Long Time Coming

If practice makes perfect, I am in need of some practice. It’s been nearly a month since my last post, and I’m feeling rusty. My brain is firing on all cylinders, but my fingers haven’t been pounding out much in the way of words.  I think I need to go down to Florida next month with pitchers and catchers and loosen up the arm and fingers.

A lot has been going on at Clearfront Advisory over the past month. We moved office locations to awesome new space on the Upper West Side, and we hired a new client relationship manager, Zach Scott.

If I have said it once, I’ll say a hundred times more: weather forecasters are as useless as stock market and interest rate forecasters. Here in New York City we just experienced the most overhyped weather forecast in memory. For days the media had been hyping the blizzard, Juno, as the worst to come in a century. Supermarket shelves were cleaned out; Fairway Market ran out of toilet paper! Friends and colleagues were calling in from Chicago and the UK to check in. As you know, the city ended up with less than 8 inches of snow; New Jersey had 3 inches. The mightiest blizzard to hit New York City in a century was a dud.

You can’t control the weather, and you can’t control the stock market. If the forecast is for rain, bring an umbrella. You don’t need a boat or to lock yourself in the basement with canned food and enough batteries for a lifetime. The same logic holds true for your portfolio: be prepared for good and bad times, diversify, and when things get too good or too bad, rebalance or reallocate.

Growing up, a tennis coach once told me: never get too high or too low during a match; keep your emotions in check and play your game. With respect to the weather and investing, the media will make you too high or too low and play with your emotions or whatever the part of your brain is attracted to that stuff. Most of the time the thing to do is tune it out, turn it off, and stick with your plan. Live your life.

Speaking of which, starting a blog has been a wonderful experience.  I look forward in 2015 to writing more and more often. Writing has really allowed me to entertain and explore a lot of thoughts and ideas. I understand why in creative writing they teach you to keep a journal. It’s cheap therapy. Truthfully, I love the feedback, especially the positive kind. It is really gratifying when people tell you they love to read your blog. Feed the ego!

Blogging has its own drug, Google Analytics. Google Analytics tells you how many people read your blog, when they read it, and what part of the world they live in. Someone in Eastern Europe reads my blog! According to Google, my most popular post last year was, “You Complete Me,” http://clearfront.blogspot.com/2014/09/you-complete-me.html.

It was one of my favorites as well. In it, à la Jerry Maguire, I laid out my manifesto for all of you to read. After all, you should know what your financial advisor is all about. For that matter, you should know what anyone who is dishing out advice is all about. If you would like to reread it, feel free to click the link, or pass it along to a friend or family member.

Millennials, they're not so bad.

Millennials get a bad rap and some of it for good reason. They are, it seems, spoiled, entitled, and feel that the world owes them a big break. They have grown up in the world of reality TV, hip-hop, hedge funds, and overnight billionaires who have created an app that brings a car to you (what’s up with that?).

You can see that from a distance it is easy not to like them. I am afraid, though, that I am changing my tune. I recently moved into a new office—or workspace, as they call it. It is full of millennials who have started new businesses, some who are freelance designers, and others who do stuff with the World Wide Web. I hear them discussing their work with each other but still don’t understand how clicks on a Web page generate revenue, but according to them, the checks come in. Damn, I sound old.

Work for my generation involved a desk and a telephone. We sat at our desks, most likely in a cubicle, and we did our work. Eventually, they gave us a computer. We went to lunch, worked some more, and then we went home.

Millennials come to work with their MacBook Air, an iPhone, and a headset, and they are working. They can be in an office, a conference room, or a coffee shop, but they are working and producing. They Skype, Facetime, or use another technology to communicate face to face. My generation spends hours in meaningless meetings. It’s what we were taught. How unproductive.

I am in awe of this younger generation and am glad to be around it. They are smart and resourceful. They get stuff done. Fast.

Really?

The price of oil has dropped to a five-year low, hovering near $67 a barrel. The drop has sparked a frenzy of discussion about the impact this will have on global economies. Here in the United States, there seems to be an enthusiasm among economists and Wall Street talking heads that it will create an uptick in consumer spending, creating more demand for consumer goods—Mr. and Mrs. Jones will have more money in their pocket because they are spending less at the gas pump.

