Rethinking Daily Life

Andy Rooney of 60 Minutes has a great approach to his journalism. It's simple, pure and direct. Everyday items are looked at with his unique perspective.

With this approach in mind, I'd like to examine our daily lives on a few different levels.

A recent trip to Colorado provided a wonderful time to relax & reflect. Visiting my good friend Anthony, we enjoyed the Rocky Mountain altitude, shared a few laughs and went to two football games as well. Go Buffs!

During the weekend, we discussed how his lady friend doesn't have cable tv? Yes, she has a television, but only uses it to watch movies. The more we talked, the more I realized, maybe this isn't such a bad idea! It seems a little contrarian to a certain extent. But, how many times do we simply turn on the tv for background noise or music? We're not watching anything, but filling the quiet void.

Personally, I now watch the majority of my favorite tv shows on my PC (aka: entertainment center) these days on my schedule. "Two and a Half Men" is a great example. Simply go to http://www.cbs.com/ and 'tune in'. You'll have a few spot advertisements, but it's less than you would have if you watched the regularly scheduled program.

Also, I recently noticed my daily routine of gathering morning news had changed. My favorite source is now USA Today - not the print version, but rather the online version. Great layout, content and it's free. I Fire up the PC each morning with a cup of tea and read the Money section. Life is good!

We all have daily routines. Some habits are useful and others are simply... well... habits! They may even be costly ones as well. How many days do you stop @ Starbucks during your morning commute for a mucho expensive grande latte (or something similar)?

Perhaps examining your daily habits could lead to positive changes. It may also improve your financial situation as well!

Moral Dilemma - Where Did We Go Wrong?

What happened to personal responsibility?

Everything from brokerage accounts to mortgages and from Little League to Pop Warner football are in play.

We seem to be building a nation of bad decisions. Some may call it morals, others ethics. Call it what you like, there's something wrong with this trend. People are walking away from personal commitments & responsibilities when things don't go there way.

Parents are letting their children quit their sports program in mid-season. Why? The parent and/or child didn't feel they were getting enough playing time. Correct me if I'm wrong... aren't 9 players a minimum requirement to field a baseball team. Due to injuries, vacations, family obligations, etc. every child is needed plus a few extras. There's a reason it's considered a 'team sport'. Everyone relies upon one another. Here's a novel idea: Let your child finish the entire season and then decide if they want to play next year.

In the grown up version, we can discuss mortgages. Everyone wanted to own real estate in some capacity from 2000-2007. It didn't matter if you were buying a primary residence, flipping properties or rehabbing for profit. People were blinded by dollars and real estate was the "It" investment. The herd mentality was running wild.

Unfortunately, when the music stopped, thousands of 'investors' were left holding properties they couldn't afford. When times were good and everyone was making money, nobody complained. Now that the winds of profit have turned, everyone was quick to point a finger for their financial difficulties. Very rarely did you hear, "I made a bad decision." But, rather "The bank took advantage of me." "I didn't know what I was signing." I'll be the first to admit, the banks weren't angelic in this whole process. But, let's cite the facts. They simply made money available. They didn't contact you! Further, for the individuals who borrowed money, didn't you have an attorney representing you during the entire process? I don't see how the banks are the bad guys in this scenario. When you went to closing, you had the option of signing your mortgage documents or not - with legal counsel present. What am I missing?

Our moral compass has gone astray in recent years. Personally, I tend to think it started with the dot.com era and day trading. A similar scenario unfolded with brokerage accounts and margin requirements.

I'm not sure how we get back on track, but I tend to think our economic recovery is going to have a direct correlation to our moral standards.

The Killer called Inflation

"Inflation is as frightening as a robber and as dangerous as a hit man."

Ronald Reagan - 40th President of the United States

Good retirement planning can be crushed by the unknown... inflation. Recent years have shown benign, if not deflationary figures. However, since 1980, inflation has averaged about 3% per year.

How can this effect your retirement savings? We all know that things will cost more, but here are a few examples assuming annual inflation of 3% per year over 20 years:

• House - Current: $200,000 Future: $364,424
  
• Loaf of bread - Current: $3.00 Future: $4.47
• Car - Current: $30,000 Future: $54,664

Some of these figures may not thoroughly register. But, let's look at things with a retirement angle. You have to try and keep up with the rate of inflation via your investments. Sitting in a conservative account (ie. money market fund) earning 1% per year, is a sure fire way of failing to reach your retirement plan.

You have to outpace the rate of inflation to stay ahead of the curve. A retiree living on a fixed income of $30,000 cannot sustain spikes or long term increases in inflation. Oil & gas drastically increased a few years ago and then retreated. This effected a number of people, not to mention summer vacation plans. Long term increases will permanently decrease purchasing power AND your lifestyle.

Your retirement income can decrease by 50% if inflation averages 4% over 18 years. Retiring at 60 or 62 sounds good on paper, but unless there's an ample amount of pension money, retirement savings, real estate, etc, to last another 20-30 years, you could be selling yourself short.

Longevity and healthy living is an amazing concept... don't be overly cautious with your retirement investments.

George M. Steinbrenner (7/4/1930 - 7/13/2010)

A Yankee doodle dandy! A winner! A tyrant! Call him what you want, George M. Steinbrenner born on July 4, 1939 was a sports legend.

He will forever be remembered as the passionate owner of the New York Yankees.

Call him a visionary. After purchasing the disenchanted franchise in the early 1970's, his unique approach to running a business (exactly what it was) encompassed a worldwide marketing campaign.

Back in the day, television rights only covered a portion of the baseball season. Former player/manager, Gene "Stick" Michael, was recently interviewed on a local sports radio program and discussed an old four (4) game series played in CA against the Oakland Athletics. Having won the two (2) games NOT televised and having lost the two which were on tv, Mr. Steinbrenner called him to let him know, he lost the wrong games!

