Mitch Zi(k)es quote on Long-Term Care

Last week I was quoted in the Sun Chronicle by a local reporter. The reporter needed a few quotes for an article that she was writing on long-term care. She had read a recent study that showed more people were putting off buying long-term care insurance. Her conclusion was that people were too busy and planning wasn’t at the top of their list.

My quote that made the paper was, “When you should start planning depends on a number of factors,” he said. “The process today is a lot more complicated now than it used to be.” “You definitely want to start early, looking at financial plans,” Zikes said, “but you have to weigh the benefits for yourself.” Yes, that is not a typo, she called me Mitch Zikes throughout the article. 🙂

My wife thought my answer wasn’t all that informative and sounded a bit uneducated. I explained to her that was the first thing that I said before giving the reporter a lengthy answer. It wasn’t that I was misquoted, but all the important details from our conversation were left out of the article. I disagree with most of her conclusion that people don’t have the time to think about planning for sickness and death.

I believe that people don’t buy long-term care insurance as much because it is getting more and more expensive. Only a few companies now offer insurance and the premiums are very high. Premiums can continue to rise even after you buy the coverage. Women on average can pay up to 30% more than men. Years ago, long-term care insurance was very cheap and underwriters underestimated the costs of nursing home coverage. This put many insurance companies out of business paying out claims.

Many financial advisors make their clients sign forms that they decided against buying long-term care insurance. Family members often sue financial advisors when they learn that mom or dad didn’t have long-term insurance.  What the family doesn’t realize is that the premiums have become unaffordable. If you read the fine print of these policies, there is also a maximum number of days or years that it will be covered. It is only likely to save on average $125,000-$250,000.

The reporter wrote that I said planning depends on a number of factors when considering long-term care insurance. She left out all the factors from her article. They are cumulative savings, health, expenses/budgets, income, goals, and the most important is attitude towards money. People have different attitudes towards money, and many would rather invest the premiums in the stock market rather than buy the insurance. If you get sick early in life, the long-term insurance is a better choice. If you get sick much later in life, your investments should be able to cover the cost of care.

Another consideration is many long-term insurance polices don’t start until you’re almost permanently disabled for a certain time period. You need to demonstrate you have lost the ability to engage in at least two activities of daily living: eating, bathing, dressing, toileting, walking and continence. Many buyers of long-term care are surprised to learn that recovery from major surgery is not covered. It might be better to have the money accessible in an investment account to pay for these costs.

I always recommend a long-term care quote for clients that are interested in learning more about their options. The conclusion that they usually reach is that they are either rich enough to cover the nursing home care, or too poor to afford it. There are also other strategies to cover nursing home care such as buying life insurance. Heirs can get a nice inheritance if it is not used for nursing home care. These insurance premiums will also not rise later in life unlike long-term care insurance.

I’m glad that I was able to help the reporter reach her deadline, but the article would have been more informative if she added all the details about why less people are buying long-term insurance. I might have overwhelmed her with my lengthy response to her question, when all she wanted me to say was that people should start planning earlier. My quote to her that the financial process is more complicated that it used to be and everyone should weigh the benefits themselves, would have been much better at the end of this article.

Please read our disclosure statement regarding the contents of this post and our website as a whole.

Current View on the Markets

The S&P 500 just set an amazing record. This is the longest time that the US stock market has went without dropping 3%. The streak started around the time of the presidential election back on 11/7/2016. Since then the volatility has all but disappeared. This year the S&P 500 index has closed lower 1% or more only four times—the fewest for a full year since 1964.

My outlook hasn’t changed much from the first quarter of this year.  I wrote back in March that I was focusing on investing in innovative companies that were developing autonomous vehicles, social media, the cloud, and artificial intelligence. I had one eye on Washington, and the other on corporate cash flows. The right call over the past 8 years has been to invest in high quality businesses that are either generating high cash flows, paying dividends, buying back shares, and/or growing revenues. When this formula stops working, then I’ll reevaluate.

I decided not to write a second quarter or third quarter outlook because my views haven’t changed much. Here is a quick summary of the trends that I have written about often this year.

Mickey Drexler, the former CEO and current chairman of J.Crew couldn’t have summed it up better this week. “Things have been miserable in retail, The last two or three years have not been fun whatsoever. The trend of consumers changing how they now shop from their phones and computers is showing no signs of slowing.

