Tag Archives: gainesville florida

Why Medicare Won’t Cover You Overseas

Leave a reply

My Comments: It’s been a few years since my wife and I last travelled out of the country. During this time, she and I both became eligible for Medicare benefits. And given my health history over these past few years, without Medicare we would have been financially stressed.

We still have expectations of visiting family in Europe and fulfilling an item on my bucket list which is a visit to New Zealand. This article adds another element when it comes to making plans to travel overseas.

By Kathleen Peddicord | U.S.News & World Report LP – Mon, May 13, 2013

If you’re an American considering the idea of retiring overseas, your Medicare won’t travel with you. The United States generally prohibits Medicare from paying for medical services for retirees outside the country and its territories. The more than half a million retired Americans living overseas and the millions more who travel extensively abroad must either go without care until they return to the United States or pay out-of-pocket for the care they need.

Many retired Americans who have paid into Medicare their entire working lives and then choose to move overseas find this situation to be unfair. This restriction on Medicare coverage also ignores the potential cost savings to Medicare offered by lower-cost health care options abroad.

Currently about 50 million Americans receive Medicare benefits. In less than a generation, that number will increase to 80 million. In 2012, Medicare spending was $560 billion, about 15 percent of the total federal budget. By 2022, Medicare spending is expected to reach $1.1 trillion, or more than 19 percent of the federal budget. The Medicare Part A trust fund is expected to be exhausted by 2024.

As policy-makers grapple with this financial crisis, may people believe that more of the cost of health care will be shifted to Medicare beneficiaries in a mix of higher deductibles, co-pays and reduced benefits. While allowing seniors to receive Medicare coverage abroad is not a cure-all to this fiscal crisis, the potential savings could be significant. Health care costs for a procedure overseas can be less than half of the cost of the exact same procedure performed in the United States, saving both Medicare and the retiree money.

For example, if a Medicare beneficiary could get a hip replacement performed in Costa Rica, Panama or Israel by a highly-trained (often U.S.-educated) surgeon at an internationally accredited hospital for half of the cost of the same procedure at a U.S. hospital, the Medicare system would realize significant savings.

Studies indicate that the age of retirees living abroad peaks at about 72. One reason that older retirees are less likely to live abroad is that, as healthcare needs and concerns increase with age, they are returning to the United States where Medicare covers them.

The current Medicare rules create a disincentive for Americans seeking a lower cost of living (and lower health care costs) abroad. Medicare-eligible Americans living abroad, even part time, must continue to pay their Medicare premiums but either forgo health care while abroad or pay out of pocket for it. If they pay out of pocket, they are in effect paying twice for health care coverage. If they do not continue their Medicare premium payments, they are penalized upon their return to the United States and enrollment or re-enrollment in Medicare.

This disincentive may also be causing unnecessary costs to Medicare and poorer health outcomes for some Americans. Because of the double cost, retired Americans often choose to forgo health care while abroad, even skipping routine doctor visits until their condition has festered into one requiring extensive and costly treatment. Then they return to the United States to receive Medicare coverage.

A non-partisan group called the Center for Medicare Portability, formed in 2011 and based in Washington, D.C., is working to try to change Medicare’s rules for overseas retirees. The objective of the CMP is to make it possible for retired Americans who live overseas to have access to the Medicare benefits they have paid for throughout their lives.

International health care coverage for American retirees is not new. In fact, it’s fairly common. The federal government already provides health care coverage abroad for retired military and their families, retired federal employees, some veterans and even some Medicare beneficiaries. The CMP hopes that Congress will see that the global health care market offers part of the solution to the Medicare spending crisis.

The CMP does not advocate any one mechanism for Medicare portability, but has proposed several ideas. One option, which could be administratively feasible in countries with large and growing U.S. expatriate retiree communities, would be to set up a traditional Medicare system, including Medicare Part A (mainly inpatient care), Part B (mainly outpatient care) and perhaps Part D (prescription drug coverage).

A Medicare-contracted insurance intermediary (for example, a U.S. insurer that already operates in the specified foreign country and that has a network of providers and administrative capabilities in that country) could manage beneficiary enrollments and relationships, oversee provider accreditation and certification issues, negotiate reimbursement rates (based on usual and customary costs in that country and with Medicare approval), administer billing and payments and manage fraud and abuse.

Another option could be a capitated care system in which a network of providers would agree to provide care to a beneficiary for a set price. That price would be based on the expected actuarial cost of care for the beneficiary in the foreign country, based on age, pre-existing conditions and other factors, just as Medicare Advantage does in the United States.

