Christopher W. Beale, CFP®

The Roaring ‘20s refers to the 1920s when economic prosperity flourished in the United States and Europe.  Deferred spending from the effects of World War I and the Spanish Flu Pandemic, a construction boom, and the growth of consumer goods more than doubled our Nation’s wealth from 1920 to 1929.  

Just over a year ago, on March 16, 2020, everyone at New England Capital packed up our equipment and said our goodbyes. I didn’t know when we’d be back together in the office – hopefully within a month, or certainly within two months. After all, some scientists said it would take 15 days to slow the spread of the Corona virus. Even our President said the virus would be gone by Easter. . .

By far the most common question I get asked these days is “what is next?”.  Many times, it starts like this: “Chris, I know you don’t have a crystal ball, but…..”  Actually, I do have a crystal ball!  Chris Lee gave me one years ago. It’s on a shelf in my office.  Unfortunately, it doesn’t tell me what is going to happen next.  It does not flash red at the top of the market telling me to get out before a market correction.  Just as important, it does not have bells and whistles going off at the bottom of the market letting me know to be fully invested.  Maybe I should check the return policy since it may be defective!

Luckily for you, at New England Capital, we prefer proper planning over prognostication.  When I hear all the predictions coming from “experts” this time of year I’m reminded of economist, John Kenneth Galbraith’s quote: “The only function of economic forecasting is to make astrology look respectable”. For clues as to what might be ahead, let’s look at how we got to where we are today.

Christopher Beale was recently on Fox 61 News discussing what to do if you were to win the lottery!

All of us at New England Capital Financial Advisors would like to take this opportunity to wish you and your family a very warm holiday season and especially in these pandemic times, a very healthy, safe and prosperous New Year. It is one of our greatest pleasures to exchange season’s greetings and thank those whose friendship and goodwill are so highly valued. 

What a year it has been. 2020 no longer references the current year. 2020 is the latest swearword added to our lexicon! Use it with great flexibility like, “bull 2020” or “son of a 2020”.

While so many of us can't wait to turn the page of the calendar and kick the year 2020 to the curb, I'd like to find reasons to celebrate it.

We were very pleased at the large turnout we had for our October 5^th event/webcast on The US Election and Geopolitics in the Age of Disruption with special guest John Emerson from Capital Group.  Unfortunately, Capital Group did not allow for the taping of the event, which is why we are unable to post that webcast here on our blog.  For those of you that were unable to make the webcast, Capital Group did post a podcast on much of the discussion we had on Monday which you can listen to here:

Here is the transcript of the video above:

We miss you! We miss you at New England Capital. We also miss feeling normal and comfortable in our daily activities. I don't have a mask on as I speak to you because no one is within 6 feet of me as I record this blog in our conference room. Our new protocol in the office is to arrive to the office with masks, have our temperature taken, continue to wear masks and keep social distance whenever we are not at our workstations or desks. It's just not comfortable, nor does it feel normal.

Here is the transcript of the video above:

New England Capital’s Business Continuity Plan 

Chris Beale:  You might notice the byline on this article is both Chris Lee and Chris Beale. The reason for that is we knew there's only one topic to talk about this quarter, which is the coronavirus and its effect on the US economy and you. It is our sincere wish that all of you are safe and well and doing everything you need to do to maintain your health and safety. We certainly wish our sincere gratitude to all first responders and anyone in the medical field, as well as essential businesses that are keeping us safe.

For those hoping to read the continuing description of my visit to the MIT AgeLab in Cambridge, MA, you’ll need to wait until my next blog post in April.  For this blog, I felt it was more important to review The Setting Every Community Up for Retirement Enhancement (SECURE) Act, which is the most significant and sweeping retirement tax law since the Pension Protection Act of 2006 and Employee Retirement Income Security Act (ERISA) of 1974.

The SECURE Act passed in the House of Representatives in May by a bipartisan vote of 417-3.  It was bogged down in the Senate until it was attached to the spending bill in December.  That bill, which raised the debt ceiling and avoided another Federal Government shutdown, was passed by a vote of 81 -11.  President Trump signed the Bill into law on December 20^th and most provisions of the law took effect on January 1, 2020.  This proves to me that Congress can be non-partisan; especially if it means more money for both parties to spend!  For example, one provision alone is estimated by the Congressional budget office to bring in $15.7 billion over the next 10 years.

