Archived Newsletters

We read a thoughtful analysis about recent stock market volatility that helps explain why, although the market may be reacting to some recent news or event, we most often recommend that clients remain invested without making changes to their investments.

This article from American Century Investments examines the volatility of the S&P 500 Index in the short term through the activity in October and November of this year, as well as over longer periods. Over the past two months, 27 of the 42 trading days recorded daily index price swings of at least +1% or -1%, while 12 of the 42 days had swings of at least +2% or -2%. Yet at the end of the 2 months the S&P 500 Index had a positive gain of over 10%. An investor who held on and ignored the volatility earned a nice reward.

Over a longer time frame the study indicates that daily market volatility goes through periods when it is elevated and periods when it is lower than on average. It exhibits a “mean reverting” property; i.e. when volatility is higher than its long term average there will more likely be a decline in volatility than an increase in volatility over some future time period.

Short-term volatility is simply a reflection of investor uncertainty. For example the S&P 500 Index declined -20.47% on Monday October 19, 1987, known as “Black Monday.” This was the largest single-day decline in the index since 1950. Yet the next 2 days the index was up 14.92%. The earnings of the companies within the index could not possibly have changed in a mere 3 days, so fundamentals do not explain the huge swing. Fear and greed, more than the value of the stocks, is often cited as the force behind these fluctuations.

Myriad global and economic issues certainly contribute to unrest in the market. The general culprits include the European debt crisis, the US deficit, political uncertainty, slow economic growth and weak employment. When investors feel uncertain they tend to react more quickly to news, thus increasing market volatility. Because their behaviors are not always grounded in sound financial analysis, an eventual inverse reaction is likely to follow. While we have seen market volatility increase of late (as well as trending up over the long-term), it does not preclude the possibility of earning positive returns. This is why we frequently advise clients not to make portfolio changes based on daily or short-term news. We may sound like a broken record but there is good reason to stay level-headed when things look dire. We can’t get rid of the fear and greed that drives much of the market fluctuations, but we can react wisely. As the great investor Warren Buffett says: “Be fearful when others are greedy and greedy when others are fearful.” ~Jill

I recently spent 5 days in Key Largo with a group of financial planners who had gathered to attend a program called “Inward Bound”. The purpose was to explore aspects of ourselves – subconscious behaviors, transformative experiences, and life purpose – and to practice skills that will help our clients make good, well-grounded decisions.

The fact is money is more complex than many of us realize. And there are two sides to money – the emotional subjective side and the technical objective side. Both are equally important. We may think we are making good objective decisions around our money when often times those decisions arise from our emotions. Take for example the Mini Cooper I bought in 2006. I fell in love with the Mini back in 2003 when I first spied this modern version British import as it zipped along Route 95. Delightful and rebellious, spunky, sassy, adorable and hip – the car screamed “own me!” Clearly BMW (the auto maker) made a direct connection with the less rational side of my brain. Had I bought the car just then, there would be nothing objective about the decision process. But I waited three years, saved some money, gave it a lot of thought and when the time came to put my Saab 900 to rest due to exorbitant and unrelenting repair bills Vinnie encouraged me to buy “Bettie”, the name I gave to my hot new Mini Cooper.

What took place for me in that time frame between 2003 and 2006, between wanting the car and acquiring the car was some bridge building between my emotions and reasoned thought – a merging of the subjective and the objective. Such that I explored the financial ramifications (the car is pricier than on average and what am I willing to give up?), the practical implications (can we fit a large man, a German Shepherd, a Nova Scotia Duck Tolling Retriever and me along with any bundles?), and the drive behind my goal (what makes the car so special and does this justify the purchase?)

As financial planners, we often witness this gap between the emotional and the technical. We see it in a choice to fund a child’s education at the expense of saving for retirement; when an unhappy career is sustained to support a particular lifestyle; when fear drives investment decisions, when impulse blows a budget; when procrastination prevents implementation of a plan. The Inward Bound experience has made me a little wiser on the topic and I hope to utilize this knowledge and help make a difference in our clients’ lives. ~Susan

Advances are made so quickly these days that it can be a struggle to keep up with what’s going on in technology. Those of us over 50 are just getting used to smart phones and learning to download “apps” while our children and grandchildren are texting at lightning speed. 20 years ago, we didn’t even have words like “netbook” and “paypal.” Now you can do all of your banking online, text message your kids from your phone and send out “tweets”! Before we’ve even mastered one type of technology it seems something newer arrives on the market. It is easy to see why some people, especially seniors, choose to just ignore it all.