According to FactSetone-seventh of the nearly $4.2 trillion in global ETF (exchange-traded fund) assets are in funds tracking the benchmark U.S. equity index. Passive funds now own an average of 17% of each component of the S&P 500, whereas passive ownership was “a rounding error” a decade ago. ETFs will continue to scoop up corporate shares and remove supply, which has helped to take stocks higher.

Two weeks ago GM and its self-driving car unit Cruise Automation  deployed a fleet of autonomous vehicles in New York City, making it the first company to launch a test program in the hectic urban environment. I expect that self-driving technology will be required in all vehicles within the next 10 years.

Here is a quote from a newsweek article this week, “world-renowned physicist Stephen Hawking has warned that artificial intelligence (AI) has the potential to destroy civilization and could be the worst thing that has ever happened to humanity.” In the meantime, it’s a safe bet that investors are going to make a ton of money investing in it.

Tech giants Apple, Amazon, Facebook, Google, and Microsoft, are monopolies that are generating huge amounts of cash flows. They are disrupting the economy with new innovations, which has been rewarding to investors. If you follow the money, it would lead you to these companies.

Consumers are cutting the cords. This quarter Comcast lost 125,000 video subscribers and Charter’s pay-TV dropped by 105,000, reflecting the broader trend of Netflix and other streaming companies luring away traditional cable customers.

According to WSJ, investors have been excited about emerging markets across the globe this year. An average of $24.4 billion has flowed into emerging-markets stocks and bonds this year, according to data from the Washington-based Institute for International Finance.

Interest rates are so low that there has not been much of an appreciation in prices. I’ve avoided bonds and prefer other investments that offer higher returns.

A well-known bank analyst reported that banks are swimming in so much excess cash that they don’t know what to do with it. Most banks have been returning cash to shareholders in the form of rising dividends and share buybacks. The largest U.S banks are now buying back shares at a greater rate than many cash rich technology companies.  I expect that this pace of buybacks and dividend increases will only increase over the next few years.

As we head into 2018, there are many structural growth drivers in place that will cause an upside surprise to current GDP estimates. We are in the middle of a boom period that will cause many economists to revise their GDP forecasts higher. My risk to this outlook is that central banks have been slow to tighten monetary policy. Other significant risks to this forecast include a rise in oil prices, interest rates increase, tax reform doesn’t pass, or inflation returns.  I will continue to focus on the above trends. I will update you on them and any new trends that emerge and how I’m investing in them in the coming year.

Please read our disclosure statement regarding the contents of this post and our website as a whole.

Who will benefit the most from the tax cut?

On Thursday, the GOP leadership in the U.S. House of Representatives unveiled its much anticipated ‘Tax Cuts and Jobs Act’. The tax bill still needs to be debated in the Senate and will unlikely pass in its current form.

GOP lawmakers have crafted a bill that will permanently cut the corporate tax rate to 20% from 35%. S corporations, partnerships, and LLC’s will also see a benefit from a substantial tax cut. These small businesses that operate as pass throughs will be eligible for a 25% tax rate rather than having to pay as much as 39.6% at the top individual level. The other major change is that the estate tax will be repealed as of 2024. This is all great news for small business owners and the ultra-wealthy.

The tax cut in its current form will not be welcome news for everyone. The highest-earners will see their top rate unchanged at 39.6% and many of these wealthy families living in states with high property taxes will pay even higher taxes.

The number of individual income-tax brackets will be compressed from seven to four, but the tax code will still be complex enough that your accountant’s job is safe.  This tax plan would do away with many popular deductions, which could increase federal taxes for those who itemize their deductions. The tax cut is not kind to new college graduates or retirees with high medical bills. The tax proposal is repealing the deduction of student-loan interest and repeals the itemized deduction for medical expenses.

It was welcome news that the government will allow us to keep the 401(k) pre-tax at $18,000. There were rumors that they wanted to drop the pre-tax benefit down to $2,500. The limit on home mortgage-interest deduction loans will be up to $500,000, down from $1,000,000, but existing loans would be grandfathered. The bill also capped the state real estate property tax to $10,000. There were rumors that this deduction was going away entirely.

I believe that middle-class families in states with low property taxes will benefit the most from the doubling of the individual standard deduction to $24,400 for married couples and $12,200 for singles. The bill also increases the child tax credit from $1,000 in 2017 to $1,600. This should appease many Trump supporters in the South and Midwest.

