Evensky & Katz Newsletter

Dear Reader:


From Discover magazine – The Internet Archive, a nonprofit organization that creates back-ups of every page of the Internet, has branched out on a new endeavor: the Internet Arcade. They’ve added a collection of 900 classic arcade video games from the 1970s through the 1990s, and you can play them all for free on your Web browser. Enjoy!


One billion people worldwide watched the Times Square ball drop on New Years Eve – from the comfort of their own homes. They also avoided the 2,000 pounds of confetti that fell on New Years Eve. I have to admit that I missed it this year. I was in Texas enjoying a wonderful bottle of Schramsberg Rose champagne with Deena, Katie, and John, and we forgot to take into account that we were on Central time while the ball was on Eastern. It could happen to anyone. We did see the replay, though.


From Barron’s – “As 2014 draws to a close, many hedge funds find themselves lagging the market, and they aren’t alone—many active mutual fund managers are in the same boat. S&P Capital IQ’s Director of ETF & Mutual Fund Research Todd Rosenbluth notes that as of

Friday, only 39% of all U.S. large-cap mutual funds are ahead of the S&P 500. Things are a little better in the small- and mid-cap space, but even there, a majority of the managers are behind. Forty-seven percent of mid-cap mutual funds are beating the S&P 400, and 43% of small-cap mutual funds are beating the S&P 600.”


Do you know any family or friends who might be getting married? I have a book for them. By Terry Savage, one of my favorite financial writers, and her co-authors, The New Love Deal is, “everything you must know before marrying, moving in, or moving out.” These three professionals from different fields confront this issue, exploring the financial and practical issues that couples confront, and the agreements that can resolve these differences before they destroy the relationship. Whether marrying for the first or second time – or just moving in together – it pays to plan in advance.


From my friend Peter:

• If God wanted us to vote, he would have given us candidates. ~ Jay Leno

• The problem with political jokes is they get elected ~ Henry Cate, VII

• We hang the petty thieves and appoint the great ones to public office. ~ Aesop

• If we got one-tenth of what was promised to us in these State of the Union speeches, there wouldn’t be any inducement to go to heaven. ~ Will Rogers

• When I was a boy I was told that anybody could become President; I’m beginning to believe it. ~ Clarence Darrow

• Politicians are people who, when they see light at the end of the tunnel, they go out and buy some more tunnel. ~ John Quinton

• Politics is the gentle art of getting votes from the poor and campaign funds from the rich, by promising to protect each from the other. ~ Oscar Ameringer

• I offer my opponents a bargain: if they will stop telling lies about us, I will stop telling the truth about them. ~ Adlai Stevenson

• A politician is a fellow who will lay down your life for his country. ~ Tex Guinan

• I have come to the conclusion that politics is too serious a matter to be left to the politicians. ~ Charles de Gaulle

• Instead of giving a politician the keys to the city, it might be better to change the locks.

~ Doug Larson

• There ought to be one day – just one – when there is open season on senators.

~ Will Rogers

• If you want a real friend – that you can trust in Washington – go buy a dog! ~ Harry Truman


It’s always worth reading Jason Zweig’s columns, but I’d particularly recommend “Lessons Learned from the Year of Surprise (http://www.wsj.com/articles/lessons-learned-from-the-year-of-surprise-1419957058?autologin=y). If you’re inclined to invest based on the short-term prognostications of financial gurus, his article may help you manage your expectations. Here’s the issue.

Unlike, say, meteorologists, who predict specific outcomes at exact times and use percentages to indicate how confident they are about their forecasts, financial pundits rarely assign probabilities to their predictions and make a variety of judgment calls that can be hard to categorize.

Why, then, do so many people seem to complain that the weather forecast is inaccurate even as they bet a chunk of their life savings on a prediction from an investing pundit whose track record isn’t even traceable?

