A Rare Sighting: Interest Rates

© Can Stock Photo / khunaspix

Some thought that interest rates for savers had become extinct, gone for all time. Data from the Federal Reserve Bank shows that one year bank CD rates fell below 1% in 2009. Since then, we have often characterized short term interest rates as being zero-point-nothing. (Obviously, we exaggerated. But not by much.)

When rates were next to nothing, it did not matter much where you got them. But with rates moving up, it may pay to shop around.

The good news is, FDIC insured bank certificates of deposit are at the highest interest rates in years. U.S. Treasury securities are also at multi-year highs. We are making these kinds of opportunities available to you for your options. Interest rates vary from institution to institution; we have offerings from many national banks available through LPL Financial.

There are some size limitations, and some real advantages for larger accounts. FDIC insurance basically covers $250,000 per person, per institution. For example, by using four different issuing banks, we can obtain $1 million of coverage within a single LPL Financial account. See www.fdic.gov for more information.

People understand interest rates very well—higher is better than lower. But choosing maturity dates is a little trickier. When interest rates peaked in the 1980’s, many people were buying six month bank CD’s at 12 or 14%. At the same time, ten and twenty year U.S. treasury bonds were also paying double digit rates.

The CD owners saw rates fall at the end of six months. They could renew only at lower rates as market interest rates got cut in half, and cut in half again in the following years. But the long-term bond owner continued to reap the double-digit returns for many years.

On the other hand, people buying long term U.S. treasury bonds at low rates as recently as 2016 are now stuck with below-market rates since rates went up after the bonds were issued.

We can’t know the future, but we can talk to you about our thoughts and offerings in the interest rate arena. Clients, please email us or call if you would like to talk about this or any other topic.


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.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

CD’s are FDIC Insured and offer a fixed rate of return if held to maturity.

Government bonds and Treasury bills may or may
not offer an equivalent degree of safety. Alternative investments to CDs may fluctuate with market conditions, so that upon sale
an investor may receive more or less than the original investment.

Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.

Hello, Our Name Is 228Main.com

© Can Stock Photo / magann

A long time ago, we had a vision of what we wanted the business to be when it grew up. The kinds of things we do for you today are pretty much what we had in mind when we first got into business.

Naming the enterprise Leibman Financial Services was just good sense. That told who we are, and what we do. At first, there really was no ‘us,’ it was a one-man band. And people in the local market knew the name. When we moved to 228 Main Street in beautiful downtown Louisville, we started to grow a staff.

Then there were two people in shop, both named Leibman. My oldest brother Paul, a retired firefighter, helped me get the office ready for occupancy and became my first assistant. After that, my partner Cathy came in, and son Greg came in when Cathy retired. All named Leibman.

Now we have clients in twenty states. Many do business strictly from afar, by phone and email. Regardless of location, most of our clients receive most of their communications from us via http://www.228Main.com. Key members of our team have other last names.

As students of history, we do not seek change for the sake of change. Unchanging principles are a key part of what we are about. But we believe the name 228Main.com is a better reflection of the enterprise than Leibman Financial Services.

We are available 24/7 with a complete archive of our beliefs, principles, strategies, methods and aims. We put out daily commentary and features at the speed of light in various venues, available on your phones and screens at your convenience. We believe in the power of 21st century media to make us a straightforward source of better information on a more timely basis.

There are many ‘My Name’ Financial Services firms. There is only one 228Main.com.

Our top priority is the work we do with you and for you. Administrative tasks, if not pressing, are lower on the list. It will take us some time to fully convert to 228Main.com. We want you to be up on our plans.

Clients, if you would like to discuss this or anything else, please email us or 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.

It Works Until It Doesn’t

© Can Stock Photo / joebelanger

Money poured into tech stocks in the late 1990s. Then it went into residential real estate in the middle 2000s. No wonder: prices marched higher, year after year—until they didn’t.

We humans usually believe that recent trends will continue. When friends and neighbors and coworkers are getting in on the action, it is easy to join them.

A powerful narrative that seems to be creating a lot of wealth is hard to resist. “We have entered a new era.” “This time is different.” “You can’t lose money in real estate.”

Popularity pushes values farther and farther away from the underlying economics, and a reversal usually follows. The bubble pops; a great number of people are surprised. Some end up with losses instead of the gains they felt sure about making.

Our analysis suggests that a new kind of bubble is upon us. The zero interest rate policy or ZIRP of the Federal Reserve Board for most of the past decade led to a scramble for yield. This moved the valuation on many kinds of investments that pay income into very rich territory, in our opinion.

For example, we were recently pitched on a “cash substitute” with a 5% yield, in a supposedly liquid form. Sounds great, right? Perhaps too good to be true.

Indeed, when we took the proposition apart, we found it was made largely out of corporate bonds in financially weak companies—junk bonds, in other words. To make matters worse, the manager pursued opportunities in a thinly-traded part of the market—odd lots, small amounts of each bond that are unattractive to other buyers.

This idea will work until it doesn’t. When the next economic slowdown creates cracks in the theory, investors who believed they owned a “cash substitute” may be sensitive about losses of any size. As they cash out, the manager may be forced to sell into a market with even fewer buyers.

