DWM SAYS THANKS – LAST WEEKEND AT THE SWEETGRASS PAVILLION

This past Saturday, many clients/family/friends attended our annual Charleston Friends of DWM Appreciation Event at Sweetgrass Pavillion in Mt. Pleasant, SC. Although the sun evaded us, the room was filled with bright faces!

A great time was had by all!

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Marilyn Dingle, the resident sweetgrass basket weaver, educated us on the history of sweetgrass baskets.

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And some even participated!

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Everyone learned a thing or two about Marilyn and the art of sweetgrass basket weaving!

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And had lots to talk about!

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Many thanks to all who waded through the rain and joined us for our appreciation event! And to both those that did attend and to those that couldn’t make it, let us reiterate that we are honored to have you all as our friends and look forward to a continued great relationship! Thank you!!!

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Nobel Prize Winner Helps Add $30 Billion to Retirement Accounts

Richard Thaler received the Nobel Prize in economics last week, principally by showing that people don’t always behave rationally and, in fact, we are systemically irrational.

Here’s an example: Two friends are given tickets to a basketball game in the Northeast.  The night of the game there is a tremendous snowstorm.  One friend calls the other and suggests there is no way they are going to the game now, in the snowstorm, and they don’t go.  But, he said “You know, if we had paid for those tickets ourselves, we’d be going.”

Studies by Dr. Thaler show that if the friends had paid for the tickets, they would likely driven through the snowstorm because they didn’t want to “lose” their money.  Classical economics would say that’s crazy, but it’s true.  People pay huge attention to “sunk costs,” often irrationally.

Because of Dr. Thaler and others, we know more about human biases and anomalies that impact our financial decisions. These include compartmentalizing (putting money in mental boxes), mental accounting (thinking differently about money in your pocket versus money in the bank) and the endowment effect (once you own something you value it more than before you owned it).

Dr. Thaler not only helped discover our biases but also identified ways to make irrational behavior work to our advantage.  Savings and retirement has always been a big area for him.  He applauds the fact that if we compartmentalize (have a “mental box”) for retirement savings we are doing a very good thing.  Putting money in a 401(k) plan makes it much “stickier” than other money and it stays there.

In 2004, Dr. Thaler and Shlomo Benartzi published “Save More Tomorrow.”  It is based on the idea that instead of asking people to save more now, ask them to save more in the future.   We tend to irrationally discount our future commitments.  Hence, we tend to put off savings because retirement is so distant, but we will commit to future savings because it is also so distant.  Dr. Thaler suggested that people save 50% of every raise.  No need to give up anything now.  And, this concept would mean that if you save 50%, then the remainder will be left for current spending, without any guilt.  Every raise therefore increases both spending and savings- a much more palatable idea than taking away some of our current income to save.

Over the past few decades, most company pension plans have been discontinued and replaced by company sponsored defined contributions plans, where employees needed to make contributions.  These voluntary accounts should have worked better.  Rational employees were expected to save and invest to meet their long-term goals.  But, it didn’t work that way-participation rates early on were very poor.   Dr. Thaler was asked about the problem and his response was that workers can be their own worst enemies- “without help, they’ll never retire.”

His solution: “Nudge” them into joining company retirement plans, using a concept known as automatic enrollment.  Rather than waiting for employees to complete paperwork, companies would automatically enroll them and workers, if they don’t want to be in, can opt out.

Last year, 58% of companies were automatically signing up workers. That’s up from 8% in 2000.  And some companies are automatically escalating the contributions or giving the employees the option to do so.  Thaler and Benartzi’s research shows, as compared to 2011 data, 15 to 16 million more people are saving.  Assuming an average contribution of $2,000 a year, that’s $30 billion a year in additional contributions.

Dr. Thaler, with his colleague Hersh Shiffrin, suggested that our mental accounting of money is often a battle in our brains between the “doer” (focused on short-term rewards) and the “planner” (focused on the long-term.)  How choices are presented to us (“the choice architecture”) makes a big difference in our decision.  Making enrollment in the 401(k) occur by default and requiring a worker to “opt out” will likely put the “planner” in control, not the “doer.”

