King Dollar Reclaims the Throne

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1 Your Investment News from True Private Wealth Management October 2014 What s Inside... * Greenback s Effect on Stocks * Fool s Gold * Headline Noise * Things I m Watching * A Recent Message from Bryan * Lincoln s Whiskers * Bits & Pieces * Heard Round the Office * Coaching Tip For now, the dollar is enjoying its day in the sun. There will be winners and losers across the economy, but let s not discount the possibility that as a whole, the U.S. economy and the market could be the big winner. King Dollar Reclaims the Throne here are many tests that can be run during an annual physical, but the simple measures like blood pressure or cholesterol count give a good indication of general health. Similarly, there are basic ways to assess the financial health of a firm. Tracking the price of a stock in relation to its industry peers and in relation to the broader market is like taking the company s financial pulse. It s a simple measure that offers a rough estimate of market sentiment and expectations for that company. A country s currency can also be evaluated in basic ways. Weakness can suggest anything from economic problems to political unrest. Conversely, a strong currency suggests economic might, or, at a minimum, an economy that is outpacing its peers. Recently, the dollar has surged in relation to its peers. The Dollar Index, which is a weighted average of the currencies of the nation s major trading partners, has risen to its highest level in over four years. There are two major reasons we re seeing a resurgence of the greenback, and it may bode well for stocks and the economy. First of all, the U.S. economy is expanding at a faster rate than many developed nations. And growth attracts foreign cash as investing opportunities, including those in stocks, multiply. Dow Jones Industrial Average MTD % YTD % 3-year* % NASDAQ Composite S&P 500 Index Russell 2000 Index MSCI World ex- USA** MSCI Emerging Markets** Source: Wall Street Journal, MSCI.com *Annualized **USD In addition, for investors looking to park cash in safe, interest-bearing investments, a favorable rate advantage is also a magnet for capital. Yes, short-term rates are near zero, but it is an advantage in U.S. bond yields, as the difference between longer-term Treasury bond yields and yields in a number of developed nations widen. And there has been no shortage of talk from the Fed that an eventual hike in interest rates seems destined to occur next year. It s a different story in Europe and Japan, where economic woes may encourage their respective central banks to increase monetary stimulus, keeping rates at rock-bottom levels for quite some time.

2 Greenback s Effect on Stocks Conventional wisdom suggests a stronger dollar will make exports less competitive and reduce revenues from sales overseas that are translated back into dollars. Yes, it s a headwind for individual companies, but research by RBC Capital and the Schwab Center for Financial Research (SCFR) suggests the market as a whole won t be hindered by King Dollar. RBC pointed out that a stronger greenback has historically been supportive of higher price/earnings ratios. And SCFR notes that the S&P 500 Index has performed nearly twice as well during dollar bull markets vs. dollar downturns. It s not that stocks have fallen during dollar weakness; they just haven t performed as well. For now, the dollar is enjoying its day in the sun. There will be winners and losers across the economy, but let s not discount the possibility that as a whole, the U.S. economy and the market could be the big winner. Fool s Gold From time to time, people ask if I think they should own gold. On occasion, I m even asked whether a portfolio of mostly gold or precious metals is a wise move. It s not that we can t put a small portion in precious metals or mining outfits that pay dividends. Gold and the broader market tend to diverge, which can reduce the overall volatility of an investment portfolio. But when it comes to jumping headfirst into gold, I ll defer to Warren Buffett. Gold gets dug out of the ground in Africa or someplace. Then we melt it down, dig another hole, bury it again, and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head. He adds that it s an unproductive asset that will never produce anything, but is purchased in the buyer s hope that someone else will pay more for it in the future. Owners of assets like gold are not inspired by what the asset itself can produce it will remain lifeless forever but by the belief that others will desire it even more avidly in the future. No doubt about it, gold has its avid promoters. It always has and always will. They ll hold the faith no matter how high or low the yellow metal