There has even been discussion that the gas war is over and that demand for bigger SUV’s will soon start to surface.

 

As a country and members of the human race, can we really be this shortsighted? It was just a few years ago that oil was over $100 a barrel, and the emphasis was on building electric cars and cars fueled by natural gas and expanding our electric rail system.

Climate change is real: you don’t have to look very far to see that our weather patterns are changing, ice caps are melting, and where there was once land it is now covered by water.

Like investing for your retirement or a child’s education, you can’t make long-term decisions based on short-term reactions. If you go back and look at a chart of oil prices over the last one hundred years, you’ll see they have gone up and down more times than Pinocchio’s polygraph test. (Don’t you love that Geico commercial?) Oil may have temporarily receded, but as soon as the oil barons of Saudi Arabia, Iran, and North Dakota decide to cut production, prices will rise again.

If we learned anything over the past five years since the financial crisis, it’s that you have to be positioned for both good and bad times. A portfolio must have the right mix of stocks, bonds, and cash to weather a storm. We still need to save more, and just because we are saving a few dollars each time we fill up the gas tank, that doesn’t mean you can now buy that 75-inch flat screen you have been eyeing or upgrading to that new Chevy Tahoe SUV. If you remain consistent in your lifestyle while tapering your spending habits, it will be a lot easier to ride the waves of up-and-down oil and stock market prices. More important, if we maintain an outlook of continuing to reduce our carbon footprint and not getting sidetracked by lower oil prices, the planet will be around longer for future generations to enjoy.

Shortsighted reactions = Bad long-term decisions

Taxes and Wine

Yikes, it’s that time of year when we start saying, “I can’t believe it’s that time of the year again.” Starting next week, holiday decorations will adorn office building lobbies, stores, and your neighbors front lawns. You won’t be able to escape the endless loop of holiday commercials. I dread that Lexus commercial so much—who wakes up on Christmas morning with a new car in the driveway?

It also that time of the year to make your year-end tax moves.

·        Max out your 401(k), if you are older than 50, you can contribute up to $23,000. If you are self-employed and have a Simplified Employee Pension (sep) ira, you may be able to put away more. You have until December 31 to set up a sep for 2014.

·        If you are over 70½, you need to take your required minimum distribution (rmd) from your ira. Failure to do so by December 31 can result in a penalty.

·        Tax-loss harvesting: if certain investments didn’t work out, take the loss. You can use the loss to offset gains or carry it forward to offset future gains.

·        Give to charity. Aside from the good that comes from supporting your college, hospital, or social cause, your donation can help lower your taxes. If you have highly appreciated securities, they are great investments to donate; you avoid paying the capital gains tax, and you get the deduction for the charitable donation. It’s not a bad idea to set up a donor-advised fund for your charitable giving. A donor-advised fund is essentially a vehicle that accepts your donation (cash, stock, real estate, etc.) and allows you the flexibility to distribute funds to the charities of your choice over time.

·        If you have children or grandchildren, you can contribute to their 529 accounts. We all know how fast the cost of college is growing. Grandparents can contribute to an existing 529 account or set up their own, naming their grandchildren as beneficiaries.

Next week is Thanksgiving, and I thought I would close out this post with a few wine and beer selections to complement your turkey feast. I am a firm believer that there is no “right” wine to drink with your dinner. Drink what you like, and who cares what your pretentious uncle has to say.

·        2012 Slingshot Napa Valley Cabernet. I love this wine! It’s soft, with a lot of fruit, and not terribly oaky. It will definitely not overpower your bird or pumpkin pie.

·        2012 Montinore Estate Pinot Noir. I wrote about this Oregon wine earlier in the year and still consider it my go-to pinot. Pinot noir is the traditional red wine of Thanksgiving because of it softness and earthy flavor. While I have not tasted Montinore’s Almost Dry Riesling, I have read great things about it. Riesling is a superb white wine choice with turkey because of the richness of flavor and slight sweetness on the finish.

·        2012 Argyle Pinot Noir. This is another Oregon pinot noir that is peppery and full-bodied enough to take on that overcooked turkey.

