The Biggest Opportunity Families Miss

BT introduces BLF
(BLF)
Thanks BT. Good Morning everyone!

I’m just going to jump into our topic – mistakes a lot of families make this time of year. And really what I’m referring to is this time of year a lot of families getting together to celebrate the holidays, Christmas or Hanukah whatever holiday you and your family celebrate. All too often I see a missed opportunity and what I’m talking about is I’ll call it family estate planning. Now you can take it so far as to review and discuss with your family here’s our net worth, here’s what we have and who gets what. I would encourage you to do that – if your family dynamics would allow that, the more your family knows ahead of time the better off. Simply because if someone in the family has an issue or concern with your estate distribution, plan, or strategy better for them to voice that now instead of potentially causing at the least arguments and disagreements. And at worse litigation, after it’s time to settle the estate.

The other thing I want to talk about and get you thinking about is to share with your family what it is you would like done or not done, should you become ill or incapacitated, if you want to stay on life support, any funeral arrangements, any special wishes or requests. And you don’t have to sit down in some kind of fancy or formal setting, you can just kind of make light comments about it for example- my wife and I have made light on several occasions we wish to be cremated and buried or scattered at sea. We have some specific wishes along that line and we know and the boys know what we want to have done. Now is a wonderful time if you have your family together.

The other thing we see a lot of folks do is leave behind a letter of instruction. A letter of instruction is in writing answering questions the family might have as far as any final arrangements and personal property distributions, we see not nearly enough people taking the time to write these thoughts down.

One other aspect and the best gift you can give your family is make all your final expense decisions and/or final arrangements/funeral celebration of life ceremony, put it in writing and the last place you want to keep it is with your will. Usually the wills etc are read after the funeral/celebration of life ceremony. You want to make sure to communicate to the family members some guidance of what you like and don’t like.

In my own family, Annette lost her parents within a four month span. Here folks had told her they had taken care of everything. Well their definition that everything was taken care of is that they had some burial plots in a cemetery I think up north. Of course that was nowhere near adequate. Annette was confused and had concerns at the time. What kind of casket? Pine box or platinum gold plated or something in between. None of those decisions had been made. There was no guidance given her or the rest of the family. The family made the decisions but had to wonder if this is what mom and dad wanted. Food for thought for when you have family members around during the holidays you may want to discuss these issues.

This way if anyone has any questions, answers or concerns; get them on the table now to work through them now to avoid fights, arguments or heaven forbid litigation later on.

Tony BT anything I’m leaving out?
(Tony)
I think what you’re saying is spot on the only thing I would suggest to folks is those of you who would want to provide those wishes and you don’t have those documents in place already, then take the time to make all the arrangements and have your estate planning docs prepared.

Brian you might want to talk about what those basic documents are, that might be helpful

(BLF)
Yes we can talk about those. We sometimes take it for granted but everyone, regardless of the size of your estate, should have at a minimum:
A will,
A living will,
Durable power of attorney (permission to act on your behalf if you cannot communicate)
Health Care power of attorney

An example of needing a Power of Attorney would be as tax time is approaching if you’re not able to sign your tax return who will have the power to do that?

Healthcare power of attorney what one person has say in your health care decisions if you are unable to communicate to your doctors.

Living will is a kinda misnomer that’s the disconnect me from life support if I’m going to be in a vegetative state indefinitely. That’s the document Terri Schiavo’s family did not have in place.

And then if your assets are such that probate avoidance makes sense then a living trust. And that really is the primary benefit of a living trust is to by bass the time and expense of probate.

I want to cover a couple of other issues and then we will open it up for questions.

I mentioned in the email reminder we sent out that we are making some investment changes and wanted to let you know what those changes were in general terms. About a month or so ago we took a little bit of in some positions, didn’t sell everything, but just took some profit. We were happy to leave the money parked in a money market account up until now. The market’s been sideways which is why we haven’t been in a big hurry to reinvest it. But later this week we intend to reinvest surplus cash if you will, in the areas that look most appealing right now, would be emerging market Latin America. Don’t confuse that with just the broad emerging market arena, but emerging market Latin America, emerging market Asia and what is commonly referred to as the Q’s or which is the NASDQ Index. So we will be adding money to those areas. It’s nothing more than us following our supply and demand investment system. Demand is not just strong but increasing in strength so we hope to take advantage of those areas before the end of the year. That is a quick update in those areas.