Today, his YES Network is an industry giant and a national success. Some will even argue the signing of foreign superstar, Hadeki Matsui, made the team a worldwide franchise as Japanese fans flocked to the American game of baseball. PT Barnum had nothing on old George. He was a master at marketing.

Lastly, true to the Steinbrenner business acumen, he died in 2010. Anyone who follows financial planning and in particular estate planning laws will understand, he died in the ONLY year in which federal estate taxes are zero. He family legacy will carry on monetarily as well!

Rest in peace George M. Steinbrenner. And, thank you for the GREAT memories!!!

World Equity Markets 2010

Here are some statistics for world equity markets through July 12, 2010.

(Indexes are based on local currencies. Due to holidays and time zone zones differentials, the most recent close is not necessarily that of July 12, 2010).

Amsterdam (AEX) -3.25%

Athens (General) -30.44%

Bombay (Sensitive) +2.11%

Buenos Aires (Merval) -1.35%

Caracas (General) +19.05%

Copenhagen (OMX20) +20.76%

EuroSTOXX 50 (SXSE) -9.57%

Jakarta (Composite) +16.16%

London (FT-SE-100) -5.17%

Madrid (IBEX35) -15.18%

Moscow RTS -5.50%

Paris CAC -9.70%

Santiago (Selective) +16.74%

Shanghai (Composite) -24.60%

Stockholm (OMXS) +6.90%

Sydney (ASX200) -9.74%

Tokyo (Nikkei 225) -9.11%

Toronto (TSX) - 1.50%

Wellington (NZSE-50) -6.95%

Zurich (Swiss) -5.12%

Gary Coleman 1968-2010

"What you talking about Willis?"

We've all read of the passing of child tv star Gary Coleman during the last few weeks. Not only is it sad a 42 year old passed at such a young age, but he also left behind a financial puzzle.

Gary Coleman apparently had 3 wills at the time of death - one was even handwritten. Unfortunately, figuring out the actors intent will be based on 'clear and convincing' evidence. This will be challenging for a number of reasons.

Because he was estranged from his parents and divorced from his wife (who he apparently was living with once again), figuring out his true intentions is now left to the courts to decide.

Mr. Coleman is reported to have made $18 million from the sitcom "Different Strokes." How much remains is unclear.

As a Financial Advisor, I can easily say... everyone should have a will. You should also consider including a healthcare proxy and power of attorney. This will state who can act on your behalf should you not be able to make decisions for yourself.

Whether you are single, married or divorced makes little difference. We all acquire 'stuff'' during our lifetime. The older we get, the more 'stuff' we accumulate. Who gets our worldly possessions will be your choice. If all of your financial matters are in order, YOU decide who gets what. If things aren't in order, plan B kicks in... your Uncle Sam will decide for you (aka State Court).

With people changing spouses as frequently as careers these days, make sure you properly document your wishes. Couples who are remarried with children from different spouses may have children of vastly different ages & needs. Some children will require a guardian be named in lieu of being of legal age.

Start with the basics: Take inventory of what you own (ie. bank accounts, investments, home, car, life insurance, etc.). If need be, call your Financial Advisor to assist with these items. Lastly, you will have to see a lawyer as legal documents will have to be drawn.

British Petroleum (BP)

Okay, let's jump right into the uncharted waters (sorry for the pun) and discuss British Petroleum (BP). This is center stage these days and let's face it... there are numerous issues at hand.

The environment is number one. The delicate balance between the ecosystem and the gulf coast region may be forever changed. Wild life, shorelines, jobs and all derivative related issues will be effected (ie. recreational activities, gas prices, etc.) for years to come.

A secondary issue pertains to energy costs & future drilling. I'll be the first to admit, it doesn't seem like BP had a back up plan for deep water drilling. As you can tell from the picture above, there are hundreds of oil rigs in the gulf coast between the Florida panhandle and Texas. This isn't new, they've been there for years. How many are deep water drilling platforms is unknown. Drilling more than 1 mile below sea level can be problematic in a number of different scenarios.

"People complain by nature." We've all heard this expression. We have to somehow find a balance between allowing oil companies to drill for oil while protecting the environment. According to the Financial Times, the Obama administration has apparently halted all dig water drilling until further notice and is seeking to prosecute BP on criminal and civil charges to the 'full extent of the law.' If laws were broken, there should be an investigation into wrong doings. No doubt. In the meantime though, isn't this more of a distraction that anything else? I'd prefer BP to focus on solving the problem and not getting a legal team in place to defend future litigation.

Should oil go back above $100 per barrel and gas prices skyrocket to $5.00 per gallon, the real complaining will start. The rhetoric of "Our government should better regulate big oil companies and the price of gasoline." Now that a drilling moratorium is in place, oil companies with platforms in US waters will see a reduction in earnings and will probably layoff idle workers until further notice. I wonder if Washington is helping these people???

In USA Today, some interesting statistics were revealed today as to the manpower and efforts taking place in the gulf of Mexico region. Here are a few statistics:

* 6.625 inches - Size of pipe leaking oil.

* 20,000+ - Number of government & private workers cleaning up coastline(s).

* 1,900+ - Vessels, aircraft, etc. involved in containment and cleanup of oil.

* 13.8 million - Gallons of oil/water recovered.

* 120+ - Controlled burns to reduce/eliminate oil from water.

* 993,000 - Gallons of chemicals used to treat contamination.

We may have a long road ahead of us. I just hope BP and our government have the manpower and financial resources to complete the job. BP may simply run out of money and at some point be forced into bankruptcy (they've allegedly already spent $1 billion on cleanup efforts). I hope this doesn't happen, but depending on the magnitude of what's to come, it's certainly possible.