The questions that investors are debating is how will the government pay for the tax cut and how much will it ultimately cost? We all know that the government doesn’t have the money to pay for the tax cut and I wouldn’t be surprised if the cost will end up being much higher than what the politicians estimate. Many Democrats are claiming that the new shortfall in government revenue will eventually lead to cuts in Medicare and Medicaid, and maybe even Social Security.  However, over the short-term, if this tax cut is passed, it could be very bullish for the stock market next year.

Please read our disclosure statement regarding the contents of this post and our website as a whole.

Is 70 the new retirement age?

Personal finance expert Suze Orman wrote this week that the new retirement age is 70. Not a month or a year before. She pointed to the retirement risk of longevity. Expected longevity for men and women has risen 10% since 2000. According to the Society of Actuaries, men who reach 65 are expected to live to the age of 86.6 and women to the age of 88.8. The numbers are even higher for more affluent households.

Suze wrote that the first 15 years are easy, but you need to support 30 years and not 15. She also pointed to a Fidelity study that a 65-year old couple retiring in 2017 will need $275,000 to cover their health-care costs in retirement. Health expense has become an ever-increasing risk to a successful retirement.

Other risks during retirement include inflation, long-term care, stock market, and interest rate risk. I would add that a new type of risk is political risk. Regardless of your political affiliation, the rules of the game are changing. I prefer that politicians don’t meddle with Medicare, retirement plan rules, and Social Security.

A successful retirement is maintaining your standard of living until the end of your days. Suze’s advice that the new retirement age of 70 really doesn’t ring true with me. The reality is 50% of people expect to keep working past age 65, but only 15% actually do so. The average retirement age is 61, up from 57 in 1991. There are 31% of people entering retirement before age 60. The main reason that I see why many people don’t work past 65, is that employers have forced them into early retirement. There are not many companies looking to hire a 69 year old for a full-time position. I find that many people who continue to work into their 70’s and even 80’s do so because they enjoy many aspects of their jobs.

My major concern is that the government might play a hand in pushing out the average retirement age. Fiscal deficits will eventually force politicians to raise the age of full retirement for collecting Social Security. The full retirement age used to be 65 for everyone born in 1937 and earlier. The government then moved the full retirement age to 66 for most baby boomers.  They further climbed it to 67 for everyone born in 1960 or later. It’s only a matter of time until they move the full retirement age to 68 or older.

The biggest consideration for any retiree is Medicare eligibility. Medicare can be the deciding factor for when people retire. Medicare coverage starts at age 65 and is the best health insurance on the market. Early retirees learn quickly that private health care before the age of 65 is very expensive. Personal savings are usually drained paying for these premiums.

The health and quality of life is most important to retirees. This is where Suze’s advice falls short. Her argument is based on life expectancy and not the quality of life. Life expectancy statistics are meaningless to me.  All of my retired clients would support the fact that their best retirement years will be spent in their 60’s and not their 90’s. Suze’s advice to the general public is just that, a blanket statement written to capture headlines. No two financial circumstances are alike and the final decision to retire will always be a personal decision.

Please read our disclosure statement regarding the contents of this post and our website as a whole.

As Good as it Gets

The S&P 500 has never gone a full calendar year without a month of negative returns since it’s inception in 1926. Through the first 10 months of this year, the S&P 500 hasn’t had a single month of negative returns. The index is already up for 12 consecutive months starting from last November.

Since the start of 2013, 18 of the past 19 quarters have been positive. Volatility has virtually disappeared. Bloomberg reported, “there has yet to be a 2 percent move up or down on the S&P 500. For a frame of reference, in 2009, there were 55 separate 2 percent up or down days and there were 35 in 2011.” There is now an entire new generation of naïve investors born, that believe markets can only go up.

This week Fidelity Investments released a new survey that shows that wealthy young millionaires have staggeringly high expectations for the coming year. Millionaires who are either millennials (roughly 20 to 36 years old) or Gen X (37 to 52) expect their investment portfolios to return 16.4% next year!!! (Fidelity’s 2017 Millionaire Outlook Study)

I’ve maintained a very positive view on the stock market, but this is not even close to my expectations.  This study is a sure sign that unrealistic market expectations are taking hold on this bull market. If a potential client met with me and expected a 16.4% return, I’d politely ask them to go visit another advisor that manages money based on past performance. I’m always hesitant to provide any future market return. Any financial advisor that promises a future return or even a past return, is most likely providing a misleading statement.

What is most important is not returns, but risk-adjusted returns. If a wealthy young millionaire wants to achieve a 16.4% return next year, they better be willing to lose their title of “young millionaire” and fall into the “once millionaire” category. When markets go up for 12 consecutive months and volatility drops to nothing, investment risk is no longer being considered. I would argue that this is the point when investment risk is the highest.

