Adams Financial Concepts, LLC

The Department of Labor has published new 401(k) plan rules and regulations requiring full transparency of fees. Though plan sponsors and participants have not previously been sent itemized bills, the Department of Labor lists 17 fees they have been incurring. These fees include marketing, legal services, record keeping, investments and more. Under the new rules, indirect fees must also be disclosed. For example, when a company sends an employee to a conferences run by a 401(k) vendor, the vendor passes this cost off to their clients through fees.

With the new transparency, “People will find there were a lot of pigs at the trough,” said Jeff Acheson, a partner at Schneider Downs Wealth Management in Columbus, Ohio. (more…)

When it comes to chocolate covered ice cream, I’m all for double dips. In terms of the United States economy, I don’t believe we will see one.

At the beginning of 2011, I gave seven reasons I didn’t believe we would see a double dip. Despite the unpredictable world events and catastrophes, we didn’t. Our economy held steady.

As I look at how 2012 is shaping up, I believe there are four reasons we will also not see a double dip this year either: (more…)

Allegory of the Frog: If you drop a frog in a pot of boiling water, it will jump out. But, if you put a frog in a pot of cold water and slowly bring it to a boil, the frog will sit in the pot until it dies.

America is facing serious challenges in the next 10, 20, and 50 years. These challenges also present opportunities. What challenges are we facing? Thomas Friedman and Michael Mandelbaum identified four main issues in their book That Used to Be Us. One of them is: managing the rising need for energy and its impact on the climate. This issue is commonly known as Global Warming.

The term Global Warming is used in politics to instill fear and win elections. But, it is not a political stance. Within the debates of Global Warming there are indisputable facts. As any of you who know me can attest, I believe in facts. First and foremost, decisions need to be made based on concrete details. Here are a few facts I know: (more…)

Am I really talking about PIGS in relationship to the economy? Yes and no. PIGS stand for Portugal, Italy, Greece, and Spain. Five or even three years ago, most of us didn’t think about these countries. Today, they are all over the news – particularly Greece. For the sixth time in 150 years, Greece will default on their national debt. The concern in the United States is this will mean a double dip recession. I don’t believe it will.

A double dip recession is, and will continue, to affect Europe. But, I do not think the United States’ Gross Domestic Product (GDP) will feel a drastic impact. (more…)

The presidential race has begun. If you have listened to the debates, you know the Affordable Care Act (Obama Care) is a hot button issue. The question: Is the health care issue just a political scheme or is there a real problem? I believe health care is a real problem, one that will grow the longer it is unaddressed. I also believe this crisis is becoming a war of words where facts are forsaken in the pursuit of a successful election.

For both Republicans and Democrats, discussing health care is about winning a debate. Inflammatory words are used. There is talk of a government takeover of our medical system. Threats of socialized and cookbook medicine are dangled in front of the public like a nightmare on the horizon. You hear how Obama Care will add jobs and destroy them. How it will increase and decrease the United States deficit.

No matter what is said in the press, the issue remains the same. Health care is nearly 20 percent of the United States Gross Domestic Product (GDP). As the largest piece of GDP, it continues to grow at nearly six percent a year causing the staggeringly high cost of health care to keep climbing. (more…)

When it comes to investing, one of the biggest questions in my mind is strategic versus tactical management. Before we can discuss the merits of one or the other, I think we should clearly define both.

Strategic management focuses a financial portfolio on a group of assets.

Tactical management changes the asset classes of a portfolio depending on the economy.

So, which is better? In theory, tactical management sounds wonderful. You get in when the market is low and out when it is high. Unfortunately, this does not consistently yield the maximum returns to investors. Correctly guessing the exact moment to jump in and out of the market can have definite rewards. However, the key word is “guessing.” And, I believe guessing what will happen in the market is far riskier than just staying in. And I am not alone. The facts back me up. Just look at this 20-year financial study published in Money Magazine in August 2008:

Carla Fried analyzed the Standard and Poor’s 500 Index from 1982 to 2001. She discovered that $100,000 invested in the stock market in 1982 and left alone would have grown to $930,000. This is nearly a 10-fold increase.

What if you missed just the best 10 days? Carla’s study shows your portfolio would be cut nearly in half, totaling $560,000. If you missed the best 30, it would have dropped to $280,000. And if you missed the best 50 days, it would have gone down to just $150,000.

A financial advisor’s attraction to tactical management is understandable. It is extremely difficult to feel those losses. Yet, those who ride the ups and downs consistently come out ahead. Keeping your money in the market, even when things look bleak, means you don’t have to guess about what will happen in the market. I think guessing should be better known as betting. After all, there is a reason Las Vegas stays in business. When it comes to my financial future, I believe in calculated risks not hopeful acts.

Want to know more about why I think strategic management is better? Listen to the podcast below.

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I remember when gas was $0.25 a gallon. I remember when it was rationed. I remember when homeowners took out home equity loans to buy boats and go on vacations. I remember when, don’t you?

Why is remembering important? What does it teach us about the future? I am of the firm belief history doesn’t repeat, but it rhymes. While it can be said the consumer is missing in today’s economy, I don’t believe this is the case. Rather, I think history is rhyming in this sense: Americans are learning to adapt to save money, just as we learned to conserve oil when it was rationed in the 1970s.

