Vintage Yacht Dorade Wins Transpac Again – 77 Years Later

Dorade by HawaiiLast week we talked about change. Today, the focus is on enduring values. The inspiration for today’s blog is Dorade, a 52-foot wooden sailboat, built in 1930. With its varnished mahogany trim and polished bronze hardware, many thought it was a piece of antique furniture, incapable of even making the 2,225 nautical mile course from Los Angeles to Honolulu. Yet, last week, the Dorade won again, as it had in 1936.

In the process, the Dorade beat the most modern carbon-fiber ocean racers in its division. This included Roy Disney’s modern 70-footer, Pyewacket, which had an adjusted time nine hours more than the Dorade. I’m not a sailor, but you don’t have to be a sailor to appreciate enduring values.

Dorade’s owners, Matt and Pam Brooks, bought Dorade in 2010 with the goal of racing the yacht in all the great ocean races the boat won in the 1930s and ‘40s. Rick Spilman in the “Old Salt Blog” describes it this way, “Compared to modern boats, Dorade appears to be a beautiful anachronism. With a yawl rig, graceful overhangs, a narrow beam and built of wood, she seems an artifact of a more graceful time.”

In preparation for this year’s race, Mr. Brooks and his crew spent last winter in California testing sails, navigation equipment and sailing techniques. He had new masts designed and built, in spruce, to handle the additional stress of the new laminated, aramid fiber sails. Dorade’s hull was reworked. Some of the best sailors in the world were brought in to round out the seven-person crew, including an America’s Cup navigator and an around-the-world race skipper. According to the NYT, the crew learned during the 12 day race that the “genius of the boat’s design and how the sailors in the 1930s skillfully sailed her never go out of style.” In addition, navigator Matt Wachowicz added to the historical realism by using celestial navigation all the way to Hawaii. Using modern technology, Mr. Brooks was able to confirm that Mr. Wachowicz had kept them within one mile of the GPS course.

I couldn’t help but think that the Dorade’s 2,225 mile successful sail across the Pacific was similar to successful life-long financial plans. There are enduring values that can’t be overlooked:

    • Have a comprehensive  plan
    • Execute it faithfully
    • Spend within your means
    • Save regularly
    • Allocate and diversify your assets thoroughly
    • Think long-term
    • Consider using the best possible crew and navigator to keep you on course and help you make adjustments as needed

All of us at DWM wish you smooth sailing! If you aren’t sure if your current financial plan includes enduring values for decades to come, give us a call; we can help. We won’t use celestial bodies for navigation, but we are an all-star crew.

Mind-blowing Technologies Expected in 20 Years

AI handKeeping up with all the change in the world is not easy. Futurist George Dvorsky wrote a very interesting article this month in which he outlined 10 futuristic technologies that he believes will appear by the 2030s. These include artificial intelligent personal assistants, anti-aging intervention, megascale geoengineering to combat climate change, personal fabricators and industrial scale desalination. They blew my mind. Here’s why:

AI personal assistants. Many of us have used SIRI on our Apple iphone. It responds to specific language cues and can access the internet. According to Mr. Dvorsky, that’s nothing compared to what will be available twenty years from now. Our personal assistants will be available 24/7 and exhibit an uncanny level of general intelligence. They will know everything about us and be our virtual clones. They’ll write emails for us, book appointments, perform menial tasks and even anticipate our needs.

Computers Everywhere. Computers are getting smaller and will be everywhere, but for the most part, completely invisible-absorbed into our surroundings. They will be in our clothes, our fashion accessories and even our contact lenses. And, these devices will have a certain amount of “ambient intelligence” to help them perform autonomously under specific conditions. Mr. Dvorsky believes that in the 2030s, we will be completely surrounded by computers, but unaware of their presence.

Anti-Aging Intervention. There is nothing available today to slow down or reverse the effects of aging. But, there may be in 20 years. Futurists and gerontologists are not sure what form this intervention will take. It may be a genetic tweak. Today, there are studies being conducted to map the genetic constitutions of supercentenarians to isolate the factors that extend their lives. It might involve therapy on our telomeres, which are like plastic tips on shoelaces because they prevent chromosome ends from fraying and sticking to one another. Or, says Mr.Dvorsky, it could be an initiative to replenish our mitochondria, the cell’s power producers. Perhaps I should start thinking about inviting folks to my 120th birthday party. Could be a wild event.

Megascale Geoengineering Project. Historically low levels of sea ice, rampant wildfires, superstorms, and record breaking are hard to ignore. The climate is changing. Already some scientists are working on a geoengineering solution to reverse the effects of rampant carbon emissions. Their solution is cloud whitening- the seeding of marine stratocumulus clouds with a generous supply of tiny sea water particles. Other techniques include artificial trees, enhanced weathering, ocean fertilization and alkalinity enhancement.

Personal Fabricators at Home. Most everyone knows that Jay Leno owns lots of antique cars and motorcycles. But, did you know that he uses 3D printing to produce parts to repair them? With 3D printing, you download specs, or scan a part and produce the finished product at home. 3D printing can be used for day-to-day items and electronics, vaccines, self-assembling robots and more. As more blueprints are available online, 3D printing will likely be quite disruptive to traditional manufacturing.

The Oceans Will Quench the World’s Thirst. Mr. Dvorsky suggests that industrial-scale desalination is expected by the 2030s. Using advancements in solar power, we will be able to build massive concentrated solar power plants that utilize the residual heat to strip ocean water of its salt. Experts predict that growing freshwater deficits could be increasingly covered sometime in the next 10-20 years. These desalination plants could produce most of the safe drinking water by the year 2030 and afterwards.

Yes, change is everywhere. At DWM, we embrace change. We are committed to understanding the new economy, the ever-changing investment options and all the other tools available to give every client better information and better choices to protect and enhance their legacies.

