Should You Spend Like You’re Rich?

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When children think about rich people the mental image might be something like Rich Uncle Pennybags from the Monopoly game: a monocled fat cat in a top hat with bulging sacks of money.

Obviously, the reality is much different. As we mature we typically develop a more realistic picture, but there is one surprising realization: it is usually much, much cheaper to be rich than to be poor. Having money enables us to live more cheaply and avoid many painful financial pitfalls.

To begin with, paying cash is often cheaper than paying with credit. If you are able to lay down cash for major purchase such as vehicles or even houses instead of having to borrow, you don’t just save on fees and interest, you may even be able to negotiate a better price. If you are funding large items on a credit card, you are likely to wind up paying many times what they are worth. If you are hard up enough that you need to turn to high risk credit in the form of payday loans, things get even worse.

There are other ways that having money allows you to stretch your money out, too. Buying quality merchandise may take more money up front, but if the alternative is buying shoddy products need to be replaced more often, you may save money in the long run by paying more up front. (Of course, care must still be taken to select your purchases carefully: higher cost does not always correlate to higher quality!)

Also, when you have a life of plenty you have the luxury of being able to shop around and wait for a better price. If you have two of everything, it is not an emergency if one breaks or gets used up. Without that surplus, you may find yourself having to go out and buy a replacement whether you like the price or not.

These habits, paying cash and shopping carefully and not being in a hurry to spend, are ones that all of us can use to help us build and maintain our own wealth.

The wonderful conundrum that some have discovered is this: the less you spend, the more wealth you accrue; the more wealth you have, the less you need to spend. Please call or write if you would like perspective or conversation about your situation.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

That’s a GREAT Question

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Recently, a client asked a very blunt question. Just in case anyone else is wondering the same thing, I would like to share the answer.

The client lives a couple states away. He was originally referred by a good friend of his, a person we’ve known for a very long time. We had been conversing about a notable investment success of the past year. I detailed the millions of dollars in gains across our whole client list, and then he asked the question.

“So with your ability to find opportunities like that, why are you talking to me?”

Great question. It gets right to the core of my being.

Obviously, it isn’t the money. I could run a hedge fund, or work on investments in an ivory tower somewhere on behalf of investors I never met and did not know. Instead of working with clients every day, I could have managed the people who talk to clients or managed the people who managed the people who talked to clients.

The fact is, back when I was still in my twenties I knew my ultimate aim was to find a group of clients to whom I could deliver sophisticated investment advice, for our mutual benefit. More than twenty years ago I started Leibman Financial Services to attain that goal. The lives I had touched in my previous, more wide ranging career affirmed the course I set.

The widow who was able to retire within weeks of our first meeting, and own her first home a couple years later—my work was key to giving her the confidence to act. I had a positive impact on her life. Nothing else in my career had ever gratified me as that did. Twenty years ago, a handful of experiences like that inspired me.

Now, our business is organized to maximize gratification from work like that. It might be for retired school teachers or truck drivers or business owners or big-company execs or bankers—we serve a niche market of the mind, not some narrow demographic.

This driving force, by the way, also explains why I persevere in my work despite other challenges we face—and why I want to work to age 92. My passion has provided us the material things we need in life—my bills are paid. Now it is about piling up the psychic rewards my work provides. THAT’S why I’m talking to you.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

No strategy assures success or protects against loss.

Freedom to Decide vs Freedom to Debate

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One definition of ‘discretion’ is freedom to decide what should be done. 95% of our investment advisory clients have granted us discretion to trade individual securities on their behalf, for their benefit, in line with their objectives.

In 2016 this privilege was key to making bond purchases, which had to be done on a bulk basis. In other words, one large purchase in the market was divided among scores of our client accounts. The issue is that we cannot talk to eighty or a hundred clients in a short enough time frame to place a bulk order.

The logistics can be daunting. When we learn that a bulk purchase has been negotiated, then we must make sales that same day in all affected accounts to raise the money to pay for the bonds.

Fortunately, we developed a rules-based framework that enabled us to handle all the work on a timely basis. In late 2016 we used the same concept to develop a protocol for trading stocks. This new method is astoundingly effective.

On one day, we placed more than five hundred individual stock trades. We had concluded that a sector we owned was going to have a lot of trouble maintaining revenues and profits and needed to be sold. At the same time, we were excited about the bargains we had found elsewhere in the market. (You can read more about our strategies here.)

We have a high duty to advisory clients, whose situations and accounts we must monitor over time. Even with our new-found efficiencies, we have less and less time for commission-based brokerage business. Because we lack freedom to decide, we only have freedom to debate.