There are good reasons to embrace what’s going on in the electronic world, some of which may help you lead a more active and enjoyable life. Technology can make our lives easier in many ways. For instance, banking on line, filing your tax return electronically, and being able to phone a friend while you’re out running errands can save time and resources. Keeping in touch via the web, whether through Face book, email or other social media sites, can improve a person’s emotional health.

In addition, adapting to the use of technology stretches one’s mental capacities which helps keep the brain in shape. Tackling challenging tasks such as learning to use an electronic item helps keep the brain from aging. There are word games and card games to play online. There’s a world of research to be studied at Wikipedia. Electronics can even help our physical well-being; a large segment of Wii users are senior citizens who play games that exercise their muscles (if you don’t know what Wii is – check it out!)

I think one of the most important reasons to embrace technology is because to ignore it is to limit your possibilities. So much of our commerce and social interaction has gravitated to the web that to disregard these options means becoming more and more out of touch with society. For instance, cell phones have become so ubiquitous that it’s hard to find a pay phone anymore.

The fear of using technology is that the “old ways” which seem more personal and simple will be lost. To some extent that is true; the art of letter writing is a diminishing phenomenon. But the “old ways” can co-exist with modern ideas. Just because you can use email doesn’t mean you can’t send a letter to a loved one. Technology not only exists to improve efficiency and productivity but is there to make life more fun and engaging and should be used in a way that personally enhances your day. ~Jill

Embrace Technology

Advances are made so quickly these days that it can be a struggle to keep up with what’s going on in technology. Those of us over 50 are just getting used to smart phones and learning to download “apps” while our children and grandchildren are texting at lightning speed. 20 years ago, we didn’t even have words like “netbook” and “paypal.” Now you can do all of your banking online, text message your kids from your phone and send out “tweets”! Before we’ve even mastered one type of technology it seems something newer arrives on the market. It is easy to see why some people, especially seniors, choose to just ignore it all.

There are good reasons to embrace what’s going on in the electronic world, some of which may help you lead a more active and enjoyable life. Technology can make our lives easier in many ways. For instance, banking on line, filing your tax return electronically, and being able to phone a friend while you’re out running errands can save time and resources. Keeping in touch via the web, whether through Face book, email or other social media sites, can improve a person’s emotional health.

In addition, adapting to the use of technology stretches one’s mental capacities which helps keep the brain in shape. Tackling challenging tasks such as learning to use an electronic item helps keep the brain from aging. There are word games and card games to play online. There’s a world of research to be studied at Wikipedia. Electronics can even help our physical well-being; a large segment of Wii users are senior citizens who play games that exercise their muscles (if you don’t know what Wii is – check it out!)

I think one of the most important reasons to embrace technology is because to ignore it is to limit your possibilities. So much of our commerce and social interaction has gravitated to the web that to disregard these options means becoming more and more out of touch with society. For instance, cell phones have become so ubiquitous that it’s hard to find a pay phone anymore.

The fear of using technology is that the “old ways” which seem more personal and simple will be lost. To some extent that is true; the art of letter writing is a diminishing phenomenon. But the “old ways” can co-exist with modern ideas. Just because you can use email doesn’t mean you can’t send a letter to a loved one. Technology not only exists to improve efficiency and productivity but is there to make life more fun and engaging and should be used in a way that personally enhances your day. ~Jill

Inward Bound

I recently spent 5 days in Key Largo with a group of financial planners who had gathered to attend a program called “Inward Bound”. The purpose was to explore aspects of ourselves – subconscious behaviors, transformative experiences, and life purpose – and to practice skills that will help our clients make good, well-grounded decisions.