Of the many provisions of the act, here are what I believe are the most significant features:

All of us at New England Capital Financial Advisors would like to take this opportunity to wish you and your family a very happy holiday season and a very healthy safe and prosperous New Year. It is one of our greatest pleasures to exchange season’s greetings and thank those whose friendship and goodwill are so highly valued.

In addition to the financial planning work done by our Certified Financial Planners in the office, another main activity we do is investment management.  At this time of the year, the list we make and check twice for both our broker/dealer clients and our investment advisory clients is our Required Minimum Distribution (RMD) list.  It’s not quite a “naughty or nice” list, but it could have very bad consequences.  For example, we review our client lists to see who needs to take required distributions from their retirement accounts to make sure the minimum amount required by the Internal Revenue Service has been distributed.  If the required amount has not been taken, the IRS penalty is 50% of what should have been taken.  That’s a tremendous penalty we want you to avoid! 

For our advisory clients we will make changes to our managed portfolios as we constantly search for the best and most appropriate mutual funds, exchange traded funds and other investments for the achievement of your goals.  We also look for tax loss harvesting opportunities where we can offset potential capital gains with any capital losses that may have occurred.  We also will typically rebalance your advisory accounts annually that our in our model portfolios.

Last month, I had the privilege of touring the MIT AgeLab to gain insights into issues all of us face as the average life expectancy continues to increase. My guide was Joseph Coughlin, PhD who founded the AgeLab at Massachusetts Institute of Technology in 1999.

Unlike some research think tanks that only focus on retirement, the MIT AgeLab’s goal is to improve the future quality of our lives by improving people’s physical and financial health. They aim to achieve this through technological innovations, how products are designed, how services are delivered and how local and national policies are implemented. The AgeLab applies a multi-disciplined consumer-centered approach to imagine what tomorrow will look like for people 45 and older.

The research focuses on the challenges and opportunities of longevity which include topics such as:

The first six months of 2019 have been a good year. I mean the stock market gains for the first six months of 2019 would be above average performance for any 12 month period. The S&P 500 is up over 17% year-to-date with the first three months being up about 13% and the second three months adding an additional 4%. International investors as measured by the Europe, Asia, Far East (EAFE) index were up almost 2.5% in the second quarter and up over 11% in the first half of 2019.

The bond market continues its long stretch of low yields. The 10 year US Treasury Bond currently yields around 2% annually. If you had left half your money in the treasury bonds and half in the S&P 500 Index, your total return for 2019 would be almost 10%. Again, not a bad annual return jammed into the first six months of the year.

Where do we go from here? The US is growing at a “healthy tortoise pace”. We are still growing at about a 2% rate which is less than half the growth rate of historic expansions. This month, the economic expansion officially became the longest expansion on record.

No. I’m not referring to the sex talk. The talk you need to have is about college. Not just about choosing the right college academically but also financially.

The college path is not right for everyone, even if the cost was free. Success, happiness and financial security can certainly be attained without a college degree. College diplomas don’t come with any written or implied guarantees of future fortune or fame…even diplomas from the most prestigious universities.

That being said, in our technologically sophisticated and complex society, advanced education and training beyond high school may be the best way to better jobs and higher lifetime earnings. According to The Center for Education and The Workforce, the average college graduate with a bachelor’s degree, will earn $2.8 million over his/her lifetime. The average high school graduate with no additional higher education will earn $1.5 million over his/her lifetime.

Many investors have been shaken by this year’s volatility, especially after the long calm period with positive returns experienced prior to 2018.

March 2019 will make the 10 year anniversary of the low point in the stock market after the Great Recession. Starting from that low point, was a tremendous tailwind that worked in our favor over the last 10 years and caused the US stock market as measured by the Standard and Poor’s 500 (S&P 500 Index) to rise almost 400%. Stocks are clearly not as cheap now suggesting their returns will be more modest over the next five years.