A third option, possibly the simplest one, would be to create a voucher system for retirees who live abroad. A voucher could be provided to Medicare beneficiaries who agree to receive their care abroad, valued, for example, at 75 percent of the expected cost of care for the beneficiary in the United States. This would immediately save Medicare 25 percent of the cost of covered benefits for that beneficiary, and the beneficiary could use the voucher to purchase a health insurance policy from a private insurer in the country where he or she retires.

It’s Scary

Leave a reply

healthcare reformMy Thoughts About This: I think today is the day that the House of Representatives is scheduled once again to hold a vote to repeal the PPACA. I find this disturbing, ludicrous, a waste of taxpayer money, grandstanding and any number of other perjorative words.

This opinion by Darwin Carmichael points to the crux of the problem. Namely that the cost of health care in this country was and perhaps is, increasing at a rate that is totally unsustainable. And instead of attempting to get to the root of the problem, something which none of the players in the health care industry have the ability to do, those in Congress who are supposed to be focused US as US citizens, are simply trying to earn points so they can stay in power and get tax breaks and perks that the rest of us cannot enjoy.

I’m reminded of countries around the world where there are more than two political parties vying for control. If one of them wins an election, they have to form a coalition with another party to gain enough seats to possibly control the outcome when it comes to making policy decisions.

Before PPACA, can you imagine how you and I would be treated if the coalition in power to reform the health care delivery system in this country was in the hands of the insurance companies and hospitals. Would they work toward reform that was in our best interest or their best interest?

By Darwin Carmichael | May 13, 2013

Could health policymakers be missing something?

National Underwriter Life & Health recently ran an article about how Obamacare will affect brokers near an article about high hospital costs.

It just seems obvious to me that the real problem here is not with high insurance premiums but with the actual cost of health care.

Most of the members of Congress who created Obamacare just don’t seem to have understood the fact that insurance premiums are driven by actual costs.

When costs rise, insurance premiums must rise.

There was very little attention paid to actual costs in the Obamacare bill. The drafters seemed to want to demonize the insurance companies, and, while doing that, overlooked the real health care cost culprit: The cost of care.
The profit margin of insurance companies is among the lowest for any industry.

When you look at some of the underlying health care costs, it’s understandable that insurance premiums are very high.

Until the consumer becomes more involved in the cost of care the costs will continue to rise. If a consumer pays only $25 to $30 for a $300 prescription, the consumer really doesn’t care what the actual cost of the prescription is.
The same is true for hospital costs.

I recently handled a claim for a policyholder. Let’s call the policyholder “Jane.” (I’m changing a lot of the details here to protect the policyholder’s privacy.) Jane was 57-year-old female who had a heart attack. She died one day after the suffered the heart attack, and her total bill was almost $350,000.

It seems virtually impossible that two days of health care could cost that much.

The insurance company, of course, paid the majority of the bill. Guess what? The cost of that claim is ultimately passed along to the consumer in the form of higher rates.

It’s just really scary that legislators are making all the rules about something of which they have very little knowledge.

Move Over, Saudi Arabia, and Let North Dakota Take Over

Leave a reply

My Comments: How many of us saw this coming as little as five years ago?

By Gil Weinreich, AdvisorOne | May 14, 2013

A buyer’s market in oil is in the making and will bring about disruptive market change that should benefit American manufacturers and consumers and prove challenging for Middle Eastern producers and European refiners.

That is the International Energy Agency’s new forecast, released Tuesday in London, and the anticipated supply boom from North American oil fields in particular should contribute to what the IEA terms a “supply shock.”

America’s shale revolution, and abundant capacity in Canada’s tar sands, is well established, but “supply growth is even steeper than previously expected,” said IEA Executive Director Maria van der Hoeven at an oil summit in London launching the organization’s Medium-Term Oil Market Report (MTOMR).

Van der Hoeven noted the irony that the country that was the cradle of the oil industry 150 years go, but which eventually fell into what seemed like irreversible decline, has now become the center of an oil boom.

But today’s oil bonanza in the U.S., she said, has powerful compound effects as well.

“What makes the tight oil boom truly transformative is not just the sheer production volumes unlocked but the combination of volumetric production growth with other factors: the crude’s distinctively light quality, the unconventional nature of both the plays from which it is extracted and the technologies which have unlocked it, the economic and market impact of the new production, and the chain reaction it is creating in the global transportation, storage and refining infrastructure,” a summary of the report says.

