History and Your Financial Portfolio

Sunday, April 2, 2017 – Wealth Strategy with Bryan Rigg
Tune In Every Week: Saturday on WRR from 7:00-8:00 am / Sundays on 570 KLIF

Bryan Rigg and Reid Heller in the radio studio

One thing history tells us is that if you are diversified, your portfolios usually are going to do extremely well in the long run. Another thing people don’t look at as far as the fabric of our world and how this came about in helping productivity is women in the work force. That’s something that, really, the last three decades, if you will, women have really been able to enter into the workforce at a very high level.

Right now, Rigg Wealth Management focuses a lot on contrarian plays, and the market is at all‑time highs, but energy is still low. You look at historical events with energy, what does it tell you when the barrel of oil a few years ago was at $120, and now it’s floating around $50‑55.

This is important to look at, world events, and how the oil market is playing out, because as Friedman wrote in his book, “The World is Flat,” there is a lot of truth to that, looking at world events and how they’re impacting things locally, are very critical in looking at your financial planning.Look at the economy, what’s going on in the economy. Are companies flush with cash? Are they overleveraged? In 2008 and 2009, companies were way overleveraged. Bear Stearns and Lehman Brothers were 30‑1 leveraged. It was absolutely insane, especially what fooled the leader of Lehman was doing at that time. That’s why Lehman Brothers is dead. It’s no longer around.

Today, we see that a lot of companies are rich in cash, especially since a lot of banks are not lending as much as they used to, because they don’t have the cash. They don’t have funny money, if you will, because a lot of times when Lehman and Bear Stearns were lending out money, it wasn’t theirs. 30‑1 leverage is a crazy way to deal with money.

Look at the economy, look at where institutions are strong with cash. That’s something important to look at. Financial institutions a few years ago, since they hit rock bottom, but they were coming back with better regulations, was a good investment. That’s one way that just looking at the economy in general can help you with your portfolios.

Look at scandals, very important. Just recently we had the scandal with Volkswagen of falsifying its reports on its cars. This impacted the share price of Volkswagen dramatically. Luckily, the good news about our economy is that when the scandals come to light, you’ve got to be worried about the scandals that you don’t hear about.

LISTEN TO SHOW

RIGG Wealth Management offers securities to Broker Dealer Financial Services, Member SIPC and advisory services through Investment Advisors Corp and SCC registered investment advisor. RIGG Wealth Management is not a subsidy area of Broker Dealer Financial Services. Neither RIGG Wealth Management nor Broker Dealer Financial Services offer legal advice. Client should consult their attorney of choice on all legal matters.

Opinions expressed on this program do not necessarily reflect those of Broker Dealer Financial Services. The topics discussed and opinions given are not intended to address the specific needs of any listener. Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk. Examples mentioned are for illustrative purposes only, individual results may vary. Past performance is no guarantee of future results. Investing involves risk including loss of principle. Rebalancing can entail transaction costs and tax consequences that should be considered when determining a rebalancing strategy.

SHOW TRANSCRIPT 

Welcome to the show, ladies and gentlemen. This is Bryan Rigg with Rigg Wealth Management. I appreciate you tuning in today.

We’re going to start the show with ideas about estate planning. I feel that during this tax season when you’re going through all the things that you need to to make sure you get everything to the IRS that you need to, it’s a good time to also be thinking about estate planning if you haven’t done so.

I have found continually through my years of dealing with people with financial management that they quite often have not done the things that they need to do with setting up a living will, doing a durable power of attorney, setting up a trust, doing their wills. This is very important.

We are joined here again today with Reid Heller. He’s had several decades of experience in the legal field, and he has done a lot of work for me, for my clients, and myself with estate planning.

I think that is something very important to look at if you haven’t started doing anything right now with your estate and how you’re going to take care of your kids, how you’re going to take care of yourself. You need to start planning now.

A lot of people put it off, but that is something that is critical, I think, for people to look at, because it helps give you direction for your financial portfolios. They work together in helping you establish your goals, and that’s why I think it’s so important.

Thank you so much for being with us today, Reid. I’ll hand it over to you to start discussing these important issues that people need to be thinking about when it comes to planning their estates.

Reid Heller:  Thank you, Bryan. It’s a pleasure to be here today. I really appreciate the opportunity. I want to remind your listeners, I’m a general practitioner. I’m not an individual specializing in any area, licensed by the state bar in Texas, other than for the general practice of law.

But I do practice. This is a special interest of mine, and I’ve been working on it for many years. I really enjoy helping and educating people.

Today, what I want to talk about is the potential risks and penalties that you pay when you don’t think ahead. Working with lawyers is probably not anybody’s idea of a fun afternoon, but it is something that can save you money in the long run and can give you peace of mind.

Those people who don’t use lawyers have multiple ways of creating estates. One is by statute. If you don’t make a will, the state has made a will for you. It’s in the form of the statutory scheme of the probate code. The probate code will leave money ‑‑ not all of your money ‑‑ to various people ‑‑ children, your wife.

