The ESG Update, Vol. 10
Updated: Aug 30, 2019
4 Things You Need to Know About the Market Right Now...
Watching the trends, listening to the experts, arming you with insight and forethought — these are my goals with the 4 things. There’s more info at the end of this email and, as always, don’t hesitate to check in with me for any reason!
Julie Skye, Principal
1. Make Volatility Your Friend.
The two corrections in 2018 were “practice” for the -20% correction that history tells us we will eventually see. As this correction nears, two words will show up more in the headlines: Risk and Volatility. While they sound related, they’re very different.
Risk is more about permanent or long-lasting loss.
Volatility is more about the expected ups and downs that you get with stocks or bonds.
In our stage of the economy you will see increasing volatility...but know the difference. Is it longer-term Risk? Or is just run of the mill Volatility?
Twice this year I’ve written about “9th Inning Investing” and Craig Israelsen, contributing writer to Financial Planning, gives us the antidote to Risk: diversification!
Craig says, “Building a portfolio is like putting together a basketball team. Each player brings a different skill or attribute to the team. It’s the differences between the players — not the similarities — that help form the best lineup. Thus, if a portfolio only includes the 500 large-cap U.S. stocks that comprise the S&P 500, isn’t that kind of like building a basketball team by only having point guards, or only power forwards? Those are not diversified basketball teams.”
In the chart below “Diversify your Diversification,” the starting point is a portfolio that only includes large-cap U.S. equities. Over the past 20 years, the average annualized return was 5.62%, well below the historical norm of roughly 10%.
BUT, take a close look at what you gain as you diversify your portfolio. Look at the two right columns: the percentage of years with a Positive Return…and the Worst Calendar-Year Return.
Building on the basketball “team” approach makes sense, doesn’t it? Let’s look at where YOUR portfolio is below.
2. Did the next recession just get closer?
One of those voices I listen to is Seeking Alpha’s Erik Conley:
“The risk of a new recession increased recently, and its proximity became closer. I don't make predictions about exactly when the business cycle will turn down, other than to say that my model now tells me that it will probably happen sometime within the next six months to twelve months.
This assertion doesn’t come from my “gut feel” or pure guesswork. It comes from the combination of economic and stock market indicators that, in aggregate, generate a forecast based on the Bayesian probability theory.”
Erik sums up his analysis here:
“The stock market tends to peak several months before a business cycle peak. How you, as an equity investor, choose to play this is a personal choice. I’ve been telling clients to raise cash for several months, but not to abandon stocks altogether. Having a contingency plan in place before the market tops out would be invaluable for most investors. This involves setting up a series of defensive steps to take, based on the level of recession threat. The higher the threat level, the more defensive your posture should be.”
If you want more than Erik’s “executive summary above,” read the full article here.
3. Required Minimum Distributions Likely to Change.
Michael J. Jones | May 29, 2019
After all the work we have spent on managing your taxes when you are 70½, there they go…changing the rules, once again. The House of Representatives’ Ways and Means Committee has issued its report on “The Setting Every Community Up for Retirement Enhancement Act of 2019.” The House has now passed the proposed legislation and while the Senate hasn’t yet produced its version, it is expected to.
The major change is an increase to the age when required minimum distributions (RMDs) must begin from age 70½ to age 72, which basically recognizes the increased life expectancy since 1986 when RMDs were first enacted.
To pay for these new benefits, RMD rules would be modified and filing failure penalties would be increased. Retirement accounts will also have to distribute all benefits within 10 years after IRA owner dies. What does this mean to many of you? Below is the full article but right now, nothing written in stone, yet.
If you want more details, read the full article here.
4. Clark Howard on SIM Card Fraud: What the Major Carriers are Doing About it.
Clark.com Staff | July 9, 2019
Criminals are trying to steal personal information from your phone and taking to SIM card fraud like never before. With all the safety issues cell phone users face, here is what the major carriers are doing to combat SIM card fraud.
What is SIM card fraud? SIM card fraud, also known as a SIM swap hack or phone account hijacking, is a form of identity theft in which the scammer can steal your mobile account and the personal data attached to it. Criminals can gain access by targeting a weak two-factor authentication or tricking a phone service representative. The result is that thieves can access your contact list, bank account, and other personal data and some serious damage can be done.
