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What is Fiduciary Responsibility?

August 20, 2015 2 Comments

Americans are not financially literate as a group. The depressing collapse of the markets in 2008 followed by a bank bail out has left the country with gross inequity.  Working folks with real estate holdings, retirement plans and other investments took big hits while the banks returned to business as usual.  Regulations designed to curb the abuses of financial institutions, like Dodd/Frank have not been implemented.  We are still in a situation dominated by lenders, bankers, and mortgage brokers.  Stock brokers have been able to operate under an assumption that suitable, reasonable investments were the only offers made to clients.  In reality any system that is commission based encourages transactions.  The broker makes a cut from each trade, and wants to maximize the client’s contribution to his total commission.  His company also rewards him for selling in house products by offering a higher commission for the sale than competitive products may have.  The client becomes the least of the broker’s concern within this structure.

I switched to a fiduciary to manage my investments years ago. I am much more secure and happy with my portfolio since I made the change.  I worked with brokers from different brokerages in the past, but never found one with my interests in mind.  There is a simple reason for that.  The rewards were structured against my financial well being and in favor of trades to create commission.  Now I split the profits with my fiduciary firm, which works perfectly.  I make as much money as they make.  If they make nothing for me I pay them nothing.  This incentive to make good decisions for both of us carries weight and works like a charm.  I do discuss the strategy a few times a year to make sure we are on the same page, but my involvement is very light.  We are in the same financial boat which makes me feel happy.

Brokerages are starting to lobby the public with misleading ads about this new proposed regulation.  I urge you to take some time to understand the issues.  Brokers pretend that fiduciary responsibility to you will somehow cut you off from good advice.  What it will do is make it illegal to sell you products that are not the best investment or the best deal in terms of fees for your situation.  This is a protection Americans need to stay financially stable into retirement. Caveat emptor, gentle reader.

Self Indulgence, Choose Well

March 6, 2014 4 Comments

Most luxury goods from ice cream to cars are marketed as being self-indulgent.  The idea that we deserve some luxury is a tried and true method used to sell overpriced goods.  Obviously luxury has to mean different things to each one of us, and our fortunes limit what we include in our worldly possessions.  We do have to choose and over time our choices change.  We move into a new phase or environment or hobby and find that what was a big treat in the past is not even interesting now.  We may own something we thought we needed and wanted that now we no longer like.  This is natural.

I am in favor of self-indulgence if it is done in a true spirit of enhancing  the self.  Self care and self-awareness  are valid and necessary for a healthy balanced personality.  To make good long-term investments in self ask yourself:

  • Are there unhealthy consequences I am ignoring?
  • Will this be likely to make me as happy next week as it does now?
  • Do I have sufficient extra money for this indulgence at this time?
  • Is there a way to try, rent, or take lessons before committing to buy?
  • Am I responding to peer pressure or marketing?
  • Might I enjoy this indulgence more if I saved for it or split the expense with others?
  • Is there a possibility this indulgence may appreciate in value?
  • How great is the possibility of buyer’s remorse?

There may be another element to consider when finding a reward for yourself that will reap future dividends.  Would I enjoy this time/money/thing more if I gave it away or shared it with others in some other way?  I personally can think of at least a million things I would rather own than the yacht A, and a million people who could make good use of a more reasonable boat.  Everything is relative.  To each her own.  Choose wisely, gentle reader.

Defining Waste

December 8, 2013

During this December of deletion it has become abundantly clear to me that waste of all kinds can be nipped in the bud by simply defining it.  I, for instance, have not been willing to admit that owning 5 times more clothing than can be worn in a year is wasteful. Hoarding and waste are the exactly same thing, but hoarding is waste without boundaries . This shocking realization has deep meaning in my closet, in my office, in my kitchen, my garden, my barn, and even in my social life.  The most notable waste that can be eliminated is time spent seeking more acquisitions.  If you don’t need anything, is it not a waste of your time to go around trying to mindlessly acquire something, just to be consuming?  Even more devastating to my health and happiness is allotting my space to extra junk. I pay taxes, insurance, and utility bills to basically own the space in which I keep all my gear.  Although I am not approaching the level of the hoarding crazy people on reality television, I see no reason to continue owning extra stuff I never use. I now define that as a waste of my time, energy, and space.  As the hoarder in the video explains, the junk is like a barrier or a wall created to hide himself from the world.  All possessions can be treated as self-limiting boundaries, from your Mercedes to your expensive signature haircut.  Marketing is the process of changing the desires of the people to match what is available in the marketplace.  In itself, it is not evil.  Something has changed our attitudes about consuming to the detriment of our society and economy.  We are building a landfill to heaven.