While U.S. law continues to ban crude oil exports, the growth in oil supply should be a boon to U.S. refiners in the coming years. Long a top importer of refined products, the U.S. is already a large net exporter, and steep production surpluses are expected to push the U.S. share of refined products up even more.

As a news release announcing the report put it, “The supply shock created by a surge in North American oil production will be as transformative to the market over the next five years as was the rise of Chinese demand over the last 15.”

The report’s scenario was not entirely rosy for the U.S., citing three categories of challenge: infrastructural and logistical, legislative and regulatory, and environmental.

Though the U.S. contribution to oil production growth is expected to grow by 3.9 million barrels a day from 2012 to 2018, the market changes do not spell the end of OPEC but do suggest a lowering of its relative stature.

The Saudi Arabia-dominated oil cartel will also see its capacity rise, but by only 1.75 million barrels a day—about 750,000 barrels a day less than last year’s IEA forecast. The new report cites social and political turmoil in the wake of the Arab Spring as a factor in OPEC performance.

Another key IEA finding concerns the shift in demand from Western to emerging economies. While this development has been forecast before, the actual shift is expected to occur over the coming five years.

While emerging economies will blow past the developed world, the IEA sees a split within the developed economies—“a bifurcation has appeared between a North America energized by cheap natural gas and a euro area plagued by debt issues,” van der Hoeven said.
Beyond its slow growth and consequent tepid demand for oil, Europe will lose out in another significant way in the coming five years—specifically, it will cede its primacy as an oil refiner.

“OECD refining, notwithstanding a renaissance in the U.S., is increasingly relinquishing market share to the non-OECD region, a form of de facto offshoring not unlike the trend in other manufacturing sectors,” a summary of the IEA report says.

“Already most of the world’s refining capacity is located in non-OECD economies. In the next five years, virtually all net crude distillation capacity growth is forecast to take place in the emerging-market and developing economies.”

The Plug is Pulled on PBR

Leave a reply

blackhole2PBR is the short version name of a company registered as Physicians Benefits Resources Risk Retention Group, Inc. For the past four years, I’ve invested significant time and energy with this company as I was convinced since day one ( and am still) that it had a unique value proposition. This value proposition is significant for physicans in these days of uncertainty as the PPACA comes online nationally.

Until this week, it offered professional liability insurance to physicians. The unique structure of a policy from PBR was that it returned 50% of the premiums paid, every year. This resulted in a “pool of money” accessible to the physician, with some tax breaks, all with the approval of the IRS if done properly. Think of it as cutting premiums in half, and still being fully covered.

This past week, the people who created PBR decided to throw in the towel and call it a day. The concept never gained enough traction among physicians in private practice to allow it to grow and become economically sustainable as a company. This is spite of it being available in all 50 states and with the backing of Lloyd’s of London. For those of us who saw the benefits and advantages of this insurance model, who talked with dozens of physicians, few of whom actually signed up, the question that hangs in the air is “Why not?”.

In some ways, it makes me think of the millions, if not billions, of dollars spent by auto manufacturers worldwide to develop and market an electric car. After all, gasoline is an incrasingly precious commodity, lending itself to the effects of global warming. We’ve been told for years that the supply of gasoline is running out and it’s just a matter of time before the world economy collapses as a result. But in spite of this, people like you and I are not flocking to car dealerships to buy an electric car. Why not?

For one thing, we as a nation are becoming increasingly less dependent on foreign oil to satisfy our needs for transportation. Think “fracking” and the supply of natural gas. For another, understand that the internal combustion engine has been around for over 100 years, is increasingly efficient, and more importantly, part of our national psyche.

Much the same can be said for professional liability insurance that physicians purchase from traditional commercial insurance companies. Premiums have been trending downward for several years now; the culture within medical practices is increasingly conscious of why lawsuits happen and so take steps to eliminate or at least minimize the chances of a lawsuit. Buying coverage from a tradional carrier is the norm and has been for years.

Both electric cars and the PBR model are good ideas, both offer significant benefits over the status quo, and both suffer from acceptance by consumers. Both are good ideas that appeared at the wrong time.

Over these past four years, I’ve spent much time and energy trying to get the attention of decision makers at small hospitals and private medical groups. I’ve shown them that PBR is something they should look at closely and consider seriously. But my efforts have been spotty, at best. But not because I’m a lousy salesman, but because the idea is sufficiently outside the norm that to take a step toward it is uncomfortable.

As a result, I’m going to re-focus my efforts on a step that is short of that offered by PBR but which results in a similar outcome. The underlying idea is to turn revenue that can be expensed and therefore a tax deductible item, into an asset that can be used at a later date, an asset not unlike cash, which can be used for most anything you need, or want, and the tax consequences are favorable to you.

