Holiday greeting


Happy holidays and best wishes for a healthy, prosperous 2013

to you and yours! 


Your business and referrals have helped us to grow over the years and

we are grateful for your support.

Sincerely, DWM

Seeing a Future with Optimism

xprizeFrom The Charleston Mercury, December 13, 2012

It’s easy to get caught up in pessimism. It’s in the media everyday: slowing economic growth worldwide, high unemployment here and abroad, Eurozone problems, and terrorist attacks. And, then, what about world issues such as feeding the hungry, providing clean water and wiping out malaria? Can our planet support everyone?

Peter Diamandis thinks so and also that it can provide everyone a life of opportunity. In fact, in his bestseller, Abundance: the Future is Better than You Think, co-written with Steven Kotler, Mr. Diamandis provides great analysis, solutions and hope for the future. His work is based on the confluence of four major trends: exponential technology advances, do-it-yourself (DIY) innovators, techno-philanthropy, and the needs of the poorest billion of our planet.

Technology is changing exponentially. A Maasai tribesman in Africa equipped with a cellphone has better communication than President Reagan did 25 years ago. With an internet-connected smartphone, he has access to more public information than President Clinton did 15 years ago. 

DIY innovators are everywhere. We see all the apps for cellphones. DIY biologists are now beginning to solve world problems. The winner of the 2008 IGEM competition built a vaccine against the virus that causes the most common forms of ulcers. Robots, like we saw in the movie “Robot and Frank”, may have a big impact on reducing the costs of elderly care.

Techno-philanthropy continues to grow. Bill Gates is crusading against malaria. Mark Zuckerberg is working to reinvent education. The founders of eBay are focused on bringing electricity to the developing world. And there are lots of others. 

There are 7 billion people in the world today. One billion currently lack access to safe drinking water and 2.6 billion lack access to proper sanitation. Diamandis contends that a world in which everyone is provided a life of opportunity can lead to increased GDP, standards of living and happiness worldwide.  Solving universal problems helps everyone.

Don’t expect governments to provide solutions. The private sector will do most of the heavy lifting. Mr. Diamandis believes a key is the X Prize competition which he created. Right now, Qualcomm has funded an X Prize of $10 million for the first team able to develop a “tricorder.” This would be a device straight out of Star Trek; a wireless device in the palm of your hand that monitors and diagnoses your health conditions. X Prize competitions will grow in the future. The concept is based upon four principles:  high visibility, breaking bottlenecks, wide range of competitors, varied approaches leading to new industries.

 Let’s put things in perspective. Our world has come a long way in the last few centuries: we’re living longer, wealthier, safer lives. And, the future is looking up.

Les Detterbeck is one of a small number of investment professionals in the country who has attained CPA, CFP®, and CFA designations. His firm, DWM Financial Group, Inc., a fee-only Registered Investment Adviser, has offices in Charleston/Mt.Pleasant and Chicago. Les may be contacted at (843)-577-2463 or 

Focus on Asset Allocation-Not Uncertainties

fee-only financial plannersAre you nervous about the fiscal cliff (or speed hump)? How about the U.S.budget and debt? Europe? Sure, all of these uncertainties are concerns. But none of us can control those outcomes. What we can control is our asset allocation. That’s where we need to focus.

 Ask yourself these two questions:

1) How will your portfolio withstand the next bear market?

2) Will the returns in your portfolio likely outpace inflation?

Let’s start by reviewing what happened in the last two bear markets; the financial crisis starting in September of 2008 and the Europe/US Debt ceiling and downgrade concerns of 2011. For simplicity, we will use the S&P500 index plus dividends as a proxy for equity returns, the aggregate bond index (“AGG”) as a proxy for the fixed income returns and a basket of liquid alternative securities* as a proxy for liquid alternatives (“liquid alts”).


  Last Bear Markets:

Asset Classes



Liquid Alts*









5yr annual return through 9/30/12





What this demonstrates is that in bear markets, fixed and liquid alternatives perform much differently than stocks. AGG, which is comprised of 40% treasuries and 30% agencies, actually performed inversely to equities. That is, when everyone is concerned about stocks, there is a rush to safety. U.S.treasuries may not be what they always were, but they continue to be the safest port in the storm. Liquid alternatives, as DWM clients know, are designed to participate in up markets and protect in down markets. Hence, they are uncorrelated to the stock market.