One of our key jobs and challenges at DWM is to assist our clients by framing questions and choices in the appropriate way.  Like Dr. Thaler, we understand that wealth, health and happiness decisions are not always rational yet we do our best to find a way to “nudge” both your doer and planner parts of your brain in order to help protect and grow your assets and your legacy. We haven’t made a $30 billion impact yet, but we’re passionately working on it every day.

October: Halloween and National Cybersecurity Awareness Month

What a combo!  Ghosts and goblins seem pretty tame compared to the potential theft of our financial information.  146 million Americans got a big scare last month when Equifax announced that hackers had stolen their personal information.  Fast food chain Sonic just announced that customers’ debit and credit card information was stolen last week.  So, while Halloween costumes, haunted houses and trick or treats get put away on November 1st, cybersecurity issues cannot be put away in the attic trunk or tossed into the garbage.

We probably all wish we could just email Equifax a two word message:  “You’re Fired!”  Unfortunately, it’s not that easy.  For example, Fannie Mae, who sets the rules for most mortgages, requires information from all three credit “repositories.”   If you will never need a mortgage, you can try to delete your files from Equifax.  However, those who have tried have been put “on hold” for hours and then told that deletion of their files was impossible.  The “no” response to deletion was confirmed by Equifax former CEO Richard Smith last week to Congress. For now, the best we can do is freeze (not “lock”) our accounts at Equifax, Transunion and Experian.

New “cyber-vampires” are emerging from the darkness.  Did you ever watch the movie “Catch me if you can?” Great film.   It is the story of Frank Abagnale, Jr., played by Leonardo DiCaprio, a master of deception and a brilliant forger who stayed one step ahead of the FBI (Tom Hanks) for five years with his highly successful scams.  Once arrested, he spent five years in jail from age 21 to 26.  Since that time, Mr. Abagnale has put his unique skills to good use teaching FBI agents around the country about cybercrime, identity theft and fraud.    He also serves as an ambassador for AARP’s Fraud Watch Network and lives in Daniel Island, SC.  Here are some of Frank Abagnale’s (“FA”) recent warnings:

FA: “Stop writing checks- if you are still paying by check, you might be putting your life savings at risk.”  If you go into a grocery store and write a check, you have to hand the clerk the check with your name and address, phone number, your bank’s name and address, your bank account number, the bank routing number and your signature.  And then, the clerk may ask to write down your date of birth and driver’s license number as well.  You never get the check back, it goes to the store’s warehouse, where it may be destroyed thoroughly (or not) six months from now.  Anyone seeing the check has all they need to draft on your bank account tomorrow.

FA: “It is now 4,000 times easier to forge checks (with today’s technology).”  50 years ago, FA used a Heidelberg printing press, originally costing $1 million, to forge checks.  The press was 90 feet long and 18 feet high.  Now, one simply opens their laptop and says, “Who’s my victim today?”  In fact, FA indicates that forging checks is so easy these days that street gangs that used to deal in drugs and narcotics are forging checks instead.  FA: “It’s easier and you spend a lot less time in jail if you are caught.”

FA: “Technology breeds crime-whether it is forging checks or getting information.”  Facebook is a great source of information for the crooks.  One of the most common scams now is the “grandparents scam.”  The bad guys go on Facebook and find out who the grandparents are and see who the grandson is dating.  They easily manipulate their telephone caller ID to show a call coming from the NYPD or other police department.  The thieves place their call on a Friday night and tell the grandparents that the grandson is at the jail after being picked up for DUI/DWI and being held for bail.  If money for bail is not received in two hours, the grandson will have to spend the weekend in prison.  “Millions of grandparents have fallen for this scam.”

At DWM, we recognize that you have worked and continue to work very hard for your money.  Our goal, in every facet of providing Total Wealth Management, is to protect and grow your assets.  Cyber-safe practices are a key element of risk management.  Our first job is to educate our clients and friends about the importance of cybercrime, identity theft and fraud.  Charles Schwab & Company, the custodian for our clients’ money, is as dedicated as we are to keep you and your funds safe and help prevent attacks.