It’s going to be a much more comforable step for those who will benefit, since the elements are increasingly mainstream and understood by lawyers and CPAs alike.

More posts on this will follow as I continue to get my arms around this approach, with the expectation that I can properly articulate how it works and how physicians and business owners in general can benefit. Please stay tuned.

Even Skilled Investors Can Use a Financial Advisor

Leave a reply

profit-loss-riskMy Comments: Yesterday, the focus of my comments was that if you want to go it alone, that’s OK. Here, however, are some reasons for not attempting to go it alone and be solely responsible for your decisions. I can confirm, after 38 years in this business, that emotions play a huge role in whether or not you are successful as an investor. It’s not about fees, or lack of skill. It’s whether you can make objective choices when it comes down to YOUR MONEY THAT IS AT RISK.

Steve Garmhausen | Special to CNBC.com | Monday, 29 Apr 2013

In the past ten years, more investors have been turning to professionals for help with their portfolios. One measure of the industry—assets under management at registered advisors—swelled from $22 trillion in 2002 to nearly $50 trillion in 2012.

What’s behind that surge? More people need help as employer-sponsored pensions give way to self-guided retirement plans such as 401(k)s and they realize that investing in a globally linked market is complicated.

Yet, a growing number of investors and experts are embracing financial advisors for a more surprising reason: to help them avoid the most costly error investors can make, which is listening to their emotions.

People tend to buy when markets are on the way up and sell on the way down. That costs the average mutual fund investor nearly 4 percent a year, based on data from research firm Dalbar Inc. If you invested $100,000, losing nearly 4 percent a year would mean you’d end up with about $130,000 instead of $280,000, assuming a 6 percent annual return.

Dalbar found that “psychological factors” account for 45 percent to 55 percent of the persistent gap in investment returns. In short, investors can’t resist running with the herd.

Case in point is the Great Recession. In March 2009, when the markets hit a trough, household net worth had fallen from a high of $64.4 trillion in second-quarter 2007 to $50.4 trillion in first-quarter 2009. Americans’ stock holdings plunged 5.8 percent to $5.2 trillion, and mutual funds holdings slid 4.1 percent to $3.3 trillion, as investors pulled $300 million out of their equity funds at the bottom of the market, according to data from the Investment Company Institute.

“I do think there is a very strong case to be made for a sensible advisor to help you make the right decisions,” said Charles Ellis, founder of consulting firm Greenwich Associates and former chair of the investment committee for Yale University’s endowment, as well as a longtime proponent of buying inexpensive index mutual funds directly.

An advisor may also be able to help you establish a plan you feel comfortable sticking with.

Dalbar President Louis Harvey argues that the seeds of bad buying and selling decisions are planted well before ill-timed transactions. An investment strategy must meet needs as well as risk tolerance, he said.

“We found that when there is a mismatch; you have reactions that lose people money,” Harvey said.

While not a sure-fire solution, a financial advisor can provide a counterpoint and a reminder that staying invested through downturns yields the best returns over time.

“I don’t think there’s any dispute that a lot of people out there could do a good job of investing their own money,” said Michael Branham, president of the Financial Planning Association. But, he added, “there’s so much volatility in the market that it’s easy to get emotionally charged either way.”

The surging stock market is most likely emboldening investors again. Current low bond yields can make it tempting to jump at higher-risk fixed-income investments. It’s tempting to pour in more money, right? But then you’d run the risk of buying high—falling into an emotionally driven move, such as investors who sold during the March 2009 low.

An outside voice of reason can be a major advantage for many investors, said Mark McNabb, clinical professor of finance at the University of Texas at Dallas. “You need someone to act as your filter sometimes,” he said.

Dean Harman, president of Harman Wealth Management, recalled meeting with a client who told him that, on one hand, she didn’t want to lose money. “On the other hand, she was saying, ‘Should I get aggressive so I can make more money?’ ”

Dean reminded her of the long-term goal they had agreed on—funding her retirement to the tune of $56,000 a year.
“I brought her back to what her goal is,” Harman said. “As long as we can deliver the income she needs, and a modest amount of growth, she doesn’t need more than that.”

He said he views an aggressive stance on behalf of this client, who has $1.5 million with Harman Wealth, this way: If it were successful and increased her assets under management to $3 million, her life wouldn’t change that much. But if the posture were to backfire and the portfolio fell to $700,000, “then she’s in real jeopardy of not being able to generate the income she needs to meet her goals,” he said.