The fact is money is more complex than many of us realize. And there are two sides to money – the emotional subjective side and the technical objective side. Both are equally important. We may think we are making good objective decisions around our money when often times those decisions arise from our emotions. Take for example the Mini Cooper I bought in 2006. I fell in love with the Mini back in 2003 when I first spied this modern version British import as it zipped along Route 95. Delightful and rebellious, spunky, sassy, adorable and hip – the car screamed “own me!” Clearly BMW (the auto maker) made a direct connection with the less rational side of my brain. Had I bought the car just then, there would be nothing objective about the decision process. But I waited three years, saved some money, gave it a lot of thought and when the time came to put my Saab 900 to rest due to exorbitant and unrelenting repair bills Vinnie encouraged me to buy “Bettie”, the name I gave to my hot new Mini Cooper.

What took place for me in that time frame between 2003 and 2006, between wanting the car and acquiring the car was some bridge building between my emotions and reasoned thought – a merging of the subjective and the objective. Such that I explored the financial ramifications (the car is pricier than on average and what am I willing to give up?), the practical implications (can we fit a large man, a German Shepherd, a Nova Scotia Duck Tolling Retriever and me along with any bundles?), and the drive behind my goal (what makes the car so special and does this justify the purchase?)

As financial planners, we often witness this gap between the emotional and the technical. We see it in a choice to fund a child’s education at the expense of saving for retirement; when an unhappy career is sustained to support a particular lifestyle; when fear drives investment decisions, when impulse blows a budget; when procrastination prevents implementation of a plan. The Inward Bound experience has made me a little wiser on the topic and I hope to utilize this knowledge and help make a difference in our clients’ lives. ~Susan

Investor Fear Feeds Volatility

We read a thoughtful analysis about recent stock market volatility that helps explain why, although the market may be reacting to some recent news or event, we most often recommend that clients remain invested without making changes to their investments.

This article from American Century Investments examines the volatility of the S&P 500 Index in the short term through the activity in October and November of this year, as well as over longer periods. Over the past two months, 27 of the 42 trading days recorded daily index price swings of at least +1% or -1%, while 12 of the 42 days had swings of at least +2% or -2%. Yet at the end of the 2 months the S&P 500 Index had a positive gain of over 10%. An investor who held on and ignored the volatility earned a nice reward.

Over a longer time frame the study indicates that daily market volatility goes through periods when it is elevated and periods when it is lower than on average. It exhibits a “mean reverting” property; i.e. when volatility is higher than its long term average there will more likely be a decline in volatility than an increase in volatility over some future time period.

Short-term volatility is simply a reflection of investor uncertainty. For example the S&P 500 Index declined -20.47% on Monday October 19, 1987, known as “Black Monday.” This was the largest single-day decline in the index since 1950. Yet the next 2 days the index was up 14.92%. The earnings of the companies within the index could not possibly have changed in a mere 3 days, so fundamentals do not explain the huge swing. Fear and greed, more than the value of the stocks, is often cited as the force behind these fluctuations.

Myriad global and economic issues certainly contribute to unrest in the market. The general culprits include the European debt crisis, the US deficit, political uncertainty, slow economic growth and weak employment. When investors feel uncertain they tend to react more quickly to news, thus increasing market volatility. Because their behaviors are not always grounded in sound financial analysis, an eventual inverse reaction is likely to follow. While we have seen market volatility increase of late (as well as trending up over the long-term), it does not preclude the possibility of earning positive returns. This is why we frequently advise clients not to make portfolio changes based on daily or short-term news. We may sound like a broken record but there is good reason to stay level-headed when things look dire. We can’t get rid of the fear and greed that drives much of the market fluctuations, but we can react wisely. As the great investor Warren Buffett says: “Be fearful when others are greedy and greedy when others are fearful.” ~Jill

"Willful Waste Makes Woeful Want?"