The following is a list of other tailwinds that help market performance and enhance economic growth and headwinds that hurt market performance and slow economic growth.

All of us at New England Capital Financial Advisors would like to take this opportunity to wish you and your family a very happy holiday season and a very healthy safe and prosperous New Year.  It is one of our greatest pleasures to exchange season’s greetings and thank those whose friendship and goodwill are so highly valued.

2018 was a milestone year for New England Capital.  30 years ago, I started New England Capital in my parents’ basement after spending five years at a Wall Street firm, including two and a half years managing the branch office in Birmingham, AL.   I have been truly blessed during my 35-year career to be able to provide financial planning and advice to wonderful people who have transcended from valued clients to true friends.  I thank you for allowing me to become part of your lives. 

I want to include my deepest gratitude for the people who have also signed this letter.  Thank you for all you do, not only for me, but also for every one of our clients whom you serve so diligently and so thoughtfully throughout the years.  It is a pleasure to work with you daily.  Your dedication and commitment allows us to continue to strive for excellence in all we do.  Your talent and hard work reflect so brightly on me. I am thrilled to formally and publicly thank you in this forum.

Ten years ago, in 2008, we were in the middle of a worldwide financial crisis. I personally will never forget that time and its effects on me and the clients of New England Capital. I have been reliving this time, almost day-by-day, with the help of a book I am currently reading. A friend and client (thank you Don) lent me former Federal Reserve Chairman Ben Bernanke’s book called “The Courage to Act: A Memoir of the Crisis and Its Aftermath”.

Like many financial crises before it, excessive debt can be at least partially to blame for this “Subprime Crisis”. Simply put, people, companies and countries get themselves into trouble by borrowing more than they can afford to pay back. As Bernanke said in his book, “The financial crisis of 2007-2009 had several triggers. The most important and best known is the rapid run up and subsequent collapse in housing prices and construction.”

Other triggers include risky lending practices to individuals and real estate developers. Banks and mortgage companies were incentivized to construct and sell complicated financial instruments that magnified the leverage while making these loans appear safe.

The following was adapted from a speech given on June 28, 2018 at New England Capital’s 30^th Anniversary Celebration at Holiday Hill Outing and Events Center.

I would like to thank everyone for coming out tonight but really, I thank you for so much more.

I am truly grateful to all of you for allowing me and New England Capital to be part of your family, to be part of your life, to assist you with achieving your hopes and dreams, and to try to put meaning behind your money.   Your successes are our successes. Our goal is to successfully guide you to and through a fulfilling career and through retirement. 

Another day. Another tweet. Another tariff. Another volatile stock market day.

I was planning to write my quarterly blog about issues facing baby boomers as we age, but the topic of tariffs have taken center stage. Then I had an epiphany. These two topics are closely related and need to be combined. Why not place a tariff on all imported old people!

I know what you’re thinking.  Chris, you’re brilliant. The money raised from the tariffs on old people coming into the United States will be used to reduce the strain on the Social Security and Medicare systems caused by the increasing population of people over age 65. And yes, as a bonus my solution also finally addresses two other thorny problems for President Trump—immigration and jobs.

As college students end their winter break and head back for spring semester, I thought it would be a good time to review some college planning basics.

I tell clients there’s no “magic bullet” for accomplishing the college savings goal. Paying for college for your children usually incorporates several strategies including:

• Saving money in a college fund
• Scholarships and Grants
• Loans by parents and/or students
• Re-directing current income from parents or students during the college years.

In most cases, the best vehicle to save for college is 529 savings accounts. 529 refers to the section of the Internal Revenue Service code which allows for tax preferential treatment of college savings accounts. 529 plans are typically owned by the parent with the child as beneficiary.

All of us at New England Capital Financial Advisors would like to take this opportunity to wish you and your family a happy holiday season and a very healthy safe and prosperous New Year. It is one of our greatest pleasures to exchange season's greetings and thank those whose friendship and goodwill are so highly valued.