“Manage to your goal, not to what the markets are doing,” Harman advised.

Tired of Financial Advisor Fees? Try Going It Alone

Leave a reply

investment-tips My Comments: From the beginning, I’ve told prospective clients and clients alike that it’s OK to go it alone. But if you decide you want help, my hand is in the air as someone who does this for a living and I’m ready to help you. If you are trying to decide, here are some thoughts that will give you some clarity.

Monday, 29 Apr 2013 | By: Shelly K. Schwartz | Special to CNBC.com

As if managing your investment portfolio weren’t challenging enough.

These days, consumers who turn to financial planners for help must also contend with a minefield of compensation models, making it tough to ferret out exactly what financial advisors charge in fees.

A 2012 study by Cerulli Associates and Phoenix Marketing International, in fact, found more than 60 percent of investors either did not know how their advisors got paid or thought that the service they offered was free.

A little tip? It never comes free.

“Investors are very sensitive to the fees they pay directly to their advisors, and all but oblivious to the fees they pay indirectly,” said Barbara Roper, director of investor protection for the Consumer Federation of America.

Time to pull the curtain back on how financial professionals earn their keep—and what their words of wisdom cost you.

The following five questions, aimed squarely at your advisor, can help ensure you get the biggest bang for your buck.

Do You Collect a Commission or Fees?

Financial advisors generally fall into one of three camps: fee-only, fee-based or commission-based.

Independent fee-only investment advisors are paid solely by you, based on the amount of your money they manage.

Fee-based advisors are a more recent industry hybrid. These advisors charge you a percentage of assets being managed, but also collect a third-party commission for selling insurance and investment products.

Commission-based advisors, on the other hand, charge their clients for trades, but most of their compensation comes from the companies that create the funds they sell. In other words, their fees are built into the cost of the products they sell.

Although commission brokers often bill themselves as financial advisors, you can also see them as the sales force for the insurance and investment industry, earning an incentive payment each time you purchase a financial product they recommend.

Each of the three models creates different incentives, which is why it pays to understand them. A fee-only or fee-based advisor might be tempted to put you into investments that are too risky for you in the hopes of quickly building up your assets. A commission-based advisor might sell you a fund that’s not the best choice for you because he or she is earning a higher commission on it.

What Percentage of Assets Under Management Do You Charge, and Do You Also Charge a Flat Fee?

Some advisors charge an hourly rate or flat fee to analyze your assets (including real estate, retirement accounts, personal savings and life insurance policies) and create a comprehensive financial plan based on your goals, tax implications, time horizon and risk tolerance.

To manage your portfolio on an ongoing basis, however, they typically charge an annual percentage of your assets under management.

The industry average is roughly 1 percent, but fees can range from 0.81 percent to 2.08 percent, according to Toronto-based PriceMetrix, which tracks investment industry fees in the U.S. and Canada.

That may not sound like much, but the percentage you pay makes a big difference in your long-term return.

For example, an investor with a $500,000 portfolio earning 7 percent per year would be sitting on $2 million after 20 years. Had she paid an advisor 1 percent of his assets during those years, however, her account value would fall to $1,655,000—a difference of $364,000.

“The single most-important thing you can do to improve the performance of your portfolio is to reduce your costs,” Roper said.

Do You Sell Load Funds?

If you work with a commission-based advisor, you will pay a transaction fee each time you trade a security—which can range from $10 at discount firms to several thousand dollars at larger institutions. That can add up fast if you actively trade.

It’s the hidden fees, however, that hurt the most.

Brokers who work on commission collect a one-time sales fee for selling load funds to their clients. Load funds are simply mutual funds that include a sales charge.

In the case of front-end load funds, investors pay 3 percent to 8 percent of the amount they are investing, some of which gets passed directly to the broker in the form of a commission.

Are There Any 12b-1 Fees?

Commission-based advisors and some fee-based advisors also collect 12b-1 fees from mutual fund companies when clients purchase shares of a fund that they recommend—ongoing payments that continue for as long as their client owns the fund.

That fee, which typically is not disclosed to investors, gets passed along to investors through the fund’s elevated expense ratio.

To offer some perspective, mutual fund expense ratios can range from 0.2 percent for index funds to up to 2 percent for actively managed specialty funds.

Will I Owe Surrender Fees if I Bail?

Some insurance products and annuities sold by commission-based advisors also include a surrender charge, in which the client forfeits 8 percent to 10 percent of the funds they contributed if they cancel their policy before a certain number of months—or years.