As many of you know, clients are generally asked to provide an estimate of their spending (otherwise known as a Cash Flow Statement, a Spending Plan, or Budget) in order for us to help with their overall financial planning. And when it comes to the “groceries” category, many will often note that this expense is high in part because they buy more food than they eat; that their refrigerator is crammed so they can’t see what is in there; and that there is plenty of waste. One of the dreaded Saturday morning tasks I would wake up to as a child – the note on the counter with the list of chores for my 4 siblings and me – was not “dust and vacuum” or “mow the lawn,” but “clean out the refrigerator”. This job didn’t appear on the list all that often, and for whatever reason my homemaker mother did not use leftovers, so just imagine what lingered behind the milk jug and mayonnaise jar. Back in those days before zip lock bags and Rubbermaid we used glass containers for food storage, so I had to wear a clothespin while scraping the moldy contents into the garbage! I am sure to this day the experience informed my own behaviors as an adult. I won’t leave things to rot; we strive to eat everything we buy and cook. Our daughter Liz, while visiting and hungry for a snack, lingers before the open refrigerator door (also a pet peeve of mine) and eventually declares: “there is nothing in here to eat”! Yes; our refrigerator is small and appears to be nearly empty, but with a little creativity, we can always come up with a meal. And that way we are sure to consume everything we spend our hard-earned dollars on. It has become a fun challenge for Vinnie and me to make meals long after we believed “there is nothing left to eat!” ~Susan

According to the EPA, the US generates more than 34 million tons of food waste each year and represents 14% of the municipal solid waste stream. (We generate more paper waste than other materials but also do a better job recycling in this category.) Food waste not only hits your purse, but also has significant environmental consequences. When food is disposed in a landfill it quickly rots and becomes a significant source of methane – a potent greenhouse gas with 21 times the global warming potential of carbon dioxide. For tips on ways to reduce and recycle food waste visit: http://www.epa.gov/osw/conserve/materials/organics/food/fd-house.htm

Debt is "Cool"

A recent study by Ohio State University found that many young adults think debt is a good thing. Surprisingly, they feel a boost to their self-esteem from carrying credit card and education debt. I found this to be quite alarming. Not all debt is bad, and there certainly is some benefit to carrying debt and managing it well – you can boost your credit score which results in lower interest rates on future loans, and debt is a way to leverage your money. But there are also dangers to carrying debt. Sound financial management entails managing your debt wisely. It seems that some young people may be enamored of their ability to acquire debt, as it makes them seem more adult. The study shows that these young adults feel more in control of their lives and better able to achieve their goals. What really struck me was that those in the bottom 25 percent in total family income got the biggest boost from holding debt. Yet they are likely to be the group that has the hardest time paying it off. I am concerned as a financial planner because such a misconception may lead these young people to acquire debt that could become burdensome in the future and impede them from reaching their financial goals. Learning to manage debt is similar to learning how to drive a car – you should start out slowly and carefully and learn to take control of the vehicle without it taking control of you. ~Jill

This Time is Different?

A study from The Mutual Fund Research Center indicates that on average from 1970 through 2009, the stock market was down 47% of all trading days (120 day a year), and on the other 133 days (53% of the time) the market closed higher. So in an average year the market has fewer down days than up days. Although recent experience might suggest otherwise, the last decade was not any different from the entire 40-year period quoted above: from 2000 through 2009, the market closed down 120 days on average. In terms of the depth of volatility it is true that the number of single-day gains and declines in excess of 2% over the last 20 years has indeed become more common. What is happening is that the markets are adjusting more quickly than they have in the past. This is explained by the fact that news comes to us more rapidly these days and market participants can trade with equal rapidity, all of which makes for a choppier ride.
Despite the frequency of down days the stock market has generated positive annual returns 75% of the time since 1970. In 3 out of 4 years the market ends positively. The perception that this time is different is not true; the market is not more volatile now than it has been over the last 40 years. Investing does require patience; please do not let the ups and downs derail your long term plan.

Words of Wisdom

...from Claude N. Rosenberg’s Stock Market Primer

• Do not make hasty, emotional decisions about buying and selling stocks
• Remember that stocks always look worst at the bottom of a bear market (when an air of gloom prevails) and always look best at the tip of a bull market (when everybody is optimistic).
• Remember the public is generally wrong. They are moved mainly by their emotions and history has proved them to be wrong consistently. Hint: buy what people are selling and sell what people are buying.