goes. Gold has been a store of value for thousands of years; hence its attraction. Moreover, currencies today, including the dollar, are not backed by anything. It is viewed as an inflation hedge or an asset that benefits during times of global or economic uncertainty. But dire predictions made in 2009 that money creation by the Fed would result in runaway inflation, a collapse of the dollar, and a dumping of Treasuries by foreigners have missed the mark by miles! I have to admit, there s plenty of uncertainty around the globe right now. Yet the shiny metal is languishing and down over 35% from its September 2011 high of $1,895 per ounce. There are a number of reasons for this, including the stronger dollar, increased talk that the Fed is preparing to hike interest rates next year, an improving U.S. economy (over the long-term) and low inflation at home. Headline Noise I applaud your efforts to learn more about investing and planning. It will pay dividends in many ways, and my team is here to assist you as you take steps to educate yourself. But I caution you about spending too much time in front of the financial news channels dotting the cable landscape or the many Internet sites that are just a mouse click away. It s not that they don t report hard news. They do. But there are times when markets get volatile and the shrillness meter hits alarming levels. Just a couple of months ago, when the Dow fell over 300 points in one day, I jumped onto MarketWatch over the weekend and found a section highlighting the most popular stories. 1. Warning: the Plunge in Stocks Is Just Beginning. Well, stocks quickly recovered and claimed new highs. Then they fell off again. Having an exit strategy in place, besides just being a buy-and-hold investor, can help you navigate falling markets with better precision.

3 2. S&P 500 Suffers Largest Weekly Loss in 2 Years. True, but we emphasize the longer term and continually stress that your plan should have an exit strategy in place, many times supported by trailing stop losses. Be very careful of allowing weekly volatility to sidetrack a multi-year plan Things Winemakers Won t Tell You. This article may have been worthwhile, but it s not market-related Market Warning Signs that Predict a 20% Tumble. See my comment on article number one, above. Three of the top four stories are playing on the fears of investors. Simply put, bad news sells. But it can be confusing if the noise isn t filtered. It s been over 570 days since we ve had a 10% drop in the S&P 500 Index, or a decline that would officially be called a correction. Going back to mid-1940s, the median time period between corrections has been 121 trading days, and the average has been 273 trading days. Reading the tea leaves, this market is wildly overdue for a correction. The market movement is putting us on defense and we are accumulating cash, evaluating current holdings if they need to be sold, and are not putting new money into the stock or bond markets. Stay focused on the goal and make adjustments that take into account changes in your personal circumstances, not fear-mongering that can be deafening during market volatility. stronger economy and faster earnings growth. But we don t live in a perfect world, and that brings about volatility. Junk bond yields have backed up, especially among the lowest-rated bonds. What s unknown: Will the jump in yields stabilize as the improved return attracts buyers, or will we witness selling of investment-grade bonds amid expectations of and eventual hike in rates by the Fed? And will that spread to the stock market and force a longawaited correction? In recent years, there s been a very close correlation between performance in junk debt and stocks. But many variables go into the stock-price equation, including but not limited to earnings, dividends, economic expectations, corporate stock buybacks, and monetary policy by the Fed and major global central banks. Rising profits and an improved economic outlook are tailwinds for stocks. What s going on in the bond market matters and is worth watching. As always, thank you dear reader for staying involved with us. Your comments about the newsletter last month were very kind and we took some of the suggestions into account in this latest edition. If you are unhappy with your current advisor or if managing money in this volatile stock market has you paralyzed with indecision, call us to attend one of our workshops. Or call to schedule a second opinion. You pick. But call now, We look forward to serving your investing needs. Until Next Month, Things I m Watching There are no shortage of tailwinds benefiting stocks. Even as the Fed appears poised to start tightening policy, interest rates could remain at historical lows for the foreseeable future. In