When vetting your financial professional, it’s important to ask the right questions. And demand honest answers.

“We interviewed several advisors,” said Michael Teems, a retired engineer in Annapolis, Md., who performed his own due diligence before selecting a financial planner to help convert his nest egg into income.

“One advisor we went to was more of a salesman, with a back room full of people who were there to help me pick investments,” he recalled. “I wasn’t naive enough to think that some of these planners weren’t going to get paid. Everyone who touches the money gets paid.”

Teems asked directly how much their time was going to cost and his queries were met with candor. Ultimately, he and his wife opted for an independent advisor, paying slightly more than 1 percent on assets managed.

“It’s important,” Teems said. “You have to know what you’re getting.”

Bullish Market, Recovering Economy Deserve Respect

Leave a reply

investment choicesMy Thoughts on This: Liz Ann Sonders is a highly respected and recognized thought leader in the world of money managment. While none of these people are right all the time, their track record suggests we should pay attention to what they are saying.

by: Charles Paikert | Tuesday, April 30, 2013

The current investing enviornment is the “Rodney Dangerfield” of bull markets, because even after five years of bullish returns it is still not getting the respect it deserves, according to Liz Ann Sonders, Charles Schwab’s chief investment strategist.

And, there’s plenty of upside ahead for both the stock market and the U.S. economy, Sonders said during a keynote speech Tuesday at the annual spring forum of the Financial Planning Association’s New York chapter.

While cautioning advisors that the market is “overdue for a bit of a pullback,” she remained optimistic for the long-term.

“On forward-earnings, stocks appear under-valued,” Sonders said. Referring to the “emotional cycles” of bull and bear markets ranging from euphoria to despair, she added that “I don’t think we are anywhere near the level of euphoria that indicates a market top.”

While many investors were still hesitant about the equity markets, Sonders, also a senior vice president at Schwab, argued that these concerns were misplaced.

High unemployment numbers in particular are usually misinterpreted by investors, she told advisors.

“People get this analysis wrong all the time,” Sonders said. “Unemployment is a lagging indicator which tells you absolutely nothing about the economy.” In fact, she went on to say, recessions tend to start when unemployment is at a low point, while recoveries usually begin when unemployment is high.

One way to explain the correlation to clients, Sonders told advisors, is to “compare the economy to the stock market: short it when unemployment is low and go long when it’s high.”

However, the U.S. economy “is growing well below its potential,” Sonders said. She placed most of the blame on the country’s high debt levels, arguing that “ever-rising” levels of debt “crowds out the ability of the private sector to grow.”

But, Sonders said, the deficit is shrinking, the risk of inflation is “very low,” and “private sector de-leveraging no longer represents a drag on the economy.”

She also cited the “renaissance” of manufacturing and energy produced in the U.S. and its effectiveness as an overall “jobs multiplier,” particularly in the middle of the country. In fact, Sonders said, “Whenever I’m asked what’s my favorite emerging market, I answer Middle America.”

Investor Optimism Rose in March

Leave a reply

yellow smile in field of blue frownsMy Comments: I have no idea what I’m having for supper tonight, much less how the markets are going to perform over the next several months and years.

However, assuming I haven’t left the building, I expect to eat something, and in like manner, I expect the markets to move up and down with a generally upward trend. To do otherwise would be to fly in the face of what’s happened over the past 70 plus years (mine and the markets).

If you want to see what some clients experienced over the past few years, click on the smiley face.

By Paula Aven Gladych

Investor optimism jumped 31 points in March, but not everyone is upbeat about the markets.

Retirees are not nearly as optimistic as their non-retired counterparts, according to the latest Wells Fargo/Gallup Investor and Retirement Optimism Index.

More than half of investors believe now is a good time to invest in the financial markets, up from 39 percent last quarter. Fifty-four percent of the non-retired say this is a good time to invest while 43 percent of retired investors hold this same view.

Despite a rise in the stock market in the first quarter of the year, the bulk of investors didn’t make any changes to their investments in the stock market. Only 10 percent increased their stock market investments during the first quarter.

“The emerging optimism is encouraging, but the disparity in optimism between the non-retired and retired is notable. The lack of action on the part of investors during the first quarter rally shows that people stayed the course and didn’t have a knee-jerk reaction that caused them to change their investment allocations,” said Laurie Nordquist, director of Wells Fargo Institutional Retirement and Trust.

Half of retired investors surveyed between March 14-24 say low interest rates have done a great deal or quite a lot of harm to savers and investors compared to 25 percent of non-retired investors. Nearly 70 percent of non-retired investors believe the benefits of low interest rates have outweighed the costs, but only 51 percent of retirees agree with them.

