Month: March 2016

There is a story of Ray Bradbury’s that lives just under my skin, ready to be brought out at any time to be marveled at, nodded in agreement with, and used as a reminder. It’s not fiction; it’s an anecdote from his childhood. It’s about having a hero and abandoning him.

From Zen in the Art of Writing: “Buck Rogers arrived on scene [when I was nine], and it was instant love. I collected the daily strips, and was madness maddened by them. Friends criticized. Friends made fun. I tore up the Buck Rogers strips.”

Buck Rogers was the star of one of the first sci fi comic strips, an intrepid adventurer on the front line of fictional space exploration. It must have been a grand thing, being a kid in the days when space was “the final frontier,” and its exploration and the innovation that would get us there were still to come. It’s easy to see why Buck Rogers would’ve captured the hearts of kids like Ray. He was a hero.

The raison d’être of the hero

Heroes serve an important function in our lives: They represent the basic idea that human beings, by their nature, are capable. They show us that we as a species are efficacious — we are so good at living! (Not surviving. Living.) They show us, over and over again, that man can be successful at even the most far-flung, impossible-seeming, unbelievable feats of innovation, creativity, and exploration. They stand as an example of the nobility of man. We need this. We need it as much as we need food — it is food, for the mind and spirit. Seeing men with character triumph over obstacles to achieve great things affects us in two important ways:

1. We experience hero worship.

This is one of the greatest feelings in existence, and there is nothing else like it. Remember when you were a kid? When the whole world was new, and you were filled to the brim with finding stuff out and exploring new places (like the woods and the park and your own backyard)? When everyone and everything around you seemed ripe with grand possibility? When you felt like you could do anything? You were full of wonder. You were full of the sense that life holds great promise, that there’s grandness out there, and that it’s within your reach. The stars were within your reach. They still are.

Heroes remind you of that, when you don’t feel like a kid anymore. They show you again that there’s grandness out there, and it’s within your reach. Without them, it’s all too easy to forget.

2. We feel like we can do it, too.

Heroes provide concrete examples of people overcoming obstacles, including their own fear, and winning. They show us that success in our endeavors is possible, before we’ve achieved it, and that gives us more courage and motivation to lift our heads and keep trying.

If Buck Rogers can travel to the moon, surely I can write this blog post. If Beryl Markham can cross the Atlantic by herself in a rattling 1930s biplane, with the wind battering her the whole way, surely I can launch a website.

If Brian Wilson can keep his sunny, childlike disposition and honest wonder after growing up with a demanding father, withstanding the pressure to create hits for years, taking drugs, living his life very much in public, etc., surely I can have a positive outlook on taking new and scary career directions. Even if I’m not planning to fly to the moon or cross the Atlantic in a biplane or create genius-level music, a member of my species has, and that shows me what’s possible.

Heroes show us that it has been done and therefore can be done. They cross barriers, challenge boundaries, innovate, and stand up to criticism. They show us that we can say “full speed ahead; damn the torpedoes” and win.

The absence of heroes

With a need this deep and important, you’d think that heroes would be everywhere. But they’re not. Heroes are in danger in our culture. The tall, broad-shouldered, confident, capable hero who knows what he wants and goes for it — the ideal man — has disappeared from serious literature and nearly from art in general.

You can still find remnants of him in genre fiction, especially fantasy. You can find his spirit in young adult and middle grade novels. You might find some version of him in the preponderance of superhero movies and detective shows being made. But he will not be the same as he once was, for the ideal man is passé. He’s “too perfect.” Our culture scoffs at him. He must be dull; he has no flaws. At the very least, he isn’t like us, for we are all flawed, aren’t we?

Professors of creative writing urge their students to give their heroes flaws. For readers to connect with him, he must be more “human,” they say. Being heroic is not really human, they say. Being a screw-up is “human.” Being an alcoholic is “human.” Being condescending to everyone you meet is “human.”

If your hero is a genius doctor, then he ought to have the manners of a total asshat. If he’s a skilled innovator in technology and robotics, so skilled that he might single-handedly save the world, then he’d better be an irresponsible, drunk playboy (never mind that it’s nearly impossible for those two things to live side-by-side in the same man, in reality — according to them, this is what makes him more “real” — his flaws).