Humans don’t want accuracy; they want reassurance. The Nobel laureate and retired Stanford University economist Kenneth Arrow did a tour of duty as a weather forecaster for the U.S. Air Force during World War II. Ordered to evaluate mathematical models for predicting the weather one month ahead, he found that they were worthless. Informed of that, his superiors sent back another order: “The Commanding General is well aware that the forecasts are no good. However, he needs them for planning purposes.”

Some examples Jason provided included:

In The Wall Street Journal’s January 2014 economic forecasting survey, for instance, 48 of the 49 participating business economists expected the yield on the 10 -year Treasury note, about 2.9% around the time of the survey, to exceed 3% by year-end, with an average forecast of 3.52%. (Actual 2.17%)

The economists surveyed by the Journal expected oil to end 2014 at about $95 a barrel, up from about $92 at the time of the survey. (Actual $54.12)

And when fears of Ebola, among other factors, scared investors into knocking stocks down by almost 10% from September to mid-October, analysts and traders raced to declare that the decline had just begun. (Actually ended the year up 13.7%)

Last year was not an anomaly. Here are some examples from our recent Client Letter:


Goldman – CNBC

The investment banking powerhouse sees the S&P 500 gaining nearly 25 percent to a level of 1450 in the next 12 months, fueled by strong corporate profits, easy monetary policies, and an improving U.S. economy.

Barron’s Roundtable

Collectively, the 10 strategists and investment managers surveyed by Barron’s see the S&P 500 finishing next year near 1373, roughly 10% higher than Friday’s close at 1244. But this solid if hardly extravagant target belies their increasingly expansive view of the U.S. stock market. A majority sees 2011 as the year when a sustainable economic recovery takes root, winning over skeptics and persuading both companies and consumers to relax their stranglehold on squirreled-away cash. Improving confidence and low interest rates bode well for corporate profits. Meanwhile, the Federal Reserve remains hell-bent on propping up asset prices, and wages and prices of goods aren’t rising enough to sound an inflation alarm that would lead the central bank to alter its course of aggressive benevolence.

Against this backdrop, nine of the 10 strategists we polled are penciling in stock-market gains ranging from 7% to 17% for next year.

RESULTS – S&P +1.9%


Barron’s Roundtable

The mean prediction of the 10 stock-market strategists and investment managers surveyed by Barron’s is that the Standard & Poor’s 500 Index will end 2012 at about

1360, some 11.5% higher than Friday’s close of 1220. That sounds like a big gain, but a lot of things have to go right for the market to make such impressive headway. Even the most bullish of these Street seers’ fears stocks could be more wobbly in the next six months than in the six months past.

RESULTS – S&P +16.1%


Barron’s Roundtable

The 10 strategists recently surveyed by Barron’s see more gains ahead next year. Their mean S&P prediction for 2013 – 1562 – implies a 10% price gain from current levels.

However, not all strategists are so positive. Jeremy Grantham in October warned, “I think next year will be a dangerous year. History is quite clear. There has been, on average, no money made in year one and two after a Presidential election going back to 1932, after you adjust for inflation. All the money is made in year three with an adequate return in year four.”

RESULTS – S&P +32.3%

FOR SHAME! (Or the things Wall Street tries to sell)

Some letters recently received by our clients:

Letter to David:

Congrats on the exercise and sale of your options at a price of $52!! As we discussed, you will probably net about $425k from the transaction. We will follow up with you regarding the wire. As I mentioned on the call, a great “temporary” place to park money

where you can receive a 3% to 4% rate of return rather than.01% in a bank account is in the Virtus Multi-Sector Short-Term Bond Fund.

Should you have any questions, or if you want to move forward with moving these funds into the Virtus Multi-Sector Short-Term Bond fund, to talk to my Private Banker regarding mortgages, or to run a financial plan, then please don’t hesitate to give us a ring directly. Also, the very best to you regarding your “growing” family. It’s a lot of work but there’s nothing better than coming home to a “dada” at the end of the day!!