By that we mean to place calls, discuss potential investments, argue or not, and perhaps obtain permission to make a trade in exchange for a commission. The ‘freedom to debate’ part of our business is under $10 million and shrinking. The ‘freedom to decide’ piece is approaching $50 million and growing.

We are committed to our three key activities: talking to you, researching investments, and managing portfolios. We can do the most good for the most people if we have freedom to decide. This is why we ask you for that privilege and obligation. If you have any questions about this, or any other aspect of your situation, please call or write.


In a fee-based account clients pay a quarterly fee, based on the level of assets in the account. In deciding to pay a fee rather than commissions, clients should understand that the fee may be higher than a commission alternative during periods of lower trading. Advisory fees are in addition to the internal expenses charged by mutual funds and other investment company securities. Clients should periodically re-evaluate whether the use of an asset-based fee continues to be appropriate in servicing their needs.

Investing involves risks including the possible loss of capital. No strategy assures success or protects against loss.

Ask Your Advisor if Asymmetric Returns Are Right For You

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Those who know us best have probably noticed one of our investment tendencies. We lean toward those opportunities where we perceive a high probability they will work out over time. One of the hallmarks of our method is seeking bargain valuations . Quite often, these are in boring but essential industries.

One of our major current themes is the evolution of the automobile. It takes 3 cents worth of electricity to go a mile in an electric car or a hybrid in electric mode. But it takes 10 cents worth of gasoline. The seven cent difference figures out to $175 billion per year in the US1. The change won’t happen overnight, but the economics will only get more compelling over time.

Large global auto manufacturers appear to be trading at bargain prices. One of them has sold hundreds of thousands of hybrids. Another is launching the first all-electric vehicle priced at mass-market prices. Sophisticated suppliers that are bringing new things to the manufacturers also figure into our strategy. These companies are attractive, based on our traditional research methods.

There are other players, however, that do not fit our usual specifications. Silicon Valley is full of disruptive visionaries trying to turn the auto industry upside down. Maybe they are geniuses, and maybe they are nutcases. But if an upstart company can capture 3% of the new vehicle market over the next few years, the payoff may be considerable—or, they could go broke in the face of their many challenges.

A dollar invested could be lost—or could turn into many dollars. There are no guarantees here: this is more speculation than investment. This is what is meant by “asymmetric returns.” It probably won’t work out to where you could make only a dollar or lose a dollar—the potential gain and the potential loss would be symmetrical in that case.

One might consider a small investment in an upstart as a hedge on our other holdings—a way to cover all the bases. We’re not going to change our core investment philosophy. Speculative investments are not appropriate for all accounts, and they will never replace the timeless principles that shape the vast majority of our portfolios. This is an evolution in our thinking and methods and we thought we ought to keep you informed. If you would like to discuss these ideas or other parts of your situation, please write or call.

1. Figures derived from US Department of Transportation statistics and the American Petroleum Institute.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Value investments can perform differently from the market as a whole. They can remain undervalued by the market for long periods of time. Investments mentioned may not be suitable for all investors.

The Longest Journey, Part Three

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Our client W is the one who came the farthest to become an effective investor. When he began, he had all the poor investing habits that untrained human nature bestows. He learned three huge lessons along the way. Because his journey has meant so much to his financial security, we are profiling his story in this series of three posts.

W learned that popular but over-priced assets are dangerous in the Tech Wreck of 2000. Many others learned the wrong lesson, to their detriment—they came out believing that ‘the stock market is dangerous.’

After the 2007 market peak in the financial crisis, W learned that fear about short term action did not need to be acted upon—that one could take the long view. He stayed in position to recover, instead of selling out at a bad time. And he learned to keep the long view in mind, instead of getting rattled by temporary declines.

Our work played a large role in these first two lessons. The third one, W learned on his own.

Within a year of retiring, a decision that his employer made for him in the tough times, W realized that all of his pre-retirement fuss and worry about having enough money had been a big waste of energy. W loved having control of his time, for time is what life is made of.

What hit W is that money is not the scarce resource one should be most concerned about. Time is the limiting factor. Living life became so important to W that time well spent became the source of his greatest fulfillment.

Understand that W had done a nice job of planning. He earned and saved enough for financial success. But when he began to focus on life, money became less important. He was able to disassociate from temporary downturns, and not worry about them.

Recently we reviewed our understanding of this long journey with W. He agreed with the notion that the three lessons were crucial to where he ended up. But he also made an interesting observation:

“The great conundrum is that once you stop worrying about money, it is much easier to have more of it.”