BT will explain to you how to ask your questions in just a minute, but before I do that as a reminder if you have friends that would be interested in listening in on these calls, please feel free to share the information with them. If for some reason you are listening in today and you are not receiving the updates or you are not receiving the newsletter, I would encourage you to go ahead and signup so you don’t have to rely on the information being forwarded to you. The easiest way to do this is to go to the website which is www.brianfricke.com Look for a button on the homepage where you can sign up for the newsletter. That will also get you on the list to receive these updates as well.

With that BT, why don’t you let everyone know how they can ask their question.
(BT)
Okay everyone this is Brian Terry. If you would, this is gonna’ be a party line, so we’re gonna’ un-mute the phones and just give us a holler, raise your hand verbally and let us know you have a question. And,umm, I’m gonna’ go ahead and un-mute the phones now. Is there a question please?

(caller1)
Hey Brian, I’m not sure how you want us to interrupt.

(BT)
Nope, this is perfect

(caller1)
I received a letter from Fidelity, talking about switching over from, ummm, some of the funds into a choice of funds. Question number one, have you received a similar letter? Ah, it has to do with the …

(BT)
Annuity

(caller1)
Annuities, And number two, are you gonna’ give us any recommendations?

(BT)
Absolutely, we’ll take care of all of that for you

(caller1)
I shall sleep easy tonight , as I usually do

(Brian)
Thanks, Paul.

(caller1)
Thank you

(BT)
Sure, absolutely, any other questions right at this point?

(caller2)
Brian, ah Rod Binge with everything that’s going on in the government right now and the ramifications. Where do you see, aside from the emerging markets that you addressed, where do you see opportunities going forward.

(Brian)
Well currently just in the broad view, the opportunities seem to favor everything not US. Investments that would do better in a weak or a falling dollar environment, foreign currencies, foreign stock, investments that do best in a inflationary environment, commodities if you will.

(BT)
I’d also add the ahhh, some of the large cap US areas have been doing very well just your flight to quality. Ahhh, you tend to think money moves towards bigger companies in times of stress or distress, in the economy. So we’ve kinda’ seen strength in the large cap US market as well. But still more in the international areas.

(Brian)
And I’m gonna’ caution everyone. In fact this was the cover story of our January newsletter which we just sent to the printer. And that cover story talks about and cautions you be aware of or leary of, this time of year the media (13:58) always comes out with, you know, what’s gonna’ happen in 2010, where to put your money now, how to take money and make money and all that kind of stuff. And in the newsletter, I don’t have, I can’t remember the details, but we look back over the last year or two. And that article has examples of how the media, and not just the media, also some of these so-called experts – money managers and economists. It’s got specific quotes and references of commentary they were making last year, 2009 and 2008, and just how totally wrong they were. And the point behind that is everybody, quite frankly, has an opinion but if somebody was right all the time, everybody would be lined up outside their door. Uhmm, but more importantly, especially from the media, rarely is that information dead-on? Take that all day long as to why and how come. But just be careful when you are listening to and looking at media reports often times things aren’t what they seem.

(BT)
Absolutely, just to add, I’ve tracked some recommendations from a writer from the Orlando Sentinel since 2005 just to kinda’ keep it on the sidelines. In March of 2005, and I can’t remember the gentleman’s name, but he wrote an article about the top 10 stocks and why you should be in them and so forth. And most of those are negative, 7 out of 10 are negative today so… couple years down the road. The reason I mention that is most folks think “buy and hold”. ” I am gonna’ buy it and I’m gonna’ hold it and forget about it”. Folks that tend to – air quotes- “do it on their own”. So many people, many investors have it in their head they have to buy and hold them forever. Now, I’m looking at this dashboard, and there’s, one of the stocks is down 92% from that date. One’s down 67% from that date. I think the best one’s up 20%. But that doesn’t negate the 92 and the 67 percent down or the 30 percent. So three of these are positive and marginally, most of the money would be gone from the portfolio if this is what you did to yourself 4 years ago. So definitely further evidence that taking a look at the paper and seeing what some journalist is writing about stocks isn’t necessarily the best advice.

(Brian)
Alright, any other questions?

(caller3)
Hey Brian, this is Peter Heibrun. I tuned in late so at the end, I don’t want to slow everybody down. So if you could just spend 2 minutes and just, I’m just curious, what you were just telling us kinda where you were going in the investments.

(Brian)
Sure, Sure.

