It's hard not to imagine that the drama we hear about in the news won't affect our investments - but what's important and what's not when you invest in the long term? Mike offers some insight into what he thinks is important, what he takes into account when he puts together portfolios, and maybe just some information you'll find interesting!

Thankful for Local Businesses

By Adams Financial Concepts | January 17, 2018 | 0 Comments

Happy Thanksgiving! I’m getting ready to spend time with loved ones, dig in to a big turkey, and celebrate all the things for which I’m thankful. For what are you thankful this season? One of the things I am thankful for is the fabulous local businesses that make Seattle’s economy thrive. Take, for example, Von Piglet. They’ve been open for 10 years and produce everything from short feature films to corporate productions. Normally when I think movies, I think Hollywood. But Von Piglet recently finished a new holiday movie, Ira Finkelstein’s Christmas. Ira Finkelstein’s Christmas is about a little Jewish boy who is obsessed with Christmas. His dreams are filled with reindeer, sleigh rides, and snow. Determined to get the Christmas of his dreams, Ira swaps places with another 11-year-old on his way to Christmastown, Washington. But Ira gets more than he bargained for when he experiences his first “White Christmas. Doesn’t it sound like a fantastic movie? And it was all shot in state! They shot film at Alki beach in West Seattle, a little bit at Green Lake, and some in Tacoma. Von Piglet isn’t trying to sell Ira Finkelstein’s Christmas this season. They plan to release it next year and are currently in the process of selling it domestically and internationally. For the second time Sue Corcoran, CEO, Director, and Creative Director of Von Piglet, joined me “On The Money.” What a pleasure it was to have her on the air. It was exciting to hear about her goals for the movie. Sue said, “We want to get enough eyeballs to see it, so we can get what we call an ‘Evergreen Product’ – something timeless that everyone will want to buy and watch year after year.” Isn’t it amazing all the fabulous local businesses we have?   For more information on all of these topics, I encourage you to listen to About Money, a weekly podcast and radio show. You can also follow us on Facebook and Twitter for blog updates, podcast news, and more! I want to hear your opinions; please leave a comment below and let me know your thoughts.  

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Technology Transforms Medical Research

By Adams Financial Concepts | January 17, 2018 | 0 Comments

Have you ever gotten a particularly nasty infection? The kind of infection which won’t go away until your doctor prescribes antibiotics? I have. It’s magical what those little pills can do. Yet in 1918 when WWI was ending, there weren’t any magical cures for disease. The Spanish Flu took the lives of an estimated 50 to 100 million people. It often killed within 48 hours of its victim’s first cough, filling their lungs with fluid. The epidemic triggered years of unfruitful research. Scientists in small labs around Europe worked with samples of the Spanish Flu virus. However, it was in Scotland where Alexander Fleming had a break through. In 1928, Fleming took a vacation from his Petri dishes. Leaving the windows to his laboratory open, he came back to find a green mold growing on his samples. We know this mold as penicillin. Turning mold into medicine wasn’t easy. It was a temperamental process with an extremely low yield. The isolation and extraction process was very difficult. It took almost a decade and a half for penicillin to be mass-produced. For the next 50 years, drug discoveries happened in nearly the same trial-and-error method as Fleming’s. Real changes in drug discovery came when James Watson and Francis Crick identified the DNA-helix – the molecule that carries genetic information from one generation to another. When I first heard about the helix, I remember thinking, “So what?” How wrong I was! The helix led to biotechnology and revolutionized the drug industry. With biotechnology, drugs which were once stumbled upon are now engineered.   For more information on all of these topics, I encourage you to listen to About Money, a weekly podcast and radio show. You can also follow us on Facebook and Twitter for blog updates, podcast news, and more! I want to hear your opinions; please leave a comment below and let me know your thoughts.  

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Stories and Bubbles

By Adams Financial Concepts | January 17, 2018 | 0 Comments

When a farmer in Holland planted a tulip bulb, did they know it would be worth 6 acres of land one day? In 1634, when Tulip Mania began, the price of tulips skyrocketed. By 1635, 40 tulip bulbs bought 1000 tons of butter, 3000 fatted sheep, or 2500 full-grown oxen. But in February of 1637, the tulip market disappeared and the bubble burst. Those still riding the tulip train lost their shirts. What happened? Why did the tulip bubble burst? The value of tulips was based on stories and projections rather than hard facts. This created prices which didn’t reflect actual value. When reality caught up with speculators, the bubble burst. We’ve seen several bubbles come and go. During the dot-com era, stock prices were based on ideas. Was the Internet a great idea? Yes. Was it worth the projections? No. When its true value was realized in the market place, stock prices crashed, numerous companies went out of business, and those who had invested lost everything.   For more information on all of these topics, I encourage you to listen to About Money, a weekly podcast and radio show. You can also follow us on Facebook and Twitter for blog updates, podcast news, and more! I want to hear your opinions; please leave a comment below and let me know your thoughts.  

