The Lange Report - January 2016

The Lange Report - January 2016

Table of Contents

 

Lessons Learned in Toronto



I am fortunate to be able to participate, four times a year, in a somewhat unique coaching session called The Strategic Coach. It is held in Toronto and is led by Dan Sullivan. The focus of the work is more on “quality of business life” issues than coming up with strategies to maximize profits. It struck me, recently, that much of what he recommends could also be useful in one’s personal life.

Dan recommends retiring from what you don’t like to do and continuing to do what you like to do. And by retiring, he means extracting yourself from obligations and tasks that seem to sap your energy for the things you do like to do. Sometimes that means finding someone to take your place, and sometimes it means just saying no.

He divides your activities into three categories: A, B, and C.

The A activities are things you really dislike doing. The B items are things you neither love nor hate, but you do them because you think you have to. The C activities are things that give you joy and great satisfaction and a feeling of accomplishment. Naturally, everyone will have their own rankings, but the act of thinking about your priorities can be very helpful. For instance, managing employees is something I find unpleasant and would rather not do. For over 30 years, I assumed I had to be very active in the management role because it was part of owning a company. Even though I have a great crew, many of whom have been with me for more than twenty years, it is still the most unpleasant aspect of my job. What I’ve discovered is that by “retiring” from that aspect of my work and putting it in the hands of someone who does not find the task so onerous, everyone is happier. While I will always have to attend to some management issues, I delegate a significant amount of the HR responsibilities to Matt Schwartz, our veteran estate planning attorney. Matt has more patience and willingness to deal with the issues and hence is more effective.

So, how can that translate to your personal life? Perhaps it is time to think about chores that you could delegate, freeing up time to do things that enrich your life. At our house for example, we have a shoveling service for the winter. I love getting up and being able to ignore the snow on our sidewalk and driveway to go cross country skiing and still return to a shoveled sidewalk and driveway. I think Dan Sullivan is really on to something. What would you like to give up or delegate?

And if traveling is something you would like to spend more time doing, Toronto is actually much easier to get to than you might think, and it is a very cosmopolitan city with fabulous food, theaters, concerts, museums, galleries, etc. If you fly Porter Air, you land on an island right across from the city. There is a walkway from the airport that goes under the river, and you arrive in downtown Toronto quickly. For my return flight, I walked with my luggage from my hotel to the airport and then to my gate. What a time saver!


Secondhand News

Jim Parker - Vice President, Outside the Flag

Why doesn’t the media run more good news? One view is that bad news sells. If people preferred good news, the media would supply it. But markets don’t see news as necessarily good or bad; rather, they see it in terms of what is already built into prices.

One academic study appears to confirm the view that the apparent preponderance of bad news is as much due to demand as to supply, with participants more likely to select negative content regardless of their stated preferences for upbeat news.1

"This preference for negative and/or strategic information may be subconscious," the authors conclude. "That is, we may find ourselves selecting negative and/or strategic stories even as we state that we would like other types of information."

So an innate and unrecognized demand among consumers for bad news tends to encourage attention-seeking commercial media to supply more of what the public appears to want, thus fueling a self-generating cycle.

Insofar as consumers of news are investors, though, the danger can come when the emotions generated by bad news prompt them to make changes to their portfolios, unaware that the news is likely already built into market prices.

This is especially the case when the notions of "good or bad" are turned upside down on financial markets. For example, stocks and treasuries rallied and the U.S. dollar weakened in early October after a weaker-than-expected U.S. jobs report. Some observers said the "bad news" on jobs was "good news" for interest rates.2

Conversely, a month later, stocks ended mixed, bonds weakened, and the U.S. dollar rallied after a stronger-than-expected payrolls number. While an improving job market is good news, it was also seen by some as cementing the case for the Federal Reserve to begin raising interest rates. In both cases, the important thing for markets was not whether the report was good or bad but how it compared to the expectations already reflected in prices. As news is always breaking somewhere, expectations are always changing.

For the individual investor seeking to make portfolio decisions based on news, this presents a real challenge. First, to profit from news, you need to be ahead of the market. Second, you have to anticipate how the market will react. This does not sound like a particularly reliable investment strategy.

Luckily, there is another less scattergun approach. It involves working with the market and accepting that news is quickly built into prices. Those prices, which are forever changing, reflect the collective views of all market participants and reveal information about expected returns. So instead of trying to second-guess the market by predicting news, investors can use the information already reflected in prices to build diverse portfolios based on the dimensions that drive higher expected returns.

As citizens and media consumers, we are all entitled to our individual opinions on whether news is good or bad. As investors, though, we can trust market prices to assimilate news instantaneously and work from there.

In a sense, the work and the worrying are already done for us. This leaves us to work alongside an advisor to build diverse portfolios designed around our own circumstances, risk appetites, and long-term goals.
There’s no need to respond to secondhand news.

1 . Marc Trussler and Stuart Soroka, “Consumer Demand for Cynical and Negative News Frames,” International Journal of Press/Politics (2014).
2 . Mark Hulbert, “How Bad News on Wall Street Can Be Good News,” WSJ MarketWatch (October 5, 2015).