(Caller3)
But when you’re done.

(Brian)
Alright, so we’ll finish up with Peter’s question. Does anybody else have a question?

(Caller4)
Brian, this is Tony again, uhmm, we have a tendency to want to focus on the equity side of the markets, can you just, just a’ well either Brian Terri or Fricke, uhmm you guys want to comment on the fixed income side and expectations over the near and further terms as far as we invest on the fixed income side?

(BT)
Sure, we can do that, this is Brian Terri. Ah, so from a perspective of what do we look at when we look at the fixed income market, uhmmm, generally speaking, first off, investment grade quality bonds. We look for individual bonds put together in an individual bond portfolio that takes into account current interest rates, current markets. We actually use an investment banker as an adviser to us to manage that portfolio. So we have a long standing relationship with an investment bank that helps on the fixed income side to identify problem issues to identify problem areas, opportunities. So right now we are looking into opportunities in the municipal markets, taxable municipal markets, agency markets. Those are the areas that have been the most safely attractive. The corporate markets have been somewhat interesting, here and there, in fact we’ve seen a few opportunities to take profit in some of the corporate bonds we’ve had in the portfolio. Unfortunately, in the last year and a half, we’ve also seen some losses or protecting-wealth opportunities in the corporate market as well. But near and mid-term, we are looking at potentially rates climbing, and so we’ve positioned the portfolio with relatively short maturities or shorter, ah, short calls, so bonds from time to time will get called. So we find issues that do get called so that we can take advantage of reinvestment opportunities down the road. So that’s kind of a 35,000 foot view. Brian, did you have anything else to add to that?

(Brian)
And just again, in a big picture sort of perspective, we tend to keep the overall bond allocation maturities on the short end of a maturity range noting that new issue bonds sometimes carry a 25 to 30 year maturities. So we’re way way shorter than that. Part of the reason for that is when you look at the volatility, you know a bond is gonna’ fluctuate in value, and part of that value fluctuation is based on interest rates, but it’s also based on how long before the bond is matured or reaches a call date. So when you’re looking at long term bonds that are a long way away from maturity. They tend to be as volatile as stocks. So our philosophy is if you’re going to expose yourself the same volatility as stocks, you might as well just have stock exposure and benefit from the profit opportunity that stocks have that does not exist with bonds. Just another reason we try to keep the maturities more on the short end of things. Any other questions?

Well, I’m gonna’ circle back and answer Peter’s question. Again, just a big picture, we’ve had some surplus money sitting on the sidelines for a month or so from taking profits from other positions. The market’s been sideways since then. Our supply and demand investing system is showing an increasing strength in 3 areas that we intend to deploy money into, this week – next week at the latest. Those would be the areas, ah, emerging markets – Latin America. Emerging Markets Asia, and the cubes (???), here domestically. So those are the areas we look to put money to work. Alright, one last chance for any other questions.

(caller5)
I had one other. Anything new on that new Iceland stuff?

(BT)
Yep, absolutely, we’re actually in the process… we’re gonna’ be probably the first of the year, we’ve identified another bond opportunity in ahhh, not necessarily in Iceland, but in Cronos. Right now, the central bank has prohibited any currency trading outside of the Cronos for investment purposes. So there is no possible way to get that back to dollars at this point. So we’ve identified … Our investment banker actually has gotten the opportunity to find comparable investment grade paper that’s still denominating in Cronos. We’ll be getting that invested and we’ve been working with Fidelity for a couple of months to get that done. And it should be done in January now.

(caller5)
… seem like a 2 or 3 year maturity or longer, do you have an idea?

(BT)
Ah, no we are looking at a treasury. So the maturity quite frankly isn’t going to matter. As soon as the central bank lets us get out of it, we’re going to start looking at opportunities to exit from the position and get back to dollars. So I’m trying to find something that’s the most liquid possible to get us back to dollars eventually. It’ll be a…

(Caller5)
That’s why I was asking.

(BT)
Yeah, yeah.

(Caller5)
Thank you

(BT)
Oh, absolutely.

(Brian)
Alright, next question. Questions going once, twice, three times. Well I want to thank everyone for joining us on this week’s call. We will be back with a call next week. And between now and then, for those of you that celebrate Christmas, “Merry Christmas!”. For those that have been celebrating Hanukkah, hopefully you’ve had a wonderful and happy Hanukkah! We’ll see everybody next week.

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