When I was a child we never thought of wasting energy, or carbon footprints, or even about world peace.  I grew up in an industrial era during which producing goods and shipping them around the world was exciting and considered to be the highest and best use of time and resources.  Owning things was very important to my parents.  Pride of ownership was a distinct value they impressed upon me.  They were both very seriously into wardrobe, theirs and mine.  They had super high standards for tidiness and order that would not allow them to acquire more stuff than they could store.  The material world was in balance because they did not mistake quantity for quality.  I rejected their materialistic version of reality, but ended up with plenty of material goods anyhow.   It is time to examine, eliminate, and most importantly be vigilant about portions.  Time, interest, talent, and resources need to be spent in the right proportion.  As we head into the darkest time of the year it is my goal to emerge with a highly organized and clear space.  There is much to do.

What is a Carry Trade?

April 9, 2013 1 Comment

High finance is very easy to understand. The fact that everyone avoids understanding it makes it very easy to take advantage of the financial ignorance of the population. Bernie Maddoff you do not have to be, in order to screw your neighbor and your society out of maximum profit. Buy/borrow/die is all one has to do to benefit from the magic vanishing value of the currency everyone uses. Taxation avoidance, both legal and shady, is the province of those who already have their money in hand. Taxation without even a shabby lobbyist for representation is the fate of those who must claim earned income from jobs.

A carry trade is a calculated risk. The problem is that now the general public does not seem to know how to calculate risk, also known as random acts of unexpected circumstances. We hear the words risk-reward and carry trade, but think this is something that has nothing to do with us and our finances. This banker jargon is for people who wheel and deal, not for borrowers who pay interest on almost everything they buy during their lives. While occupying Wall Street may be symbolic, society would benefit by knowing how Wall Street profits while the population withers financially. If you carry credit card debt while your banker is free to gamble/borrow/invest in carry trades, you will come out as the big looser.

Do you ever wonder why carrying debt at a high interest rate all the time seems natural and unavoidable? Do you simply accept the idea that everything you buy is charged to the future, when presumably it will be so much easier to pay?

The Federal Reserve has become the banker of bankers. Now it is possible to predict with some certainty that interest rates will be kept at nothing for a long time. The certainty itself reduces risk for anyone who wants to gamble with money. Knowing how this will effect your own personal finances may be the single most valuable concept you have learned since you learned to count.


January 27, 2013 4 Comments

Wampum, or shell beads has been used for centuries in New England. After colonists arrived in America a currency exchange value was set to convert it European currency. This forever changed the meaning and trade value of what was a Native American tradition and source of historical pride. Once it was adopted by Dutch and English as currency it was manufactured in New York on Long Island as well as by Native tribes that dominated the newly created market for trading currency. Since both Native and Europeans could trade with it, it’s use thrived until the end of the 17th century. Counterfeiting was a problem during colonial times as it was more widely used. It was eventually phased out in favor of metal coins as the official currency of New England.

Before the colonists changed the meaning and tradition wampum was used in ceremonies and agreements.It is important as a covenant record and means of communication. Language was commonly understood in terms of wampum color. Messages and agreements were sealed by way of wampum belts created for the specific meaning. White shells had a brighter meaning and dark purple shells indicated heavier subjects. The tapestry woven into a wampum belt was a story.  I am looking forward to seeing the new wampum being made today and perhaps some of the historical pieces.  I will be visiting museums as well as living wampum artists.  It is a fascinating subject.

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