Often times, our perception of things, places and people is unwittingly clouded by our biases and preconceived notions. What we think we see and know becomes an intimate part of who we are and how we come to see the world. The challenge is to remain open to new information and reevaluate our positions for a better understanding of how we interpret our world.
I started out on a very overcast day driving down I-91 in Vermont to a introductory meeting with an partner of a New Hampshire trust company. The forecast was for increasing rain as the first drops from Tropical Storm Nicole splattered my windshield. Lucky for me, it was foliage season. The hills were covered with brilliant red, orange and gold bursts of color. The drive became somewhat hypnotic as mile after mile brought endless vistas of quaint little towns nestled in a bouquet of fall colors. I smiled at my good fortune to be taking in the breathtaking views in such a wonderful setting. I sipped my coffee and flipped on the radio to catch the morning's news.
The commentary turned to a story on the local Vermont economy and how families have been coping the past few years. I had always heard that Vermont was a relatively poor state. I knew that local tax rates were quite high (and increasing), there were less job opportunities than the big urban areas and just about everyone I knew was belt tightening and being conservative with their money and investments. What the announcer said next was what stopped me short. "In 2009, 19% of Vermont children lived in poverty". According to the US Department of Health and Human Services, the poverty level for a family of 4 is in a range of $22,000-$27,000 per year depending upon which state you live in. In Vermont, they define it has roughly less than $900 per month for a single person. A report by the Kaiser Family Foundation found a record number of Americans signed up for Medicaid last year bringing the total to 48 million people or almost 16% of the US population. I'm a financial planner and, to be honest, I don't know how you feed, clothe and provide shelter for 4 individuals in America on so little let alone go to the doctor or pay for kids' schooling, music, camps, sports, etc. The countryside was indeed incredible, an idealist's paradise. Yet, it also contained a lot of people struggling just to get by everyday.
The rain was picking up now and the incoming fog muted fall's colors into a mottled, mosaic of its former brilliance. The radio switched gears to a discussion of the upcoming general elections in Brazil. The two-term President of the eighth largest economy by GDP, the popular Luiz Inacio Lula da Silva was stepping aside as the law required. Highlights of his presidency include paying off early the nation's IMF debt; overseeing an expansion of needed infrastructure and social programs; stabilizing the economy; enacting a pragmatic foreign policy; and an upgrade in the nation's credit rating from speculative to investment grade. Since his term began, the announcer stated the impact of Brazil's success has resulted in an amazing 30-35 million people added to the middle class. This is an astounding number! Imagine over 30 million additional US buyers of cars, homes, washing machines with additional Starbucks to serve them all coffee! The investment opportunities that have been created in manufacturing, the service industry, banking, trade and construction create exciting possibilities for foreign investors. No longer a nation known only for its slums, the beaches of Rio, Brazilian futbol and rain forests, this nation has transformed itself to become the dominant economy of the southern hemisphere and an increasingly important player on the world stage.
We take false comfort in what we see with our eyes and what we believe to be true in our minds. Yet, that is no substitute for reality. In an instant, a few simple facts can change your entire view of a nation or a small, New England state. I've reoriented my thinking so that when I stop at a local farmer's market, I may be helping put money on the table of a family that so desperately needs it. I can also see a country like Brazil with new eyes and realize its great investment opportunities and can understand some of its dynamism.
Rain and spray kicked off the highway in front of me. You could still see the trees but there was less clarity and more uncertainty in the driving and the view. Having an accurate world view is important for investing opportunities or identifying problem areas in your own backyard. We need to see things they way they really and not fall back on comfortable assumptions of what we think we know.
Thursday, September 30, 2010
Wednesday, September 29, 2010
Buy Gold?
An ounce of gold crossed the $1,300 threshold yesterday and has appreciated over 350% since 2000. Is now the time to buy? Many money managers and large institutions have been aggressively buying exchange-traded funds (mutual fund-like trading vehicles) and physical gold (coins and bullion). Companies are buying storage capacity, coin dealers are charging premiums, volatility measures suggest people are not just speculating but hanging onto their gold and more professionals are switching to ongoing bullish forecasts.
Q: Should you buy gold?
A: Perhaps, but only for the right reasons.
First, most homeowner's insurance policies severely limit the amount of money, silverware, goldware and coin collections to a few hundred dollars. Additional amounts you can cover under a separate Personal Articles Policy but bullion is generally not covered. You would be best served placing these types of assets in a bank safe deposit box. There are ongoing expenses for this service plus you won't have 24/7 access. Transporting gold is burdensome and not immediately marketable unless through a dealer. You would also have to be familiar with the current market rates for your bullion and coins.
Second, you can access gold and other commodities via ETFs, mutual funds, and the commodities futures markets. There are costs and taxes for buying and selling but you generally have greater liquidity. The big caveat here is: know what you are buying. When retail investors mix with big institutions, hedge funds and other professional money managers, you are at a decided disadvantage. Commodities are volatile and big players can move markets... or have them move against them in a hurry. They place large trades, have better information and teams of analysts and traders to take advantage of inefficiencies in the markets. You also have to know there are significant differences whether you are buying a futures contract, gold bullion, stock in a mining company, how much leverage is involved and the history of the manager.