The silver lining for us is that dislocations bring opportunities. Prices overshoot in both directions. One of our roles is to try to spot these anomalies, and figure out which ones are attractive opportunities for you. (We have no guarantees of success in this.)

Clients, if you would like to talk about this or anything else, please email us or 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. All performance referenced is historical and is no guarantee of future results.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

All investing, including stocks, involves risk including loss of principal.

Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

High yield/junk bonds (grade BB or below) are not investment grade securities, and are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated investors.

 

Thanking All The Regular Folks

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When we were kids, one million dollars sounded like a mind-boggling sum of money. To be a millionaire meant being rich beyond your wildest dreams.

Nowadays, with a firmer concept of numbers and several decades of inflation, a million dollars is more tangible and less impressive. But it still is a lot of money. People may work hard all their lives, build a comfortable safety net, and never have a million dollars.

The financial services industry has a name for those who do: “high net worth individuals.” This is such a common topic, it has its own acronym. Acquiring HNWI as clients seems to be the sole focus of some of my peers. Some act as if a potential client should have a million dollars, or five. Anything less, they imply, is not worth their time.

To us, this attitude is puzzling. People tend to accrue wealth over a lifetime of hard work. If someone is worth pursuing after they have amassed a tidy nest egg, surely they are also worth helping while they are building their wealth. This been the source of many mutually beneficial relationships for us. On a personal level it is gratifying to watch clients grow their wealth over the years.

Much of this success is due to the magic of your hard work and patient saving. We believe it would be insulting if we left you to tough it out on your own during the hard years only to swoop in to sell you our services after you had already succeeded in building a fortune.

This attitude puts us at odds with certain trends within the industry. But we are proud to have a different perspective than others. A “mere” six figure account may still represent a lifetime of hard work. We are happy to meet good people who share our principles about investing and life—whether or not they have a million dollars.

We have been working together with many of you for decades. We never once felt like you did not have enough money to be worth our time. Some of you have become millionaires, some won’t need to get there, others may hope to be on the way. Whatever the case, it is a pleasure to work with you. As always, call us for a longer conversation, or with questions, whenever you would like. We know that you are worth our time.


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

 

Values, Principles, Strategy, and Tactics

© Can Stock Photo / Klementiev

When our enterprise was founded, we had an idea about how things connected. This concept gave us a chance to bring a coherent approach to our work.

• Tactics arise from strategies.

• Strategy springs from principles.

• Principles are based on values.

We knew our principles, and have recited them endlessly ever since. Avoid stampedes in the markets. Seek the best bargains in the investment universe. Own the orchard for the fruit crop.

We form strategies—long range plans aimed at meeting your goals and objectives—in accordance with those principles. We use tactics which we believe will advance the strategy. Not every decision is optimal, of course. But this structure has always kept us pointed in the right direction.

The fuzziest part of the whole thing? Values. I always felt like I knew what I was about. But at the beginning I did not have words to describe it. Now, the perspective of a long career brings clarity, and life has taught more lessons.

I would not claim that every thought and word meets the standards of our values. But our values do represent our beliefs, and influence what we do.

Wake up every day and make the most of it. Whether the challenges are great or small, and resources abundant or few, this formula applies.

Understand that money is usually the residue of years or lifetimes of work and thrift—and respect it as such. Each person’s money is important to them, and to us.

Seek to provide value to others. That is the basis of win-win relationships, in which all benefit: the only sustainable kind.

Clients, if you would like a longer conversation about these things or anything else, please email us or 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.

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

 

The Three Kinds of Performance

© Can Stock Photo / edharcanstock

In our recent reading, we came across another useful concept from Morgan Housel. He talks about the three kinds of investment performance:

1. Bad.

2. Overall good, but occasionally bad.

3. Always good but fraudulent.
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Many have had experience with the first one. The last one is obviously not a place to be. The key to the second one, according to Housel, is communication. Communication builds the trust required to get through the rough patches and down times.

Every day we are grateful for you, whom we believe to be the best clients in the world. You talk to us, you listen to us, we usually understand each other. We work to communicate in various ways, but it is a two-way street!

You know we won’t get mad if you ask a pointed question—if it is in your head, we want to hear it. You trust us enough to start a dialogue when you think we may not be on the same page. When there is something you think we should know, a development in your life or an investment idea, you tell us.

And we do you the honor of believing you can handle the truth. If we need to acquaint you with some aspect of changing reality as we see it, we do so.

Our mutual trust and straightforward communications seem very valuable. It is indeed the key to living with ups and downs. Our best guess is that things will turn out well, on balance, over the long haul. Of course, we can offer no guarantees.

Clients, if you would like to discuss this or anything else in more detail, please email us, call, or set an appointment.


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

Amazing But True

© Can Stock Photo / kryzhov

The twin pillars of American prosperity have been relative freedom for each person to make the most of what they have to work with, and a generally competitive marketplace for goods and services. Count us among the fans. But this essay is about one of the worst features of modern American capitalism.

