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Investment survival in unpredictable times

Markets are plummeting. Don’t panic. Don’t sell out. Stay the course.

Off the Beaten Path: Hidden Gems in the US – Dispatches From Route 66

If you are considering taking a vacation in 2020, book it sooner rather than later. Learn more.

Final Edition – Bob’s Market Observations

For your sake, I have decided to wrap up with a single reminder I regularly direct at myself.

Passing Down the Family History – Bob’s Market Observations

It’s not just transferring material wealth to our children and grandchildren that we should focus on, but our own personal histories. Read more.

Financial Parenting: Teaching Your Kids Financial Responsibility – Bob’s Market Observations

The financial beliefs we pass down to our children can have a significant effect on their financial outcomes. Read more.

What A Waste – Bob’s Market Observations

Food waste is a serious environmental problem in the United States and other parts of the world. Fortunately, there are efforts along the chain from the farm to the consumer to help reduce waste.

Bob McCormick Hits the Open Road

Our colleague is taking an early retirement at the end of the year. Although we don’t normally announce retirements in this publication, it is important to note a few of Bob’s lasting impacts on us, his colleagues.

The Risk Of Negative Interest Rates In The U.S. – Bob’s Market Observations

Understand the risk of negative interest rates in the U.S.

Is Fiscal Discipline Extinct? – Bob’s Market Observations

Does anyone care about government spending and debt? And who will pay the bill?

They Want To Take Away Your Burgers – Bob’s Market Observations

There’s been a growing buzz about cow’s flatulence contributing to global warming. What does that have to do with land usage and the economy? Read more.

My Aunt’s Close Call – Bob’s Market Observations

Luckily, one day, Bob discovered that a beneficiary document his aunt signed could put her estate plan at risk of entering the troubled probate waters.

Jobs of the Future – Bob’s Market Observations

“Many jobs in the future aren’t even in existence today.” Are we unprepared for what’s coming? Read more.

New Year’s Day Reflection- Bob’s Market Observations

We ended 2018 with high volatility, but McCormick is optimistic our investments will be better off soon. It’s not shaping up to be a straight line though.

Market Observations – October 2018

I’ve recently crossed the Southwest towards California, and one of my favorite parts of the trip was driving by the trains transporting goods to and from the West coast, a statement of the power of rail road transportation and our economy. As for investments, September brought record highs for large-cap U.S. stocks. Read more.

Market Observations by Bob McCormick – September 2018

Market Observations by Bob McCormick – September 2018

Legendary singer and songwriter, Aretha Franklin died in August. Without a will. As a result, her assets are to be divided equally between her four sons per statute set by the state of Michigan. It is estimated her estate, including business interests and artistic work, is worth upwards of $80 million, so a really large estate tax also appears due. Proper estate planning would have possibly saved her family millions.

Ms. Franklin was also characterized as intensely private. How ironic then that her death without an estate plan makes her finances very public for the whole world to see. Plus, if there is litigation due to the absence of planning, the settlement could drag on for years and cost a lot of money.

Dying intestate (without a will) may be fine for some people.* Yet, the need for an estate plan usually gets stronger as we age, marry, have children, become blended families and grow our wealth. I am not going to delve into the affliction PRD-itis** (Procrastination, Rationalization, Denial), but why is it so hard for some of us to do the important planning when it comes the time?

Here are a few of the more common reasons we have heard over the years that cause inaction:

  • My assets are held in joint tenancy with my spouse and in accounts with specified beneficiary designations. This may work out for some couples, at least for the spouse who dies first, and if both spouses are competent.
  • My spouse and I cannot agree on a plan. This is a big hurdle so it’s definitely time to get real-world guidance from an estate planning professional so that you can try to find common ground.
  • I am not sure who to leave my estate to. Remember, if you don’t decide, the state has already decided for you. Make sure you are fine with its formulas.
  • I am having difficulty how best to address the need to treat one or more children differently. It is a fact of life that not all kids are ready for wealth at the same time or same age. Professionals can help design estate plans to handle all sorts of family needs and dynamics.
  • I don’t want to incur big attorney fees. This may be a case of penny wise, pound foolish. You should be able to get the legal services you need at a fair price. Some estates need complex (read expensive) planning while many others do not.
  • “I can ignore it since I’m not going to die right away.” “It’s too depressing.” “I don’t like to think about it.” “I haven’t had time.” “I don’t care – I will be dead.” Ok, these are not valid reasons but cases of PRD-itis. Sometimes the person suffers from a severe case and just says “I’m not going to die.” This last one has a really poor track record.

The importance of wills and estate planning cannot be stressed enough.

I don’t know why Ms. Franklin didn’t have even a will, much less a trust to keep her estate transfer private. And she appears to have been a prime candidate for more comprehensive planning to reduce estate taxes and protect assets from illegitimate heirs and other “hanger-on’ers“. Maybe she struggled with some of the same issues many of us have. Yet, the right planning will not only put our own minds at ease but make our family’s life less stressful.***

*I am not an attorney so nothing I say should be confused with legal advice.

**I made this ailment up.

***Other parts of an estate plan often include a power of attorney and an advance health care directive. These are two big items that help your family handle matters when you are alive but are unable to act or decide on your own.

Robert A. McCormick, CFA, CAIA
Senior Executive Vice President & COO
(918) 744-0553
Bob.McCormick@TrustOk.com

Market Observations by Bob McCormick – August 2018

Market Observations by Bob McCormick – September 2018

It takes:
•    3 seconds for a cheetah to go from zero to sixty;
•    Less than 1 second for an Indy 500 car to travel the length of a football field;
•    Less than ½ second for a baseball to travel 60 feet, 6 inches from the pitcher’s mound to home plate at 100 mph.

I thought about the speed of things when I read that high heat and humidity in New Jersey last month was slowing down radio waves that were transmitting trade data between Nasdaq’s center in Carteret to the New York Stock Exchange’s facility in Mahwah. That’s about 27 miles as the crow flies. The 90-degree heat combined with 60 percent humidity caused the data to be delayed by about 8 microseconds.

A microsecond is one-millionth of a second. Sum up about 350,000 microseconds and you have the time it takes the average person to blink, so 8 of these is still pretty darn fast in my book.

What would the founders of the NYSE think of this as they signed the agreement under the shade of a buttonwood tree forming the exchange on May 17, 1792?

It is astounding this delay makes a difference for some investors. Not for us, mere mortals, but for computer-driven, high-frequency trading (HFT) firms the delay was noticeable – and newsworthy. Hundreds of millions of dollars were spent in 2010 on building just one fiber optics line from Chicago to New York in order to increase one-way speeds by about 3 milliseconds (3,000ths of a second) – over 300 times faster than it takes to blink. Since then, at least two competing microwave networks have been built to increase speeds by even a few more milliseconds between these two cities. Big bucks spent for minuscule, but profitable, time improvements.

Consider these speeds the next time you are sitting around in your pajamas day-trading on your laptop, trying to take advantage of the tiny little blips in stock prices that occur throughout the day. It’s not just some big powerful machine you are competing with. It is the near speed of light trading you are racing against. May the force, and very fast fingers, be with you.

Cheers,
Bob

Robert A. McCormick, CFA, CAIA
Senior Executive Vice President & COO
(918) 744-0553
Bob.McCormick@TrustOk.com

Market Observations – July 2018

Corporate earnings are growing at a double-digit rate, yet halfway through the year the S&P 500 posted a meager 2.6% return. Read Bob’s investment market commentary.

Market Observations – May 2018

What are the lessons history taught us? Today’s headlines are troublesome, but a quick look at American history provides a healthy dose of perspective. Read Bob’s commentary on the market performance and social issues.

Dangerous Words

There are five words investors should always use with caution: “It is different this time”. In this article Bob suggests two unusual suspects which may explain why “different” may be happening now.