Watch for more blogs this month (and beyond) on cybersecurity.  It’s a tremendously important topic!!

DWM 3Q17 Market Commentary

“Train Kept A Rollin’ All Night Long…” The US economic expansion continued on during the third quarter of 2017. It is the third longest expansion since World War II and is now closing in on 100 months.  There were plenty of negatives that tried to slow it down. Politically, we had the debt ceiling deadline, a failed attempt to repeal Obamacare, and a war of words with North Korea. Even the lives and economic losses from the likes of Hurricane Harvey, Irma, Maria, western wildfires and two Mexican earthquakes – amounting to what could be the most expensive year for natural disasters ever – couldn’t slow this train down.

Thing is: the positives outweigh those negatives. At the end of the day, the market is powered by companies’ earnings. And those earnings have been robust and are expected to continue to be! And it’s not just domestically; growth is accelerating at a global level with Eurozone businesses and households more confident about their prospects than at any time in more than a decade. Japan has shown decent growth and inflation this year. And emerging markets are enjoying better fundamentals with more credible politics. Choo! Choo!

We are big believers in asset allocation which is why we showcase the major asset classes each quarter. Here’s how each fared:

Equities: The S&P500 rose 4.5% on the quarter and is now up 14.2% year-to-date (“YTD”). Sounds excellent, but actually a more diversified benchmark, the MSCI All Countries World Index, which includes US large cap stocks, US smaller cap stocks AND international stocks, did much better, up 5.3% quarter-to-date (“QTD”) and now up 17.3% YTD. We’ve been saying for some time that domestic large cap stocks in general look pretty “frothy” and hence it’s not surprising to see this rotation out of domestic large cap stocks into other cheaper equities. The other thing at play is the renewed interest in the so-called “Trump trade”. The areas that moved post-Trump Presidential Election, like small cap and value, have ‘steamed ahead’ in the last few weeks from the renewed hope of possible tax cuts. In just September, the Russell 2000 outperformed the S&P 500 by 4.2% and the Russell 3000 Value outperformed the Russel 3000 Growth by 1.6%.

Fixed Income:  During the quarter, the Fed announced that they are pushing ahead with an aggressive schedule for rate increases. We are happy to see the Fed take this path toward “normalization” while the economy is strong. The US needs to get back to higher rates so that the Fed has “some coal for their engines” if things go bad. That said, this announced path has succeeded in boosting inflation expectations, which has pushed up yields in both the 2-year and 10-year US Treasury notes, with the latter closing the quarter at 2.3%, its first quarterly gain of 2017. For the record, the Barclays US Aggregate Bond Index gained 0.9% in the third quarter and is now up 3.1% for the year. The inclusion of global fixed income assets led to better results with the Barclays Global Aggregate Bond Indexregistering +1.8% for 3Q17 and +6.3% YTD.

Alternatives:  Let’s take a look at a few ‘alts’ we follow. Gold gave back a little in September, but registered a +3.1% 3Q17 return represented by the iShares Gold Trust. With 2017 going down as one of the worst natural disasters year on record, the alternative exposure to reinsurance-linked securities (sometimes referred to as ‘catastrophe’ securities) took a hit. One would have thought oil would have suffered from the hurricanes as well, but demand was strong and with slowing US production, oil prices (WTI) ended the quarter up 12.2%. For the record, the Credit Suisse Liquid Alternative Beta Index, our chosen proxy for alternatives, was up 1.6% for the third quarter and 2.8% YTD.

For balanced investors, It’s been a pretty nice three quarters to start 2017. Looking forward, this bull market train can continue to roll, and a case can be made that returns can even get stronger given the great economic fundamentals around the globe. If Washington can get something done relative to a tax cut, look for stocks to accelerate into year-end.