I can go into greater detail perhaps in another show. The idea being the you don’t get to decide. The code gets to decide. The other problem that people face when they don’t use an attorney to get a will is very expensive probate, multiples of the cost of actually going to the trouble and having basic estate planning done.

Probate costs…

Bryan:  Can you give an example there? Tell me if I’m wrong when I speak the following. If somebody puts together a very sophisticated will, and puts together estate planning ‑‑ has a will or has a trust, puts it together. It could be a few thousand dollars, maybe up to $5,000.

But if you do not do all that planning, and you let it go to probate, we are talking about tens of thousands of dollars, if not more, correct?

Reid:  The amounts are unknown. Among the problems that you have is the executor that is appointed by the court to oversee the administration of your estate must serve with a bond. You have the cost of putting up a bond that secures the total value of your estate.

Many people have estates in the many hundreds of thousands of dollars, sometimes even millions of dollars. A bond in that amount is expensive, and that’s just the beginning.

Bryan:  For example, how expensive would a bond be?

Reid:  It could wind up being three to five percent of the total amount in terms of expense.

But aside from the bond, the bigger issue is the fact that administration is very expensive without a will. Wills in Texas, drafted by ordinary, competent practitioners, provide that the individual named as executor is to serve without bond.

That means no cost for a bond, and an independent administration. Independent administration is the thing that permits you to save all the really big dollars [inaudible 5:06] probate means.

Bryan:  Sorry to jump in here, Reid. One thing I want to reiterate here from my experience of being over a decade on Wall Street, when I have gone through many estates, when people have died. I want to reiterate to people that when death happens, it often, if not all the time, does not bring the best out in people.

It brings out the worst a lot of times. A lot of times, if you want to have a certain thing happen with your estate, it is imperative that you don’t leave it up to probate, that you have a direction, you have a strategy, and you put it into place using a competent lawyer of your choice. I just wanted to throw that in there.

Reid:  That is a very important point. Family conflict is one of those things that lawyers in certain specialties feed on, and that’s not a group of people you want to feed.

What you want to do is ensure that conflict is reduced to a minimum so you do not create openings for people to step in and engage in expensive and, ultimately, time‑wasting litigation that depletes estates of the money that you worked hard to leave and better the lives of your beneficiaries.

Aside from the probate costs, the cost of bonds and things like that, there are other very important considerations that you need to be aware of, and these have to do with thing that matter to you in your life today.

One of them has to do with the financial power of attorney. There’s a statutory form in Texas. Any lawyer can help put it together for you. You can find it if you google for the form on the Internet. It’s a document that allows a loved one to work as your agent, your power of attorney, in the event that there’s some incapacity.

For example, you’re in surgery. Something needs to be taken care of. Surgery would be an event of incapacity. If it’s something that involves an injury ‑‑ a brain injury, something that involves impairment of mental processes to the point that you’re no longer capable, physically, mentally, or even emotionally, of taking care of your estate matters, or just doing ordinary business.

You’ll want to have someone appointed who can do that. There are two methods of appointing the individual within the estate form.

One is the individual’s appointed at the moment that you sign the form. The other is one that arises only when one or two doctors, depending on what you specify, certify your incompetence. That’s called a springing power. Those are the typical ones that we recommend.

Bryan:  What I wanted to jump in there with is I want to give a real‑life example that happened to me. I was just getting out of the Marine Corps when I get a call that my father was not doing well. He had just had brain surgery, and all the sudden, he was having a hard time functioning.

I went down to Florida to take care of him. Luckily, he had just put together the power of attorney that allowed me to, while he was incapacitated ‑‑ and he ended up being incapacitated for several years. Something happened with the surgery, and he was mentally incompetent.

It allowed me at the very beginning to keep the life insurance that he put in place in force, they will pay for those, and that took care of my brother and I a little bit. I was able to take care of his bills. I was able to make sure that he got into a good medical facility. Not only did he have power of attorney, but he had a healthcare surrogate.

This had real‑life implications for my family. We would have been lost in the courts for several weeks until we would have been able to give ‑‑ or at least, that’s what was told to us ‑‑ been able to have the power to take care of his affairs.

Because he had set up these documents, we were able to go down there an immediately get the nurses notes from the hospital, try to figure out what was going on, find a place for him, and then start paying his bills, and be able to represent him with the different institutions that he had been a part of.

Reid:  That is terrific testimony and personal experience, and that really needs to be taken to heart, I think, by your listeners, because the problem with financial powers of attorney can really create a crisis that can wreak havoc on your whole financial system at the time you awaken or become competent again.

Likewise, the healthcare power of attorney that goes along with that is absolutely essential in order to ensure that there is someone who understands your mindset and can represent you with your doctors, giving them the best view of who you are, and the kind of healthcare that you want.

Bryan:  This is important, ladies and gentlemen, is that there’s two different type of power of attorneys. There’s a healthcare power of attorneys, sometimes called a healthcare surrogate, and then there’s the durable power of attorney, or regular springing power of attorney.