This holiday season seems to be more enjoyable after a good year of gains in the markets.  Most markets have done well this year; stocks and bonds both in the USA and globally.  For example, the US stock market, as measured by the S&P 500, has had over 50 new record highs so far in 2017.  While some believe the US stock market is overvalued, others believe that the current valuations are supported by record earnings.   A company’s earnings may be the biggest factor in determining its value. 

In fact, for the first time in years, the world’s major economies all appear to be trending higher.  United States GDP (Gross Domestic Product) will increase at a 2.4% rate for 2017 (compared to 1.6% for 2016).  Europe and Japan seem to be turning a corner with 2017 GDP rates slightly ahead of 2016’s.  China’s growth rate in 2017 shows more stability than many expected.  At 4.5% GDP, emerging markets could have room for further growth. 

I've noticed in several of my recent client meetings that the topic of risk is being discussed more often. I think this is a good thing. Unlike Chris Lee's article in this newsletter which discusses large, geopolitical economic risks from around the world, I want to concentrate on risks closer to home, specifically individual self-inflicted risks. 

Behavioral finance which is a relatively new field of study can help us make better decisions which allow us to reach our financial and life goals. Behavioral finance attempts to understand the biases of human behavior when it comes to money.  Imagine economist Adam Smith got together with psychoanalyst Sigmund Freud and combined their two fields of study! 

A quick review shows the economy continuing its slow but steady ascent. The economic output grew at a 3.1% annual rate in the second quarter, slightly stronger than previously thought and marking the best growth in two years according to the US commerce department. Unemployment remains low and the stock market as measured by the S&P 500 is up 12.5% year to date according to the Wall Street Journal. Also worth noting is that markets have generally been calm this year. The VIX, or volatility index listed on the Chicago Board of Options Exchange (CBOE) has mostly stayed in a very narrow range indicating little expectation of future volatility.

Did your mother ever tell you fondly that you were one in a million? The better question now is: are you one of 143 million? If you are, you're one of 44% of Americans that had their security breached at Equifax credit bureau. 

According to the company website: “On July 29, 2017 Equifax discovered that criminals exploited a US website application’s vulnerability to gain access to certain files.” The information that the hackers gained access to include names, Social Security numbers, dates of birth, addresses, and in some instances driver’s license numbers. They also stole credit card numbers for about 209,000 people. The company then compounded its public relations nightmare by sending people to a website to find out if they were affected. The site included language so that anyone signing in to get this information had to waive any right to join a class action lawsuit against the company should their identities be stolen and financial harm come to them. Under pressure they no longer include this language and in most states, have waived the $10 fee for this service.  If you are one of the consumers that rushed to lock their credit files with a pin at the three credit information bureaus (Equifax, Experian, and Trans Union), please change your pin once you receive it. Instead of being assigned randomly generated pin numbers, the pin numbers reflected the date and time you had signed up for the freeze. This template used to create sequential pin numbers puts consumers at additional risk since hackers know the pin set up they can potentially unlock credit files by guessing a series of possible pins. Equifax has since changed how they assigned pin numbers so that they are randomly generated. 

If you've never used credit, (never had a mortgage, car loan, credit cards or other personal loans) you may not be affected. If you have credit, there’s a high probability and that the identity thieves now have your Social Security number and address.  Besides fraudulently obtaining credit in your name, experts are worried that the hackers could fraudulently file tax returns in your name to obtain a tax refund. 

I bought a new car last month and I was wondering if it would be the last car I ever buy. Or maybe the last car I ever drive?

I gave my old car which I had kept for 10 years to my son, Jon. He graduated college in three and a half years so we agreed that some of the savings from not having to pay for that last semester would be used to purchase him a car. Of course, he reminded me that the value of my old car is less than a third of what I would have paid for his last semester. Nonetheless, he was very grateful for the car and we both considered it a good deal for each of us.

I intend to keep my new car for at least 10 years. Let’s take a peek into the future to imagine what life, or at least transportation, could look like 10 years from now.

I like to talk about money and finance, a subject I know pretty well after 33 years as a financial advisor. Many people don’t like to talk about their personal finances. While sex may be the most personal and private topic to discuss, I think the money discussion runs a close second. Certainly there are many people who would much rather talk about their sex life than their financial life.