We don’t even call them “heroes” anymore — main characters of stories are “protagonists” in college creative writing classrooms. Given this attitude, the “protagonists” who have replaced the ideal man are men like Larry David. Unattractive, bumbling smart-alecks who live in an absurd universe, where even the smallest task becomes an insurmountable obstacle, unachievable with even the most Herculean patience.

In the Larry David universe, everything is chaos, and man can do nothing in the face of it. It’s an existentialist vision, with us as helpless playthings at the mercy of forces outside of our control. Since we cannot control our own lives and they are full of little awful absurdities, the only option we have is to mock ourselves. Man, in such a world, is small and ugly. You can’t even say “incompetent,” because in such a world there is no such thing. In such a world, man is impotent by his nature.

But is the world like that? What you believe about heroes relates directly back to what you believe about a) what the world is really like and b) what people are like and whether or not they are fundamentally capable of succeeding in the world or not. If the world is nothing but chaos, if we create reality by our wishes and whims, if we are fated and destined and have no control over our own lives, then yes, it’s true, we are helpless.

But if reality is what it is regardless of our wishes, if things are what they are and act in ways that are in accordance with what they are (meaning they are predictable, meaning, causality exists), if man is capable of understanding the world through reason, and if we are not determined or fated, but have free will and are in control of our own lives, then …

Well, then man is capable. It is possible for him to not only survive but thrive—to succeed. Then he is able to do things like invent penicillin; discover how to fly; create exalted, moving art; and even travel to the moon. In which case, he desperately needs heroes to show him what’s possible. He desperately needs to understand one thing that has been lost. Our childlike innocence and our hungry, tired adult souls need us to recapture it. It is: the view of man as a noble being.

A rebirth of heroes

Having heroes can be scary — that hero worship feeling means there’s something to live up to. It means saying you care, and that means being vulnerable. It takes a lot of courage to be a hero worshipper. Ray Bradbury did not abandon Buck Rogers for long. It took about a month before that integrity-having 9-year-old realized that the ideal that Buck Rogers represented meant more to him than the so-called friends who’d driven him to rip up his precious comics.

The rest of the story goes like this: “For a month I walked through my fourth-grade classes, stunned and empty. One day I burst into tears, wondering what devastation had happened to me. The answer was: Buck Rogers. He was gone, and life simply wasn’t worth living.

The next thought was: those are not my friends, the ones who got me to tear the strips apart and so tear my own life down the middle; they are my enemies.”  Bradbury knew, as a 9-year-old kid, that, for a happy life, he must hold onto Buck and abandon those who would laugh at him for having his hero. It takes a lot of strength to admit to having heroes, and there will always be those who poke fun. But denying the need for heroes weakens us. It makes us cold and brittle and hard.

It leaves us frustrated and struggling rather than open and ready to connect. It turns us into bone-weary, cynical adults rather than allowing us to hold onto our childhood wonder. It makes us less capable, not more. We begin to lose touch with our dreams. We need them, and it hurts us to deny it.

Who are your heroes?

If you don’t think you have them, think of people who risk things in ways you want to or in ways you know you will never be able to. Think of people who push you to stretch your boundaries in healthy ways and of people who have taught you so much. Look to art — that favorite TV show? Which character is the reason you watch it? And books, of course the books. My best, most cherished hero comes from Ayn Rand’s Atlas Shrugged. How could you ever forget a man with as much sparkling life in him as Francisco d’Anconia?

Don’t deny your heroes. Don’t be afraid to acknowledge them. It will make you stronger. You will be less afraid to reach out and touch your own dreams. Enjoy your heroes, celebrate them, and let your enthusiasm for them show. Some of the greatest friendships of my life have come from reaching out and saying, hey, you know what? That thing you did was amazing, and it changed me. You’re my hero. Thank you.

If somebody wants to make fun of you for it, just pack up your heroes and go. You don’t need the fun-poker. You need your heroes.

Heroes will save your life.

********

This essay originally appeared at http://www.spunkymisfitgirl.com; reprinted by permission.

There’s been lots of coverage in the news the past couple weeks about changes to Social Security claiming strategies, so we’d like to share a few key highlights about what’s changed and how it may affect you.

The Bipartisan Budget Act of 2015, signed into law by President Obama on Monday, November 2, 2015, closes several “unintended loopholes” in Social Security’s rules. It effectively eliminates a married couple’s ability to use well-known social security claiming strategies – file and suspend and restricted application for spousal benefits – which have made it possible for both members of a couple who are 66 or older to delay claiming benefits based on their own earnings record, while the other receives a spousal benefit based on their spouse’s earnings.

