And let me...

Why interest rates are moving higher.

After two years of warning bond investors that their days are numbered, the recent hike in global interest rates is making some of those smug bond babies stay up at night. They should. We are entering our ninth year without a Federal Reserve-inspired hike in interest rates. It has been over 25 years since bond prices have dropped by any appreciable amount. Given that time period, it is no wonder that bond bulls are taking all these warnings with a grain of salt. U.S. investors have been expecting the Fed to raise rates at any time. Most pundits think that a small September or November hike in short-term rates is in the cards. The problem is that the Fed has told all of us that a raise in rates is “data dependent.” Given that guideline, every trader on Wall Street is pouring over a range of numbers both here and abroad to try and determine the Fed’s next move. Recently, the economic data both here and in Europe has been encouraging. Some say too encouraging. Consumer prices in Europe, for example, have led some to worry that if price levels continue to increase, inflation could be a problem for the EU. Readers may recall that it was only in April that German sovereign debt was yielding 0.05%. Today, it is topping 1.00% and moving higher. In other countries, from Japan to the U.K., rates are higher than they have been for many months. But despite the run up in rates, bond interest rates are still abnormally low by historical standards. Take our ten-year U.S. Treasury note, a benchmark rate...