And finally, we know that our clients understand the philosophy of creating diversified portfolios and holding on to them through the good times and the bad, but it is still not unusual for one to wonder if selling and sitting on the sidelines for a while might be a good idea. The problem with this is figuring out when it is best to get back into the market. This might involve waiting until stocks have risen substantially so you can be “sure” it is okay to go back in; but by this time you have missed out on some positive returns. Vanguard founder John Bogle did a study in 2005 of the 200 mutual funds with the largest money flows (shareholders buying and selling) and found that while the 10-year average annual return of these funds was 8.85%, the average investor in these funds earned only 2.4%!

Cornerstone's Summer Happenings!

... Jill attended the annual conference of the Association of Divorce Financial Planners. Topics ranged from tax issues to retirement plans and other challenging issues in divorce financial planning. She also visited friends and family in Connecticut, rode her bike for the first time in years (!), ate lots of delicious local corn and watched the Thunderbirds fly over the back 40.
... Susan appeared in television interviews on 3 different occasions. She helped Vinnie build a deck at their place in Gray and had great fun measuring, calculating and cutting. They expect their first grandchild around Thanksgiving Day.
... Raylene enjoyed some time “up ta”camp in Sangerville. She and husband John are making ready to sell their house in Gorham. Son Reeve has begun the college hunt and loves UVM so far.
... We all enjoyed a company outing that included shopping at Leroux Kitchen, lunch at Dry Dock Restaurant and a trip to the Ogunquit Playhouse to see The Music Man.

To see the Summer Sky
Is Poetry, though never in a book it lie
True Poems flee. ~ E. Dickinson

Thoughts on Letting Go

We have a new college graduate in our family. In some ways Jeff and I feel like our job is done – we’ve gotten Sam
through 16 years of schooling and imparted about all the wisdom he’s willing to listen to. Now it’s time for him to make his own decisions about every aspect of his life. Do we hope he’ll still ask for our advice? Sure! But I don’t think we can assume he wants to hear it unless we are asked. In conjunction with this new freedom to live as an adult is our message to Sam that he must now be responsible for this new life – rent, cell phone, food etc. The “gravy train” has left the station. Continuing to pay for children’s expenses is something I often see clients do, long after the children have left home. It’s perfectly understandable to want to help our children have a good life and to be able to afford all the amenities and activities that fall under that description, which of course are different for everyone. Helping out once in a while with unexpected expenses is one thing, but there are good reasons to cut the purse strings. If we want our children to really stand on their own two feet we must give them the opportunity to do so, even when it means struggling for a bit. Through their experience of budgeting money, working hard to earn enough for the fun things, and waiting patiently for something, they learn important financial values. They may also discover what is personally important – is it working hard for a big income, or working less hard and having fewer “things”? Sometimes parents underestimate their children. One client of ours wanted to reduce the amount of living expense money he gave his daughter while she was in college, but wasn’t sure if she could live on less. To his amazement his daughter reviewed her expenses, came up with a budget and functioned fine on her reduced income. Another client absolutely needs to reduce this type of support for her son in order to protect her own future security, but unfortunately is unable to bring herself to do so. We all want the best for our children no matter what age they are. Helping to create the best means teaching financial values – a most important gift that will serve our children their entire lives. ~ Jill

Reflections on Italy

• You do not need salt on the table.
• The driver who flinches goes last.
• Timid pedestrians will never get across the street. 
• Gelato needs to be eaten daily.
• Rome is romantic.
• One and a half dollars buys about one Euro’s worth of goods and services (ouch).
• Italians drive fast but eat slowly.
• Route markers on the Autostrada do not necessarily agree with maps.The Chianti region is lovely and spectacular.
• Strands of Cypress have the same kind of magnificent order as the Pantheon.
• Michelangelo’s David should be viewed from a particular aspect for maximum appreciation.
• Tomatoes and mozzarella make a great breakfast.
• Always put raddiccio in your salad.
• Red wine is yummy.
• Without Christianity, artists might not have had enough subject matter.
• Without the concentrated wealth of the Medicis to pay for commissioned work, art may not have advanced as it did.
• The simplicity of the Pantheon is refreshing after a visit to Vatican City.
• People-watching piazzas are pleasing and plentiful.
• Sienna is a handsome city.
• The moat around Lucca is loaded with trout.
• Travelling wine bottling companies are ingenious!
• Con men do wear fancy suits.
• Rail travel is relaxing.
• Medieval cities are converted to shopping meccas.
• Polizia on the street bearing machine guns are apparently common but unnerving nonetheless.
• San Gimignano has great pottery.
• Tuscan sunsets are memorable.