What are the major carriers are doing about SIM card fraud? The wireless carriers haven’t been as proactive as many of their customers would like when it comes to SIM card fraud. That’s why we contacted each of them to see if they had a plan:
Verizon - Verizon will never make an outbound request for customers to provide personal account information so if you see an inbound call that looks like it’s from Verizon, if it doesn’t feel right, it probably isn’t. If you have questions, hang up and immediately dial Verizon’s customer service line at 1-800-922-0204 or *611 from your mobile device.” To protect yourself from SIM swapping fraud, Verizon recommends you call its customer service line and put an administrative lock on your account. An administrative lock on your account means no changes can be made (including porting a number to another carrier) without you calling in to personally verify the transaction.
AT&T - AT&T looks for ways to enhance policies and safeguards to protect against these sorts of scams. When customers are victims of identity theft, they strive to reverse activity related to their account and restore service as quickly as possible. Customers can learn how to help protect themselves from this scam by going here.
T-Mobile - When it comes to SIM card fraud, T-Mobile had the most high-profile incident. The carrier was sued in 2018 after a customer’s account was hijacked and his bank account drained. T-Mobile encourages customers to add extra security features to their accounts, such as passcodes and security questions. T-Mobile will never reach out and ask you to provide information, like your passcode. Customers can contact T-Mobile with any questions or concerns by dialing 611 from their T-Mobile phone or 1-800-937-8997.
Sprint - Sprint didn’t respond to Team Clark but the company requires all its wireless customers to set up a PIN and create security questions to access their accounts. On its website, Sprint says that one way they protect your account is that they’ll notify you “by email or text message” each time your PIN, security question or answer changes.
How can you stop SIM card fraud? Here’s 4 steps you can take:
Up your two-factor authentication game: Not just any two-factor authentication works though. If a hacker has already gained access to your phone, they will intercept any SMS-based code that is used for authentication. Instead, use a strong two-factor authentication app (like Authy Microsoft Authenticator or 1Password) to lock your account down. See these other password tools.
Create a PIN: Add a PIN or a passcode to your mobile phone account. This way, you have an added layer of security and protection.
Put a SIM PIN on your phone: A SIM PIN is a multi-digit code that you enter anytime your phone restarts or if you remove the SIM from your device. If someone steals your phone, it won’t work unless they know the PIN. If you have an iPhone, go to Settings > Cellular > SIM PIN and turn it on. If you have an Android, go to Settings > Security & Location (or Security & Privacy) > SIM Card Lock (or More Settings, then Ecryption & Credentials) and turn it on.
Freeze your credit: Money expert Clark Howard is a big proponent of freezing your credit. This prevents crooks from taking out new lines of credit in your name. Here is his Credit Freeze Guide.
Let’s Check In...
After you get your 3rd Quarter 2019 Report lets schedule time to review your portfolio and set your “Agenda” for the rest of 2019. Look for a mailing from me soon that will include:
✔️ 2019 Tax folder with your 2019 Charitable Contributions Worksheet
✔️ 2019 Agenda
✔️ Life Planning Checklist
✔️ 2019 Right Capital Income and Expenses
Like and Follow:
Updating Skye Advisors’ Facebook page with real-time posts is one of my favorite parts of the day! Don’t use Facebook? Find my Facebook feed, charts of the day, and thought-provoking blog posts at my website www.skyeadvisors.com.
Right Capital Right Now:
A new feature at Right Capital, you can now enter information about your homeowner, auto, and umbrella insurance policies on the Profile > Net Worth page. With your Right Capital login and password, your insurance information is in one place!
Look for recently added folders and documents in Right Capital. First Affirmative’s and Skye Advisor’s 2019 Form ADV and annual privacy policies have been added to their respective folders. They will also be sent to you in a separate email.
Make a Note:
I recently notarized paperwork a client had to complete, at a cost of $8,000 in fees, to cancel their Time Share. She wants a bumper sticker that says, “NEVER get a Time Share” so others know how hard it is to get rid of them.
The recent tornadoes and floods in Tulsa have really brought it home: a leaky roof or rising water could damage your most valuable documents. Let’s talk about your disaster recovery plan before bad news happens.
What to do when you need help...
Schwab Website Problems and Password Reset
Schwab Alliance Team (800) 515-2157
Julie Skye’s Backup Contact
Diane Conrad at the First Affirmative Home Office
(703) 245-5820 or toll free at (800) 298-1890
Let me know if you have trouble logging onto First Affirmative – I may need to request a password reset!
To learn more about ESG investing, please contact Julie Skye at firstname.lastname@example.org or (918) 408-7981, or visit skyeadvisors.com.