Tuesday, November 27, 2012

The 12 Days of Debtor's Christmas


On the first day of Xmas my true love gave to me
A paper bag tied up with a string

On the second day of Xmas my true love gave to me
Two bounced checks
And a paper bag tied up with a string

On the third day of Xmas my true love gave to me
Three past due Visa bills
Two bounced checks
And a paper bag tied up with a string

On the fourth day of Xmas my true love gave to me
Four expired Amex cards
Three past due Visa bills
Two bounced checks
And a paper bag tied up with a string

On the fifth day of Xmas my true love gave to me
Five Master Cards! – with $39 left on the credit limit!
Four expired Amex cards
Three past due Visa bills
Two bounced checks
And a paper bag tied up with a string

On the sixth day of Xmas my true love gave to me
Six empty six packs
Five Master Cards! – with $39 left on the credit limit!
Four expired Amex cards
Three past due Visa bills
Two bounced checks
And a paper bag tied up with a string

On the seventh day of Xmas my true love gave to me
Seven copies of “How Not to Spend too Much at Xmas for Dummies”
Six empty six packs
Five Master Cards! – with $39 left on the credit limit!
Four expired Amex cards
Three past due Visa bills
Two bounced checks
And a paper bag tied up with a string

On the eighth day of Xmas my true love gave to me
Eight Ichiro bobbleheads – a steal!
Seven copies of “How Not to Spend too Much at Xmas for Dummies”
Six empty six packs
Five Master Cards! – with $39 left on the credit limit!
Four expired Amex cards
Three past due Visa bills
Two bounced checks
And a paper bag tied up with a string

On the ninth day of Xmas my true love gave to me
Nine mis-matched sox (they were on sale!)
Eight Ichiro bobbleheads – a steal!
Seven copies of “How Not to Spend too Much at Xmas for Dummies”
Six empty six packs
Five Master Cards! – with $39 left on the credit limit!
Four expired Amex cards
Three past due Visa bills
Two bounced checks
And a brown paper bag tied up with a string

On the tenth day of Xmas my true love gave to me
Ten Tulley’s gift cards
Nine mis-matched sox (they were on sale!)
Eight Ichiro bobbleheads – a steal!
Seven copies of “How Not to Spend too Much at Xmas for Dummies”
Six empty six packs
Five Master Cards! – with $39 left on the credit limit!
Four expired Amex cards
Three past due Visa bills
Two bounced checks
And a paper bag tied up with a string

On the eleventh day of Xmas my true love gave to me
Eleven transaction denied debit card slips
Ten Tulley’s gift cards
Nine mis-matched sox (they were on sale!)
Eight Ichiro bobbleheads – a steal!
Seven copies of “How Not to Spend too Much at Xmas for Dummies”
Six empty six packs
Five Master Cards! – with $39 left on the credit limit!
Four expired Amex cards
Three past due Visa bills
Two bounced checks
And a brown paper bag tied up with a string

On the twelfth day of Xmas my true love gave to me
Twelve ringing headaches
Eleven transaction denied debit card slips
Ten Tulley’s gift cards
Nine mis-matched sox (they were on sale!)
Eight Ichiro bobbleheads – a steal!
Seven copies of “How Not to Spend too Much at Xmas for Dummies”
Six empty six packs
Five Master Cards! – with $39 left on the credit limit!
Four expired Amex cards
Three past due Visa bills
Two bounced checks
And a paper bag tied up with a string

Wednesday, October 24, 2012

Election-Related Investing Themes


By now you know that America is electing a new president on November 6.  No matter which side one is on, we know that one of the candidates is going to be elected.  Like me, you may be asking yourself – “What are some of the possible effects on investing and will those effects be different depending on the winner?”

As you may know, it often is not the event itself that moves markets but the perception of the effect the event may have.  The 2012 election is no different in this regard, so ignore the promises let’s focus on the likely outcomes.

Here are the Big Picture issues as we see them from an investment perspective:

Issue
Obama Re-Elected

Romney Elected
Regulation
Environment
Financial

Minus
Neutral or minus


Plus
Plus
Energy
Carbon
Alternative
Nuclear

Neutral/mild minus
Plus




Neutral

Plus
Minus
Tax
Neutral/mild minus

Neutral/mild plus
Social Security
Neutral

Mild plus
Medicare
Plus

Minus
Medicaid
Plus

Neutral
Fiscal Cliff
Tax Rates
Sequestration

LT minus
LT minus
ST Neutral

LT plus
LT plus
Health Care
Hospitals
Doctors
Med Technology

Plus
Minus
Minus


Minus
Plus
Plus
Defense


LT neutral/minus
ST Neutral

LT plus
Exports
Plus

Minus

ST = Short Term – less than 6 months
LT = Long Term – more than 6 months


Drill-down to sectors/industries:

Sector/Industry
Obama Re-Elected

Romney Elected
Oil & Gas
Neutral

Plus
Coal
Minus

Plus
Alternative
Plus

Minus
Financials
Neutral/mild minus

Plus
Transports
Autos
Rail

Minus
Minus


Plus
Plus
Health Care
Hospitals
Pharma
Med Tech

Plus
Neutral/Minus
Minus


Minus
Plus
Plus
Defense


LT Minus
ST Neutral

LT Plus
Exports
Aerospace
Technology
Autos
Food
Agribiz
Processers
Machinery
Sofware/IT
Nat Gas
Plus

Minus
Housing

Neutral

Fiscal Cliff Diving


“A committee is a group of people who individually can do nothing, but who, as a group, can meet and decide that nothing can be done.”
-      Fred Allen, comedian

Got a problem?  Form a committee to study it.  The committee will study the problem for as long as it takes.  The “take” usually involves large sums of money and when the committee is in Wash D.C., the money involved is yours and mine.

You’ve probably heard plenty of press about the coming “fiscal cliff” that the U.S. is marching towards on December 31, 2012.  The problem is a “two-fer”, meaning there are two parts:

  1. Part One is the result of our leaders kicking the can down the road in December, 2010 to wiggle out of their inability to come to grips with the expiring tax policies of the previous administration.  A deal was cut to extend most of those policies for two more years to December 31, 2012 (but see below for items that may affect 2012 income taxes).

  1. Part Two is the result of our leaders kicking the can down the road in August, 2011 to wiggle out of their inability to come to grips with the expiring U.S. government debt ceiling.  A deal was cut to force “severe” budget cuts in a broad swath of government spending if a Joint Congressional Committee couldn’t agree on what those cuts should be.  The Committee was unable to agree on the cuts and here we are arriving at the date on which the mandatory budget cuts are to become effective – January 1, 2013.

  1. BONUS! More provisions of the Patient Protection and Affordable Care Act - aka “Obamacare” – go into effect January 1, 2013.  We’ll provide more details about these provisions in a special commentary after Election Day.

I don’t know about you, but I’m detecting a pattern here.  It’s almost a perfect storm, a financial Katrina.  You will continue to hear much hand-wringing and demagoguery from Wash D.C. about these issues because it is election season.

What You Need to Know Now
Most of these issues will not be dealt with until 2013 nor is earlier action necessary.  However, some of the income tax items on the list may – if not dealt with before year end 2012 – affect taxes due for 2012.  The following two are probably of the most importance to you:

  1. Alternative Minimum Tax (AMT) Exemption – The AMT is a separate tax system that imposes a flat tax rate on certain taxpayers.  The law contains an exemption amount (sometimes called a “patch”) which offsets the AMT for many taxpayers.  However, the exemption has not been adjusted for inflation so unless it is increased by Congress, as many as 27 million additional U.S. households will be subject to the AMT in 2012.  The AMT exemption was increased for tax year 2011 as part of the 2010 deal, but an increase for 2012 was not included.  If you are subject to the AMT in 2012, your total income tax bill will be higher than otherwise.

  1. Itemized Deduction for State and Local Sales Tax – Most states impose an income tax on their residents (only seven states – including Washington - do not).  State income taxes are allowed as an itemized deduction but an itemized deduction for sales tax paid has been at the whim of Congress.  A deduction for sales tax paid in 2011 was included as part of the 2010 deal, but not in subsequent years including 2012.  If you are not able to take a deduction for state sales taxes in 2012, your total income tax bill will be higher than otherwise.

I have to think that our leaders aren’t so polarized that they can’t get something done about these issues before year end.  But they might not.

What You Can Do About It
If you are working with a CPA or other tax professional, you should contact them to get their input on how these items might affect your taxes for 2012.  We can provide a CPA referral if you like.

We intend this information to be informative, not alarmist.  Nothing will be done in Wash D.C. on these issues until after the election.  The 2010 tax deal was signed into law December 17, 2010 and we expect anything done this year will follow a similar timeline.

I have to think that our leaders will take the pragmatic approach and solve these issues before year end.  Let’s hope they do so.

Wednesday, July 25, 2012

What I Learned Serving Beer for a Day


“Beer. Now there's a temporary solution.” 
-      Homer Simpson
(voiced by Dan Castellaneta on The Simpsons)

My son Sean (25 year old college graduate) was recently hired for what is arguably the dream job of every 25 year old:  beer salesman.  His new employer, Georgetown Brewing is the third-largest beer maker in the State of Washington.  Their primary claim to fame is Manny’s Pale Ale served by a large - and growing - number of venues in the Pacific Northwest.