Some of the uncomfortableness surrounding money comes from a lack of understanding the subject. The blame goes to many factors including the misinformation we get from others including our parents, a lack of financial literacy taught in our schools and the financial industry itself. Yes, the industry likes to make things more complicated and confusing than need be. I’d like to add some clarity here by simplifying the basic factors of any investment.

There are three basic factors of any investment. It doesn’t matter if the investment is a stock, bond, mutual fund, exchange traded fund, house or other real estate, or a bank account. The three factors are time, rate of return, and money. ALL are important to accomplish your financial goals. None can be omitted but all can change. For example, if you reduce the investment timeframe, you would need more money to invest or you’d need to achieve a higher rate of return.

As the new year begins, and we start to write the first chapter of 2017, the United States of America is days away from swearing in a new President and administration. In my opinion, one of the least discussed problems facing the new administration and Congress is the increasing national debt.

By comparison, when George W. Bush was first sworn in to office, the national debt was $5.63 trillion. Eight years ago, when Barack Obama took office, the national debt almost doubled to $9.98 trillion. Today as Donald Trump prepares to be sworn in, the national debt stands at $19.88 trillion¹.

This figure does not include the unfunded obligations we have made through Medicare, Medicaid and Social Security. The non-partisan Congressional Budget Office estimates that would bring total obligations of our government close to $200 trillion dollars!

All of us at New England Capital Financial Advisors would like to take this opportunity to wish you and your family a happy holiday season and a very healthy safe and prosperous New Year. I am truly blessed to be doing what I love to do in partnership with a team of professional and competent colleagues for the benefit of you, our valued clients.

As we approach and prepare for this joyful but incredibly busy holiday season, I find myself struggling with balance. Not the balance I struggle with in my weekly yoga class, rather the work-life balance we all aim to achieve. A study published by the American Sociological Review found that the majority of people who manage to achieve some form of work-life balance do certain things well.

First, they make deliberate choices about what they want in their life.  They create a roadmap of the kind of life they want to live, how they will spend their time and then commit to this path.

I love my kids. I really miss them now that both boys are away at college. I must also confess that Abby and I have adjusted surprisingly well to the “empty nest”. With the kids at school, we have found more time for ourselves including taking a yoga class at the local Park and rec department. Additionally food shopping has become much easier and less expensive, there’s less laundry and less dishes, the house stays cleaner, and Abby is free to use her Stop and Shop gas points for HER car!

Chris Lee and I sent out an email on Friday June 24^th, the day after the historic vote in the United Kingdom where the British people voted to leave the European Union.  We told you to be prepared for a negative market reaction to the vote in world markets and increased market volatility in the following months.  While the Dow Jones was down by more than 600 points on the first trading date after the vote, many would be surprised to know that on the first day of July, the Dow Jones, S&P 500 and NASDAQ index were all higher than they were before the Brexit vote.  This strongly suggests to Chris and I, that once again people who panic and let their emotions rule their investment decisions are more likely to lose money by selling low and buying back at higher prices.  For those who understand that short-term volatility is the price to be paid for higher, longer term returns, they will be better positioned to achieve their financial goals.  

I don’t want to imply that Brexit is a “non-event.” Quite the opposite; Chris and I know that many questions remain not just for the United Kingdom (UK) and the European Union (EU), but also for the USA and around the world.  Brexit, along with future acts of terrorism, the seemingly endless Mid-East saga, the Zika epidemic, rising oil prices, declining oil prices or any other crisis du jour that our 24/7 news media bombards us with will certainly have an influence on us as investment advisors and how we consequently manage your money.  

Of course the biggest question is: Will the EU break up?  After all, the UK is the second largest economy in the EU.  There are already renewed talks of a Grexit (Greece departing from the EU) other clever names have already popped up too.  How about “De Partugal”, the “Czechout” and the “Big Finnish.”  We can even bring the issue closer to home with rumors of Texas leaving the United States.  