~ Susan

Thou Paradise of exiles, Italy!" --Percy Bysshe Shelley

Heard on the Street

... a young man talking about how he cut expenses to pay off debt rapidly who said: "I’m living for a few years like most people won't, so I can live the rest of my life like most people can't."
... as of 2010 it costs the U.S. Mint 1.79 cents to make a penny.
... there are over 9 million female-owned businesses in America, generating more than $2.3 trillion in annual revenue.
... the website www.seniordiscounts.com lists hundreds of discounts for those over age 50.

Elder Fraud

How do we protect our aging parents from financial scams? A recent MetLife study shows that financial abuse of elders is growing. They estimate the total cost at $2.9 billion, a 12% increase since 2008. Financial abuse includes stealing credit cards, forging checks, transferring assets and otherwise stealing money. Women are twice as likely to be targeted as men, partly because they live longer and are often living alone. The impact on the elderly is magnified by the fact that there is little or no opportunity to recover the loss by going back to work or growing remaining assets. Some red flags for abuse include:

• Sudden withdrawals from bank accounts
• Additional unwarranted names added to accounts
• Substandard care even though funds are available 
• Sudden changes to the will
• Unexplained transfer of assets

Cognitive impairment can make seniors vulnerable to financial fraud. Studies show that people in general tend to make poorer financial decisions as they age. Elder abuse is sometimes hard to perceive if the person is normally very private about their financial status. Adult children often do not find out about a problem until it is too late to correct. Seniors may also feel that any attempt to oversee their finances by their children means having to give up control or implies  that they are not capable of handling their own money. It is important for family to talk frankly with their older parents or relatives about the problem of elder abuse, and how they can work together to prevent it. The Alliance for Investor Education has a list of 10 websites with resources to help the elderly recognize scams and fraud. This can be found at www.investoreducation.org/elderinvestmentfraud

Protect Your Records

Wildfires in Arizona, floods in the Midwest, earthquakes in Australia and Japan – these are all a reminder that nature is unpredictable and can be devastating. While here in the Northeast we are not too concerned with wildfires or earthquakes, other weather events such as hurricanes and snowstorms are just as devastating. Preparing for a disaster is important in order to protect all manner of valuable items. By now the task of backing up your computer should be
second-nature. Using an online backup service such as Carbonite makes the task easy. But there are a few more actions you should take to help you protect and inventory your belongings. Scan a copy of all important documents such as tax returns, insurance policies, birth certificates, loan documents, real estate deeds, etc. Then either copy the information to
your offsite backup storage, or store it on a CD offsite in a safe deposit box. Keep most important documents in a safe deposit box. An exception is your will and other estate planning documents, which should be kept somewhere easily accessible to the executor or agent. Take pictures of or videotape an inventory of everything in your home. Be sure to highlight every individual item of value. Open drawers and closets to capture the contents. Don’t forget items in the garage or outdoor shed. Keep the photos or videotape in a safe deposit box or some other offsite facility and update it every year. If you have receipts to show the cost of an item, keep it with the inventory.

A Practical Approach to Choosing a College

About now college-bound high school seniors are getting a little nervous as they await their acceptance letters. Mom and Dad are getting nervous too for a different reason; they want to know what financial aid will be offered. The majority of clients we see are not able to foot the entire cost of college from savings and/or income. Financial aid has become a fact of life for most families. Yet many families don’t take as much time to study and evaluate the implications of financial aid as they do in choosing a college. This is unfortunate because loans can have a long-term effect on both the parents’ and student’s finances. 

If the parents are going to foot all the loans it is important to sit down with a financial planner and project how those loans are going to affect other goals such as saving for retirement or paying off a mortgage. Will the payments become a hardship? Are they going to cause you to delay retirement? These are questions to be asked and answered before you enter into the loan agreement.

