Quote of the Week

“We give dogs time we can spare, space we can spare and love we can spare.  And in return, dogs give us their all. It’s the best deal man has ever made.” – M. Facklam

Technical Corner

Apple, which accounts for 12% of the Nasdaq Composite and 5% of the Dow, had its worst week in seven months, down 5%, and it was 16% off its recent high. Concerns about disappointing iPhone sales and slower growth led shares to their seventh straight weekly loss, the longest stretch since 2012. 

So far this week the markets are selling off. Last week the Dow was down 2.2%, the S&P 500 was down 1.6%, the Nasdaq was down 2.1% and the MSCI EAFE was down 1.5%. For the year the Dow is up 2.8%, the S&P 500 is up 2.3%, the Nasdaq is up 5.0%, and the MSCI EAFE is down 11.6%.

The markets are now far off their 2018 highs and things are going in the wrong direction. The Emerging Markets are in free fall, Europe and the rest of the developed international world has now gone negative as it relates to growth. The U.S. growth is now starting to slow and we should print a much lower GDP for the fourth quarter. So much for the tax cut stimulating growth and paying for itself. I think the markets are beginning to realize that we have been bamboozled. Now the markets and most Americans can see that we are going to be running off the cliff by continuing to run up massive Federal deficits of over one trillion dollars per year.

When Congress meets next year, the hope is that they will pass an infrastructure bill. I think this is certainly needed as our infrastructure is rated “D” by most engineers in the know. Of course, good infrastructure helps promote efficient economic activity. But it won’t create new jobs. Construction companies have become so efficient with big machines that far fewer workers are needed to accomplish the same tasks that required many more workers in the past.  By borrowing or taxing money from the private sector to build the infrastructure, politicians harm growth elsewhere. In the long run, it may be positive, but in the short-run, at best, it’s neutral. Beware of politicians saying they can create jobs and speed growth. That’s demand side thinking, and it hasn’t worked anywhere in the world up to this point.

Larry’s Thoughts

When it comes to retirement planning, most clients fail to realize that their children have a significant role to play on their “retirement team.” While addressing their kids’ needs is a core element of most clients’ financial plans, they tend to focus only on education costs and helping their kids achieve independence.

The reality is that clients’ kids can be a significant asset in helping them achieve a secure retirement—but only if they invest early on in teaching their children about critical financial concepts and values.

This challenge can be daunting for clients—after all, one reason they talk to an advisor is to get help deciphering financial concepts! Once clients understand that one of the most effective ways to keep their retirement plans on track is by empowering their kids to live financially fulfilling and independent lives, though, they frequently begin to prioritize financial education.

This can create tremendous opportunities for advisors to strengthen relationships by teaching clients to teach their kids about money. Here are some important tips:

  1. Help clients spot opportunities to begin a rapport with their kids about financial topics.Just as married couples can run into problems if they don’t cultivate communication skills around financial issues, parents can run into problems later in life if they don’t involve their children in financial conversations early on.

This does not mean clients should discuss their salaries with their kids or how much they paid for their house. It means they should look for ways to help their children understand the concept of costs in everyday ways, such as letting them hand money to the cashier when the client makes a cash transaction; taking them to the bank to open their own savings account; or sitting with them when the client pays bills online.

  1. Encourage clients to help their kids build their own savings—and learn how to use them.Nothing is more empowering for kids than learning that they have the ability to save their own money and make their own spending decisions. In my view, a child’s progress toward building their own savings is an excellent barometer of their overall progress toward financial literacy.

Getting kids to this point, however, involves a number of (sometimes tricky) intermediate steps. These include communicating clearly that clients’ children are expected to earn their own money, first through chores and later through outside jobs; establishing that the client will only buy certain items—such as, for example, a new phone or tablet—if the child contributes a certain percentage; and helping them understand that buying one thing may mean sacrificing something else.

This process can be just as tough on parents as it is on kids, and advisors can help by providing ongoing encouragement and reassurance to their clients.

  1. Help clients understand that kids need teachers, not Santa Claus.Many successful clients pride themselves on their ability to give their kids the world; in fact, the desire to be seen as a great provider is often a central—and commendable—driver of their success. Clients need to know, however, that this impulse can actually be harmful to their children if it leads them to shield their kids from important financial concepts and realities.

Advisors should seek to help clients understand that expecting their children to take responsibility for their own financial lives does not mean they are not providing for their kids. Moreover, it does not reflect poorly on them if they do not step in to resolve financial challenges their kids may encounter as they get older, such as excessive credit card debt or a failure to save. Rather, it simply means that the clients are preparing their kids for their role on their retirement team.

  1. For entrepreneurial kids, stress the importance of profits—not just revenue.Once clients’ kids understand their role in controlling their own finances, some may want to start side businesses, whether it’s mowing lawns, selling lemonade or something else. Obviously, parents should celebrate this type of entrepreneurial spirit—but clients shouldn’t think their job is done just because their kids are doing yard work to pay for college.

Here again, clients can teach their children valuable lessons by resisting the urge to play Santa Claus. If a client’s child is mowing lawns, advisors should urge the client to make sure the child pays for gas (both for the mower and for travel to the job site). While it may be tempting for parents to absorb these costs, doing so can create unrealistic expectations of easy success for their kids and deny them the opportunity to learn valuable lessons about how businesses function.

Clients looking ahead to retirement should understand that their children can be a major asset in helping them achieve their retirement goals, but only if they consciously train their kids to be part of their retirement team from an early age. As trusted financial experts, advisors can add tremendous value to their existing relationships by helping clients meet this challenge head-on.

Greg Powell is president and CEO of Fi Plan Partners, a wealth management and financial planning firm based in Birmingham, Ala.

Powell, Greg “Four Important Tips To Help Clients Teach Their Kids About Money  https://www.fa-mag.com/news/4-important-tips-to-help-clients-teach-their-kids-about-money-41908.html  Accessed 19 November 2018

By the Numbers

“WAY DOWN – The price of crude oil closed at $67.59 a barrel on Friday 10/26/18. From that point, the price of crude oil fell for the next 12 trading days through Tuesday 11/13/18, bottoming at $55.69 a barrel (down 17.6%). That’s the longest stretch of consecutive down days for oil according to records maintained for the last 35 years. The reason for the price decline: a fear of a slowdown in the global demand for oil (source: NYMEX). – Michael A. Higley, BTN 11-19-2018

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These are the opinions of Larry Lof and Stephanie Mayoral and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs.

The S&P 500 is an index of stocks compiled by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. The index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Indices mentioned are unmanaged and cannot be invested into directly.

Technical analysis represents an observation of past performance and trend, and past performance and trend are no guarantee of future performance, price, or trend. The price movements within capital markets cannot be guaranteed and always remain uncertain. The allocation discussed herein is not designed based on the individual needs of any one specific client or investor. In other words, it is not a customized strategy designed on the specific financial circumstances of the client. Please consult an advisor to discuss your individual situation before making any investments decision. Investing in securities involves risk of loss. Further, depending on the different types of investments, there may be varying degrees of risk including loss of original principal.

Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Laurence Lof Financial Advisors, LLC are not affiliated. Laurence Lof Financial Advisors 4757 E Camp Lowell Drive Tucson AZ 85712     [email protected]


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