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Smart Investing (Within Every Economic Problem, There’s Potential Wealth)

By Adams Financial Concepts | January 17, 2018 | 0 Comments

Did the Great Recession make you weary of real estate investments? Or, were you among those who benefited from short sales and foreclosures? Nearly all of us were hit by the economic fallout. While this might make us shy away from investing, it’s important to remember every economic problem creates the potential for economic gain. Making smart decisions as we move forward requires a firm grasp on where we’ve been. Many historical factors can help intelligently influence our understanding of current and future markets. Here are a few things to understand about the housing market: Collateralized Mortgage Obligations In 1983, Gordon Taylor and Dexter Senft from Saloman Brothers developed the idea of bundling mortgage payments into $1000 increments which they sold to investors. These bundles became known as Collateralized Mortgage Obligations. How did this create a profit? For example, if a mortgage had a seven percent interest rate, they paid investors six percent. This was good for banks because they could get money from investors to make loans on which the banks would make a margin. They were also able to spin the risk off to the investors. If borrowers defaulted on their loan, it was the investors who mostly lost. This development was also good for homeowners because it created a pool of money from which they could borrow to buy a home. And, it was good for Wall Street because they profited from the fees this process created. Collateralized Debt Obligation Spring forward roughly 20 years. The principle of Collateralized Mortgage Obligation was expanded to more than just home mortgages. This became known as the Collateralized Debt Obligations. Loans (for anything from homes to cars, planes, vacations, and boats) were bundled into bonds called Tranches. Think of Tranches as building blocks, stacked one on top of another. The first money to come in paid off the top block and so on and so forth. Meaning, the bottom Tranches had the most risk. Lenders were able to get Tranches rated by rating agencies which used the historical default rate on mortgages to determine the bond’s worth. To cover the potential default from borrowers, a few additional mortgages were added to the bond beyond the bond’s determined worth. Thus, the bond appeared to be a foolproof investment. Unfortunately, if too many borrowers defaulted, bond holders took a cut. REPO In the 1930s, Congress and the President signed into law the Federal Deposit Insurance Corporation (FDIC). This insured individual accounts up to $100,000 should a bank fail. However, in the 1970s depositors began carrying much higher balances, in the $10 to $100 million range. These large depositors wanted insurance. To insure depositor’s money, banks created REPO (short for repossess). REPO normally consisted of Collateralized Mortgage Obligations and Collateralized Debt Obligations. Adjustable Mortgage Rates Adjustable Mortgage Rates were created out of the big push to sell more and more homes. Teaser rates offered low mortgage rates, such as 0.5, 1.0, and 1.5 percent, for a given period of time. This low rate was then adjusted to a much higher percentage, requiring homeowners to pay significantly increased sums. During this same time, No Income No Job No Asset Loans (NINJA Loans) were introduced. Borrowers needed no qualifications to buy a home. Lenders saw NINJA Loans as a win-win. If the borrower defaulted with an annual property value increase of 14 or 15 percent, they could sell the home and still turn a profit. Artificial Drops Part of the initial dip in the housing market was artificial. For example: Four homes are sold in one year, two for $500,000 and two for $100,000. The average home price would be $300,000. One year later, the people who bought their home $100,000 sold for $200,000 and the people who bought for $500,000 sold for $1 million. The profit would be a factor of two. But, suppose the new buyers for the $500,000 home (now priced at the inflated $1 million) didn’t get financed and the sale didn’t go through. It would appear home prices fell by 50 percent. In reality, they’d increased by 100 percent. This example is grossly exaggerated, but done so to illustrate what was happening – high-end homes were not selling. Lower priced homes were. Additionally, understanding what helped some companies succeed can help you identify those same characteristics in potential future investments. Each week on About Money, I interview a successful business owner whose company survived the Great Recession.   For more information on all of these topics, I encourage you to listen to About Money, a weekly podcast and radio show. You can also follow us on Facebook and Twitter for blog updates, podcast news, and more! I want to hear your opinions; please leave a comment below and let me know your thoughts.  