"I don't trust the stock market". I've heard that a lot over my 33 year career. It may even be the way you're feeling right now. Did the negative double-digit returns of the S&P 500 at the beginning of the year (which was the worst January in the history of the stock market), only to be followed by a positive double-digit return since mid-February, leave you feeling the same queasiness as riding the Wildcat roller coaster, the oldest continuously operating wooden coaster, at Lake Compounce in Bristol, Connecticut?    As the chart below shows the S&P 500 has a positive return in 27 of the last 36 years. Of course that means we've had nine years of negative returns during that time. The average annual return for the 36 years has been over 11%. But in order to enjoy that 11% return you must have been able to endure an average, temporary, intra- year decline of 14.2%.

All of us at New England Capital Financial Advisors would like to take this opportunity to wish you and your family a happy holiday season and a very healthy safe and prosperous New Year. It is one of our greatest pleasures to exchange season’s greetings and thank those whose friendship and goodwill are so highly valued.

I’d like to share with you one of the most serious threats to your financial accounts, not only the accounts you’ve entrusted with us at New England Capital, but all your accounts including bank, credit union, and credit card accounts. This threat has nothing to do with the price of oil and gas, potential increases in interest rates or the 2016 elections. Cybersecurity including but not limited to wire fraud, identity theft, email scams, phishing, and social engineering, is increasingly threatening the security of every financial institution worldwide.

For our part at New England Capital Financial Advisors, compliance costs this year is over $100,000 with about half of that figure dedicated to cyber security prevention programs. As part of our fiduciary responsibility to you, we want to educate you on what you can do to help us protect you from this threat. The threats are real but embracing these simple actions can help you protect your identity and mitigate your potential security risks:

The average person can't dunk the basketball. The average mutual fund manager can't beat their passive benchmark index.

Both of these statements are true. But this doesn't mean that no one can dunk a basketball or that no active manager can beat their index.  Obviously some people can dunk a basketball but due to the mainstream media the statement about active managers being able to beat their passive benchmark is not as obvious. 

To help you better understand what I’m talking about, a market index is a portfolio or combination of several financial securities or other investment vehicles with their value expressed as a total for purposes of tracking the entire market or at least a sector of the market. For example, large US company index may be expressed as either the Standard & Poor's 500 or the Dow Jones Industrial Average. An index of small US companies is represented by the Russell 2000. An index of bonds is represented by the Barclays Capital Aggregate Bond Index.  $152.7 billion has left US stock funds from May 2014 through May 2015. At the same time passively managed funds have increased by $157.2 billion. The popularity of index funds can be traced to low costs and the difficulty of the average mutual fund manager to beat these benchmarks: only 47% of the time have active managers of US stock funds outpaced the S&P 500 during the 20 calendar years ending 12/31/2014.

Hopefully everyone enjoyed the long holiday weekend as we celebrated the 4th of July.  2015 marks not only the 239th anniversary of our nation’s independence, but also 80 years since social security became law and 50 years since the Grateful Dead was formed. I was reminded of this milestone as I spent my 4th of July with over 70,000 friends in Chicago watching the Grateful Dead’s final shows at Soldier’s Field.

I never considered myself a “Deadhead” although I did see the band over half a dozen times in my twenties and early thirties. As my 70,000 plus friends filed into Soldier’s Field, I was surprised by the age ranges of the fans. Sure I expected to see 50, 60 and 70 year olds (yes I saw people wearing tie-dyed T-shirts with walkers) as well as 20 somethings with their infants. Imagine 20 and 30 somethings sitting next to me to watch a band whose original members range from age 67 to 75. 

Obviously all the band members are all eligible for Social Security (SS) benefits. I don’t know if they’re taking SS but what if I was their personal financial advisor. What would I recommend to them about taking their SS benefits?

By Christopher W. Beale, CFP®

"The only function of economic forecasting is to make astrology look respectable ".
This quote is from one of my all-time favorite economists, John Kenneth Galbraith, 1908-2006.