Of course, there will always be (rail) road blocks. We are thrilled to see inflation measures move toward the Fed target range around 2%, but there are many out there concerned that inflation might ‘chug’ right through those target levels and create havoc on the back-end. Furthermore, the announced and about-to-start-very-soon Federal balance sheet reduction is an unprecedented experiment. And it’s not just the US attempting this.  Global central banks at some point need to do some house-cleaning and will be reducing their balance sheets as well. There is a huge risk something can go wrong and send this train off track. Lastly, we don’t think the markets are adequately pricing in the geopolitical risk out there, which some would say is approaching multi-decades high. Frankly, when a small probability risk is hard to price in, the market usually just shrugs it off. With trading activity so light recently and little risk currently priced into the market, things could get ugly very quickly if anything goes wrong.

In conclusion, these are challenging times. It’s not easy to navigate the terrain out there. So make sure you have good direction and management. Don’t fall victim to a bad conductor and wind up like Ozzy Osbourne “going off the rails of a crazy train!” Make sure that your engineer is keeping you on track. At DWM, we engineer our clients’ portfolios to ride safely through the peaks and valleys that this train has and will travel through. With the right team at the controls, you can make your journey a pleasant one.

Brett M. Detterbeck, CFA, CFP®

DETTERBECK WEALTH MANAGEMENT

DWM SAYS THANKS – LAST WEEKEND AT ARLINGTON PARK!

This past Saturday, many clients/family/friends attended our annual Chicagoland Friends of DWM Appreciation Event at Arlington Park Race Track in Arlington Heights, IL. We were blessed with a warm, sunny day under the shade of one of Arlington Park Race Track’s marquee tents!

A great time was had by all!

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Don the Handicapper educated us aka “Arlington Park Betting 101”.

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And we had some lucky winners!

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Then again not all of us were old enough to bet, but still had fun!

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Some just wanted to chill…in a tree!

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Some of us – both young and old – even had a roll down the hill match! (Thanks for organizing, L.M.)

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For those that attended, thank you very much for coming and partaking in what was a truly special day for our Detterbeck Wealth Management team. And to both those that did attend and to those that couldn’t make it, let us reiterate that we are honored to have you all as our friends and look forward to a continued great relationship! Thank you!!!

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Lastly, for those in Charleston area, we look forward to hopefully seeing you at our October appreciation event!

HURRICANE SEASON 2017: SPOTLIGHT ON FLOOD INSURANCE

Water seems to be everywhere right now.  Hurricane season lasts until November 30th, but many of us in the coastal areas of the United States are already weary from this year’s active storm season.  Texas, Florida, Georgia and the Carolinas have seen widespread damage from Hurricanes Harvey and Irma and those in the East and Northeast are closely watching Jose and Maria to see what kinds of impacts they will bring.  As we watch the news and see the photos of flooded homes, streets turned into waterways and communities working to recover from the mess, the reported costs of these two storms seems almost unfathomable – estimates of the total economic cost for both storms range from $115 billion to $290 billion!  Many of those in need of assistance appeal to FEMA, the Federal Emergency Management Agency, and, while FEMA can provide small assistance payments as a safety net, much of the flood damage assistance must come through FEMA’s National Flood Insurance Program (NFIP) – and you must have a flood insurance policy to receive anything from them.

Premium rates for flood insurance policies are partially subsidized by the federal government and, without these subsidies, the cost for this type of insurance could be exorbitant.  Complicating the matter is that most banks won’t loan money to build or purchase homes in flood-prone areas without it.  Currently, flood insurance claims, partially paid-for by those premiums, will cover replacement costs for property of up to $250,000 and up to $100,000 for contents.  The average NFIP claim payment is around $97,000.  According to a September 10th Post & Courier article, in SC it is estimated that 70% of properties in the high-risk areas are insured.  Also, high-risk areas have a 1 in 4 chance of flooding during a 30-year mortgage, according towww.southcarolinafloodinsurance.org.   However, 30% of flood losses occur in flood zones that are not at high risk.  As the head of the SC Department of Insurance said, “our entire state is in a flood zone.”