W learned along the way, and continues to learn. The lessons he learned were valuable to him, and have been valuable to others. If you would like to talk about your journey, please write or call.

Part One Part Two


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This is a hypothetical situation based on real life examples. Names and circumstances have been changed. To determine which investments or strategies may be appropriate for you, consult your financial advisor prior to investing.

Year in Review

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The year now ending has been amazing in a number of ways. The investment markets and developments here at 228 Main contributed to an unusual period for you and us.

In the markets, the things that hurt us in 2015 helped us in 2016. Last year we wrote that the bargains we owned kept getting cheaper. We kept the faith and continued investing in our themes, and the trend changed with a vengeance, to your benefit. One might say that things went our way in 2016.

Our research and trading capabilities were on display all year. When bargains appeared in resource-related high yield bonds, new trading protocols were required. It took new ways of doing things to trade in scores of accounts in a day. We developed strong relationships with good people on the bond trading desk at LPL Financial. Now our capabilities are greater than ever.

Our communications program in the new media continued to build and evolve. www.228Main.com has become a fairly complete library about our philosophy, strategy, methods and tactics. About half of our clients check in daily to see what we think is most interesting or pertinent, via one of three social media sites. The efficiencies we’ve gained by using new media have enabled us to make more outbound on-on-one calls, too.

Back in the real economy, new jobs were created each month. Retail sales and most measures of economic activity moved higher through the year. Business profits are rebounding after a lull. We believe our main themes are appropriate for the times, and sensitive to current conditions.

Our principles remain unchanged, but we are always seeking to improve our strategies and tactics. Avoiding stampedes, owning the orchard for the fruit crop, and seeking the biggest bargains are always going to make sense. We will have to be more effective and efficient than ever, both to perform for you and to meet new regulatory pressures.

Goodbye, 2016! We’ll build on the improvements we made, and use what we learned to seek more opportunities for you. Please write or call with comments or questions.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

No strategy assures success or protects against loss.

Annual Market Forecast

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It is that time of year. Prognosticators and pundits issue their forecasts for the year ahead. Wouldn’t it be nice to know what the future holds! Some forecasts are hedged, and don’t really say much. Our prediction is quite specific.

Many of those who have visited our offices know that we actually do have a crystal ball. It forecasts the direction of the stock market for the coming year. It does not say how far the market will go, but it always predicts the direction.

If you knew which way the stock market was going to go, could you make money investing?

Here’s the catch: our crystal ball has only been 76% accurate. So perhaps the question should be, if you knew which way the stock market was going to go 76% of the time, could you make money investing?

Without further ado, here is what my crystal ball says about the direction of the stock market for the year beginning January 1: it will go up.

Long-time observers will not be surprised. The crystal ball always says the market is going up. It has never predicted a down year. And checking back over the past hundred years, according to Standard & Poor’s, it has been right 76% of the time.

We don’t know how well its track record will hold up, but we believe this presents a favorable backdrop to buy bargains, avoid stampedes in the markets, and seek to own the orchard for the fruit crop. In other words, to keep on keeping on, following our plans and strategies.

It is tempting to include a discussion of the economy, the strengths we perceive, and the faint possibility of recession. We’ll leave that to people with more time on their hands. If your plans or planning will be evolving in the new year and require our attention, please call.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Investing involves risk including loss of principal. No strategy assures success or protects against loss.

The Longest Journey, Part Two

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W is the person we know who made the longest journey to become an effective investor. Before, he chased performance, jumped on popular investments, and focused only on the short-term action of his holdings.

In Part One we profiled how he managed to learn the correct lesson from the Tech Wreck in the year 2000. W learned that popular but over-priced assets are dangerous. Others learned the wrong lesson, “stocks are dangerous.” Those who learned that lesson generally went on to buy over-priced real estate, or withdrew completely from investing.

W profited by owning equity investments in the recovery from the technology bubble, all the way up to the stock market peak in 2007.

Approaching his retirement years, the ensuing market value losses terrified him. He told us later he did not know how he was going to explain to his wife how he had ruined their financial situation.

Although he was tempted to sell out at low points several times during the financial crisis, three things helped him stay invested, but just barely:

  1. The realization that the damage was probably already done, and selling out would only lock in the losses from the peak.
  2. Our relentless reminders of how market cycles work, and the positive perspective that comes from taking the long view.
  3. The dawning realization that portfolio income is what would supplement his retirement—not the market value that appeared on his statements. “If the fruit crop is big enough, why would you have to worry about what the neighbor would pay you for the orchard?”