Let’s average the two most recent bear markets and see how three hypothetical portfolios did. Portfolio #1- 80% equity/ 20% fixed, Portfolio #2- 50% equities/ 50% fixed, and Portfolio #3- 25% equities/ 50% fixed/ 25% liquid alternatives. You can do the math. Portfolio 1 would have been down about 19%, portfolio two down 10%, and portfolio 3 down about 4-5%. If you can’t withstand a 4-5% hit to your portfolio, you should highly consider reducing the equity exposure to 15% or even less.

Of course, we haven’t discussed diversification of the portfolios within the three asset classes. Our typical DWM client has their equity exposure currently allocated to ten different equity subclasses, their fixed income exposure to eight fixed subclasses and their liquid alternative exposure to ten different yet complementary strategies.

Now the second question:  If you are sitting in 50% to 80% equities, you could be looking at a loss on your portfolio during a bear market of perhaps 10-20%. If the next five years are similar to the last five years, your upside potential is small. Furthermore, if you have a portfolio of 50% equity and 50% cash, you may have the worst of all worlds: A portfolio that likely will be down 10-15% in the next bear market with only a small upside. Sure, if you are nervous about the future, you can keep all of your money in cash. But, that is a losing long-term strategy, since inflation will continue to erode your purchasing power.

No one can predict the future. We believe your portfolio should be allocated based upon your risk tolerance and goals and should be designed to help you protect your assets and grow them. We suggest you not focus on the many uncertainties that exist, but rather focus on getting your portfolio in a position to withstand the next bear market while at the same time providing expected returns in excess of inflation. I’m pleased to say our DWM clients have already done that.

‘*The basket of liquid alternatives used for this writing was an equal weighting of the following public securities that are generally considered to be in the “liquid alternative” strategy:  ARBFX, MFLDX, RNDLX, AMJ, PAUDX, FLARX, SCNAX, RWO, GLD, GCC.  This basket may or may not match DWM’s specific Liquid Alternatives Model and is for discussion purposes only. One cannot directly invest into an index. Past performance is no guarantee of future performance. 

“Fiscal Cliff” or “Speed Hump”?

fee-only financial planningAre you sick of this “fiscal cliff’ metaphor? I am. Sure, Washington needs to deal with taxes and spending. But, to constantly hammer into peoples’ minds the metaphor of us going over the cliff is absurd.

Of course, the media loves to catch our attention with fear. Our brains, particularly our amygdala, are hard-wired to be aware of potential dangers. The amygdala is one of our first filters for incoming information; always looking for problems. The media knows this and continues to saturate us with a disproportionate amount of bad news.

Certainly, Washington needs to deal with the scheduled tax increases and spending cuts. Without an agreement, there could be a $640 billion impact on the economy; $500 billion of increased taxes and $140 billion in spending cuts. That could reduce our GDP by 4%-that’s not good. Without an agreement, our annual deficit of $1 trillion or more would be cut in ½. That’s good.

The politicians actually agree on more than half of the $640 billion in question. Republicans and Democrats alike want to continue the low tax rates for the middle class, minimize the impact of the AMT, and not cut defense spending. So, $375 billon of agreement already. In addition, spending cuts and tax hikes, if they happened, would be phased in over time. Lastly, agreements and legislation can occur in December or early 2013 and be applied retroactively. These ticking clocks that show the number of days, hours, minutes and seconds to December 31 when we go over the fiscal cliff drive me crazy.

The bigger picture is how we are going to handle our long-term budgets. The last four years have been tough. $5 trillion has been added to our national debt. Our debt is currently 70% of GDP. Without change, it will likely exceed 100% in the next decade and could be twice that in the next 20-25 years. Those are real problems. With all the talk of non-discretionary spending cuts and taxes on the wealthy, the real focus needs to be on the entitlements; particularly social security, Medicare, Medicaid and the like. Without change, we are on a slippery fiscal slope.

At the same time, there’s lot of good news. Consumer sentiment and net worth are up, debt is down and housing has seemingly hit bottom and is more affordable than ever. Business sentiment is up; businesses are making money, have cash and can borrow at the lowest rates since the 60s.

In my opinion, we are not approaching a fiscal cliff; but, rather, another fiscal speed hump. Hopefully it causes Congress and the White House to slow down and deal with important issues rather than kicking the can down the road. If Washington could just help lift us all out of the uncertainty of both short-term and long-term financial issues, things could really be looking up.