Some of the world’s largest corporations often receive incentives from governments at various levels to encourage them to bring their businesses. These incentives are paid by tax dollars from the rest of us that are not fortunate enough to receive them.

Local governments are currently engaged in a bidding war to lure a headquarters of a major retail giant. Newark, New Jersey has supposedly offered $7 billion and other locales are also bidding billions.1

It is not hard to imagine that Newark contains storekeepers and shop owners who compete with the company Newark is trying to woo. These people and other citizens ultimately are the ones who pony up the money to subsidize this powerful competitor. Other enterprises are taxed by the government so one enterprise can obtain huge favors from that government.

The Fourteenth Amendment to the Constitution of the United States guarantees us equal treatment under the law by state and local governments. We believe it isn’t happening in this case.

Local governments struggle to find money to pay teachers adequately, keep roads and bridges in good repair, and provide amenities like parks and transportation systems. It isn’t as if money grows on trees.

The justification made by economic development bureaucrats is that the incentives paid to large companies will be repaid with jobs and economic growth. But that conveniently ignores the underlying fundamental fact. Every facility of every type needed by every for-profit enterprise will get built somewhere, whether there are incentives or not.

Imagine if the U.S. government or court system adopted the protections of equal treatment under the law to this economic arena. Local governments could still compete for new facilities. But they could do so on the basis on the quality of the schools and workforce and infrastructure and public amenities.

The equal treatment approach to economic development could strengthen and build our communities as leaders seek to make the most attractive locale with the best-educated workforce. Contrast that with the current mess: taxes on the little guy are given to the large and powerful, at the expense of public necessities and amenities.

Clients, if you would like to talk more about this or anything else, please email us or call.

1Bloomberg, Christie Backs Newark’s Amazon Bid With $7 Billion in Tax Breaks. October 16, 2017.


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

The opinions expressed in this material do not necessarily reflect the views of LPL Financial.

 

Frisky as a Puppy

© Can Stock Photo / mvaligursky

We recently wrote about our plans to keep on managing your needs, and those of the friends and loved ones you keep sending to us. Bottom line, we have to scale up.

Greater effectiveness gives us the time we need to talk to you and understand what you are trying to accomplish. Our systems and our staffing are key to the effort. The scale we are building adds to the resiliency of the organization.

An interesting byproduct of intending to work to age 92 is that the business seems as frisky as a puppy. Why? Maybe because I have thirty more years to work. While some of my colleagues are coasting into retirement, we are planning for the decades ahead.

Those plans are getting exciting.

1. You know about the understudy to our Client Service Specialist Larry Wiederspan: Patsy Havenridge, Client Service Assistant. She is already on the job, working and training with Larry and Greg.

2. Technology Associate Max Leibman is working on a project basis, part-time, building a new operating system for the business. This will last through year-end, or longer. This new system will be a platform to automate and simplify our administrative tasks, freeing up our staff to spend more time with you and on seeking opportunities to grow your accounts.

3. Our Marketing Associate Caitie Leibman, within three semesters of her doctorate in English, is spending some part-time hours for the firm–outside of and without interfering with her current work as Director of the Writing Center at Doane University. Fittingly, she is collaborating with Greg Leibman to improve our communications and provide more consistency.

4. Caitie’s partner, Operations Associate Billy Garver, is also engaged in projects for us. His master’s degree in statistics is a good base from which to add depth to our research and portfolio management capabilities. His work with online course content provides some insight into things we are trying to do with http://www.228Main.com. He will continue to serve on the adjunct faculty at Doane University.

We cannot know whether the current projects turn into more permanent connections with these talented people. But having more of the next generation more involved with 228 Main is wonderful.

Clients, if you would like to talk about this or anything else, please email us or 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.

Doane University and LPL Financial are not affiliated.

Create Your Own Adventure

© Can Stock Photo / Elenathewise

Narratives, or stories, are how we understand the world and our place in it. They have played a powerful and positive role in my life. For example, the narrative about working to age 92 has given our enterprise a vitality and dynamism that those coasting toward retirement may lack—among other benefits.

More importantly, your narratives shape the work we do for you. While your story is highly personal and unique, many fall into one of three general patterns.

1. Some of our clients are retirees whose narratives involve being a good steward of their wealth, enjoying life by living modestly but well, and aiming at leaving a legacy to succeeding generations.

2. Others are more focused on travel or other things that were not possible during their working years, and having the cash flow to comfortably support those things.

3. Younger clients often are aiming at building financial security and ultimately becoming financially independent.

The foundation of your narrative is your core principles, or what you are trying to do with your life. When your story connects with the most fundamental thing about you, it may be more likely to become true. What are the three most important things in your life?

Where and how do you want to live? What role will family play in your activities? How will you spend your time? Will you work at something you enjoy for pleasure in later years? Is entrepreneurship in your future?

You do yourself a big favor when you realize that life is your own adventure. You can create it.

Sometimes your story has to change because life happens. One chapter ends and a new one begins. We are almost never done with new chapters and new stories. Resiliency and adapatability, making the most of what you have to work with, are useful additions to any story.

Clients, if you would like to talk about your story or anything else, please email us or 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.