After a quick, 36 hours trip to Kansas City two weeks ago I caught a cold on the return flight. This cold turned into a respiratory/sinus issue with double conjunctivitis. So, to the delight of my office, I did something that I have not done in the last 3 years---I called in sick! Spending time with my two friends, CNBC and CNN, made me want to get back to work as soon as possible. How depressing to listen to their negative take on everything! No wonder why so many people think “we’re going to hell in a handbasket”. I’d like to take you away from the negative messaging of the addictive 24/7 news cycle to give you my view of what I see for both the short and longer term economic view of the US and the rest of the world.

Let me start with a brief list of economic “realities” that I’ve heard both at client meetings and from the “expert” talking heads who fill cable TV air time: interest rates are too low making money too cheap, interest rates will be too high, the Chinese economy is slowing, the Chinese economy will take over the United States’, too much global unrest including instability in Russia, our dollar is too strong, our political system is a mess, the income disparity is too wide, there's too much debt in the world.

First, let's start with The United States. In 1945, the United States accounted for more than half of the world’s total gross domestic product (GDP) or total output of goods and services.

This means that half the world's economic output took place inside our borders. Today the United States economy makes up just fewer than 24% of the world’s GDP. Without further analysis we could conclude that the United States has been in a terrible decline over the last 70 years. But economic and financial growth is not a zero sum game. The leveling of the global playing field is not from us going down on one side but both sides going up, albeit at different rates. In other words, the US has absolutely enjoyed steady growth, but the rest of the world; including developing economies (somewhat due to a lower starting point) have essentially taken off like a rocket! In a recent client meeting, the client’s accountant questioned whether the 30% international stake allocated to the equity portion of our model was too high. Again I don’t expect the average accountant to understand why it is essential to have global diversification. Most accountants don’t understand that some international markets have faster growth rates and higher dividend yields than our US markets. The US tax code doesn’t show how global diversification can reduce risk and increase returns over time.

Other concerns I've heard from some of you during our client meetings is about the United Sates declining to the point that we will soon be irrelevant to the global economy. This reminds me of when I started as a financial advisor over 3 decades ago. The rhetoric today sounds strikingly similar to the 1980s when Japan was going to eat our lunch economically. The common belief was that we would quickly become a second rate economic power full of lazy workers. Although before my time, I would assume the National conversation was very similar after October 4, 1957 when the Soviet Union launched Sputnik and beat the United States in the global space race.

Let's take a look at what's really happening. Every year, the World Economic Forum ranks countries for global competitiveness. They rank factors such as labor market efficiency, the quality of primary education and higher education, infrastructure, strength of institutions, innovations, business sophistication, technological readiness, in the sophistication of financial markets. In the most recent survey, the US ranked third overall just behind Switzerland and Singapore. The superpower that most Americans are worried about, China ranked 28th, one rung above Estonia.

One last doom and gloom issue the “experts” love to discuss is the decline of US manufacturing. One of the untold stories is that the combination of wage increases in China and elsewhere, plus the availability of cheaper energy, has made it more attractive for American companies to bring their manufacturing plants back to US soil. Foreign companies have also relocated their plants here to be more convenient to the huge end market for the manufactured goods. This trend even has a name. It’s called “reshoring”. Two recent examples that never made it through the filter of the 24/7 news programming because they aren’t negative enough: General Electric moving the manufacturing of washing machines and heaters from China to a factory in Kentucky (the rumor that the Kentucky factory was closing did make the news); and Apple moved the production of its Macintosh lines from China to the U.S.

The bottom line is that the US economy is growing, tax revenues are increasing, the deficits have shrunk from post-crisis levels, we are politically stable and have had 46 straight months of job growth. The United States didn’t become a second or third world economy in the 1950’s or the 1980’s and I see no threat of this happening today.

What about the rest of the world?

The same two inherent, universal drivers of US economic growth are also drivers of world economic growth. The first is that all people strive for a better life for themselves and their families. The second driver is the new era of global innovation in which we live.

400,000 people per day will enter the middle class over the next decade. Nearly one billion people entered the middle class from extreme poverty in the last 17 years. By 2025 (just 10 years from now) 4.2 billion people of the 8 billion people are projected to be living above the poverty line. This will be the first time in human history that over half the world’s population will be living above the poverty line! This is beyond the feel good story. As an investor, this story has huge implications. What do you want when you leave extreme poverty?