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Slapped by the Invisible Hand

By Adams Financial Concepts | January 17, 2018 | 0 Comments

Gary Gorton’s Slapped by the Invisible Hand: The Panic of 2007 is a unique and unprecedented look at the recent economic meltdown. The book opens with a self-disclosure revealing his access to data inaccessible to other academics: “Starting in 1996, I also consulted for AIG Financial Products, where I worked on structured credit, credit derivatives, and commodity futures.” Originally written for a conference of the Federal Reserve, Gorton puts the financial crisis into a relatively simple framework of banking panic and analyzes both the effects and causes. He explains how the securitized-banking system, a nexus of financial markets and instruments unknown to most people, stand at the heart of the financial crisis. Despite the Panic of 2007 ahs few difference from the Panics of 1907 and 1893. Gorton shows that in 2007, “Most people had never heard of the markets that were involved, didn’t know how they worked, or what their purposes were. Terms like subprime mortgage, asset-backed commercial paper conduit, structured investment vehicle, credit derivative, securitization, or repo market were meaningless.” While we continue to explore the recession, Gorton’s book will prove to be a helpful tool.   For more information on all of these topics, I encourage you to listen to About Money, a weekly podcast and radio show. You can also follow us on Facebook and Twitter for blog updates, podcast news, and more! I want to hear your opinions; please leave a comment below and let me know your thoughts.  

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Sixteen Tons

By Adams Financial Concepts | January 17, 2018 | 0 Comments

You load sixteen tons, what do you get Another day older and deeper in debt O’ Saint Peter don’t you call me yet I owe my soul to the company store – Sixteen Tons, by Ford Tennessee Ernie I remember when Tennessee Ernie Ford sang Sixteen Tons. It described working conditions 100 years ago and the control a company had over its employees. Men worked for the same company their entire life. The company provided housing. People bought everything from groceries to clothes on credit at the company store. On payday, the company took what it was owed straight from their paycheck. I imagine this kind of life was a lot less stressful. You didn’t worry as much about losing your job or your home. You knew you always had a place where you could get food. Your life had no uncertainty. A clear path was laid out for you. By the 1950’s when this song came out, this lifestyle was disappearing. People were becoming more mobile. They were buying their own homes and going to college. Supermarkets opened and purchases were made with cash rather than a line of company credit. Even one generation ago, men kept the same job for an average of 13 years. Now, the average tenure with a company is just eight. The Occupy Wall Street movement, with its “99% verses 1%” slogan, brought the nations wealth inequality to the forefront of people’s attention. The wealthier have gotten wealthier, while the 99 percent have essentially kept the same income. What it doesn’t illustrate is the standard of living seems to have improved for everyone. In 1960, the poverty rate was 22 percent. By 2000, it dropped to 11 percent. The standard of living since the 1960’s has drastically improved, even with the effects of the Great Recession. Take the TV for example. I remember when we didn’t have remotes. Many TVs were black and white. My parents spent an enormous sum for a large color TV. Today, you could spend that same amount for a screen two or three times the size, with better definition. The standard of living’s improvement has run parallel with the increase in workplace stress. In 2008, studies show a large majority of people worried about losing their job. But, what do these changes mean for investors? It means investors need to choose companies with the ability to adapt, gain productivity, and reduce costs. It means investing in companies which can save other companies or the government money.  

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Relevant Jobs in a Technology-Driven Market

By Adams Financial Concepts | January 17, 2018 | 0 Comments

How relevant are you? In today’s market, technology and productivity are turning routine jobs into machine automated ones. When I graduated from high school, you could always work in a factory or as a ditch digger if you didn’t go to college. Now, many jobs with a reproducible input-output are being replaced by computers. You might expect only manual labor jobs to be eliminated by technology, but every industry faces the same push for productivity. For example, lawyers face the same “relevancy” test. In 1978, a case study examined six million documents. It required an army of lawyers and paralegals, which cost more than $2.2 million. In January of 2011, Blackstone Discovery of Palo Alto, Calif., helped analyze 1.5 million documents for less than $100,000. That’s a lot of jobs replaced by computers. What does this mean for job seekers? It means education will continue to be more and more vital in the job market. You’ll need more to earn a living than just the sweat off your back. Relevant technical skills will be a top priority for recruiters. In his recently released book, That Used To Be Us, Thomas L. Friedman said job seekers will need three qualities: Think Like an Immigrant – Work like the world doesn’t owe you anything. Think Like an Artisan – Look outside the box for new ways to accomplish tasks. Think Like a Waitress – Always go above and beyond your job description.   For more information on all of these topics, I encourage you to listen to About Money, a weekly podcast and radio show. You can also follow us on Facebook and Twitter for blog updates, podcast news, and more! I want to hear your opinions; please leave a comment below and let me know your thoughts.  

