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August 25, 2017

Are we at the top yet? Selling near stock market highs and locking in profits is always tempting, especially when the current bull market is one of the longest on record and seemingly puttering out. Yes, this might be the perfect time to sell, however, let’s look at the long term odds first.

According to Check Capital’s research, the Standard & Poor’s 500 Index (S&P 500) has advanced in 78% of the years since 1950 (or about 4 out of every 5 years). Further, 95% of every five years – and 100% of each decade – since 1950 have led to a new high. These statistics are true even though the S&P 500 has had an average of 14.2% annual peak to trough dips. Volatility is normal. While the average S&P 500 annual return has been about 10%, annual returns in the 5% – 15% range surprisingly only happen about 20% of the time so expect big price swings. If your investment time horizon is longer than a few years, betting against these odds is dangerous. But sitting through another multi-year decline is equally unsavory. What to do, then?

HeaderThe Most Important Heir to Prepare:
Part 1 of Preparing Heirs Series

I have been helping high net-worth families with their finances for almost 40 years as a professional investment advisor, as a Tiger 21 peer and as a friend. Based on my experiences, after a wealthy family has successfully organized their retirement income for the first generation and helped their children launch, many change focus to preparing their heirs for future inheritance. This is a noble and important task which will likely take decades to conduct properly (I will expand upon this topic in future series). However, the family’s primary concern needs to be preparing the heir who will accede to the responsibility of stewarding the family resources after the head of household passes; most often, this is the spouse. (While I will refer to the “spouse” in this report, statistically the survivor is the female, non-income producer in the marriage.)

In my book, Cash Out, Cash In: The After Success Investment Guide, I wrote a chapter directed toward widows and divorcees who find themselves unprepared. I also recommend reading the chapter on writing a “what if…” letter to your spouse with instructions on practical issues that are not covered in your estate plan. There I outlined how to create a road map of your different holdings and advisors for your spouse.

There are so many elements to consider when planning for your future that it can seem overwhelming; yet, imagine the possible ramifications of not properly preparing your partner. And as we all know, we are not talking about an if, but a when… Here are a few tales of successes and averted tragedies that I hope will encourage you to prepare your precious heirs:

Tiger 21 Economic Insights

Insights from Tiger 21 Conference

Dear Investor: I recently attended my second annual Tiger 21 conference where some of the biggest names in the investment world shared insights alongside 379 private investors of Tiger 21 (whose collective worth is over $40 billion). I wanted to share some valuable takeaways from the headliner speakers with you:

Thomas J. Barrack, Executive Chairman of Colony Capital, Inc. (the third largest private real estate equity fund in the world), arguably one of the country’s greatest real estate investors spoke on current real estate trends:

  • Barrack compared real estate to a slow moving train with large, long cycle moves
  • He reminded the audience that real estate is forgiving, but debt is not
  • The most important aspect of any project is free cash flow and understanding how to change the use of property to create more cash flow
  • He went on to say that the best class A building sitting on Market St. and Main St. in a large city with a AAA tenant has only one way to go – down. It cannot get better so therefore, it can only get worse
  • Barrack also held that credit today is still fairly tight with conservative LTVs, and that supply and demand are roughly in balance. Thus he did not believe that we are in a “bubble” real estate market
  • When asked what advice he would give a young professional he said, “Be able to elegantly withstand pain, work harder, learn more and be prepared and ready to take risks when the right deal comes along”

David Bonderman, Founding Partner of TPG Captial (one of the largest private equity firms in the world), listed by Forbes 400 as one of the 170 wealthiest Americans spoke about today’s economy… 

How to Keep Your Family Wealthy

We are in the midst of a historic transfer of family wealth: Right now, $1 trillion is being passed to heirs every single year In all, Baby Boomers are expected to bequeath $30 trillion to their heirs over the next 30 to 40 years. But if history is a guide, this story won’t end well. In 70% of cases, family wealth does not make it past the second generation, according to Sloan Management Review. The old saying, “shirtsleeves to shirtsleeves in three generations” is all too accurate.

A Simple Formula for Success

What’s your number? It seems that we all have a number in mind, whether realistic or not, that if we get there, our financial future would be secure and we could retire without worry. For many this “number” keeps growing and forever seems out of reach. For some this number is “a little bit more,” even though they have long passed their requirements for a comfortable retirement.

According to the Wall Street Journal, over the next 20 years, approximately $25 trillion will be passed to women through divorce, death of spouse or inheritance. Currently, women make up just under half of the nation’s millionaires. If their earning potential continues to grow on track, they will account for up to two thirds of the nation’s wealth by 2030.

Why Your Investment Return Targets Should Be Priority #3

January 2010

I have climbed mountains like the Matterhorn and El Capitan that most people have heard of, and many like the Dru, that most have not. On these long, multi-day adventures, I have always hired a local mountain guide. The old ones are the best. As the saying goes, “there are old guides and bold guides, but no old, bold guides.” The younger ones sometimes have the fastest ascents and have climbed the hardest routes, but I value and am more interested in experience and perspective.