In 1972, the Organization of the Petroleum Exporting Countries (OPEC) withheld oil creating a massive shortage in the United States. By 1974, barrel prices rose from $3.00 to $12.00 a barrel. And, by 1981 they jumped to $35.00. That’s a 10-fold increase. Rationed gas was expensive and hard to come by. Cars which got six or eight miles a gallon were impractical. Homes, which let warm air escape, required a fortune to heat.

What did America do? We adapted. We started making energy efficient cars. We installed double pane windows. We added insulation to buildings. In short, we significantly reduced our oil consumption.

How does this relate to today’s consumer? Prior to the Great Recession, Americans took home equity loans for any number of practical and extravagant reasons such as: remodeling, new cars, second homes, and weddings. When the Great Recession hit, many people had leveraged their homes so high that they had borrowed more than their homes were worth. Now, people have paid off their loans, credit cards, and cars. As America moves forward, we can still expect to loans to be taken, just as oil continued to be used in the 1970’s. But, Americans will be smarter with their loans and more cautious about the amount of equity they put in and take out of their property.

Curious what else we’re going to see in American spending? Listen to the podcast below for more information.

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I believe an Adams Financial Concepts’ client is someone who wants success. What does success mean for my clients? It means wealth. My clients want to win and beat the market. Regardless of whether they own their own businesses, have grown through a company, or inherited their wealth, they aren’t the average performer. They want their investments to do more than perform at market value.

Charles Ellis wrote a book called Winning the Loser’s Game in which the premise is 85 to 90 percent of money managers underperform the market over the long-term. Thus, he concludes clients need to lower their expectations and recognize they’ll have less than market returns. I couldn’t disagree more.

My clients want to outperform the market and they have. Yes, there may be drop years, like 2011 when we’ll underperform by one or two percent. But in the last three years, my clients have out preformed the market at an average of 10 percent. That’s including this year’s drop.

Who is an Adams Financial Concepts’ client? A man who wants to accumulate wealth. A woman who believes success is performing above average. A person who wants to win.

At the end of every year, I believe it is important to evaluate your performance and consider your goals for the coming 12 months. As you sit down with your financial planner, consider what kind of client you are. Ask yourself, what do I want? Do I want success?

“All of our jobs are going to China.”

“Everything is made in Taiwan.”

“Nothing is manufactured in the United States anymore.”

I hear those sayings a lot. Don’t you? I want to set the record straight. Since 1979, the United States has lost over 8 million manufacturing jobs. It may seem like those jobs are going overseas, but it doesn’t quite work that way. Yes, some manufacturing jobs are going overseas. But not as many as you would think. In 2007, just before the Great Recession, the United States produced more manufactured goods than ever before. We produced more goods than any other country. In fact, we produced just over one-fifth of the manufactured goods in the world.

Then why does it seem we’ve lost manufacturing jobs? Because we have. Productivity has eliminated jobs. For every $1.00 of product a person produced in 1967 they are now producing $3.82.

Job market shifts have occurred throughout history. Productivity consistently creates them. In 1850, there were 23-million people in the United States. Eleven million of them were employed on the farm. By 1900, the United States grew to 76 million people, but only 20 million of them were farmers. The introduction of tools like tractors, combines, and more efficient forms of transportation increased productivity and shrunk farm industry jobs by 33 percent in just 50 years. Less people were needed to produce more. By 2004, only 1.6 million people worked in the farming industry.  Yet, they produced 600 times as much food as the United States did in 1850.

In 2007, 29 million people were terminated by being laid off or retiring. But, 31 million people were also hired. Most of the 29 million jobs were eliminated and most of the 31 million jobs were completely new.

What does this mean for the job market? Listen to the podcast below for more information.

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The Holidays are upon us. Soon trees will be on sidewalks, decorations packed up and put away, and taxes will be due. A lot of people do their tax planning after the first of the year, but now is the time to plan. If you have any undiscovered opportunities to save on taxes, action must be taken now. Action taken after the first of the year will be next to impossible to utilize. It will be a lost opportunity.

Like most of my clients, I am not a tax expert. For the best advice, I look to my Certified Public Accountant (CPA) Bill Hanlin of Hanlin Moss. Joining me “On The Money” last Friday, Bill and I explored some of the tax saving options available. Here are some to think about:

Taking Prior Year Losses
During the Great Recession, a lot of us took really heavy hits. Utilizing those losses now can maximize our current gains. Up to $3000 a year of losses can be used to pay no tax on gains. However, many people forget unused losses from prior years can be used currently to pay no tax on gains from the current year.

Before December 31 – Utilizing Sales Tax Write Offs
The Congressional Election isn’t until November of 2012, but Congress has been known to change laws at the last minute and make them retroactive to the first of the year. To ensure you can write off your sales tax, purchases must be made before December 31.

More Then 30 Days Before December 31
(Please note, it is a too late to utilize this option now. But, I want you to be aware of this potential gain next year.)
For stocks that are down, but which you feel are extremely valuable and will go back up, you can double the position. After 31 plus days, you can sell the original position and take the tax loss. This is especially helpful for short-term losses when you expect to hold the stock for a long-term gain; you will be able to deduct at ordinary income rates and take the gain at capital gain rates.

Interested in learning more about taxes? Listen to the podcast below.

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