April 2019

Kentucky Derby

Don’t Let the Kentucky Derby Pick Your Advisor

Horse racing can be a lucrative business.  This year’s Kentucky Derby winner will bring home $1.86 million.  The first Saturday in May is the only time America (outside of Kentucky) pays attention to horse racing.  This might be stretched out to several weeks if the same horse wins the Preakness Stakes, setting the table for a possible Triple Crown at the Belmont Stakes.  “The most exciting two minutes in sports” garners intense buzz, but is quickly forgotten.  Too many investors adopt the same strategy for choosing financial advisors. The Horse Race The investor allocates a little money across three or four potential advisors.  Whoever has the highest returns at the end of 6 months or a year gets to manage all of the investor’s assets.  In the biz, we call this a horse race.  The investor thinks they are choosing a financial advisor, but is this really the way to…

Cost of Money

How Much Does Money Cost?

The Federal Reserve Bank of St. Louis caught my eye with a tweet the other day: “If you would know the value of money, go and try to borrow some.”  This quote from Benjamin Franklin got me thinking about the cost of money and how it impacts a few different aspects of financial life.  The St. Louis Fed was looking at what it costs the unbanked to borrow their next paycheck, but it is instructive to look at interest rates as they relate to things like the pensions and housing, too. Pensions Despite ten years of stock market gains, many pensions are underfunded.  Much of the blame has gone to retirement systems overpromising unrealistic payouts.  Their assets haven’t returned as much as expected, providing a double whammy.  The investment research guy in me wants to dig into the underlying investments and asset allocation.  Many pensions got hurt by stocks during…