What do the Social Security changes mean for you?

• The file and suspend strategy has been eliminated. When you suspend your own benefit, you suspend all associated benefits (spouse, children).
• Individuals who will be age 62 or older by December 31, 2015 will be grandfathered in and still be able to use the file and suspend and restricted application strategies. However, after May 2, 2016, the restricted application strategy will no longer be available.
• Deemed filing now applies to age 70, rather than at full retirement age. This means that when you file for social security benefits, you file for the maximum personal and spousal benefits, not one or the other.
• Those already implementing the file and suspend and restricted application strategies are also grandfathered in under the previous laws.
• Persons turning 62 in 2015 will have options, but there is a six-month window to file a restricted application.

Unfortunately, if you turn 62 after December 31, 2015, you will not be able to use the file and suspend or restricted application strategies.

Even though the file and suspend and restricted application strategy may no longer be an option for you, we can help you optimize your social security benefits. If you have any questions about these social security changes or intend to follow the file and suspend or restricted application strategy, please contact us for a complimentary social security analysis that takes into account the new rules.  mh

I. Choosing the Wrong Controlling Instrument

Don’t let the fancy language scare you.  It just means that some people choose wills when they should have a trust, and vice versa.   I’ll admit to you right here that I prefer trusts for most of my clients, even for those who do not yet have substantial net worth.  However, I always leave that decision to a conference between the clients and their attorney.  In cases where wills are used instead of a trust, I still often like to see provisions in the will for the creation of a trust or trusts at death.  Briefly, my main reasons for preferring the trust are “privacy” and “asset protection” for the beneficiaries, including in many cases the surviving spouse of the first-to-die client.  Also, trusts don’t die.  What I mean is that you can provide continuity of purpose and management of your assets for possibly two or three generations.  (I’m writing a book about that.  Stay tuned.)

II. Not Integrating the Plan

Your estate documents—wills, trust, powers of attorney, living wills, etc.— must be integrated with each other as to who, how, where, and when.  Assets must be titled in a manner consistent with trust documents.  Likewise, beneficiary designations must be updated to be consistent, though not necessarily identical, with your documents.  I like to have my clients bring their newly drafted and signed documents to our office, so that we can be sure that everything that needs to be changed—ownership, beneficiaries, etc.—has been changed.  We’ve had to do this for clients (including my father) on their deathbeds, and that’s really not ideal.

III. Not Creating a Minor’s Portion

This will sometimes be called “An Emergency Medical Authorization for Minors”.  Imagine you’re a grandparent caring for your grandchild.  Horror of horrors, that child gets whacked with a baseball bat and needs emergency surgery.  The parents, who usually are the people who can authorize emergency care, just happen to be away from home and unreachable by cell phone.  If the grandparents were given those emergency powers in advance, they could authorize the needed surgery when time is the very essence of the emergency.  Stuff like that happens all the time.

IV. Believing Life Insurance Isn’t Taxable in an Estate

There are exceptions, but life insurance is almost always paid to the beneficiaries free of income tax.  However, life insurance death proceeds are almost always includable in the estate of the owner.  It’s always a good idea for your estate planning attorney, your CPA, and your financial advisor to know how much life insurance you have and who owns it, so they can be sure that it’s been accounted for in your estate plan—and appropriately titled.  Depending on the size of your estate, you may need to create an irrevocable trust to hold your policies to remove those death benefit proceeds from your taxable estate.  No estate plan should be a do-it-yourself project, and this is one of the biggest reasons why.

V. Underestimating the Value of the Estate

This really is two mistakes in one.  Let’s start with the life insurance we just discussed in paragraph IV.  You have your documents—wills, trusts, etc.—when you’re forty-five years old.  Then you buy a business or farm, or you build a new house.  Over time, any or all of those assets can appreciate in value at an amazing rate, lifting your net worth well into seven digits.  It’s not rare for that to happen.  Then your bank wants you to own more life insurance.  Before you realize it—say in fifteen or twenty years—your net taxable is subject to a 35% estate tax rate.  Your IRA or 401)k) has grown, too, and you’ve failed to provide stretch provisions for your beneficiaries.  Double trouble: Estate tax of 35% or more; ditto, income tax on your IRA.  Your life insurance isn’t enough to pay all the taxes, so your heirs have to sell the farm or business.  Most of you probably know whether you’re in this situation or not, but as Nick Murray says, “knowing is to doing, as one is to sixteen.”