One handles your personal affairs, business affairs, and the other one handles your medical needs. Remember, when you do your estate planning, you need to have both.

We’re going to have to break away here for a quick break, but please stay tuned. We’ll continue on discussing issues about estate planning, how important they are, and things that you need to be thinking about. We’ll be discussing these with Reid Heller.

Please feel free to visit us at our web page at riggwealthmanagement.com. That’s Rigg with two Gs, riggwealthmanagement.com. Also, please feel free to call us at 972‑383‑1210. We love hearing from you and hearing your feedback. Please stay tuned, and we’ll be right back with you.

COMMERICIAL BREAK

Bryan Rigg:  Welcome back to the show, ladies and gentlemen. This is Bryan Rigg with Rigg Wealth Management. We’ve been discussing estate planning and the importance of estate planning and things that you need to be thinking about, especially in this time of tax season when you’re dealing with your affairs anyway.

It is a very good time to also explore putting your estate in order if you haven’t done so or updating your estate planning if you haven’t done it in many years.

We’re joined here by a seasoned lawyer, Reid Heller, a dear friend and colleague. He’s done a lot of estate planning for me, for my clients. He’s done my estate planning. We were talking about healthcare surrogates, and durable power of attorneys, and springing power of attorneys. I’ll turn it over to Reid to continue on those subject matters.

Reid Heller:  I want to talk about two other areas, today, that create heartburn and worse over time if they’re not properly handled.

One has to do with the end of life. It’s the form that Texas promulgates for determining at what point medical care should be withheld. The other matter I’ll talk about are trusts and the way that trusts can be used to handle difficult family situations or problems with providing care for people who have special needs.

On the first one, end‑of‑life issues are exceptionally delicate. They usually fall into two slots that create serious, serious conflict. One has to do with at what point can medical intervention be removed. For many people, this is a religious question.

There are many religious groups in America and people that I work with all the time that have religious scruples on the issues, so I always ask them to speak to a religious clergy. Once we get beyond that, once we know the parameters of that, then there’s the question, if they want to be able to withhold treatment, under what circumstances should it be withheld?

Texas provides, in a form that you can sign and give to your family and to your healthcare providers, that tells them when death is imminent and the use of additional extreme medical care would be solely for the purpose of extending the moment of your death, that treatment can be withheld.

By withholding treatment, you can ensure a death with less pain, sometimes with greater dignity. It’s a matter for each individual, the individual’s conscience, and for religion ‑‑ religious advice based on their particular clergy.

Bryan:  On this note, I want to point out a lot of people remember this back in the late 90s, early 2000s, of Terri Schiavo down in Florida. This is important to look at because even if you put in the legal documents, sometimes it can be difficult.

You need to really make sure, if you have a particular vision for your living will, that it is done well, that it is updated, that people are well‑informed about what you want, because this caused a lot of turmoil not only within the Schiavo family ‑‑ with her parents and with the husband ‑‑ but it caused a lot of problems with a lot of other people because it caused a lot of confusion with lawyers and with families of what to do.

Reid:  Oh my God, the expenses of the Terri Schiavo case ran into the millions, if you count both sides. The other area where you find what, I would say, is ripe for litigation at end of life is disposition of remains.

There are many people who have strong feelings about burial versus cremation. It is a wise idea to either include this information, this preference, in your will or in a form that’s promulgated to direct family and funeral directors on how to dispose of your remains.

There are also Schiavo‑like cases involving conflicts within families about burial versus cremation, or burial at sea, and even the location of the cemetery. All these things can and should be decided by you in order to eliminate conflict later on.

Bryan:  By way of illustration, I had a family that the mother was telling me when we were going over how she wanted to be buried, she says, “Well, I’m going to be turning into dust anyway, so just go ahead and cremate me because it’s the cheapest way of disposing of my remains.”

But her daughter was very religious, Evangelical Christian. She believed that you should not destroy the body because it was going to be reanimated later on when Jesus came back in the Second Coming, according to her theology.

She was at a crossroads ‑‑ “Do I honor the religious belief of my daughter, who feels like if I cremate myself I’m violating a religious tenet, or do I go ahead and just let my daughter do what she wants with me, because I’m going to be dead anyway?”

Reid:  A classic. That’s usually the way that the conflict shapes up. The other matters I wanted to talk about involve trusts and what you can do in a trust in order to ensure creating more problems rather than solving problems or simply doing what you want.

One of the problems that one faces in creating trusts or wills that leave money to people who maybe can’t care for themselves, who have serious problems. You may have an impaired relative, a child, a parent, someone with little or no resources to their names who are dependent upon you for their maintenance.

They may get a little bit of money from the federal government, maybe a little bit from the state government, but the problem comes when upon your death you leave a significant amount of money to them thinking that this is going to benefit them and ensure their future care.

Pretty soon, you run afoul of Social Security rules in which $2,000 is the maximum amount of money that you can have access to ‑‑ money, property ‑‑ if you intend to continue to qualify for special Social Security benefits. In cases like these, we want make sure that the bequest to an impaired person is couched in the form of a special‑needs trust.