The NFIP is now reportedly close to $25 Billion in debt, even before these most recent storms, and the program was set to expire on September 30th.  Last Friday, PresidentTrump signed legislation reauthorizing the National Flood Insurance Program until Dec. 8, 2017 and providing federal disaster assistance for the nation’s hurricane recovery.  This buys more time for Congress to consider reforms to the program, which, by all accounts, is drastically needed.  Reportedly, program costs overrun annual premium income, even without the catastrophic losses from natural disasters.  While a lot of communities have flood mitigation programs in place, there is much discussion that it is time for stronger flood-proofing standards – like making sure that all flood-prone properties are reinforced or elevated and redrawing outdated flood maps to properly assign risk to those properties.  Critics have claimed that the NFIP has wasted money rebuilding vulnerable homes when it would be cheaper to help homeowners move to higher ground.  There is also concern that “grandfathering” certain properties allows homeowners to pay subsidized rates based on outdated flood maps.

The National Flood Insurance Program was created in 1968 when private sector insurance carriers stopped offering the non-profitable coverage.  The idea was to transfer some of the financial risk of property owners to the federal government and, in return, high risk areas would adopt flood mitigation strategies to reduce some of that risk.  Some are now arguing that these subsidies mask the true risk of living in these high flood-prone areas and full actuarial rates for flood insurance premiums should be phased in, subsidizing only those truly in need.  In a Bloomberg article from September 18th, U.S. Rep. Sean Duffy (R-WI) and U.S. Rep. Earl Blumenauer (D-OR) are appealing for reform and suggest that “…the NFIP’s subsidized rates make flood-prone properties more affordable… and that for “ the sake of people’s health and safety”, it’s critical that we “stop paying to repeatedly rebuild flood-prone properties.”  They hope to encourage Congress to reform NFIP and to make bi-partisan recommendations to protect future flood victims.

At DWM, we recommend that you annually review all of your insurance, including property & casualty and flood insurance.  There are many ways coastal or flood-prone homeowners can mitigate their own risk with upgrades to roofs, windows, landscaping, hurricane shutters etc.  You should find out your home’s elevation and evaluate your risk.  You may also want to check on your flood zone and consider a flood insurance policy for added protection.  Flood insurance has a 30-day waiting period, so once there is a hurricane en route, it is too late to sign up and be covered in time.  For most policies not in high-risk flood areas, annual premiums range from $400-$700 under the current regulations – high-risk flood zones will be more.  We will continue to monitor the legislation as it approaches the next deadline of December 8th.  Luckily, our DWM office did not have to contend with any direct flooding issues, but we will most certainly be keeping an eye on the weather!

Please let us know if we can help review any of your insurance policies to make sure you have affordable and appropriate coverage on all aspects of your life and property.

“An Ounce of Prevention is Worth a Pound of Cure”- B. Franklin

Millions of Americans are being impacted by two Category 5 disasters- Hurricane Irma and the Equifax data breach!!  Certainly, we’re all watching Irma spread through FL and our hearts and prayers are with all those in Irma’s path.  But don’t discount the Equifax high-tech heist as something small.  Last Thursday, Equifax announced that personal and confidential information for 143 million Americans.  This included names, social security numbers, birth dates, addresses and, in some instances, driver’s license numbers and other information.

This epic breach is a really big deal and a great concern.  Equifax, Experian and Transunion warehouse the most intimate details of Americans’ financial lives, from credit cards to medical bills.  Once security is breached, the hackers typically sell the stolen information to sophisticated identity thieves.  Last year, 15.4 million Americans were victims of identity theft, which totaled $16 billion.  In most cases, the money was recovered, but only after a tremendous amount of time, money and stress.  One man said the thieves so ruined his credit that he was unable to secure a needed mortgage refinance.  One lady’s social security number was used by others to file her income taxes and get a refund before she even filed her own return.  It took her over a year to get it straight with the IRS.  In the first half of 2017, there were a record 791 data breaches in the U.S., up 29% from last year.  Victims have recounted what a terrifying experience it is to have your identity stolen.  “You’re worried about the tremendous implications this could have and the possibility of it going on for years.”