addition, the European Central Bank is increasingly discussing more monetary stimulus. And let s not forget that corporate earnings are rising, the U.S. economy is growing, and companies continue to repurchase shares, which not only represents confidence but a real demand for equities. Yet the skies are never completely clear. One risk: There has been an exodus of funds from the high-yield, or junk, bonds. Bryan Sarff, CFP, RFC Senior Wealth Manager TRUE Private Wealth Management TRUE (8783) The Fed s low rate policy has encouraged a reach for yield, and hundreds of billions of dollars have gone into lowquality, high-yield debt. Typically, a stronger economy is good for bondholders because it makes it easier for debt-laden firms to pay down debt and meet scheduled interest payments. However, a strong economy could prompt the Fed to hike rates, which could lead to rising defaults, especially among companies that have high leverage and low bond ratings. In a perfect world, we d have a seamless hand-off of the baton between the Fed s decision to raise rates and a Image Copyright 2013 Creators.com

4 IF YOU HAVE BEEN THINKING ABOUT WORKING WITH US TO HELP YOU MANAGE YOUR INVESTMENTS AND PLAN YOUR RETIREMENT THEN THE MESSAGE BELOW IS FOR YOUR EYES ONLY. Recent Message from Bryan This was sent on October 1, 2014 Dear Prospective Client: Since we last spoke, much of what I forecasted has come true. I am actually sad that TRUE called this right. Like everyone, I would just like to see the market go up forever. That is simply not economic or historical reality. In the last 10 days we have seen a pullback of over 3% on large cap, and 6% to 20% or more in the mid, small and Russell 2000 asset classes. This may be a temporary blip, or the beginning of bear market #17, as we discussed at our dinner seminars and in person with many of you. Either way, caution is in order, and good sailors know when to come ashore and tie down their craft. Please consider an appointment with us to review your portfolio for weaknesses, and remember the oldest saying on Wall Street: Don t confuse brains with a bull market. Call Kal at to schedule a second opinion on your investments. All The Best, Bryan PS: I have attached another scary chart for your entertainment!!! CRANBERRY RELISH 1 bag, or 3 cups, cranberries 1 orange 1 apple Sugar to taste (1/2 to 3/4 cup) 1 cup coarsely chopped pecans (optional) Quarter orange, leaving on rind (but be sure to get the stem and the little sticker off and pull out the white part in the center). Start with the orange in the food processor and chop fine. Clean and add cranberries and apple, unpeeled, removing core and cutting in quarters. Chop all fine. Remove from processor and add sugar and pecans. Mix well. For best results, refrigerate overnight or for at least 4 hours before serving. Depending on the size of your food processor, you may need to do half the recipe at a time. Special Reports for you to Request Call and we will mail it to you. Or send an to Kal@RetireWithTrue.com 3 Ways to Raise Your Social Security Benefit Medicare and the Affordable Care Act Plans are nothing; planning is everything. Dwight D. Eisenhower And in the end it s not the years in your life that count. It s the life in your years. Abraham Lincoln 5 Things to Ask 5 Years Before You Retire Key Financial Data for New Tax Rules of 2014

5 Lincoln s Whiskers ile this story under Charming Kids. It s the story of an eleven year-old girl who influenced a president and maybe even won him his election. The day was October 15th, the year The entire nation was gripped with tension as one of the most important election seasons of all time drew to a close. As storm clouds gathered on the horizon, Abraham Lincoln grappled with one of the most famous politicians of the day, Stephen A. Douglas. The country was threatening to split in two, and a civil war looked more and more likely. More than anything, what people needed was a little childlike innocence. Step forward, Miss Grace Bedell. Grace s Letter A few days later, Abraham Lincoln, presidential candidate, received one of the most remarkable and important letters of his lifetime. It read: Hon A B Lincoln... Dear Sir My father has just home from the fair and brought home your picture and Mr. Hamlin s. I am a little girl only 11 years old, but want you should be President of the United States very much so I hope you wont think me very bold to write to such a great man as you are. Have you any little girls about as large as I am if so give them my love and tell her to write to me if you cannot answer this letter. I have yet got four brothers and part of them will vote for you anyway and if you let your whiskers grow I will try and get the rest of them to vote for you. You would look a great deal better