Other asset classes are also showing signs of extreme risk. Bitcoin, which I have written about often, is up another 40% in the past month. Over the past year, Bitcoin has leaped from around $778 to $6,000.

Many mortgage brokers and real estate agents have commented that home buying activity this October is higher than the spring season. They don’t know if it’s attributable to the warm weather or things are overheated.

We are entering the end of the year with investment risk nearing a very high level. The belief that politicians will pass tax reform, and a friendly business environment has placed a floor under the market. I remain positive on equity markets, but I’m not projecting anything close to a 16.4% return next year. I’m certain that this new generation of investors who believe markets only go up, will turn out to be very disappointed.

Please read our disclosure statement regarding the contents of this post and our website as a whole.

Keeping it Simple

The Harvard Management Company (HMC) recently reported an investment return of 8.1% for the fiscal year ending June 30, 2017. While the endowment is one of the largest in the world at $37.1 billion, the return is one of the lowest returns compared to other endowments. Other endowments such as Yale’s returned 11.3%, Duke’s 12.7%, MIT’s 14.3%, and one of highest returns was University of California’s at 15.1%.

Ever since Jack Meyer left in 2005, investment returns at HMC have been inconsistent at best. Jack managed HMC from 1990-2005, and during his tenure, the endowment earned an annualized return of 15.9%. He was forced out because many alumni were upset by the size of his annual bonus. The HMC endowment has struggled since his departure as other managers have either left to find more lucrative opportunities or were fired.  It has gotten so bad that HMC is laying off approximately half of its 230-person staff.

If there isn’t a Harvard Business case study on what went wrong, then one should be written. But there have been other outside business consultants who have conducted internal reviews. The Harvard Crimson wrote back in January, “Beyond its lackluster returns, the firm’s employees also privately criticized HMC’s workplace culture as “lazy, fat, and stupid” in a 2015 internal review conducted by McKinsey and Company, accusing their employer of setting artificially low benchmarks and overcompensating its executives.” 

This is a very harsh assessment. I believe that the real problem with HMC is that it’s portfolio construction is too complex. They invest in internally-managed hedge funds, direct real estate investments, natural resources, and other types of alternative investments. In my opinion, HMC has outsmarted themselves. HMC has been overhauling the endowment for five years running. My biggest lesson learned from HMC’s poor returns, is to keep it simple. Here is a good example of what I mean by keeping it simple:

Steve Edmundson made headlines last year when the Wall Street Journal wrote an article on his success as a endowment portfolio manager. The title of the article was, How one man in Nevada is trouncing the Harvard endowment. He manages the Nevada State Pension fund, which is about the same size as Harvard’s endowment. The difference is that he doesn’t have any internal professional staff. He doesn’t take phone calls from outside managers and he only invests in low-cost exchange traded funds. He tries to keep investing costs low and does not trade too often. Other endowments are now beginning to mirror his successful investment model. There are even major U.S public pensions following his example.

I spent most of my entire career working with and researching the largest U.S. institutions and retirement companies. I gained firsthand insight that Steve’s investment approach was far superior to that of Harvard’s complex approach to investing. Much like Steve, I have never held a meeting with another company selling me a product. This would be a complete waste of my time. A better use of my time is helping my clients meet their goals through customized asset allocation.

Please read our disclosure statement regarding the contents of this post and our website as a whole.

The Next Big Idea II

Back in January, I wrote an article on a new technology that would have an enormous impact on the economy. It was that autonomous vehicles were going to change the automotive industry and disrupt transportation industries. What I failed to realize was that even car ownership in the future would change.

Two major ride sharing services, Uber and Lyft, have emerged as the leaders in a race to offer a new way of transportation. Uber believes that self-driving taxis could change the way millions of people get around. Ride sharing may become so inexpensive that people might not even own a vehicle. Uber has already decimated the taxi industry with a smartphone app and now it has its sights on upending the entire automotive industry. Google’s autonomous-drive company, Waymo, is also close to launching a ridesharing service.  In the state of California, there are 42 firms that have permits to test self-driving cars. The Wall Street Journal reports that Waymo now has the world’s largest fleet of self-driving cars, with over three million miles of testing on public roads so far. Uber has over 200 self-driving cars and has logged over 1 million miles.