As I said earlier, I believe in drinking the wine you enjoy. But if you really want to impress someone on Thanksgiving this year, bring a gewürztraminer to dinner. Gewürztraminer is a grape varietal that is grown all over the world but is most prolific in Germany and the Alsace region of France. There are many fine American gewürztraminers, many from wineries in northern Michigan, specifically the Leelanau Peninsula. One of my favorite gewürztraminers comes from a California winery, Gundlach Bundschu. This is the ultimate turkey wine—luscious, viscous, and packed with aromas to complement everything on the table. Trust me!

Last but not least a Thanksgiving beer, and it’s an obvious one. While some pumpkin beers can be overpowering, too much cinnamon and clove, Southern Tier Brewery located in western New York State makes a winner called Pumking. This beer comes out before Halloween, but you should still be able to find bottles at your favorite retailer.

 

 

Enjoy your Thanksgiving with friends and relatives. Cherish the time off, watch some football, eat until you can’t eat any more, and most important, if you are traveling, travel safe. Happy Thanksgiving.

 

A Guide to Great Service

I am a good service junkie. Some people love cars or watches. I love a great customer experience. Whether in a restaurant, grocery store, or a doctor’s office, a superb customer experience is a work of art and makes me want to come back again and again.

We have all experienced the worst in customer service: your local cable provider is as bad as it gets, followed closely by your bank. Having someone apologize for lousy service doesn’t make it any better.

I first learned about the art of the customer experience at a seminar over 20 years ago at the world-renowned deli Zingerman’s.  Yes, a deli, in Ann Arbor, Michigan.

From the moment you walk into Zingerman’s, you are king. There are samples of food displayed everywhere. Enthusiastic sales people are scrambling to answer any question you have. If you want to taste a Sicilian olive oil, they’ll crack it open. They know that an engaged customer is a happy customer who will come back time and time again.

If you want to read about the art of giving great service, I suggest you order a copy of Zingerman’s Guide to Giving Great Service by Ari Weinzweig, www.zingermans.com/Product.aspx?ProductID=P-ARI-7.

What prompted me to write about great customer experience was a trip I took with my daughter to her dermatologist. Granted, this is a fancy Upper East Side dermatologist who does not take insurance, but the experience was great—you almost don’t care that you have to remortgage your apartment when you check out.

When you enter this doctor’s office, you are immediately made to feel relaxed and happy. The walls and carpet are a rich cream color, there is beautiful comfortable furniture to melt into, and your favorite music is playing on a super chill Pandora playlist (think Dave Matthews meets Van Morrison.)

While my daughter was being treated, the doctor noticed a burn I had on my wrist from a cooking mishap. She didn’t like the way it looked, and without saying a word, her nurse began bathing my wrist in hydrogen peroxide. A baggie of bandages and “special” antibiotic cream was prepared for me. All of this with no words exchanged.

After we were done, we walked over to settle our bill. We were greeted by a very pleasant young exchequer, and there on the counter beside her was a glass vase filled with the best caramels I have ever had. I popped one in my mouth and eyed my daughter, signaling her to throw a few more in her pocket.

 

My daughter thinks I am crazy to feel so happy about a trip to the doctor, but this was an unbelievable customer experience. Who ever says they had a great experience at the doctor’s office? Usually the waiting room has uncomfortable generic furniture, torn-up old copies of People magazine, unhappy receptionists, and no Van Morrison playing in the background. Certainly no delicious caramels. This doctor has made every effort to wow you from the moment you walk through the front door. You are happy to be there.

If you are in the service business, think about your customers’ experience. Have you thought about every possible step and how it might be improved? Are you meeting or surpassing your customers’ expectations? Do your customers value your service, your expertise? Do customers rave about you to their friends and colleagues? If not, it’s time to think about how you really want to be treated and do that for your customers.

Failure to Fail

My 10^th grade daughter has more homework each night than I had each week when I went to high school. It is astounding; she is up until 1 or 2 o’clock in the morning doing homework. She is not a procrastinator or busy multitasking on Facebook and Instagram. She may get a late start because she runs cross-country, but I don’t think she starts her homework any later than most 10^th graders.