for your face is so thin. All the ladies like whiskers and they would tease their husbands to vote for you and then you would be President. My father is going to vote for you and if I was a man I would vote for you to but I will try to get every one to vote for you that I can I think that rail fence around your picture makes it look very pretty. I have got a little baby sister she is nine weeks old and is just as cunning as can be. When you direct your letter direct to Grace Bedell Westfield Chautauqua County New York. I must not write any more answer this letter right off Good bye Grace Bedell (Image courtesy of Biography.com) Grace s father was a follower of national politics, and as Grace later described it, a zealous champion of Mr. Lincoln. One day, her father brought home a picture of Lincoln for Grace to see. To the girl, it was one of those coarse exaggerated likenesses the high forehead over those sadly pathetic eyes, the angular lower face with the deep cut lines about the mouth. In her opinion, Lincoln looked thin and morose hardly fitting for such an important figure. With the fate (face?) of the country at stake, it was clear that something had to be done. Grace recalled, As I regarded the picture, I said to my mother He would look better if he wore whiskers, and I mean to write and tell him so. Eleven year old Grace decided that it was up to her to take a stand. An ordinary politician might have tossed the letter aside, but Lincoln was no ordinary politician. Only four days later, he sent a reply but it was clear he had doubts. After all, he had been clean-shaven his entire life. Springfield, Ill Oct 19, 1860 Miss Grace Bedell My dear little Miss Your very agreeable letter of the 15th is received. I regret the necessity of saying I have no daughters. I have three sons one seventeen, one nine, and one seven, years of age. They, with their mother, constitute my whole family. As to the whiskers, having never worn any, do you not think people would call it a silly affection if I were to begin it now? Your very sincere well wisher A. Lincoln

6 Lincoln s Whiskers Despite his concerns about what the people would think, Lincoln was impressed by his youngest campaign advisor s suggestion. For almost immediately after replying, he put away his razor and allowed his beard to grow. He kept it going through the rest of the election, and by the time he started his trip to Washington, had acquired his famous beard perhaps the most famous beard in U.S. political history. Since his beard had clearly won him the election, Lincoln decided to thank his little kingmaker in person. His trip to the capital stopped in Westfield, New York on February 19, A correspondent from the New York World covered the entire event. At Westfield an interesting incident occurred. Shortly after his nomination, Mr. Lincoln had received from that place a letter from a little girl, who urged him, as a means of improving his personal appearance, to wear whiskers. Mr. Lincoln at the time replied, stating that although he was obliged by the suggestion, he feared his habits of life were too fixed to admit of even so slight a change as that which letting his beard grow involved. To-day, on reaching the place, he related the incident, and said that if that young lady was in the crowd he should be glad to see her. There was a momentary commotion, in the midst of which an old man, struggling through the crowd, approached, leading his daughter, a girl of apparently twelve or thirteen years of age, whom he introduced to Mr. Lincoln as his Westfield correspondent. Mr. Lincoln stooped down and kissed the child, and talked with her for some minutes. Her advice had not been thrown away upon the rugged chieftain. A beard of several months growth covers (perhaps adorns) the lower part of his face. The young girl s peachy cheek must have been tickled with a stiff whisker, for the growth of which she was herself responsible. Almost 75 years later, Grace related her own memory of that day: He climbed down and sat down with me on the edge of the station platform Gracie, he said, look at my whiskers. I have been growing them for you. Then he kissed me. I never saw him again. Okay, so Grace Bedell s letter probably wasn t the cause of Lincoln s election. But it certainly led to his change in grooming habits. More than anything, the story of Grace Bedell and her letter shows what kind of man our 16th president was, and how children can inspire even the greatest of the great. Grace Bedell in the 1870 s (Image courtesy of Wikipedia.com) Tax Allocation 101 How your account is taxed- before, during, and after- can have a HUGE impact on your total return. As a rule of thumb, I follow and use the chart below to help guide my clients on the tax allocation of investments.