Uber and Lyft’s vision is to offer a hailing service where customers can hail a ride on their app and a self-driving vehicle will be in their driveway within minutes. Much like a taxi service, they would receive a fee for providing these rides. Ford, GM, and other large automotive companies realize this competitive threat and have drastically increased their research and development in this area. This trend is speeding up the race for self-driving vehicles, which Is now happening faster than most analysts anticipated.

I believe that the entire transportation industry will be disrupted similar to what Amazon has done to the retail industry. The trucking industry will no doubt have less truck drivers employed over the coming decade. Even the pizza delivery job will not be spared. Last month, Domino’s Pizza Inc. and Ford announced plans to conduct a self-driving vehicle test for pizza delivery in the Ann Arbor market. Domino’s CEO said that he believes transportation is undergoing fundamental, dramatic change.

Investors seem more willing to look past quarterly earning misses and are focusing more on the potential for future market share. We are still in the early stages of developing these self-driving technologies. I believe that there will be many new investment opportunities in this area over the coming years.

Please read our disclosure statement regarding the contents of this post and our website as a whole.

Dow Jones Industrial Average 1,000,000?

Albert Einstein has been credited with a few powerful quotes on compounding interest. Whether he said them or not is up for debate. The first quote is, “compounding [interest] is the most powerful force in the universe.” The second quote is, “compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” Warren Buffett’s right hand man Charlie Munger, said that understanding both the power of compound interest and the difficulty of getting it, is the heart and soul of understanding a lot of things.

Compound Interest will make a deposit or loan grow at a faster rate than simple interest, which is interest calculated only on the principal amount. Time is your best friend and the one thing that makes compound interest so effective. Warren Buffett recently spoke at an event commemorating the 100th anniversary of Forbes magazine. He said that “being short America has been a loser’s game. I predict to you it will continue to be a loser’s game,” He predicted that the Dow Jones Industrial Average will be “over 1 million” in 100 years. The legendary investor thinks that anyone betting against America is “out of their mind.” This optimist prediction of Dow 1 million isn’t even that bullish. Mario Gabelli, joked on Twitter, “one million in one hundred years … has Buffett turned bearish?”

For the Dow to reach the 1 million level, the compound annual return would only need to be 3.87%. The Dow has returned 5.7% annually over the past 100 years and 9.3% annually since 1980. Benjamin Franklin would also disagree with Warren Buffett’s bearish 1 million level in 100 years. Franklin’s magic number would be closer to 5%. How do we know this? When Franklin died in 1790, he left the equivalent of $4,400 each to the cities of Boston and Philadelphia in his will. His instructions were that a portion of the funds could be used after 100 years and they would receive the remaining funds after 200 years. When the cities received their balances after 200 years, the combined bequest had grown to $6.5 million. Had the cities followed through with Franklin’s exact instructions, the combined amount would be $40,000,000 at the end of 200 years. Boston’s fund grew to $5,000,000, while Philadelphia only had about $2,000,000. Franklin had estimated the number to be closer to $36,000,000. Franklin’s mistake was leaving the money to the government and not to an investment company. We should give Franklin a pass on this one since they didn’t exist at the time.

Buffett’s prediction will be recalled and celebrated 100 years from now.  Buffett and Franklin will both be remembered as eternal optimists. In Buffett’s words,’“That is not a ridiculous forecast at all, if you do the math on it, it’s an amazing country we live in.” I share Buffett’s sentiment and it is great working with so many clients that are doing their best to earn compound interest and not paying it.

Please read our disclosure statement regarding the contents of this post and our website as a whole.

$1 Million Dollar Bet

This week CNBC reported that JPMorgan became the seventh bank to cover Buffett’s Berkshire Hathaway, calling it a screaming buy. Its “businesses benefit from best-in-class managements, unmatched balance sheet strength, and many of the companies have strong brands, scale or low-cost competitive advantages,”. “Berkshire’s balance sheet strength is a significant competitive advantage, and its liquidity position is the highest ever,” analyst Sarah DeWitt writes. 

This is not a recommendation to buy or sell Berkshire Hathaway. In full disclosure, Berkshire Hathaway is owned by most of my clients.