Whether you’re giving things over to people in a will or whether you’re giving it over to them in a trust, you’re going to want a sub‑trust in there that qualifies in such a way that it doesn’t cut that individual off from qualification for federal aid.

Very important. I know from experience and extended family that this is a matter that can create terrible tensions, become hotly litigated, and create all kinds of unnecessary expense. Think in advance about taking care of impaired dependents in responsible ways that don’t deprive them of qualification for federal aid.

Bryan:  To throw in here, if that has sparked an interest, if you have somebody that you do want to take care of later on that has special needs, these entities that you can create are called special needs trusts.

Reid:  Correct. They can be created within the will or trust that you use for disposition of your estate.

Bryan:  I have had a client a few years ago, a Princeton grad, a football player there, a wonderful man. He’s over 60 now. He had a grandson that was mentally handicapped.

He had already set up that his portion of his estate would go into that special needs trust to take care of him in perpetuity as best as possible, because he knew that when he died here in 10 or 15 years, the kid was only going to be in his late teens. He wanted to make sure that he was taken care of.

Reid:  There’s another issue that comes up frequently in disposing of or making gifts through wills and trusts, and that is the gift to a person, possibly a child or a spouse, who has a tendency to overspend and become a credit risk. Now why is this a problem? Because you’re about to push a pile of money onto their side of the table that their creditors may be staring at.

What you’ve done is you’ve created an attractive nuisance. You’re now drawing people to come in close, and engage in litigation with the new beneficiaries of your estate, and take away the money that you wanted to use to benefit them. It doesn’t have to be that way. It’s possible for you to benefit them without creating that nuisance that will draw in their creditors.

You can have provisions inside of a trust. Don’t think about giving the money outright. The creditor‑proof provisions inside of a trust prevent any of the trust funds from being used for the purpose of benefiting creditors. This is a powerful tool.

Bryan:  These issues are very important to look at. We’ll be more than happy to help you find a lawyer of your choice to put these parts of your estate in place. At Rigg Wealth Management, we like to look at all aspects of your portfolio and, here again, part of your legal planning is critical in knowing how you’re going to do your financial goals.

We’re going to have to break away for a break here for a few seconds, but we’ll be right back with more insights into estate planning and also financial planning. Please feel free to call us at (972) 383‑1210. Again, that’s (972) 383‑1210. We’d love to hear your feedback. We’ll be right back.

COMMERCIAL BREAK

Bryan Rigg:  Welcome back to the show, ladies and gentlemen. This is Bryan Rigg with Rigg Wealth Management.

We’ve been talking about estate planning, and I want to give a little bit more insight into that area. Then I want to go into historical events and different issues in the market and history, for that matter, that you need to be looking at that can help you make decisions about your portfolios today, how you manage them, and what you need to be thinking about when certain things happen in the news.

Very quickly, to wrap up the estate planning segment of our show, it is critical, ladies and gentlemen, to put your estate in order, look at the power of attorney, look at the healthcare surrogates, look at the living wills, see if your estate have plans for it to be put into a trust later on, and how you take care of your family.

Reid, very astutely described it as a love letter, putting your estate together ‑‑ a love letter for your children, your grandchildren, your nieces, your nephews. A lot of people have a difficult time doing estate planning, because you have to deal with your mortality.

As Sigmund Freud said, “People make the wrong decisions every day, because quite often they think death has nothing to do with them,” and I think that spans the whole gamut of human experience. A lot of times, we do things, not realizing that we are very finite, that the world will go on without us. I think that’s something very important to look at, especially when you’re taking care of your family.

By way of illustration, Prince has made a disaster with his estate. He has over $100 million, and he died intestate. He died without a will. We know that Rockefeller, Junior and Rockefeller, Senior also died without wills.

My great grandfather, who’s in the Cowboy Hall of Fame, had several children, and he was, according to some reports, had the third largest ranch in Oklahoma in 1956 when he died. He died without a will. I have seen that within a family of hundreds of members, of how it’s still creating chaos today.

It is important to put your wills together and sit down and go over what you want to do with the wealth that you have amassed. It can be just as simple as putting a transfer of death, a TOD, on your individual accounts. That bypasses probate.

As you just heard, probate is a very costly and not very efficient way of disposing of your estate after your death. You put a transfer of death, we can help you with that here at Rigg Wealth Management, on your accounts, and it goes directly to whoever you want it to go to. It’s not disclosed in the courts, and like I said, it bypasses probate.

Of course, on your retirement accounts, you have your beneficiaries there, and that also bypasses probate. Those are two areas of estate planning that we can help you with, and go over ideas of how you want that to be used later on, and who should be benefiting from it.

I want to shift gears a little bit and give you ideas about how to look at the world, and look at events to help you with your portfolios. Quite often, people ignore financial planning as well as estate planning. In financial planning, we find that from some stats that I’ve had, 50 percent of all people who retire today have 50 percent less than what they need, not than what they want.