Here’s the really bad part of the Equifax breach. We now know that the breach occurred six weeks ago, July 29th.  The hackers probably sold the information shortly thereafter.  We’ve likely all been compromised for six weeks and we didn’t know it.  Equifax is now under investigation for the breach and their lack of transparency by Congress, New York’s attorney general and the Consumer Financial Protection Bureau. If you call Equifax, it’s another frustration.  Their “hot line” is staffed with people who really can’t tell you if your information was taken or not.  You should assume that it was.  Ouch!!

It’s time for us to play defense.  Step one- put a credit freeze on all three reporting services immediately.  It’s your only hope.  A credit freeze prevents existing creditors and new creditors from using your information.  It prevents new accounts being opened in your name.  When you contact the sites listed below you will receive a PIN that allows you to temporarily lift or “thaw” your freeze.  Put that number in a very safe place (see below).  Yes, you may be delayed a day or two to get your information released when you need to apply for new credit, but that’s a small problem compared to potential identity theft.

Here are the sites:

Equifax – https://www.freeze.equifax.com/Freeze/jsp/SFF_PersonalIDInfo.jsp

Experian – https://www.experian.com/freeze/center.html

TransUnion – https://freeze.transunion.com/sf/securityFreeze/landingPage.jsp

I froze Elise and my accounts yesterday in about 20 minutes.

 

Step two-you need to create strong passwords and store them in a secure spot. The bad guys have two pieces of information, your social security number (which you don’t want to change) and your address.  Don’t help them with the next step by having weak passwords.

Updating your passwords will take some time.  Focus first on the key ones; your credit cards, financial institutions, and key retailers like Amazon and Apple; anywhere there is money or where thieves could get merchandise or services.  If a site offers additional security with a two-factor authentication, enable it.   Once you’ve got the key sites, start knocking out the others.

You should use a password manager like 1Password or LastPass.  It’s always important to update your password every so often. These sites create a unique random number password for every website you visit and stores them in a database that you create.  This makes it much more difficult for the thieves to decode your password. Further, these are great places for all of your passwords and your PINs.  Of course, you need to keep your master password in a special spot and share that with your spouse and/or another trusted person.

No question, this is a real pain!!  But, the alternative is possible identity theft which could be a 100 times worse.  We live in an age of Big Data.  We have all allowed the emergence of huge detailed databases full of information about us.  Thanks to technology, financial companies, tech companies, medical organizations, advertisers, insurers, retailers and the government can maintain and access this information.  Unfortunately, companies like Equifax are only lightly regulated and there’s not much punishment for breaches.  Hence, breaches will keep happening.  Even with new technology, like Apple’s new iPhone8 which includes face recognition to unlock it, the consumer credit bureaus are not going away anytime soon.

Please do yourself a favor and freeze your credit, change your passwords and store everything securely this week.  The process will certainly feel like more than an “ounce” of prevention, but if it saves you from identity theft, it will be far more than a “pound” of cure.

My, How Jobs Have Changed

Hope you had a super Labor Day weekend!  Wonderful to be with family and friends.  It’s amazing how jobs have changed over the years.  The NYT over the weekend illustrated how life is so much different for workers by comparing two janitors working for two top companies then and now.

Gail Evans was a janitor for Eastman Kodak in Rochester, NY almost forty years ago.  She was a full-time employee, received 4 weeks paid vacation, reimbursement for some tuition costs to go to college and bonuses. And, when the Kodak facility was temporarily closed, the company kept paying her and had her perform other work.  Ms. Evans took computer classes at night, got her college degree in 1987 and ultimately became chief technology officer for Kodak.

Marta Ramos cleans floors for Apple in Cupertino, CA.  She isn’t on Apple’s payroll. She works for one of Apple’s contractors.  Ms. Ramos hasn’t had a vacation in years-she can’t afford the lost wages.  Going back to school is out of the question. There are no bonuses and no opportunities for some other role at Apple.  Ms. Ramos earns $16.60 per hour, about the same as Ms. Evans did in inflation-adjusted terms.  But her only hope for advancement is to become a “team leader”, which pays an extra $.50 per hour.