Nearly half of all investors believe that today’s low interest rates will make their retirements less comfortable, with 35 percent of retirees and 46 percent of workers fearing low rates will mean they will outlive their money in retirement. One-third of investors think low rates will force them to delay their retirement.

Housing is one area that has been positively affected by the low interest rates. A third of those surveyed said they took advantage of the rates to refinance their home.

Nearly 70 percent of those surveyed are worried they will have to pay higher federal taxes in retirement and will have a more difficult time living comfortably in retirement. Because of this, 39 percent of investors say they are more likely to seek after-tax investments.

More than 1,000 investors across the country were surveyed for this study.

Tactical Strategies Gain, as Buy and Hold Fades

Leave a reply

There appears to be a significant disconnect between those of us who have advocated a tactical approach to investing money for years from those who learned their trade during the 18 years that ran from 1982 thru 2000.

The study referenced below in the article, as it appeared in the print edition, headlined “45% of advisers surveyed … say they are applying tactical strategies.” Wow! That means that 55% are NOT using tactical strategies, which suggests to me that risk management and the avoidance of dramatic plunges when the market goes to hell is not important to them.

global investingHere at Florida Wealth Advisors, LLC we’ve been using tactical approaches to investing money for our clients for almost ten years now. And until it’s clear we are in another 18 – 20 year run like what happened in 1982 – 2000, we’ll continue to take a tactical approach.

For a better understanding of how this works, click on the image to the left that accompanies this post.

By Jeff Benjamin | InvestmentNews.com

There is nothing quite like a seismic market shift to throw financial advisers off their game.

This has been the case since the 2008-09 financial crisis, according to the latest research from Cerulli Associates Inc., which shows that advisers have been migrating away from buy and hold toward more-active strategies.

Nearly half of Cerulli’s database of more than 10,000 advisers said that they are employing some form of tactical portfolio management.

When the same survey was conducted in 2009, tactical strategies didn’t even register among respondents, according to Cerulli associate director Tyler Cloherty.

“After the financial crisis, there seemed to be a general sense that long-term strategic-allocation strategies didn’t work,” he said. “So in order to position themselves to clients, advisers started indicating that they were navigating away from risky assets and capitalizing on shorter-term opportunities.”

ALL SHAPES AND SIZES
Strategic investing comes in all shapes and sizes, but Cerulli found that 37% of advisers surveyed said that they are using a strategic allocation with a tactical overlay, and another 8% said that they are strictly tactical. In all, 45% of the respondents apply tactical strategies.

This is about where advisers have been in terms of tactical strategies ever since the initial spike, Mr. Cloherty said.

Theodore Feight, owner of Creative Financial Design, exemplifies the transition away from strategic portfolio management.

“I’m absolutely more tactical, and my clients are enjoying it,” he said.

Mr. Feight became a believer during the financial crisis, when he witnessed virtually every asset class fall in stride.

“Adjusting to tactical strategies made me go back and look at some of the stuff I was taught in the past,” he said.

These days, Mr. Feight is comfortable about setting stop orders to limit losses, and seeks out other areas of opportunity.

In the fixed-income arena, for example, he has gone from static allocations to low-yielding indexes to a more aggressive blend of high-yield-bond exchange-traded funds.

The result is a 300-basis-point increase in yield to about 5% for his fixed-income investments, Mr. Feight said.
On the equity side, he also has moved away from broad indexes to take more specific advantage of some of the higher-yielding dividend stocks, such as Altria Group Inc. (MO), Eli Lilly and Co. (LLY) and Reynolds America Inc. (RAI).

“I started doing this in 2009, and I’ve been an outlier until recently,” Mr. Feight said. “I have had a lot of people tell me I’m nuts and that I should just stick with buy and hold.”

Paul Schatz, president of Heritage Capital LLC and member of the National Association of Active Investment Managers, said that he isn’t surprised that more advisers have turned tactical since 2009.

‘ABSOLUTELY CRAZY’
“It is absolutely crazy to not have at least a portion of a portfolio actively managed at all times,” he said.

“Everybody knows that markets drop faster than they rise.”

Mr. Schatz said that he recently has begun hearing institutional managers talk about shifting back toward buy and hold now that the markets have had a strong run.

“People historically have turned to tactical after the horse already left the barn, and now that the stock market is up 125% from the bottom, people are starting to talk about buy and hold again,” he said. “To me, anytime people start talking about buy and hold being the way to go, it’s a good sign that the market is at a peak.”