There is no polite way to say it. W was a difficult client in these years. We spent a lot of time talking him down from the ledge, so to speak. But it was worth it, for the kind of investor that W became.

When the recovery from the financial crisis arrived, W’s portfolio was in position to potentially rebound, and it did. Free from worry about short term action, he could stand to own bargains that might be volatile in the short run. It paid off.

W went through the valley of the shadow of death, and learned that fear was optional. More accurately, he learned that fear did not need to be acted upon. When he emerged on the far side of the valley with more wealth than ever before, his experience had inoculated him against worrying about short term fluctuations.

W had completed the second part of his journey. He had learned two crucial lessons. But he was not yet fully formed as an effective investor. One more lesson was needed. It came entirely from within himself, with no help from us. We’ll write about that in the next installment.

If you would like to talk about your journey or your situation, please call or write.

Part Three


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

This is a hypothetical situation based on real life examples. Names and circumstances have been changed. To determine which investments or strategies may be appropriate for you, consult your financial advisor prior to investing.

Investing involves risk including loss of principal.

The Longest Journey, Part One

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We have seen many clients make the journey to become more effective investors with more productive attitudes, beliefs, and habits. We are proud of the client who made the longest journey of all. Because it has so much potential for so many others, we are telling the story of W, our client, in this series of three posts.

W reached a place in his career where he had money to invest in the late 1990’s. He consulted us about investing—but did not become a client then.

Our principles led us to conclude that the red-hot technology sector, which everybody seemed to be buying, should not be purchased. The bargains we preferred were incredibly boring to W. An annual dividend of a few percent was not appealing compared to the prospect of continued 30-40% gains from the shooting stars.

(Long-time followers will recognize our three principles in this episode: avoid stampedes in the market, find the biggest bargains, “own the orchard for the fruit crop.”)

After the wheels came off the technology boom and W lost half his money, he brought what was left of his portfolio to us.

Many victims of the massive decline that began in 2000 learned the wrong lesson. Although ‘old economy’ companies held their own or gained while tech stocks plummeted, some learned that “the stock market is dangerous.” The correct lesson, of course, is that popular but over-priced assets are dangerous.

W, to his credit, had learned the right lesson. He remembered the advice he did not take, saw how that would have worked, and became a client. Meanwhile, the people who learned the wrong lesson sold out and usually went on to repeat their mistake elsewhere.

This was the first leg of the journey of W, where it really began. But he was not an effective investor, yet. Two more lessons were needed, further along the path.

We’ll be writing about those next two lessons in the days ahead. If you just can’t wait to learn the rest of the story, or want to talk about your situation, please call or write.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

This is a hypothetical situation based on real life examples. Names and circumstances have been changed. To determine which investments or strategies may be appropriate for you, consult your financial advisor prior to investing.

Stock investing involves risk including loss of principal.

The payment of dividends is not guaranteed. Companies may reduce or eliminate the payment of dividends at any given time.

Kiln-Fired Personalities

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We all know people who know what they are about. They have clarity about that for which they strive. They focus on the essentials, and are not easily distracted. They understand the bigger picture, and their place in it.

These folks demonstrate considerable strength, firm adherence to their principles, and they usually are of service or value to others. A surprising fact applies to each of them: they all started out as soft little babies.

We have been privileged to know people who fit this description, and to read the biographies of others. The same pattern exists in people in every walk of life. In learning their stories, we often find considerable adversity or seemingly insurmountable obstacles in their past.

We’re reminded of clay, and pottery. Clay is soft and malleable, fine particles that are quite porous. Pottery is durable, impermeable, fused into a single item—not a mix of soft particles.

More than ten thousand years ago, humans were creating pottery from clay on at least four continents. We learned a long time ago that heating a clay vessel in a hot enough kiln for a long enough time transforms it into pottery.

The heat of the kiln changes the properties of soft clay. Particles fuse together. The chemistry changes. What emerges from the kiln is fully formed, durable and useful.

Perhaps adversity is a kiln that produces change within us.

We would never suggest that problems or misery are good. One cannot know the depths of heartache or pain that another is forced to bear. The point is, much of what happens, happens. It is beyond our control.

We may be able to influence our own reaction, how we choose to spend our energy and our minutes in the face of adversity. Just as we cannot know what others must bear, we are not qualified to judge how others respond. But for each of us, with our own challenges, there may be some choice.

Please call or write if you would like perspective or help on your own situation or circumstances.