Third, perhaps the most important question: why has gold run up in price? The two main reasons are ongoing worries about another U.S. or global recession and devalued currencies. People have been buyers of gold throughout this recession. Gold is traditionally thought of has a safe haven and even more so with the falling value of the dollar. The pros said we hit the top around $1,100. Today, many are capitulating and changing their tunes. Currently, there is great momentum with gold. However, the signs of mania in the gold market are clearly there. Troubling is that jewelry and industrial demand has weakened, the US government may have to intervene again and buy more debt (inflationary/weaken the dollar), and our low domestic interest rates will continue to weaken our currency. The conditions that created this environment may be fleeting and fickle. A new economic report could change sentiment very quickly. So, let the investor beware.
Long-term investors in gold and commodities would do well with a small tactical allocation. Identifying the right type of investment, the costs and risks would, however, best help investors temper their expectations.
Q: Should you buy gold?
A: Perhaps, but only for the right reasons.
First, most homeowner's insurance policies severely limit the amount of money, silverware, goldware and coin collections to a few hundred dollars. Additional amounts you can cover under a separate Personal Articles Policy but bullion is generally not covered. You would be best served placing these types of assets in a bank safe deposit box. There are ongoing expenses for this service plus you won't have 24/7 access. Transporting gold is burdensome and not immediately marketable unless through a dealer. You would also have to be familiar with the current market rates for your bullion and coins.
Second, you can access gold and other commodities via ETFs, mutual funds, and the commodities futures markets. There are costs and taxes for buying and selling but you generally have greater liquidity. The big caveat here is: know what you are buying. When retail investors mix with big institutions, hedge funds and other professional money managers, you are at a decided disadvantage. Commodities are volatile and big players can move markets... or have them move against them in a hurry. They place large trades, have better information and teams of analysts and traders to take advantage of inefficiencies in the markets. You also have to know there are significant differences whether you are buying a futures contract, gold bullion, stock in a mining company, how much leverage is involved and the history of the manager.
Third, perhaps the most important question: why has gold run up in price? The two main reasons are ongoing worries about another U.S. or global recession and devalued currencies. People have been buyers of gold throughout this recession. Gold is traditionally thought of has a safe haven and even more so with the falling value of the dollar. The pros said we hit the top around $1,100. Today, many are capitulating and changing their tunes. Currently, there is great momentum with gold. However, the signs of mania in the gold market are clearly there. Troubling is that jewelry and industrial demand has weakened, the US government may have to intervene again and buy more debt (inflationary/weaken the dollar), and our low domestic interest rates will continue to weaken our currency. The conditions that created this environment may be fleeting and fickle. A new economic report could change sentiment very quickly. So, let the investor beware.
Long-term investors in gold and commodities would do well with a small tactical allocation. Identifying the right type of investment, the costs and risks would, however, best help investors temper their expectations.
Tuesday, September 28, 2010
Lawyer Rules
[WRITER'S NOTE: The following is a partial account of an actual letter written, I suspect, from my neighbor's lawyer over said neighbor's tree threatening my house. It states the facts, is tongue-in-cheek, and ends with some reflections and questions on how things could have played out differently. My hope is simply that this may help others who deal with problems with neighbors before involving lawyers.]
What a disappointment to get a letter from a lawyer written supposedly by my neighbor over a dangerous tree. While a phone call and timely addressing of the issue would have gone a long way to solving the problem, this was unfortunately not the case. Ultimately, a letter from a lawyer should be a last resort and has only served to shut down meaningful dialogue and alienated both neighbors going forward.
Background: There remains today, a large mostly dead Ash tree overhanging our house. Last February, a violent windstorm caused a cascade of branches and debris to rain down onto our roof and property. The tree sits on her side of a stone wall and while a survey has never been done, neither of us dispute the wall as the boundary of our properties. So many branches were hitting the roof, my daughter refused to sleep in her upstairs bedroom. It was indeed, the only time I've ever been afraid in my own home.
Come Spring, I lobbied for the tree to be cut down. I received estimates between $1,600-$1,800 of which I offered to pay half. My neighbor complained about money and said she'd get back to me (I sensed this would be difficult). Summer came and went with no reply. This September, a relatively small branch
fell and punctured the metal casing of my grill and the grill cover tarp. Result: $84 damage. I called and left a message saying we had minor damage and I wanted resolution before Winter. My wife called and spoke directly to the neighbor reiterating our concerns. I now had a second cost estimate which would involve me in assisting a tree pruner to save money. Finally, I called again and left another message: I would work with a pruner to remove only threatening branches for a total cost of $500.
A few days later, I received a certified letter (never a good sign) on a neatly typed legal envelope. Inside was a perfectly typed 3 paragraph letter.
The purpose of the first paragraph was a complete unwillingness to take any responsibility for damage to the grill cover.
Rule 1: Never take responsibility for any damages. Letter states "By no means was it (payment) an admission of responsibility for the tree, or for any damages that result...". A good lawyer states this first, right up front.