It is important to start doing financial planning, because 50 percent of the people out there that you see every day have not put into place good plans, or plans, period. A poor plan today is a lot better than no plan, so get something going.

The things that you want to be thinking about ‑‑ I talked about this in the last show, but I want to reiterate it ‑‑ is you want to look at certain factors. World events are really important to look at, and what that’s telling you.

We see a lot of things with oil throughout the world, and consumption, how OPEC plays with that, how Russia plays with that. This is very important when you’re looking, for example, in the energy sector.

Right now, Rigg Wealth Management focuses a lot on contrarian plays, and the market is at all‑time highs, but energy is still low. You look at historical events with energy, what does it tell you when the barrel of oil a few years ago was at $120, and now it’s floating around $50‑55.

This is important to look at, world events, and how the oil market is playing out, because as Friedman wrote in his book, “The World is Flat,” there is a lot of truth to that, looking at world events and how they’re impacting things locally, are very critical in looking at your financial planning.

Look at the economy, what’s going on in the economy. Are companies flush with cash? Are they overleveraged? In 2008 and 2009, companies were way overleveraged. Bear Stearns and Lehman Brothers were 30‑1 leveraged. It was absolutely insane, especially what fooled the leader of Lehman was doing at that time. That’s why Lehman Brothers is dead. It’s no longer around.

Today, we see that a lot of companies are rich in cash, especially since a lot of banks are not lending as much as they used to, because they don’t have the cash. They don’t have funny money, if you will, because a lot of times when Lehman and Bear Stearns were lending out money, it wasn’t theirs. 30‑1 leverage is a crazy way to deal with money.

Look at the economy, look at where institutions are strong with cash. That’s something important to look at. Financial institutions a few years ago, since they hit rock bottom, but they were coming back with better regulations, was a good investment. That’s one way that just looking at the economy in general can help you with your portfolios.

Look at scandals, very important. Just recently we had the scandal with Volkswagen of falsifying its reports on its cars. This impacted the share price of Volkswagen dramatically. Luckily, the good news about our economy is that when the scandals come to light, you’ve got to be worried about the scandals that you don’t hear about.

Quite often, China and Russia, I would wager, are not very transparent with their economies. That Germany and America is, and we hear about these scandals should give us confidence that we should invest in these economies for the long haul.

This is good news, but it also, looking at the scandals, will help you understand which companies have a better track record of not having them, and which companies are doing a good job of responding to them, and also that depression in the stock.

If all the sudden, Volkswagen, you think is going to be around for a long time, and it takes a 20 or 30 percent dip ‑‑ I’m just throwing those numbers out there. I don’t know exactly how far Volkswagen went down ‑‑ but if that happens, that’s what we would sometimes call a buying opportunity. Scandals can actually help you tremendously.

Also, like with Bank of America, when it went, basically, bankrupt, went down, but the government came in and was bailing it out, when that share price went down to four or five dollars, that was probably a very good time to invest in it, because the scandal that it had, it wasn’t going to kill it.

It wasn’t going to make it go bankrupt, and so that was going to stay around. It had such a depression, and people were scared about it, there was a buying opportunity.

You want to be careful, though, because sometimes, like GM, you can see a buying opportunity. The government doesn’t come in, and it actually goes bankrupt, so it can work both ways. You’ve got to be very careful as you weigh that information.

Looking at company news is very important. Burry and “The Big Short,” Doctor Burry that’s highlighted in The Big Short by Michael Lewis, he was able to see what was going on with the mortgage lending in America at that time, because he read the company reports. His fund returned dramatically, over 600 percent, just because he read the reports. It’s important to look at your company reports. That’s something that also should help you with your portfolios.

Look at what is legit news versus what is a lot of hype. There’s a lot of talk about false news in the media today, and it’s always been that way. There’s always been propaganda, and then there’s been legitimate news, and how you ascertain which sources you listen to.

Are you listening to the “Dallas Morning News,” or are you listening to “The Wall Street Journal”? Are you going to “The Economist,” or are you going to “Newsweek”? These are different sources that you need to look at, and what are you basing your decisions on.

Politics play a huge role. People are continually shocked that under Democratic regimes, they have a better performance in the stock market than Republican regimes. I find that kind of shocking, because Republicans always focus on friendly to business, friendly with taxes, and so on. You look at what President Trump has done with a lot of the things that he’s hoping to accomplish ‑‑ reducing corporate taxes and so on. There’s been incredible euphoria in the market.

Trump, if he continues on down this road, we may have to adjust that assessment about what happens under Democratic presidents, and what happens under Republican presidents. To try to understand why that is is very important, as you invest, especially when you look for the next four years.

You want to look at supply and demand, very simple. A lot of people don’t do that, looking at supply and demand. What is out there that is all the craze, and what is legitimate? It can be all the craze, like the dot‑com in 1998 and 1999 craze, that something is really great, and we’ve got to get on the bandwagon, but there’s no real substance behind it. There’s no real productivity. There’s no real assets behind it, and then it flops.