DWM 2Q13 Market Commentary

Brett DetterbeckI lead this quarter’s market commentary with a discussion on fixed income as, contrary to CNBC jabber, there are a lot of investors with a considerable amount of exposure to fixed income, an asset class that historically has been viewed as a safe haven. For many older investors, it has been the asset class that meant a modest return with little risk (at least relative to equities). But that paradigm has shifted with interest rates finally bouncing off historic low levels.

Here’s what you need to know: bond prices and yields move in inverse directions. A bond typically will lose 1% in price for every year of duration that it has left for every percentage point rise in interest rates. Which is what makes this latest quarter so painful for bond investors – rates jumped on Fed Head Bernanke’s talks about possibly winding down the central bank’s easy money bond-buying policy. The 10yr US Treasury note rose from 1.84% at the beginning of the quarter to 2.49% at the end of the quarter. To prove the point above, a fund utilizing 10 year Treasuries like the Vanguard Intermediate Term Treasuries Fund had a negative 2.75% return for the second quarter. Corporate bonds fared even worse, down a staggering 3.3% as represented by the Barclays Investment Grade Corporate Bond Index. 3.3% may not sound much in stock terms but that’s a big move in bond land for one quarter. The Fed is walking a tight rope trying to communicate the right message to the market players while at the same time trying to nurse this economy back to health not only in the short term, but also the long term. A tough job indeed.

So, now to stocks – if all one watched was CNBC, you’d believe that everything is great. That is, domestic stocks (represented by the S&P500) had another positive quarter, up 2.4% and up over 12% year-to-date. But, domestic stocks were frankly the island in the 2q13 storm. A run down of the list of major benchmarks reveals a lot of negatives:

    • MSCI All Cap World Index ex USA:  -3.12%
    • MSCI EAFE Index:  -0.98%
    • MSCI Emerging Markets Index:  -8.08%
    • SPDR Global Real Estate Index:  -5.03%
    • DJ UBS Commodities Index:  -9.45%
    • Barclays Capital US TIPS:  -7.05%
    • JPMorgan Emerging Markets Bond:  -6.03%

To reiterate, there was a lot of correlation amongst markets, with most of it being down. Moreover, many liquid alts traded down albeit not as much as the uglier ones above. So, for most diversified investors with a balanced portfolio designed for the long-term, it was a negative return quarter.

We’ve seen rough quarters before. Indeed the second quarter was a challenging one, but a prudent investor does not fixate on the short-term. Markets like to overshoot and most likely many of these negatives above will turn into positives in the near future. As much as CNBC and other headline news may make you think about plowing everything into large cap domestic stocks, empirical studies prove that that doesn’t work in the long-run. One needs a diversified portfolio made up of multiple asset classes and investment styles. As always, our focus remains long-term. With kudos to the Chicago Blackhawks winning the 2013 Stanley Cup, I bid you adieu with the following hockey analogy: It’s not about where the puck is now, but where it is going to be.

What Will Be Your Legacy?

Family fourth of JulyMoney or family values? Hopefully, both.

A 2012 study by Allianz found that 86% of baby boomers and their parents agreed that family stories and values were more important life legacies than financial assets. This echoed findings in 2005 when a similar study was conducted and 77% felt that memories, stories, life lessons, family traditions and values were 10 times more important than money.

We’re seeing more multi-generational planning in our business these days. Our clients are families and in some cases include three generations; grandparents, parents and children. Multi-generational planning has become an extremely important and growing part of our business.

There are a number of reasons:

  1. People are living longer. The older generations are more actively involved with the younger generations and the younger generations may become caregivers for the older generation for a longer time.
  2. There is more communication in the family. We’re not seeing the traditional patriarchal model as often these days. Males and females of all generations have a voice in family matters and with the internet and social media there’s lots of communication.
  3. Families seem to have more assets than the past. The Great Generation and Silent Generation have made a substantial amount of money and not spent it. Despite the Financial Crisis of 2008 and the current slow economic recovery, America has been a wonderful place to live and make money for decades.
  4. Minimizing estate taxes is no longer the primary objective of family wealth management. Back in 2001, the lifetime exemption for federal estate tax purposes was only $675,000 per person. Today it is $5,250,000. Hence, if planned properly, a couple could transfer $10,500,000 or more to beneficiaries without estate taxes. Furthermore, many states no longer have estate or inheritances taxes or have high thresholds before such taxes start. Hence, taxes still need consideration, but they are not necessarily the focal point of planning.

Today, some families create 100 year family plans. They believe that the assets of the family are the human capital of its individual members. They communicate their family history and culture and pass it down through generations. They discuss shared values and develop family mission statements. They focus on each family member’s individual pursuit of happiness. Some families hold regular meetings and make a major commitment toward financial education. Many share philanthropic initiatives. Alan Alda said it well, “I’ve come to believe that giving feels good, but I think giving strategically feels terrific.”

Of course, successful families also consider their wealth objectives and dealing with strategic issues or risks that may stand in the way. They discuss preparation for major life events such as birth, death, divorce, marriage, illness, sale of a business, etc. Communication of intentions is critical in these areas. Research shows that wealth transfer is best accomplished when heirs are aware, informed and prepared. Lack of information can lead to misunderstandings about intentions and values. Some of our families are mentoring beneficiaries, and, of course, paying special attention to the long-term selection of trustees and advisors.

We now see three steps of planning: 1) Financial planning is often described as preparing, planning, protecting and growing your assets during your lifetime. 2) Estate planning prepares your assets for your family. 3) Multi-generational planning prepares your family to receive their inheritance in both money and family values.

Regardless of your age, if you would like to talk about multi-generational planning, please give us a call. We’d like to talk with you and we’re passionate about helping families to create and pass along legacies- of all types.