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Questions For Your Financial Advisor

By Adams Financial Concepts | January 17, 2018 | 0 Comments

Over the next few months, many investors will sit down with their financial advisor to look over their portfolio. Before the meeting, ask yourself what kind of investor you are. Do you simply want lower risk and higher returns that will beat the rate of inflation? Or do you want to succeed? Do you want to outperform the market? I believe my clients want to win. They want their wealth to grow significantly. If this sounds like you, I encourage you to ask your Financial Advisor the big questions. For me, they are the following: Look At The Real Dollar Terms The first question you have to ask is, how is your portfolio performing in real dollars? Is your account growing or losing money? Request A Performance Report Compared To The Market To really win, you need to outperform the market. Sometimes financial advisors only compare your earnings to the rate of inflation. Don’t stand for this. Make sure they show you how your account has done compared to the Standard and Poor’s 500 (S&P 500) for a stock account or the appropriate bond index if it is a bond account. Ask How Your Portfolio Is Picked Every portfolio takes a hit from time to time. My clients have seen dips. This is to be expected. However, it’s important to position yourself for the upswing. Your financial advisor should have an understanding of what will happen over a 5 – 10 year period. Ask your advisor how he picks your portfolio. Some advisors may say, “The firm makes recommendations and I take the firm’s recommendations.” Others might say, “The firm makes recommendations. I sort through their recommendations and pick the best of them.” If that’s the case and they’re successful, they should be able to provide you with a clear longer-term performance report. As you evaluate your financial advisor’s responses to these questions, keep in mind what you first asked yourself. Do you simply want lower risk and higher returns that will beat the rate of inflation? Or do you want to “win”? Do you want to outperform the market?   For more information on all of these topics, I encourage you to listen to About Money, a weekly podcast and radio show. You can also follow us on Facebook and Twitter for blog updates, podcast news, and more! I want to hear your opinions; please leave a comment below and let me know your thoughts.  

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Pigs at the Trough

By Adams Financial Concepts | January 17, 2018 | 0 Comments

The Department of Labor has published new 401(k) plan rules and regulations requiring full transparency of fees. Though plan sponsors and participants have not previously been sent itemized bills, the Department of Labor lists 17 fees they have been incurring. These fees include marketing, legal services, record keeping, investments and more. Under the new rules, indirect fees must also be disclosed. For example, when a company sends an employee to a conferences run by a 401(k) vendor, the vendor passes this cost off to their clients through fees. With the new transparency, “People will find there were a lot of pigs at the trough,” said Jeff Acheson, a partner at Schneider Downs Wealth Management in Columbus, Ohio. How do these fees affect your retirement? With so many pigs at the trough, your 401(k) plan can be sucked dry. Estimations show hidden fees of just one percent can reduce retirement by roughly 15 percent over 30 years. The General Accounting Office says the average 401(k) balance of those retiring last year was just $144-thousand. Meaning, the average monthly income a retiree receives from their plan is at the upper end of $400-$500. The new rules and regulations also hold business owners and plan sponsors criminally liable for their 401(k) plan compliance. Unfortunately for business owners and plan sponsors, the Department of Labor says 77 percent of plans are out of compliance.   For more information on all of these topics, I encourage you to listen to About Money, a weekly podcast and radio show. You can also follow us on Facebook and Twitter for blog updates, podcast news, and more! I want to hear your opinions; please leave a comment below and let me know your thoughts.  

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Negativity Sells

By Adams Financial Concepts | January 17, 2018 | 0 Comments

A few years ago in 2010 one newsletter written by Robert Prechter predicted the DOW would plummet to 1,000. It would take a real disaster for Prechter’s prediction to occur, but that wasn’t the point. The point was, in our opinion, to sell newsletters not give financial advice. Mark Hulburt, a man known for tracking newsletters, suggests newsletters are often incorrect. Proven records have shown that when the newsletters are optimistic the market goes down and vise versa. Negativity sells. When considering television and magazines, the main priority is selling advertising. Additionally, an author’s objective is to sell their book. The focus is rarely the client. On the other hand, financial advisers and analysts usually have clients as their main focus. Here is a game analogy: Slot machines: whether you are a beginner or an expert, the percentage of winning remains the same. Chess: experts will always win over a novice player. Poker: probability. Beyes Theorem on probability states that there are needed adjustments once one obtains more data, statistics and/or experience.   For more information on all of these topics, I encourage you to listen to About Money, a weekly podcast and radio show. You can also follow us on Facebook and Twitter for blog updates, podcast news, and more! I want to hear your opinions; please leave a comment below and let me know your thoughts.  

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