But we learned from that experience. You get new type of entities ‑‑ yahoo.com, you get Google, you get Facebook ‑‑ and they learned from that dot‑com debacle. Look how successful they are.

You want to look at natural disasters, and how they impact, or potential natural disasters. Think of what happened to the atomic energy world after Fukushima in Japan. This influences also energy policy. It influences how you set up with alternative energy investments, and this is important also to look at.

You want to look at expectations and speculation. I don’t like to speculate a lot. I’m a big fan of indexing. I like Burton Malkiel’s book, “A Random Walk Down Wall Street.” Indexing seems to show that you can get away from speculating a lot, and you can match up expectations as best as you possibly can with future returns, looking at what Burton Malkiel has studied for the last four decades. I think that’s very important.

The last thing I’d like people to look at, it’s always going to be a part of the fabric of mankind, unfortunately, is war and terrorism. As long as our brain housing grows, our adrenal glands are too big, and our frontal lobes are too small, we’re going to be ruled by passions, and we’re going to be ruled by ideologies that sometimes clash with each other.

Looking at war and looking at terrorism, and how we’re dealing with that, like investing in the defense industry, Raytheon, looking at General Dynamics and so on, these are important things to look at in the future of a conflict and how we’re going to deal with it, and how you can profit from it financially.

Throughout our history, we have profited greatly from war, especially World War II. It put us on the map. World War I did as well. World War II did tremendously, so making us a first‑rate power throughout all of the world.

These are the type of issues I think that are important to look at as you’re building out your portfolio. These are the things at Rigg Wealth Management we like to discuss and explore. I try to bring my background as a former professor to the table and really analyze things and try to educate people on how best to build out portfolios.

Please feel free to visit us at our Web page at riggwealthmanagement.com. That’s Rigg with two Gs, riggwealthmanagement.com. Also, please feel free to call us at 972‑383‑1210. Again, that’s 972‑383‑1210, and set up a complimentary consultation. We’d love to hear from you and meet with you.

Please stay tuned. We’ll be right back.

COMMERCIAL BREAK

Bryan Rigg:  Welcome back to the show at WRR, ladies and gentlemen. Thank you so much for joining us this morning. We’ve been talking about estate issues, estate planning. I think that’s very critical. We’re going to be going into some historical events now, and how that helps us with understanding investing and setting up financial portfolios.

I’d like to break away, though, for one second and go over a book that I mention often on the air, Burton Malkiel’s book, “A Random Walk Down Wall Street.” Me, as a historian, I love looking at historical truths that are out there, as best we can.

The one thing that I’ve noticed with financial planning is that if you put into place indexing in your portfolios, quite often, you’re not going to hit the huge home runs. They don’t happen very often, as we know when we watch the game of baseball, but you’re going to get a lot of singles and a lot of doubles with indexing.

You’re going to, hopefully, especially if you continually practice re‑balancing, maybe get a little bit better performance than the stock market. Historically, the stock market, if you track it, the S&P 500, has averaged around nine percent per year. That’s with a lot of volatility, though. Sometimes it’s up 25 percent, sometimes it’s down 10 percent, sometimes it’s up 30 percent, sometimes it’s down 50 percent.

Historically, when you look at it, especially in swaths, some people put it at like 7.5 years, 8 years, you usually average around nine percent. Indexing helps you be a little bit more efficient by putting into a practice of re‑balancing. Burton Malkiel talks about this.

There’s two components of indexing and re‑balancing if you do it properly with some of the evidence that he has accumulated over four decades of research, and that is you can never really beat the market. He’s found a lot of mutual funds try to beat the market a lot, and a lot of hedge funds try to a certain segment of the market. He just showed if you are the market, you’re always going to do very well in that market.

If you have several segments of your portfolio that are in certain different markets ‑‑ commodities, large cap, small cap, mid cap, value, and so on ‑‑ you don’t ever know next year what’s going to be up and what’s going to be down. It could be bonds, it could be equities, it could be commodities. You just don’t know.

But that next year, when things are down, you look at what went up, you sell off some of those profits, then you buy those depressed areas, and you have a built in mechanism of buy low, sell high.

This gives you, quite often, historically, a little bit better performance in the stock market as you re‑balance your portfolio over the years, throughout the quarters, and using [inaudible 2:57] to do so gives you broad exposure around the volatility of the market, and gives you very good diversification.

I encourage you to look at that book, Burton Malkiel, A Random Walk Down Wall Street. I wanted to make a special offer to the listeners. The first five listeners that set up an appointment with me to have a complimentary consultation on their financial plans, I will be giving them a free copy of Burton Malkiel, A Random Walk Down Wall Street.

I hope that entices some of you to take that step to do the planning that you need to, because what I have found, whether people are in possession of a lot of resources, have several hundred thousand, maybe a few million dollars, quite often they haven’t done any planning with it, no strategy, or people just starting out. They don’t have a plan. We help, hopefully, the whole gamut of people.