In 2007, Buffett made a $1 million wager with Ted Seides who is a hedge fund manager with Protégé Partners. It could be the easiest money Buffett has ever made. Even easier than the millions in interest that he collects every day in the bank. He bet that a low-cost S&P 500 index fund would fare better than a collection of Protégé Partners hedge funds.  This week Ted conceded on his horrible bet early, which was winding up at the end of this year. The $1 million hedge fund investment has reportedly only earned $220,000 in 10 years, while Buffett’s S&P 500 investment returned $854,000. The timing of Ted’s bet couldn’t have been worse. We are now in the second longest bull market in history. If you could own one investment in a bull market, it would be the S&P 500 index fund. A typical hedge fund is constructed to offer downside protection in bear markets. Without World War III, there really was no way that Buffett could lose this $1 million bet. An analogy would be buying term life insurance and never dying. The good news is that you lived, but the bad news, is you lost money. The same could be said of Buffett’s bet. The markets never failed and the insurance was never needed.

The other reason is that the fees alone in a hedge fund are excessive. The typical fees for a hedge fund are 2 and 20. The 2 represents a 2% annual management fee and the 20 represents the 20% cut that the hedge fund gets of profits over a certain return threshold.

Buffett recommends that investors should own the S&P 500, but he didn’t make his billions investing in indexes. This is the one area where he doesn’t take his own advice on investing. He has hired two investment advisors to manage Berkshire’s capital. His managers, Todd Combs and Tedd Weschler, managed their own hedge funds before joining Berkshire. They have been credited for investing in Apple. They now mange over $20 billion in Berkshire capital and it will eventually be all of the money. The reason why Buffett won’t invest in the S&P 500, is he doesn’t want the downside risk of the S&P 500. He made his billions by making bets when the odds were tilted in his favor. The S&P 500 offers 100% upside risk and 100% downside risk. He prefers when the odds are 500% upside risk and 50% downside risk. The better the upside/downside ratio, the bigger his investment.

With markets near all-time highs, the odds of the S&P 500 repeating the same returns over the next 5 years is much less likely to happen. My $1 million bet would be that Todd Combs and Tedd Weschler stand a better chance of outperforming the S&P 500 over the next five years.

Please read our disclosure statement regarding the contents of this post and our website as a whole.

Market Anxiety over Natural Disasters

A headline caught my attention the other day. It was, “What to Tell Clients Feeling Market Anxiety.” The article began by stating that financial advisors have seen an uptick of clients calling about overwhelming fears of a possible market correction. There seems much more to worry about these days. Rising tensions with North Korea, an incoherent government, and multiple hurricanes striking the U.S within weeks have investors on edge.

Investment returns couldn’t really be any better this year. Both the stock and bond market have had monumental gains over the past year. I’d hate to see investors anxieties if they actually experience a loss! I find that the same cast of characters are warning of a market bubble and their warnings grow louder as investors turn their attention to these devastating hurricanes.

The short-term impact of these storms has been very negative for the markets. However, it’s much more difficult to predict the long-term impact. Warren Buffett remains optimistic. He predictes that the damage from Harvey won’t derail the relatively steady 2 percent growth in the U.S. economy, but it will be devastating to some individuals and families. In the interview, he went on to say, “Berkshire hasn’t written much catastrophe insurance in recent years because prices were too low, so that will limit the Omaha, Nebraska-based company’s exposure.” Insurance premiums will surely rise after these storms, as companies payout claims.

The inner workings of the economy are so complicated that it’s impossible to say for sure how the hurricanes will impact the stock market. The warnings coming from government officials to flee Florida ahead of the hurricane were very telling of what will come next. They stated that we can’t fix your life, but we can fix your house. The silver lining of the devastation caused by Irma and Harvey will be a massive rebuilding effort that will bring people together. It could even cause the government to begin to work together again for the people instead of serving their own self interests.

The real losses will be those lives changed forever by these terrible storms. In Houston, 80% of the homeowners lacked flood coverage. In the aftermath of Hurricane Harvey, President Trump tweeted that the storm had brought a “once in 500-year flood” to Houston, and expressed support for relief efforts. A 500-year flood does not predict the timing of a flood, but these terms refer to the chance of a flood occurring at all. A 500-year event has a 1 in 500 chance of occurring in a single year. A 500-year flood zones has a probability of 0.2 percent. These scales are flawed and out of date. They fail to take into account climate change. It is very difficult for government officials to update these flood plains because people buying homes don’t want to live in flood zones because property values will drop when maps are updated. Hopefully, the government will continue to step up and help many of these families that are in desperate need.

I expect market volatility to continue to rise over the coming weeks as investors monitor the economic impact of the hurricanes and whatever else might be lurking around the corner. As always, if you have any concerns on the market, please feel free to give me call or a schedule a meeting with me.

Please read our disclosure statement regarding the contents of this post and our website as a whole.