Warm regards.

A letter to Brett from a client:

Letter to Brett:

I attended a medical meeting last week and there was a presentation by a few Financial Advisors from Ameriprise.

They presented two money market “alternatives” as listed below. As you know, I am holding about $ 300K in cash and would like to earn more than 0.01% on some of that money. Please look these over and let me know what you think:

A brokerage account is a traditional account. A SPS account is a wrap account and investments are fully liquid at all times.

Brokerage – Money Market Alternative Options:

1) Liquid Core – 100% liquid – STBCX Invesco Short-Term bond (1.5%) & PSTCX Virtus Multi-Sector bond (3%) Blended yield: 2.25%.

2) Stable Core 1-year Hold FRICX Federated Floating Rate Strategic Income (2.65%)

& SDUSX DWS Ultra Short (2.35%) Blended yield: 2.5%.

3) Traditional Core 50% liquid / 50% 1-year Hold – FRICX Federated Floating Rate

Strategic Income (2.65) & PSTCX Virtus Multi-Sector bond (3%) Blended yield: 2.75%.

4) Yield Enhanced – 1-year hold – HYSCX Prudential Short Duration High Yield Income (5.3%) & XSICX Voya Senior Income (4.9%) Blended yield: 5.1%.

How might that work out? How about something not included in the letter, such as past performance? While past performance may not predict future performance, it certainly might be considered a significant piece of information for an investment presented as a money market alternative.


Average Bond




Worst Returns






1 Mth

3 Mth

12 Mth



























From Money Magazine:

• Hours in the typical U.S. work day 10 hours/day

• Hours 65-74 year old retirees spend on leisure and sports daily 7

I guess that’s why they work 10 hours/day before retirement.

• How would you most like to spend your retirement? A Money readers poll:

o Volunteering ........................................................................


o Spending Time with Family......................................................... 16%

o Pursuing My Hobbies..................................................................... 23%

o Traveling .............................................................................


• What makes retirees happy?

o Having Purpose ...................................................................


o Friends and Family.......................................................................... 36%

o Financial Security............................................................................. 58%

o Good Health........................................................................................ 81%

From Wealth Management – Entrepreneurs

• The median age when they started their current companies............................................... 40

• Percentage who came from very rich or very poor families.................................................. 1

• Percentage ranked academically in the top 10% in high school........................................ 52

• The number of businesses launched by the average entrepreneur................................ 2.3

• Probability that a first-time entrepreneur will succeed............................................................. 18

• And a surprise – City with the highest number of small businesses.......................... Miami


From my #1 son. These are good.

• “Last year we couldn’t win at home and we were losing on the road. My failure as a coach was that I couldn’t think of anyplace else to play.” - Harry Neale, professional hockey coach

• “I’m working as hard as I can to get my life and my cash to run out at the same time. If I can die just after lunch Tuesday, everything will be perfect.” - Doug Sanders, professional golfer

• “I found out that it’s not good to talk about my troubles. Eighty percent of the people who hear them don’t care and the other twenty percent are glad you’re having them.” - Tommy Lasorda, LA Dodgers manager

• “My theory is that if you buy an ice cream cone and make it hit your mouth, you can learn to play tennis. If you stick it on your forehead, your chances aren’t as good.” - Vic Braden, tennis instructor

• “The film looks suspiciously like the game itself.” - Bum Phillips, New Orleans Saints, after viewing a lopsided loss to the Atlanta Falcons

• “Because if it didn’t work out, I didn’t want to blow the whole day.” - Paul Horning, Green Bay Packers running back on why his marriage ceremony was held before noon.

