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Inflation Ahead: Beware! – Part 1 of 2

One of the observations I have from creating projections for funding future goals such as college or retirement is that it is often very hard for clients to understand the impact of inflation. So, I decided to write a two-part blog about inflation. Part One covers the causes of/and multiple definitions for inflation. Part Two discusses the risk and impact of inflation, because we are living longer.

What causes inflation?

There are several possible answers.  The recent damage caused by Hurricanes Harvey and Irma and California wild fires results in higher prices because there is a temporary shortage of goods.  Therefore, prices are bid up as people compete to obtain what they need.  Fortunately, these situations are temporary.  Inflation is also caused when businesses purposefully restrict supply thereby artificially raising prices.  This happened in the 1970’s when OPEC agreed to limit oil production in an effort to increase oil prices.

The primary cause of inflation is an increase in the money supply.  You have probably heard the phrase, “Too much money chasing too few goods and services increases prices.”

What is the difference between inflation and the Consumer Price Index (CPI)?

The CPI is an index… or “a number used to measure change”.  It measures the change in prices paid by consumers for goods and services.  It reflects the spending patterns of urban wage earners, consumers and clerical workers.  Interestingly, the CPI does not include the spending habits of people living in rural (non-metropolitan) areas, people in the Armed Forces, and anyone incarcerated or a patient in a mental institution. (

Price Inflation (what we simply call inflation) is the “percentage increase in the price of the basket of goods and services over a specific period of time”.

The key to this definition is knowing what is in the “basket” that is being measured.

Interestingly, it is “all items less food and energy”.  This means the basket includes goods and services such as transportation, medical care, vehicles, clothing, and housing.

Barbara A. Culver
Resonate, Inc.
(513) 605-2500

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Why Is There So Much Excitement About International Stocks?

BlackRock’s Chief Equity Strategist Kate Moore notes the following:

While BlackRock prefers stocks over bonds, they are neutral on U.S. stocks and overweighting internationals – specifically Europe, Japan, and emerging markets.

The preference in the U.S. is for technology and financial stocks – especially those companies that are committed to growing their dividend.

In Europe, BlackRock expects the euro to continue to strengthen slightly before stabilizing.

BlackRock is also overweight in emerging markets – namely China, India, and Mexico.

We would be happy to discuss any of these topics in more detail with any of you who are interested in learning more.

Barbara A. Culver
Resonate, Inc.
(513) 605-2500

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How Is Automation Impacting Job Creation?

The November 16, 2017 issue of the Wall Street Journal contains an article which addresses this topic.  I found it to be of interest and hope you do, too.

Well-known entrepreneur Elon Musk predicts that the advance of artificial intelligence and automation will dramatically reduce the number of available jobs.

The Wall Street Journal shares a new report from IT-services and consulting firm Cognizant Technology Solutions which offers a much more positive prediction.

The study sites that there will be at least 21 new job categories created within the next 10 years.  Titles such as “genetic diversity officer,” “virtual store sherpa” and “personal memory curator” represent three of these new job categories.

Other opportunities called “walker-talkers,” represent workers to answer calls to assist and provide companionship for a growing elderly population.  Another new position is called “data detectives”.  This represents work to dig into their employer’s data stockpiles and generate new business recommendations.

In summary, the report projects that 19 million positions in the United States will be automated out of existence in the next 15 years.  However, the same report also predicts that about 21 million new roles will be created.

(Source: “A Future without Jobs?  Think Again” by Kelsey Gee.)

Welcome to the growing world of artificial intelligence and automation!

Barbara A. Culver
Resonate, Inc.
(513) 605-2500

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Thoughts on Preparing for a Stock Market Correction

No, I am not suggesting I have a crystal ball which allows me to predict the next stock market correction.  However, we all know that a correction will come.

(As a reminder, a correction is defined as a decline of 10% of current market value.)

What we know is that, as the stock market begins to drop in value, it can be very tempting to “go to cash”.  A recent study by Betterment who analyzed 58,000 IRA account holders from 2008 to 2012 found that those who went into cash had an average return of about 1 percent per year less than investors who stayed the course.

Here are our recommendations to prepare for a coming correction:

  1. Determine how much of a contingency fund you want to have on hand.  In this way, when “you have a need to cover unexpected expenses”, you already have the cash in place.  This helps prevent you from having to sell an asset while it is down in value.
  2. In addition to a contingency fund, for those of you who receive monthly income from your investment portfolio, it’s important to decide how many months or years of your income you want to have readily available.  For example, you might decide to keep one year’s worth of income needs in cash at all times.
  3. Be sure your “revolving replacement fund” is also adequately funded.  This is a fund that is used for predictable expenses such as the need to replace appliances and automobiles from time to.  Again, it is important to determine how much money you want to have in this revolving replacement fund.Having adequate cash set aside or each of these possibilities helps allow you to stay invested during the correction.
  4. Now let’s talk about the money that is invested in the U.S. and/or international stock markets.  First, we want to be sure that you are taking the amount of risk that is appropriate based on your age, health, time horizon and risk tolerance.  It is very important that you understand the potential “drawdown” on your portfolio.  The potential drawdown shows you how much your account could lose on paper during a correction.  Again, you need to be sure that you are comfortable with the amount of drawdown exposure in your portfolio.  This helps allow you to stay invested if/when the portfolio declines in value on paper.

As always, we would welcome the opportunity to answer any questions or discuss any concerns about your portfolio before the next correction.

Barbara A. Culver
Resonate, Inc.
(513) 605-2500

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What If We Have Excess Money in a 529 Plan?
College Planning
With the ever increasing costs for college and post-high school education, parents and grandparents often contribute to Section 529 Plans.