VI. Not Planning for Your Own Medical Emergency

Estate planning can be stressful.  After all, it forces you to contemplate your own death.  Two years ago, when Linda and I decided to update our plan, the death scenario wasn’t the most difficult part.  We really struggled with what would happen if one or both of us became mentally disabled; and beyond that, the idea that one of us—or even worse, one of our children—would have to decide whether we should kept on life support.  We each came to our own decision independently, so no one else will be put in that most uncomfortable situation.

That’s not all you need to know, obviously, but you know that tomorrow is promised to no one; and it’s your job to make sure that your affairs are in order, regardless of how much time you may have left.  mh

For those of you who are my age (69) or older, this little essay will be as much a refresher as a history lesson.  But, if you’re younger than I am (most of you), read very carefully and pay really close attention; you are about to receive an investing lesson for the ages.  (My thanks to Nick Murray for the data and the idea.)

1975

The war in Vietnam had been won militarily, and a peace accord had been signed.  The communists had withdrawn to the prewar border.  But, Congress pulled America’s financial support of the democratically elected government of South Vietnam, and the North Vietnamese army returned to fight again.  To our everlasting shame, Saigon fell and millions were enslaved, driven from their homeland, or murdered.  That was the bad news.

More positively, Andrei Sakharov, the great hero of anti-communist resistance in the Soviet Union, was awarded the Nobel Peace Prize. Margaret Thatcher became the first female leader of the Conservative Party in Britain; and in 1978, her historical and spiritual collaborator, Cardinal Karol Jozef Wojtyla, became Pope John Paul II.

Global population in 1975 was 4.1 billion, fully half of whom lived in extreme poverty.  U.S. inflation-adjusted GDP for the year was $5.49 trillion.  An Apollo/Soyuz first class postage stamp set you back a dime.

Earnings on the S&P 500 were $7.71, and dividends were $3.73.  The S&P 500 index closed the year at 90.19.

1985

Mikhail Gorbachev came to power in the Soviet Union and scheduled a historic meeting with President Reagan.  The Internet domain name system was created.  Microsoft published Windows 1.0.

The song of the year “We Are the World” was produced by Quincy Jones.  Written by Michael Jackson and Lionel Ritchie, the album sold more than twenty million copies.

Coca Cola introduced, and then killed, “New Coke” in the greatest corporate marketing debacle since Ford introduced the Edsel in 1958.  A first class postage stamp cost twenty-two cents.

Global population reached 4.85 billion, with U.S. population accounting for 238 million.  U.S. inflation-adjusted GDP in 1985 was $7.71 trillion.

S&P 500 earnings were $15.68, dividends were $8.20, and the S&P 500 Index closed the year at 211.28, an annualized gain for the decade of 8.88%, excluding dividends.

1995

This was my first full year in Winfield.  On April 19,  we watched on television the most horrific domestic terrorist attack in American history—the bombing of the Alfred P. Murrah Federal Building in Oklahoma City by Timothy McVey and Terry Nichols.

1. J. Simpson was tried and acquitted for the 1994 murders of Nicole Brown Simpson and Ron Goldman. Israeli Prime Minister Yitzhak Rabin was assassinated. Jerry Garcia of The Grateful Dead died.  The Rock and Roll Hall of Fame Museum opened in Cleveland.

Global population reached 5.7 billion people.  America was home to 266 million.  A first-class postage stamp was now 32 cents, more than triple what it had been in 1975.

S&P 500 earnings had grown to $37.70 and dividends to $14.17.  The S&P 500 Index closed the year at 615.93, an annualized gain for the decade of 11.29%, again excluding dividends.

At this point, you will have noticed that in the twenty years from 1975 through 1995, the S&P 500 Index was multiplied nearly seven times, dividends nearly four times, and earnings nearly five times.  The cost of living, as evidenced by the price of a postage stamp had tripled.  At the risk of redundancy, please read on.

2005

Hurricane Katrina swept into Louisiana, devastating a land area larger than Great Britain.  Saddam Hussein went on trial in an Iraqi courtroom.  Islamic terrorists attacked the London bus and subway system, killing fifty-two innocent people.