Rule 2: Deny legal basis for any action.
"As far as I know, there is no evidence that this tree is on my land...". It seems silly to make the argument to not recognize a border which, up until this point, has been recognized. Of course, the current circumstances do make it awfully inconvenient to recognize it!
Rule 3: Accuse contra party of claiming a desire to assign liability and blame towards neighbor.
"...since you have shown a tendency to want me to be liable for minor property damage that I do not consider my responsibility...". Well, would it have been better to wait until a tree branch went through my roof? Or if a branch hit a person? Were you actually wanting major damage before acting?
Rule 4: Establish firm rules prohibiting all access, for any reason, to property.
"I must plainly state that I do not give my permission for you, the members of your family or any of your agents to use my land... at any time... for any purpose.". That would be fine, except, according to you, we don't really know where your land begins and mine ends!
Rule 5: Express sympathy with the situation and state unqeuivocably that compensation is a gift.
"I am truly sorry that the situation has reached this conclusion...I am sending a check for $250...Please keep in mind, however, that it is a gift to you from me personally." Well, I've never been given a gift from any other neighbor for no good reason so I guess I'm really glad to know you! I actually understand the lawyer needing to state this but it is so phony it is almost laughable.
Aside from me paying 100%, how could I have avoided this? Was it inevitable? How could I have handled things differently? I mean, I couldn't just ignore it and let something serious happen. We felt threatened everytime there was a storm. Due to circumstances, we are both relatively new neighbors to each other (neither of us has lived in our respective homes much the past 2 years).
I am a bit sad because I never wanted to allow petty things like this come between neighbors. We both examined this situation from our own self-interest. As a result, we were both blinded to the plight of our neighbor.
What a disappointment to get a letter from a lawyer written supposedly by my neighbor over a dangerous tree. While a phone call and timely addressing of the issue would have gone a long way to solving the problem, this was unfortunately not the case. Ultimately, a letter from a lawyer should be a last resort and has only served to shut down meaningful dialogue and alienated both neighbors going forward.
Background: There remains today, a large mostly dead Ash tree overhanging our house. Last February, a violent windstorm caused a cascade of branches and debris to rain down onto our roof and property. The tree sits on her side of a stone wall and while a survey has never been done, neither of us dispute the wall as the boundary of our properties. So many branches were hitting the roof, my daughter refused to sleep in her upstairs bedroom. It was indeed, the only time I've ever been afraid in my own home.
Come Spring, I lobbied for the tree to be cut down. I received estimates between $1,600-$1,800 of which I offered to pay half. My neighbor complained about money and said she'd get back to me (I sensed this would be difficult). Summer came and went with no reply. This September, a relatively small branch
fell and punctured the metal casing of my grill and the grill cover tarp. Result: $84 damage. I called and left a message saying we had minor damage and I wanted resolution before Winter. My wife called and spoke directly to the neighbor reiterating our concerns. I now had a second cost estimate which would involve me in assisting a tree pruner to save money. Finally, I called again and left another message: I would work with a pruner to remove only threatening branches for a total cost of $500.
A few days later, I received a certified letter (never a good sign) on a neatly typed legal envelope. Inside was a perfectly typed 3 paragraph letter.
The purpose of the first paragraph was a complete unwillingness to take any responsibility for damage to the grill cover.
Rule 1: Never take responsibility for any damages. Letter states "By no means was it (payment) an admission of responsibility for the tree, or for any damages that result...". A good lawyer states this first, right up front.
Rule 2: Deny legal basis for any action.
"As far as I know, there is no evidence that this tree is on my land...". It seems silly to make the argument to not recognize a border which, up until this point, has been recognized. Of course, the current circumstances do make it awfully inconvenient to recognize it!
Rule 3: Accuse contra party of claiming a desire to assign liability and blame towards neighbor.
"...since you have shown a tendency to want me to be liable for minor property damage that I do not consider my responsibility...". Well, would it have been better to wait until a tree branch went through my roof? Or if a branch hit a person? Were you actually wanting major damage before acting?
Rule 4: Establish firm rules prohibiting all access, for any reason, to property.
"I must plainly state that I do not give my permission for you, the members of your family or any of your agents to use my land... at any time... for any purpose.". That would be fine, except, according to you, we don't really know where your land begins and mine ends!
Rule 5: Express sympathy with the situation and state unqeuivocably that compensation is a gift.
"I am truly sorry that the situation has reached this conclusion...I am sending a check for $250...Please keep in mind, however, that it is a gift to you from me personally." Well, I've never been given a gift from any other neighbor for no good reason so I guess I'm really glad to know you! I actually understand the lawyer needing to state this but it is so phony it is almost laughable.
Aside from me paying 100%, how could I have avoided this? Was it inevitable? How could I have handled things differently? I mean, I couldn't just ignore it and let something serious happen. We felt threatened everytime there was a storm. Due to circumstances, we are both relatively new neighbors to each other (neither of us has lived in our respective homes much the past 2 years).
I am a bit sad because I never wanted to allow petty things like this come between neighbors. We both examined this situation from our own self-interest. As a result, we were both blinded to the plight of our neighbor.
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