7 Bits & Pieces Great quote from Sam Mellinger in the KC Star: Like all good sports teams, the Royals have come to mean a little more than baseball to Kansas City. They are the city s easiest conversation starter, and finally for good reasons...for Royals fans, there is no sense in acting like they ve been here before because most of them haven t. Congratulations to the Kansas City Royals! With the NFL Season in full swing, I came across this map of influence by county of each NFL Team. Interesting read for those of us who love the NFL. The link for this is Heard Round the Office Bryan says, My daughter Natalie, broke her arm 5 weeks ago from a fall off her scooter. She currently has a waterproof, glow-in-the-dark cast (boy times have changed) that will be coming off on October 8th. Keep your fingers crossed that all goes well and she can get back to her normal activities. Kal says, My wife, Makaila, turned 40 this past weekend. She spent the entire day out shopping with her mom. They enjoyed a nice girls day out on the town. It sure was nice having the entire house to myself all day! Just me and my two dogs- Rusty and Kyre. My parents retired earlier this year and have been touring the US in their travel trailer. They send pictures to keep us posted. Recently, my Dad sent this one titled My First Selfie. Too funny. He s 70 this year and loving his new iphone. Keep the pics rolling Dad we love them! Kenny says, My family and I just came back from vacation in Denver, CO. It was the first trip my 4 year old daughter, Layla, will fully remember. We went to the Children s Museum, Denver Zoo and spent a day cruising around Grand Lake on a pontoon boat. My daughter said her favorite thing was the airplane ride there and back. She can t wait to fly again. Mike says, While we are speaking about daughters, My 10 year old Nia decided she was going to learn to play the viola this year. So needless to say it is a bit more musical around the house now. She is so excited and I can see how proud she is when she carries her instrument out the door each morning. I can t wait for the Mary had a Little Lamb solos in the weeks to come. Pam says, Just got back from a family trip to London England. We did some sightseeing as well as attend a very traditional Punjabi-Indian wedding. I can t wait to go again!

8 13320 Metcalf Avenue, Suite 365 Overland Park, KS Coaching Tip: Always name a beneficiary on everything that you own. Check with the custodian of your IRA on an annual basis to confirm the beneficiary. When you or your heirs experience a life event, take the time to review each component of your estate. Congratulations! Good Luck in the Playoffs Royals! Investment Advice offered through TRUE Private Wealth Management, a registered investment advisor. # 2 Forgetting to Name a Beneficiary Eleven Most Common Mistakes People Make With Their IRAs Part 2 of an 11 part continuing series Every week we help people like you rollover or transfer assets to and from an IRA. There are a number of pitfalls and potholes along the way that can turn an easy transaction into an IRS headache. We hope this series of Eleven IRA Mistakes to avoid will help lessen any time you might spend trying to unwind a mess with the IRS or investment company... This is such a simple Pitfall to avoid, but for some reason or another it occurs over and over for many of today s families. Primarily, this problem stems from a lack of education about naming beneficiaries on IRA accounts. When you name a beneficiary, the beneficiary will inherit the IRA account when you pass away. If you forget to name a beneficiary then the funds will be distributed according to your will. Don t have a will? Then your State will distribute the funds according to its intestate laws. In Kansas and Missouri, 50% of your property would go to your spouse and 50% to your kids regardless of age. Be sure to have at least a will in place. In addition, if there is not a beneficiary, then your assets will most likely flow through probate. The costs and complications will likely rise to settle your estate with your beneficiaries. The biggest drawback is that your heirs will NOT be able to take advantage of the Stretch IRA provisions (upcoming Mistake #3) allowable under federal law. Without a beneficiary, most plans will force your heirs to withdraw all of the money within five years or less and pay taxes on the entire plan. Ouch!! Coaching Tip: Always name a beneficiary on everything that you own. Check with the custodian of your IRA (typically the company that sends the statements on your account) on an annual basis to confirm the beneficiary. When you or your heirs experience a life event, be it a marriage, death, birth, divorce, disability, substance abuse problem, or inheritance, take the time to review each component of your estate.