His Holiness John Paul II—one of the truly great men of the twentieth century—passed away in Vatican City, one month shy of his 85th birthday.  A first-class American postage stamp cost thirty-seven cents.

Global population was 6.5 billion.  The U.S. population was 296 million.  Inflation-adjusted U.S. GDP was $14.37 trillion.

S&P 500 earnings were $76.45.  Dividends were $22.38, and the S&P 500 Index closed the year at 1,248.29, an annualized gain for the decade of 7.32%, excluding dividends.

2015

The Islamic terrorist group ISIS committed atrocities on a scale rarely seen since America abandoned its allies in Southeast Asia in the mid 1970’s.  Reminiscent of the so-called “boat people” of that era, refugees poured into Europe from the Middle East.  Apparently, some among those refugees have carried out atrocities of their own after they arrived.

The world’s leading nations reached a nuclear accord with Iran.

Lawrence Peter “Yogi” Berra died at the age of ninety.  A first-class postage stamp cost forty-nine cents.

Global population is now 7.29 billion, and fewer than 10% live in extreme poverty.  The U.S. population has reached 322 million.  Real, inflation-adjusted U.S. GDP for 2015 is estimated to approach $18 trillion.

Earnings on the S&P 500 for 2015 are currently estimated to be $117.  Dividends for 2015 are estimated to be $43.  The S&P 500 Index closed 2015 at 2043.94, an annualized gain—in spite of the 2008-2009 financial crisis, and again excluding dividends, of 5.05%.

Summary: World population is up 80% since 1975, but extreme poverty has been slashed from one person in two to one person in ten.  There are 3 billion new middle class consumers and entrepreneurs, with more on the way.

The U.S. population is fifty percent higher, having gained a new person through net births and immigration every fourteen seconds for forty years.  Still, America is blessed with unimaginable room to grow.  Population density is a mere 85 humans per square mile; it’s 300 in France, 590 in Germany, 680 in the U.K., and 870 in Japan; all this before the recent influx of refugees into Europe from the Middle East.  We have more than a hundred years’ worth of dormant hydrocarbon energy under out feet, and the rights thereto are vested predominately in the land owners.  Ditto, the industrial technology which brings that dormant energy to the surface and converts it into warmer, well-lit homes, businesses, and hospitals; and a million conveniences of modern life.  Many of you will remember when President Carter told us that we would run out of oil and gas before the end of the last century.  Like so many others, he underestimated the American businessman and the creative power of his free and incentivized mind.

Since 1975, real GDP in the U.S. has more than tripled, while the population is up only 50%.  Bringing the meaning of that closer to Main Street, inflation-adjusted GDP per person has risen from $25,000 per person to nearly $56,000.  I don’t know if that really accounts for the omnipresence of high definition televisions, smartphones, and global positioning systems, but I doubt it.

The S&P 500 index rose by more than twenty times in the past forty years.  Earnings increased more than fifteen times.  The difference between those two multipliers can be accounted for, I believe, by the fact that interest rates back then, though far from the highs they would attain in the early 1980’s, were still well above today’s levels.  Dividends are almost twelve times greater and—when measured against the increase in consumer prices—are more than four and a half times what they were in 1975.  I’ll say it again: Over the past forty years, dividends on the S&P 500 index increased at more than four and a half times the rate of consumer prices. 

Conclusion:  If you’re forty years old or older, you have just lived through the greatest accretion of wealth by the greatest number of people in the history of the world.  There are two trends in place that are responsible for this spectacular economic progress.  First, there is the Global Capitalist Revolution, as free market principles have all but vanquished unalloyed socialism and pure communism.  Even China is adopting free market policies, and as its top down, crony command structure fades into history—and despite its current problems—it will become a true economic superpower.

The other catalytic trend is the exponential progress in information technology.  This could hardly be otherwise, given a free market in ideas and the vesting of ownership rights in inventions.  Biotechnology will soon be performing miracles beyond our ability to imagine or predict, and the work is well advanced.  Ditto, a return to space—in commercial, passenger-carrying vehicles.  With these things, and many others, consumers will benefit, our economy will grow, and investors will find new opportunities.  There will be temporary setbacks, but the trend of discovery is accelerating.

History is a window into the future, but the real lesson here is the same one you see at the close of our Editor’s Note in every edition:  The best investors, regardless of their age, are those who can ignore the noise.  They have learned that Patience, Discipline, and Confidence in the Future are virtues practiced by truly happy and successful people. mh