When I was at Credit Suisse, they quite often always told us, “Don’t talk to people unless they have at least five million to invest with you.” I always thought that was not a very wise policy, because if you sat down with somebody, even if they did have five million to invest with you, and they just wanted to dip their toes in the water and give you half a million or a million, if you responded with, “Well, come back to us when you have five million,” you’d lose the client.

Also, where is the common decency about another human being? Somebody may only have two or three hundred thousand dollars, and for you not to help them, I think is kind of going against your fiduciary responsibility as a financial advisor to help people be productive citizens in society and not be a burden on anybody later on.

Regardless of where you are in life, we want to help you. I think Burton Malkiel is a very good foundation stone for people to understand financial issues and financial matters.

Now shifting gears to historical events. One thing I think is very interesting, looking at what has shaped our economy, what has given us this strong economy of the last several decades, is to look at Rosie the Riveter in World War II that put a lot of women into the market. Now we see that men and women both go in the market as expected when women and men graduate from college.

A lot of times, they’re looking for jobs, and that’s really a recent phenomenon in the fabric of mankind, and it’s wonderful to have that. Whenever you see a society pushing women’s rights and women’s opportunities, the whole floor rises of tolerance, of equal rights and things of that sort. When you’re investing, you want to really look at economies that don’t value women’s rights, don’t value religious freedom.

Quite often, I have a lot of heartburn with people wanting in invest in Middle Eastern countries that don’t have freedom of religion. Quite often, a lot of those countries don’t have women’s rights either. You want to be very careful. I think a barometer test on an economy, whether you’re going to invest in it or not, is how it treats religious minorities, and how it treats women.

That’s a very good barometer to look at, whether you want to invest in a country or not, or support a government or not. Quite often, when you invest in a certain economy, whether it be England, Germany, America, or Canada, you also are investing in their government traditions, their government framework, and how they deal with the rule of law.

As I’ve said often in my reports, where rule of law is strong, that is where you want to invest. Obviously, you can probably put a caveat there where the rule of law is also balanced and not discriminatory, because as we know, Nazi Germany had a strong rule of law, but it was a bastardized version of moral law or ethical law. That’s something very important to look at.

I think something, going back to World War II, beside Rosie the Riveter that’s very important to look at is look at the GI Bill of Rights. All these men came back from the war front, and they were able to go to college. A lot of people don’t realize the reason why FDR put that GI Bill of Rights into place was to make sure they wouldn’t flood the work force, because there weren’t jobs for them, so send them back to school.

But the great byproduct of that is that we had 10s of thousands, if not 100s of thousands of men who would have not otherwise got a college degree, get one, and enter the workforce, and create this incredible foundation in the ’40s, ’50s, and ’60s of the strong economy that we have today.

I like to look at these type of events throughout history and what it tells us about investing. The more educated your economy is, the better investing opportunities there are that are afforded you. These are things that are important to look at as far as looking at different countries and so on, their educational institutions, and how to get involved with their economies.

We’ll be talking about these issues throughout the next couple of weeks. We hope that you stay tuned to this program. We’re on every week on this station. We appreciate you listening today. You’ve been listening to Bryan Rigg with Rigg Wealth Management.

Please feel free to call us at 972‑383‑1210 for a complimentary consultation. Please visit us also at our web page at RiggWealthManagement.com. That’s Rigg with two Gs, RiggWealthWanagement.com. Thank you so much for turning in today, and have a great rest of your day.

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Bryan Rigg:  Welcome back to the show, ladies and gentlemen. This is Bryan Rigg with Rigg Wealth Management. We’ve been talking today about estate planning and financial planning and looking at things in the world that you need to be considering when you start to invest and set up a financial plan.

I like to tell people the following quote that I got over in Germany. It’s a quote that floats around in German, and I translated it. It says, “To know and not to do is not to know. Knowledge without action is futile and stillborn.”

If a lot of you who are listening today know you need to get your estate plans in order and know you need to get a financial plan in place, especially to take care of you in retirement, and you don’t do it, you’re letting your ignorance take advantage of you, of ruling the day. Do not let that happen.

We say in the Marine Corps quite often, “An imperfect plan today is a heck of a lot better than a perfect plan tomorrow.” Having no plan is disastrous, so I encourage you to look at ways of getting your estate plan together and your financial plan together.

We’d love to talk to you. You can come in to the office any time for a complimentary consultation, and we’ll sit down and go over all your estate issues and financial planning issues, and hopefully come up with a good strategy for you.

What I want to do in this segment is talk about historical events and how that has shaped the way we do things and how the market has recovered. A lot of people tend to look at gloom and doom. I don’t know what it is in the human DNA that people gravitate to disaster stories.

You look at it religiously, the end of times, Armageddon. You look at it financially, the market’s falling apart. These are serious issues that people struggle with. They don’t need to be trivialized. They need to be addressed, but quite often, this type of thought in the market is unrealistic compared to what the market has usually done.