529 college savings plans are often thought to be the most effective way to save for college education expenses.  Contributions to these plans can be deducted from state income tax, grow federal and state tax-free, and can even be withdrawn tax-free for the use of higher education expenses, such as tuition, room and board, books and other similar costs.  With the increasing amount of 529 plans, some are finding that a portion of the plan balance may not be needed, in fact, for college expenses.

Due to the variability in college expenses, planning for the precise amount can be difficult.  There are so many factors that affect college expenses.  In-state versus out-of-state tuition costs vary, as do public versus private institution costs.  Future tuition inflation levels and scholarships also can greatly affect a student’s college expenses.  Unlike some other child savings avenues, 529 plans give account owners control.  529 plans also provide ways to divert and divest the surplus or unused amount in the plan.  Some options account owners have are:

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What the Future May Hold for U.S. Large Caps

Of course, no one knows for sure, but I thought you might be interested in the latest opinions I have received recently.

Tailey Leger, equity strategist for the Oppenheimer Funds states that she expects the large cap rally to continue for at least two more years.

Here is the thinking that supports this position:

  1. A weakening U.S. dollar and strengthening international economies are key reasons.  The foreign exposure of U.S. large cap companies results in 30% of the S&P 500 revenues coming from outside the U.S.
  2. If the president comes through with tax cuts for businesses, it may create more opportunity for growth.
  3. The Federal Reserve is committed to normalizing monetary policy and flattening the yield curve.  Historically large caps have outperformed small caps by an average of 1.8% in flattening yield curve regimes.

Please contact me to discuss your personal objectives and portfolio strategy.

Barbara A. Culver
Resonate, Inc.
(513) 605-2500

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Is There a Hidden Agenda with Robo-Advisors?
The market for working with robo-advisers is growing rapidly.

As with anything that increases in popularity, there is new research available about these seemingly “neutral” programs.

Before I share it, let’s define a robo-“advisor”.

Roboadvisors are a class of financial adviser that provide financial advice or portfolio management online with minimal human intervention.  They provide digital financial advice based on mathematical rules or algorithms. (Wikipedia)

In other words, this is nothing more than computer- based programs into which certain data is fed about the investor.  Then, the computer applies algorithms to the data and spits out an allocated investment program.

Here in lies the potential problem.

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Investing Tips from Warren Buffett

Warren Buffett is arguably one of the best investors of all times.  Here are three investing tips from the “Oracle of Omaha”.

  1. “Never lose money.”

    While even the legendary Buffett has suffered stock market losses, one key to his success is that the losses are small and infrequent compared with his larger long-lasting positions.(Please do not take this direct quote literally.  There are no guarantees in investing and there is always the potential to lose money.)

  2. “Be an investor, not a speculator.”

    Speculators tend to bet on price without paying much attention to earnings or dividends.  Speculators tend to be short term technical traders.  On the other hand, investors tend to take the long view and expect to be paid continuously for owning an asset.  This could be in the form of interest or dividends.

  3. “Diversify, diversify, diversify.”

    This advice includes owning both U.S. and International positions, stocks and bonds, multiple sectors, and non-correlated asset classes.

While we understand that each client’s investment strategy and risk tolerances are unique, I hope that these general investing tips are both of interest and value to you.

I also look forward to sharing a conversation with you, to discuss these concepts further and explore how they could apply to your investment goals and objectives.

(Credit for some of this information goes to Steve Jurich, IQ Wealth Management September 2017.)

Barbara A. Culver

Resonate, Inc.
(513) 605-2500

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How Resonate Provides Value
Richness of LifeIn case you have not read the first blog in this short series, I invite you to do so.

Since completing it, I have given thought to which of the many client stories I wanted to share with you.

The first story is that of a recent widow who was referred to us.  When I met with Alice, (not her real name, of course), I found her to be very clear and communicative in spite of the recent and sudden passing of her husband.

The stories she told me about her experiences in the financial services world both angered and saddened me.  Assumptions were made that, of course, she would not be able to “handle her own affairs nor make thoughtful decisions” primarily because she was a woman.  On several occasions, male advisors from different companies assured her that “they knew what was best” and even provided “solutions” without bothering to understand the client and her life.

In contrast, I discovered, that when given the opportunity, this woman was quite amazing in how quickly she was adjusting to new life and found her thought process to be remarkably clear.

This included her clarity of thought that the “solutions” provided probably benefited the advisor more than they would benefit her.  Upon discussion and review of the various recommendations, I supported her thinking.

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Client Fees & Value
It seems that everywhere we turn today, the media is emphasizing advisory and product fees.

Common questions are:

“Are you paying too much?”

“Do you know what you are paying for?”

I consider this type question to be one-dimensional and shortsighted.  For example, if one wants to “stay on the numbers’ side”, then where is the question:

 “Are you receiving value for your fees?”

The interesting thing that happens when we insert the word “value” is that we add the possibility for an intangible answer in addition to the one-dimensional tangible answer.

Here are two recent examples of how we have added both tangible and intangible value for our clients:

Example One:

Clients recently came in for their conversation with us, which includes portfolio review. They brought a folder with them and asked: “Will you please look over these estimates for us to pre-pay our funerals?”

This led to a conference call with the clients and the director of the funeral home.  At the end of the conversation in which I asked many questions, the clients said, “Thank you so much.  We understand this now, and are very pleased with the decisions we have made.  Mostly, we feel wonderful that we have taken this burden off of our family.”

Tangible Results: the clients ended up saving $1100 from the original quote.

Resonate Time: 90 minutes

Resonate Fee for this work: $0 


Intangible Value Received by the Client: Relief; peace of mind.

Intangible Value Received by Resonate: Knowing we did the “right thing” for aging clients.


Another Example…

A client called recently and said: “I’m not sure if these new legal documents prepared by an attorney match our objectives discussed with you.”

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