• “I won’t know until my barber tells me on Monday.” - Knute Rockne, when asked why Notre Dame had lost a game

• “Our biggest concern this season will be diaper rash.” - George MacIntyre, Vanderbilt

football coach surveying the team roster that included 26 freshmen and 25 sophomores “The only difference between me and General Custer is that I have to watch the films on Sunday.” - Rick Venturi, Northwestern football coach


I’m beginning to feel like I should do a special NewsLetter on the depressing and often unconscionable actions of Wall Street, Congress, and regulators that impact the average retail investor. There is certainly enough going on to keep the pages filled. Here’s a recent example from the Wall Street Journal.

Wall Street’s self -regulator appears to have dropped plans to make brokers who change employers tell all clients about any big-money signing bonuses they get as part of the move [and it’s often BIG $$$].

The Financial Industry Regulatory Authority said Friday it will float a new, less stringent proposal. It would oblige the firm that hires the broker to send clients a list of suggested questions they may want to ask before deciding whether to stay with that broker and move their accounts to his or her new firm. One question would be whether the broker was getting a bonus.

An earlier proposal would have required recruiting firms to disclose signing bonuses, including upfront or back-end payments, loans, accelerated payouts, and transition assistance, along with a broker’s expected increase in total compensation. The rules would also have required firms to tell customers if they face costs to transfer assets to their broker’s new firm.

The earlier proposal was torpedoed by financial service firms’ well-funded lobby.




“I enjoy reading your newsletter very much. In it, you mentioned BookBub (http://landers.bookbub.com). There is also BookSends (http://booksends.com/), [] which is [similar]. I thought you might want to pass this along to your readers. Fondly, Jerry”


“Harold, I was reading your newsletter and I looked to see the largest company in my state and it wasn’t there. If I’m not mistaken I think there are 50 states in the Union now, lol.”

It seems the map I included neglected to include Alaska. Honest, it wasn’t my creation, but I do apologize.


From the Wall Street Journal: “Citigroup Inc. and J.P. Morgan Chase & Co. agreed to pay more than $1 billion each to resolve allegations that they tried for years to manipulate the foreign-currency market… $4.3 billion total penalties levied on six banks for misconduct in the currencies market.”


This is a really cool site for people like us. There are pictures that illustrate how minuscule our world is compared to the vastness of infinite possibilities. Thanks to technology today, pictures

like the ones below (I’ve only included the first and last ones; there are 10 in total) explain things in a way that even I can appreciate. http://www.spiritscienceandmetaphysics.com/the-size-of-space-as-depicted-here-is-truly-mind-blowing/#sthash.4G9CaKTy.dpuf

If that doesn’t impress you, take a look at the Hubble telescope pictures.


Don’t ever forget the sacrifices our soldiers make.

Click here: JP Cormier HOMETOWN BATTLEFIELD Official Video!! - YouTube


“The modern marathon was born as a flagship event in the first Olympic Games, in 1896, with a distance of approximately 25 miles, targeted to parallel the Marathon-to-Athens mileage (the distance run by the ancient Greek soldier carrying a message from the battlefield in Marathon to Athens). But race organizers for the 1908 Olympic Games in London wanted to add local flair to their course: The race began at scenic Windsor Castle and ended at iconic White City Stadium, with runners finishing only after jaunting around the track toward the royal viewing box. That distance was 26.22 miles.” Thank you Reader’s Digest.


I’ll end this issue with an invitation to join Deena and me on:

We’ll be joining Craig Matters, Managing Editor, Paul Lim, Associate Managing Editor, and two other investment professionals all chatting about how to build your retirement future. As we’re regular Crystal cruisers I can assure you that describing it as “Six Star Luxury” is no exaggeration.

We’d love to have the company. Here’s a link for more details: www.moneyshow.com/cruise/money-magazine/montreal/?scode=035323

To all my readers, I wish you a slightly belated Happy New Year. I hope you’ve enjoyed this edition and I’ll “see” you again in a few months.

All my Best,

Harold Evensky, CFP®, AIF®


Evensky & Katz / Foldes Financial Wealth Management

© Evensky & Katz / Foldes Financial Wealth Management

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