Mr. Cloherty is less interested in whether advisers are moving in and out of tactical strategies at the wrong time than he is about how qualified most advisers are to execute tactical strategies.

“If you have advisers attempting to be tactical, you will have a mixed bag of performance, because a lot of it is based on their own internal decision making where there might not be a strict framework,” he said. “An asset manager or professional research team might be better suited to apply tactical strategies.”

3 Actions for Worried Investors

Leave a reply

‘Is the stock market a bubble ready to burst? No,’ say BlackRock’s investment strategists in a spring update

question-markMy Comments: All of us are looking for an edge, an insight, a clue to help us make what we hope are smart decisions about our money. These comments from someone clearly ahead of the curve that I live on may be helpful to you. The fact that Blackrock manages over $3.7T (that “T” means trillion!) suggests they know what they are talking about.

Here at Florida Wealth Advisors, we can help you interpret and implement these ideas.

By Joyce Hanson, AdvisorOne | April 15, 2013

The stock market has powered ahead of the nation’s faltering economy so far in 2013 at the same time that the Federal Reserve keeps supporting U.S. Treasuries by keeping interest rates low.

These seemingly contrary events have left investors so uncertain about what will happen next that BlackRock, the world’s largest asset manager, with $3.79 trillion under management as of Dec. 31, stepped forward Friday to offer three actions for worried investors to take.

Russ Koesterich, BlackRock chief investment strategist and iShares chief global strategist“The powerful advance of U.S. stock markets has investors asking: Do the markets have more room to run, or is a correction imminent? First, we think there is almost no chance that the pace seen in the first quarter will continue. But does that mean we’re in the middle of a bubble that will burst? The answer is no,” write Russ Koesterich (left), BlackRock chief investment strategist and iShares chief global strategist, Jeffrey Rosenberg, chief investment strategist for fixed income, and Peter Hayes, head of the municipal bonds group.

As for interest rates, Koesterich, Rosenberg and Hayes predict that rates will drift higher, but slowly and erratically.

“A number of forces are keeping a lid on interest rates, including the low net supply of fixed-income securities (due largely to Fed buying) and a strong demand among investors for yielding assets. The Federal Reserve will not reduce its pace of accommodation any time soon given still-elevated unemployment. However, stronger economic growth could lead the central bank to pull back on the pace of accommodation later this year, they write in “What’s Next in 2013? 3 Investment Actions for 2013.”

The BlackRock strategists recommend three smart ways for investors to achieve income and return this year:

1) Broaden your bond approach. “Investor demand has pushed interest rates to such lows that it presents new risks,” the BlackRock team says. They recommend that investors allocate to flexible core bond alternatives, increase exposure to credit sectors and implement long/short strategies.

Interest rates should gradually drift higher through the end of the year, with the 10-year Treasury yield ending around 2.25%, they predict. And if the Fed begins to slow down quantitative easing, yields on longer-maturity fixed-income assets such as the 10-year and the 30-year would move modestly higher as prices fall.

“In this environment, we advise protecting portfolios from the effects of increasing interest rates,” the team writes. “One way to do this would be to focus on shorter-maturity segments of the market. Additionally, we continue to suggest a focus on credit sectors of the market, including areas such as bank loans and high-yield bonds.”

2) Find new sources of income. Historically low yields within fixed income are driving investors to cast a wider net for income. The BlackRock team recommends solutions that balance income and risk, investments in nontraditional income sources and allocations to municipal bonds for tax-advantaged income.

The team favors munis particularly due to the prevailing higher-tax environment. “Munis have demonstrated lower volatility than many other areas of the fixed-income market and boast yields that, in many cases, rival Treasuries even before tax,” they write. “They can offer a better way to keep more of what you earn.”

3) Grow your wealth in unpredictable markets. “Equities remain attractive and should be the foundation for meaningful long-term growth,” write Koesterich, Rosenberg and Hayes. “However, mitigating volatility is critical.” The BlackRock team recommends allocating to “flexible, unconstrained” strategies, investing in high-quality dividend-paying equities and implementing alternative strategies.

Surprisingly, the BlackRock team was mixed on China’s outlook, saying that while it is on an economic rebound in both manufacturing and exports, “Chinese authorities are tightening credit availability once again, which could dampen growth prospects.”

More broadly in the emerging markets, although they got off to a poor start in 2013, “thanks to cheap valuations as well as higher growth, we still believe they can outperform developed markets for the year,” the BlackRock strategists say.