The state of education in this country and maybe other developed countries is simply abysmal. I am not an expert on education, and in all fairness I have never attended a PTA meeting in my life. What I can tell you is that schools are failing to really educate our children. Schools do a really good job of giving homework and preparing students for standardized test, but are we educating our children?

In a recent New Yorker article on this subject, Nathan Heller writes about whether elite colleges are “bad for the soul.” Much of the article is about William Deresiewicz and his essay in the American Scholar, “The Disadvantages of an Elite Education,” and book Excellent Sheep: The Miseducation of the American Elite and the Way to a Meaningful Life.

According to Deresiewicz, the system “manufacturers students who are smart and talented and driven, yes, but also anxious, timid, and lost, with little intellectual curiosity and a stunted sense of purpose: trapped in a bubble of privilege, heading meekly in the same direction, great at what they’re doing but with no idea of why they’re doing it.”

Why are we still having students memorize facts instead of teaching what they really mean or don’t mean? My daughter is asked to read the front page of the New York Times every day and then quizzed on random facts. Wouldn’t it be better to discuss the front page and ask students what they think of a story or have a discussion about how they’re dealing with the stories about ISIS or Ebola?

I constantly see T-shirts or bumper stickers advertising the importance of failing, getting up, dusting yourself off, and trying again. But are we really teaching our children this approach to life? If they are only focused on their grades and knowing what they are supposed to know, are they learning the importance of failing, figuring out what it might take to find a different way, and then trying again (and again)?

If we really believe in the importance of failing, then we have to encourage our kids to be okay with failure, to take risks and experience a full range of outcomes, both good and bad.

This idea of learning through tests has crossed over into college. This is a time in young adults’ lives when they should be exploring every opportunity. Deresiewicz writes, “The job of college is to assist you, or force you, to start your way through the vale of soul-making. Books, ideas, works of art and thought, the pressure of the minds around you that are looking for their own answers in their own ways: all of these are incitements, disruptions, violations. They make you question everything you thought you knew about yourself.”

We are truly failing our children if we don’t start letting them know it’s okay not to get an A if it means they are really engaging with what they’re learning. If they’re studying in order to get an A but fail to really know, feel, or understand the material at hand, it’s not an A. It means they are robots.

Slow Mo

 As I have noted in several blog posts, before I was an investment advisor, I imported wine, olive, and balsamic vinegar. The balsamic vinegar that I imported was produced by a friend of a friend in Modena, Italy. His name is Massimo Bottura. Massimo is a chef, and his restaurant in Modena has been awarded three stars by Michelin for the past few years. Massimo has become quite a famous chef and recently published a book called Never Trust a Skinny Italian Chef.  

Massimo turned me on to a growing movement in Europe at the time called “Slow Food,” which caught on here in the United States many years ago. Slow food was a reaction in Europe to the rising number of American fast food chains then spreading across the Continent. The tipping point came when McDonald’s opened a store at the base of the Spanish Steps in Rome.

Slow food is a state of mind; it’s about eating food that is fresh and healthy, food that is pesticide and chemical free and accessed in a way that is beneficial to all.Slow food is also a lifestyle choice; it’s about slowing down and enjoying the proverbial roses. 

I view investing in a similar fashion. Like the Slow Food movement, it’s organic, and it needs time. Wealth is created slowly, by saving and riding out the ups and downs. Investing should be boring.

When Warren Buffet was once asked how the average person gets rich, he answered: “Spend less than you make, always be saving something. Put it into a tax-deferred account. Over time it will amount to something. This is such a no brainer.” I love Buffet’s mantra, “Boring is beautiful.”

It is hard for me to believe that the man I was driving around Emilia-Romagna with tasting balsamic vinegar is now one of the world’s most famous chefs. In the last few weeks he has been on Charlie Rose and Jimmy Kimmel. He even created a special hamburger for Shake Shack. When interviewed by Charlie Rose, Massimo spoke of the concept of “making simple the difficult thing.” As a purist and true believer in simplicity, I love that idea. Whether we are talking about food, wine, life, or investing—keeping it boring and simple, that is the road to success.