Lange Family Announcements

We’d like to take a moment to recognize one of our clients, Dr. Robert Sekerka, on the publication of his book, Thermal Physics: Thermodynamics and Statistical Mechanics for Scientists and Engineers. This book has been described as a comprehensive exposition of thermodynamics and statistical mechanics, serving as a complete source for thermal science. While the topic is way over our heads, we know enough to be impressed. Congratulations, Dr. Sekerka!

Our Lange work family had the pleasure of joining Matt and his family in celebrating the Bat Mitzvah of his daughter, Anna, on November 21. It was a beautifully planned event, and Anna did a really great job. Anna’s Mitzvah project was truly inspiring, and a good time was had by all. It meant a great deal to Matt to celebrate this important occasion in Anna’s life with family, friends, and his fellow Lange employees. Congratulations, Anna! And congratulations to Matt on having both of his daughters go through this important rite of passage.



A New Idea for a Moisturizer

For years I have been applying traditional store-bought chemical-laden moisturizers to deal with dry skin that is exacerbated by the dry air of winter. I didn’t realize there was a simple and chemically “clean” alternative. Then, I read about coconut oil. The buzz about its benefits when eaten plain or used in recipes has been all over the news, but it is also a great moisturizer when used externally! Think about it…if you can eat it, then you don’t have to worry about absorbing it into your system through your skin, unlike all those unpronounceable chemicals in the store-bought moisturizers. The only downside -- and I don’t really think of it as a downside -- is that if you get real close, I smell a little bit like a macaroon.



A Considerate and Helpful Gift from You to Your Colleagues

We are happy to send a copy of Retire Secure! to anyone you suggest. Simply call or email us with their names and addresses, and we will put a copy in the mail. If you would prefer to give them a copy in person, just let us know and we will provide with you another copy or two to give away. We will even gift-wrap it for you. We love learning that our clients value our information enough to share it with others, and as a token of our appreciation, we will send you a Starbucks card. One good turn deserves another. Let’s get the new year off to a great start.



Just a Few Months Left Until Apply & Suspend is Gone Forever...

As you have probably heard by now, on November 2, President Obama signed the Bipartisan Budget Act of 2015 into law.

What most do not know is that this new rule could rob millions of Americans of a secure retirement. This new law bans two of the most effective methods ever devised for maximizing your Social Security payments: “apply & suspend” and filing a restricted application. However, there is hope for some. The federal government granted a six-month grace period before the Social Security rule changes go into effect.

That means that some of you reading this may still have the opportunity to use one of these methods to increase your Social Security benefits. But you must take action by April 30, 2016. After that, it’s too late!

If you are married and between the ages of 62-70, and have not already used these methods to secure your Social Security, you must act now. Go to www.paytaxeslater.com/socialsecurity.php for more information and to find out what you can do to protect your retirement.


Crustless Asparagus Quiche

I love a good quiche to start off my weekend. Incorporating vegetables and herbs into an egg dish is a creative way to enjoy a savory meal that works for breakfast, lunch, or dinner.

  • 1 ¾ teaspoons sea salt
  • 8 asparagus spears, trimmed
  • 10 large omega-3 eggs
  • 2 shallots, finely chopped
  • ¼ cup lightly packed coarsely chopped fresh dill
  • 2 teaspoons grapeseed oil
  • 1 avocado, pitted, peeled, and sliced, for garnish

Preheat the oven to 425 F.

Bring a 3-quart saucepan of water to a boil over high heat. Add 1 teaspoon sea salt.

Add the asparagus to the boiling water and cook until bright green and crisp-tender, 1 to 2 minutes. Transfer the asparagus to a colander and rinse with cold water until cool. Dry the asparagus thoroughly with paper towels. Set aside.

In a large bowl, whisk together the eggs, shallots, dill, and remaining ¾ teaspoon salt.

Place a 9 ½ by 2-inch deep nonstick quiche pan with a removable bottom on a rimmed baking sheet. Wrap the bottom of the pan tightly with aluminum foil. Using a pastry brush, lightly grease the pan with the grapeseed oil.

Spread the asparagus evenly in the bottom of the pan. Pour the egg mixture over the asparagus.

Place the baking sheet in the center of the oven and bake until the quiche is puffed and golden and a toothpick inserted in the center comes out clean, 15 to 17 minutes. Cool for 10 minutes before removing the pan.

Garnish with sliced avocado and serve.

James Lange, CPA

Jim is a nationally-recognized tax, retirement and estate planning CPA with a thriving registered investment advisory practice in Pittsburgh, Pennsylvania.  He is the President and Founder of The Roth IRA Institute™ and the bestselling author of Retire Secure! Pay Taxes Later (first and second editions) and The Roth Revolution: Pay Taxes Once and Never Again.  He offers well-researched, time-tested recommendations focusing on the unique needs of individuals with appreciable assets in their IRAs and 401(k) plans.  His plans include tax-savvy advice, and intricate beneficiary designations for IRAs and other retirement plans.  Jim's advice and recommendations have received national attention from syndicated columnist Jane Bryant Quinn, his recommendations frequently appear in The Wall Street Journal, and his articles have been published in Financial Planning, Kiplinger's Retirement Reports and The Tax Adviser (AICPA).  Both of Jim’s books have been acclaimed by over 60 industry experts including Charles Schwab, Roger Ibbotson, Natalie Choate, Ed Slott, and Bob Keebler.

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