By way of illustration, the Black Monday crash of October 19th, 1987 ‑‑ the savings and loan debacle, when people were using savings accounts to fund real estate deals and those real estate deals started going south and you had savings accounts supporting them ‑‑ you had an unraveling in the financial markets that caused a huge pullback in the stock market. It dropped 508 points, 22.6 percent on that Black Monday, and a lot of people were shocked by this.

In fact, in my neighborhood, on Marquis Circle West in Arlington, Texas, there was a man down the street who I knew very well as a little kid who actually killed himself because he couldn’t handle the fallout of the market. You hear about the famous stories of the 1929 crash and people jumping out of windows in New York. That happened as well.

This is a sad testimony of people being very myopic in their view of what happens, because had you stayed in the market in 1987, with the savings and loan debacle and the pullback there in October, and continued to invest, within a few short years you had fully recovered, and you were back to doing very well.

We have an example, just recently, in 2008 and 2009. The market goes from 14,000 down to 6,700, and now we’re at 20,000. One way of looking at these pullbacks is actually an opportunity in time. You actually have a time‑travel event, where you’re able to go back in the market to 1985‑’86 levels, 1990 levels, even though it was 2008, and start investing your money.

If you had cash on the sidelines, this was a good time to get in. Quite often, you want to be focused on when people are running out the door; that’s when you’re going the other direction. You’re going in the door.

You want to have a contrarian view of the market, and that’s what the savings and loan debacle of 1987, or the mortgage debacle of 2008 and 2009 teaches me as a financial advisor, is that when you have those events, those pullbacks, that’s the time that you want to get involved with the market.

We have now been in a bull market going into the ninth year. Usually bull markets last 3.6 years on average, so we are due for a pullback. It will happen eventually. A lot of people talk about why they think it’s going to happen right now or tomorrow, and a lot of people have been expecting it for several months, if not several years.

Nobody knows when it’s going to happen, but when it does happen, one technique that seems to work extremely well is that’s when you liquidate your bonds and liquidate your fixed income and your cash, and you throw it all on equities when you have that huge pullback. That’s what the history shows.

The history also shows Black Monday of 1987, the crash of ’29, the mess in 2008‑2009 with the mortgage situation. All are opportunities, and we recover. We’ve had over 20 major pullbacks in America’s history, economically, and the good news is America comes back. America recovers.

I don’t want to be flippant about economic turmoil, but the one thing that I have found is that if people are really worried about the market going to the proverbial hell in a hand basket, and things are going to be death and destruction and so on, and they think they’re going to lose everything…

If that were indeed to happen, you are not going to be worried about your stock portfolios. What will have caused that to be such a catastrophic disaster will be so dramatic that you’re going to be looking at other things that are more important, like how are you going to feed yourself, or how are you going to survive the next day, because that’s what would have to happen to have the markets just totally collapse and go away.

The good news is, is a lot of the fears that people have are unwarranted, unless you are just investing in one stock, which is not wise. If you’re well‑diversified across the market, history shows us that the markets are very resilient, and they have, until this point, survived.

The markets that we have today have their roots in the Roman Empire, have their roots in the Greek Empire, have their roots in the Holy Roman Empires, have their roots in Europe, Prussia. They all are kind of spawning new markets, new productivity, new technology, and they continue on going, and people can benefit from them.

One thing history tells us is that if you are diversified, your portfolios usually are going to do extremely well in the long run. Another thing people don’t look at as far as the fabric of our world and how this came about in helping productivity is women in the work force. That’s something that, really, the last three decades, if you will, women have really been able to enter into the workforce at a very high level.

Where did this begin? As an academic, I feel where we see a huge change, a watershed moment in American history, was World War II, Rosie the Riveter. For the first time, really, in American history, you had mass amounts of women entering into the work force, because they need to relieve those men to go and fight Tōjō of Japan and Nazi Germany.

By way of illustrating this important event, when we started in World War II, we had 170,000 men in uniform. By the end of World War II, we had 16.3 women and men in uniform, and they were fighting the war. We had to have people come behind them to work in the factories, and women did it by the 10s of thousands.

This changed the mindset of a lot of women, that they were no longer just strictly going to be homemakers, but that they could be productive citizens in the economy and be workers. This really shifted things dramatically.

Looking at that, I think is very important, especially when we look at emerging markets. For the first time in China’s history, now, you have more women in the workforce than men, according to some recent research.

What does that tell us about the society? What does that tell us about productivity? What does that tell us about investing in China? I think this is important to look at.

Look what it did to America. It really helped make America extremely productive. Those women who went into the work force, later on brought up a whole new generation that now are spawning women who are CEOs, doctors, lawyers, and so on.

That is great for a society, something that a lot of the Middle East we see have problems with. That’s something else to look at when you’re looking at investing. These are the type of issues that are very important to look at. At Rigg Wealth Management, we do that an awful lot.

We encourage you to reach out to us at 972‑383‑1210. We want to hear from you and set up a complimentary consultation. We appreciate you listening today, and we wish you a good rest of your day. All the best.