Over the last 35 years, American corporations have increasingly focused on improving their bottom line by focusing on their core competency and outsourcing the rest. Part of the success of the Silicon Valley giants of today has come from their ability to attain huge revenues and profits with relatively few workers.  It’s led to huge profits for shareholders, helped grow the U.S. economy, but also has fueled inequality.

In 1993, three of the then tech giants – Kodak, IBM and AT&T – employed 675,000 employees to produce $243 billion of revenue in inflation-adjusted dollars.  Today, Apple, Alphabet and Google produce $333 billion in annual revenue with less than 1/3 of that number, employing only 205,000 employees.

Apple is quick to point out that its products generate many jobs beyond those who receive an Apple paycheck.  It estimates that 1.5 million people work in the “app economy.” However, research shows that the shift to a contracting economy has put downward pressure on compensation.  Many corporations hire full-time employees only for the most important jobs and outsource the rest; obtaining contractors at the time and place needed for the lowest price possible. It’s not just janitors and security guards that are outsourced.  There are also people who test operating systems, review social media posts and screen job applicants, for example.  It’s understandable: companies face really tough competition and if they don’t keep their work force lean, they risk losing out to a competitor that does.

In addition, outsourcing often results in a culture of transience.  Contracted workers are often changing jobs every 12 to 18 months, which obviously can be stressful to them and their family.  Contractors generally don’t receive stock options nor robust health insurance.  Also, retirement plans, even for full-time employees, have changed considerably in the last 35 years. In 1979, 28% of workers were covered by a company paid pension program and 7% had a 401(k). In 2014, only 2% of workers were covered by a pension plan and 34% had a 401(k) plan, which of course, means that most of the funding now is coming from the worker.

Here’s what’s really amazing.  With all these changes, job satisfaction has gone up.  For the first time since 2005, more than half of U.S. workers say they’re satisfied with their jobs.  This optimism has led to consumer spending increasing every month this year and a strong economy.  Apparently, after a decade of job cuts, minimal raises and reduced benefits, workers have lowered their expectations.  Rick Wartzman, author of “The End of Loyalty: The Rise and Fall of Good Jobs in America,” feels that young workers today “don’t even know what they are missing.”

On Monday, we celebrated Labor Day, honoring working people.  That’s particularly important these days as many workers don’t have it nearly good as it was 30-40 years ago.  Even so, American values, spirit and resiliency continue to be very evident in these ever-changing times. Perhaps we need another holiday, “Resilience Day.”  Time to get the grill heated up again!

How Much do You Know About Labor Day?

We are all aware that Labor Day signifies the end of a summer filled with backyard BBQs, family and sunshine. It is the one long weekend of the year when families come together to say goodbye to summer, unwind and prepare for the changing seasons ahead. However, many of us don’t take the time to consider the true origin of Labor Day.

The concept of Labor Day dates back all the way to the Industrial Revolution in the U.S. during the late 1800s. The typical work day was 12 hours long, and the typical work week was seven days. Working conditions were far from ideal, and even children as young as four or five years old were commonly seen working in mills and factories to help their struggling families scrape by.

Many workers began organizing protests and strikes across the U.S. Unfortunately, many of these demonstrations turned violent and, in some cases, deadly. In 1894, Eugene V. Debs, with the support of the American Railroad Union, organized a strike and boycott of the Pullman Palace Car Company in Chicago. This strike effectively crippled all railroad traffic in the U.S., leading then President Grover Cleveland to deploy 12,000 troops to the area to dissolve the strike.

The use of military force on behalf of the U.S. government essentially poured gasoline on the already burning fire of discontent with current labor wages and conditions. Several people were killed during the Pullman strike altercation, and although the strike did come to an end, American workers were still unhappy and began to condemn President Cleveland’s aggressive response.