This is a question that most of us, thankfully never have asked ourselves, so let me share the research. These people want better health care, better education for themselves and their families, and finally, travel and leisure opportunities. These basic goals will have great economic impact on well positioned companies. 15% of Mexicans earned $15,000 or more in 1995. Today 65% earn at least that much. Disposable income has gone up 149% in the last 17 years in Vietnam. On the way to earning $15,000 annually, we go from walking to purchasing a bike, to a scooter to a car, with the next purchase being a luxury car. Actually one of your first purchases after hitting $10,000 is a refrigerator. Then you purchase more and better food, better beer and better wine. Better is a relative term because you typically buy more animal based food. Again, all these predictable trends have economic opportunities.

By Christopher W. Beale, CFP®

The end of one year and the beginning of another is a good time to measure progress. The typical bench mark for measuring performance in our industry is the Standard and Poor’s 500 (S&P 500) which is an index of the 500 largest U.S. based public companies. Many people still use the Dow Jones Industrial Average (DJIA) as the stock market benchmark. The DJIA uses 30 large U.S. companies for this index. According to the Wall Street Journal, for 2014, the S&P 500 returned 11.4% and the DJIA returned 7.5%. If you’re wondering how your account did compared to these benchmarks you might see an underperformance this year. There may be many reasons for this but I think the main reason many of our model portfolios at New England Capital didn’t keep up with the S&P 500 and the DJIA can be summed up in one word: diversification.

By Christopher W. Beale, CFP®

My fundamental assumption about income is that there are only three sources. The first source of income is from our Labor; wages, salary, commissions, tips, royalties etc. We work, we're productive, we add value to society and we earn money from our labor. Money is used to either consume currently or to save for future consumption. The second source of income is income which comes from Capital or savings. If we don't create and save enough capital from our labors we are forced to use the third source of income which is friends, relatives or charity. Social Security and Medicare are savings, albeit forced savings through our tax system. Government programs such as Medicaid are instead a form of government charity.

So the retirement income goal is to build up enough capital to provide an income source which will replace our income from labor, thereby not having to rely on friends, relatives or charity. It sounds simple enough in theory, so where's the dilemma?

By Christopher W. Beale, CFP®

It's hard to describe single-digit first half returns as a raging bull market, but it's also hard to feel too negative about a six month period when the S&P 500 recorded 22 record highs and virtually everything in your portfolio--including bonds--rose in value.

The Wilshire 5000--the broadest measure of U.S. stocks and bonds--rose 4.83% for the second quarter--and now stands at a 6.96% gain for the first half of the year. The comparable Russell 3000 index gained 4.88% in the second three months of the year, posting a 6.94% gain in the first half of 2013.

By Christopher W. Beale, CFP®

Good advice shouldn't be expensive but bad advice will always cost you, no matter how little you pay for it.

I believe everyone wants to avoid bad advice. But how much should good advice cost? As a Registered Investment Adviser, New England Capital Financial Advisors, LLC typically charges a fee as a percentage of the money we manage. Our fee, as listed in our disclosure brochure (filed with the Securities and Exchange Commission, provided to all new clients and offered to all existing clients annually) starts at 1.5% of the assets we manage. This percentage decreases as the account size increases, similar to the way a large box of laundry detergent or a large bag of potato chips will have a lower unit cost than a smaller box or bag. The average fee our clients pay is about 1%.

By Christopher W. Beale, CFP®

“I hope I die before I get old”. Roger Daltry, lead singer from the band, “The Who” sang those lyrics in the song, My Generation. My question to my (Baby Boomer) generation is…What if you don’t? What if we get old and we’re still alive?

I ask this question because we’ve had several clients who needed help from a home healthcare agency, a nursing facility or hospice. Fortunately all had long-term care policies to help pay for the cost of care. Unfortunately I have seen many people who needed care but didn't have long-term insurance. Without this insurance long-term care costs have eaten into nest eggs, retirement plans, and home equity of many retirees and even pre-retirees--one in four middle aged adults between ages 45 and 65 were limited in activities due to chronic health conditions.