Myself being more of a wine connoisseur (red, please) I haven’t spent much time delving into the culture of beer.  This was about to change.

One marketing method employed by many if not all of Washington’s indigenous brewers is to serve their product at beer festivals around the state.  My son was assigned to the Bremerton Beer Festival sponsored by the Washington Brewer’s Association to be held on July 21st.  Due to other scheduling conflicts, no one else from the brewery was available to help out.  None of his friends – beer connoisseurs all – were interested in helping him for free – not to mention the prohibition against helping oneself to the product during the work shift of nine hours (plus set-up and travel time).  There being no takers, my participation was solicited.  Hey, what are Dads for anyway?

The Festival was to be held in downtown Bremerton about one block from the ferry dock with a start time of noon.  Since I was the grunt, I let my son take the lead and he decided to drive around rather than risk missing the ferry by one minute and thus having to wait an hour for the next one.  He was concerned about being late for setup and, not knowing exactly how the event would be conducted, he decided that we would leave the house by 6:30am to allow enough time to load up at the brewery and make our way to the event.  We loaded up the company truck and hit the road, stopping at a near-by McDonald’s for our favorite quick breakfast: Egg-a-Muffin and coffee.  The rest of the drive was uneventful (tolls on the Narrows Bridge are only collected going the other way) and we arrived at the event at about 8:30.  We weren’t the first brewers there but were definitely among the first group.  It turned out to be a well-run event.  Our extra kegs went right in a cooler and they had plenty of ice on hand to keep the serving kegs cool and to fill the “jockey box” – basically a Colman cooler filled with coils for circulating the beer through the ice pack and taps for serving.  You can see our jockey box in the picture above taken shortly after we finished our setup at about 9.  Each brewer was assigned to a tent shared with another brewer.  Our partners were the Roslyn Brewing Company from Roslyn.  Like us, they were a pair of one company guy and one non-company helper.  So, what do you do in downtown Bremerton with three hours to kill?  More coffee.

The gates opened promptly at noon and within five minutes we had our first customer.  At most festivals of this type your admission includes a small glass (5 oz. or so) and 5 or 6 tokens (wooden nickels!) good for one fill each.  They tell you what they want (we had two selections) hand over their token and we pour them a beer and answer questions about the product.  I now have a slight understanding of what an “International Bittering Unit” is. 

The glass and token are the sole means of exchange.  The rules are simple; no glass or no token: no beer.  The Liquor Control Board is watching.  They introduced themselves early in the day and were seen walking through the event more than once in the afternoon.  Later in the day we had many people show up with their glass but no token.  One trick when you’re low on tokens is to not offer it thereby requiring the server to ask for it (hoping he won’t) or to act like you’ve dropped it in the box without actually doing so.  Late in the day we had one repeat customer who showed up with a token but no glass.  She wanted us to fill up one of our water bottles for her – a definite no-no.  She couldn’t tell us what had happened to her glass.  The exception to the rule is provided by the festival in the form of a few free tokens they gave us for “friends and family”.  We ended up using these for repeat customers as a good will gesture.  If you see the same guy or gal coming back for five refills he or she must like your stuff!  The beer business is all about hospitality – free beer obviously reinforces that.

Our business was steady all nine hours.  No matter how nice the people are though, standing on your feet all day becomes a challenge.  Except for bathroom breaks and a trip to the only food stand at the event (hot dogs) neither of us left our tent.  It became a case of “mind over matter” until last call at 8:30.  Our friends from Roslyn informed us of the next ferry time – 9:05 - you never saw four guys work so fast to get packed up.  The ferry doesn’t save much time but it does save the effort in driving.  It was a relief to simply sit down for an hour.


So what did I learn from this experience?

·       Arrive early – it avoids anxiety
·       If you’re not the leader, clam up and follow
·       Beer drinkers are a pretty relaxed bunch
·       Beer drinkers who’ve had too much are very relaxed
·       If your pour has more than ½” of head on it, start over
·  When supply is low (e.g., no token) demand responds with creativity (“Please, it’s just one!” or “C’mon, I REALLY like your stuff!”)
·       When you get a compliment, accept it gracefully with something like “We love to hear that!”
·       Follow the rules – you never know who is watching
·       A little customer service goes a long way – “How’s your day going so far?”
·      And lastly, if this financial advisor gig doesn’t work out, I know I can get a job pouring beer.

Application in client relationships

·       Be prepared for meetings ahead of time – it reduces anxiety
·       Talk less, listen more
·       Be relaxed
·       Be creative in meeting the needs of others
·       Always act with integrity
·       Accept compliments gracefully
·       Always look for ways to improve the client’s experience and satisfaction