Meanwhile, union workers in New York City had been organizing and going on strike one day of the year in support of the idea of a national Labor Day that had been circulating around the U.S.

Later in 1894, which happened to be an important election year, President Cleveland decided to implement a nationally recognized annual celebration of American workers to appease his critics – and thus Labor Day as we know it was born.

Fast forward to 2017, where we at Detterbeck Wealth Management are fortunate enough to do what we are passionate about everday in a constructive and collaborative environment. We choose to use this year’s Labor Day as an opportunity to reflect on and appreciate how far the U.S. economy and workforce has come since those historic strikes in 1892.

From everyone here at DWM, have a great Labor Day Weekend and enjoy some time with the family!

“The Markets are going to Fluctuate”

Last Thursday, August 17, the equity markets took a hit of 1-1.5%.  In overall terms, it wasn’t a pullback (5% drop) or a correction (10%) yet some were concerned this might be the “start of the end” of the long-term bull market.  Yes, stock valuations have been high for some time, but many people wondered “Why now?” Various reasons were given to “explain” the causes of Thursday’s decline.  Let’s take a look at some of these:

“Terrorism.”  The first reports of the attack in Barcelona were posted in New York around noon last Thursday.  The markets were already in a decline and gold and bonds were moving higher.  Though the attack was dreadful and disgusting, it likely didn’t move the markets.

“Corporate America abandons the White House.”  Kenneth Frazier, CEO of Merck, resigned Monday, August 14.  Others followed and the major business councils disbanded on Wednesday, August 16.  However, participation on President Trump’s councils is voluntary and the first priority of each of the CEOs is their “day job,” which involves working with their customers, employees, suppliers and investors.  Their departure shouldn’t have been a surprise.

“All Donald Trump all the time has worn out people’s patience.”   Certainly, many may be exhausted by the almost singular focus of the news being the White House for the last seven months.  However, impatience is unlikely to cause the markets to move lower.  It was only two weeks ago that we all were worried about the possibility of a nuclear war starting in the Korean peninsula. And, that scare didn’t move the markets.  Therefore, it’s hard to believe the daily White House news would be a source of concern for the markets.

“The White House Economic Team is Leaving.”  Early last Thursday, a rumor floated through Wall Street that Gary Cohn, the Director of the National Economic Council, was resigning.  Mr. Cohn, along with Treasury Secretary Steven Mnuchin are leading the all-important tax reform and infrastructure initiatives.  The S&P 500 began a sharp move down around 10 am last Thursday exactly the time the false tweet came out.  Fortunately, the rumor was squelched almost immediately but the markets, nevertheless, continued to fall.   Hence, the rumor seems not to have been the catalyst for the sale, though the loss of either Mr. Cohn or Mr. Mnuchin would, in fact, be a major concern.

In short, these “explanations” given after last Thursday’s market drop really don’t identify why it happened.  Even so, story lines will continue.  We humans want them.  We are wired to try to understand why and how things happen and use that information to guide our future.

Legend has it that about a century ago, an alert young man found himself in the presence of John Pierpont Morgan, one of the most successful investors of all time.  Hoping to improve his fortune, the young man asked Mr. Morgan’s opinion as to the future course of the stock market.  The alleged reply has become a classic:  “Young man, I believe the market is going to fluctuate.”

Yes, there are many things we cannot control and, fortunately, some we can.  At DWM, we focus on helping you to create and maintain an investment portfolio that is designed to participate in good times and protect in bad times by:

  • Identifying and implementing a customized asset allocation based on your goals and risk tolerance
  • Diversifying the holdings by asset class and asset style
  • Using the lowest cost investments wherever possible
  • Striving to make the portfolio tax efficient
  • Rebalancing regularly
  • Staying fully invested
  • Providing discipline to keep you on track and, for example, making sure you are not trying to time the markets or chase performance

Yes, the markets are going to fluctuate.  We can’t control that.  But, at DWM we can help you control those key metrics that, over the long run, can produce higher expected returns with lower risk.