If some or all of the loans are going to be the responsibility of the student then one of the most important, and frank, discussions the family should have is the potential job earning capability of the student once he or she graduates. Will the student earn enough to pay all their bills including student loans? A recent client told us about her daughter’s goal to be a professional photographer. Knowing that this is a low-paying field, the daughter opted for a 2-year associates degree instead of a 4-year college so that she could afford the loan payments. Earning potential is much higher in fields such as engineering, law or finance than in social work or communications. Another point to consider is whether a graduate degree or more schooling will be required after college. We’re not implying that your child should not pursue a field they love even if it is low-paying, just that they should be realistic about what debt they take on in relation to their field of study. Some colleges will show you the job placement history of their recent graduates. Considering the cost of college should be as important a part of the decision as the academics, location and other factors that you are contemplating. While there is no argument that getting a college education is worthwhile, burdening yourself or your student with big student loans may be unwise. Overall, this discussion gives your child a chance to participate in the kind of financial decision that they will be making on their own one day.

Active Listening

We attended a retirement party recently for a person who had been a city employee for 40 years. There were probably two hundred people at the event. Food and drink was plentiful and the conversation was pleasant. After an hour or so, we were asked to gather at the front of the large room we were in to hear various speakers – friends, colleagues, and message bearers from the state house – who were there to acknowledge the retiree for his contribution to the city. We were saddened to witness that greater than half the roomful of guests just continued chatting among their small groups and in complete ignorance of the many appeals to please be quiet. They weren’t even aware they were behaving rudely.

This got us to thinking about changes in our culture – much of it, of course, good. Technological advances have made multi-taskers of us – again, with some benefit – but the down side is that we’re terribly distracted and challenged to remain focused in the moment. Think streaming news headlines at the bottom of a television screen, stock market data in the upper corner, and a news anchor reporting a different story. It’s no wonder our listening skills have deteriorated. According to various studies on listening, we remember only between 25% and 50% of what is said. This goes both ways; we aren’t listening completely and when we speak we aren’t wholly heard. Test yourself: When someone is speaking, how often are you preoccupied? maintaining eye contact? demonstrating a sincere interest? showing attentive body language? occasionally nodding or saying “uh-huh”? thinking about what you want to say next? judging the speaker or the message? planning your next dinner party?! Listening skills can be improved with practice and this in turn will have a major effect on the quality of our relationships.

We have two ears and one mouth so that we can listen twice as much as we speak. ~Epictetus

Tidbits

The Treasury recently announced that all federal benefits will be paid electronically by March 1, 2013. This change will impact people who are about to apply for federal benefits (like Social Security retirement) and the more than 10 million people who are already receiving benefits by paper check. For more information, visit www.godirect.org

Do you have missing money waiting for you? There is more than $33 billion in unclaimed property from accounts that have been forgotten or whose owners or heirs cannot be located. Check www.missingmoney.com or www.unclaimed.org for your name. And don't forget to check your maiden name.

Inflation Primer

Most everyone is familiar with the Consumer Price Index (the CPI) which measures the average change over time in prices paid by consumers for a basket of goods and services. The CPI is one of the most closely watched national economic statistics and is an indicator of our government’s effectiveness in managing fiscal and monetary policy. According to Wikipedia, the Consumer Price Index was created at the time of World War I when rapid increases in prices, particularly in shipbuilding centers, indicated a need for an index so that cost-of-living adjustments in wages could be determined. The inputs for the Index have been revisited and adjusted at various interims since that time. Ultimately, the CPI-U was introduced in 1970. The “U” stands for “Urban” – and takes into account the buying habits of a broad spectrum of urban people including retirees, wages earners of all types, the unemployed and the poor. The 8 major groups that comprise the CPI include: Food and beverages; Housing; Apparel; Transportation; Medical
Care; Recreation; Education and communication; Other goods and services. 

In 1995 the US Senate appointed The Boskin Commission to study possible bias in calculating the CPI. The report concluded that the CPI had, in years prior, overstated annual inflation by a little more than 1%. This was an important study because the calculated increase of annual income for union workers, Social Security beneficiaries, food stamp recipients, military and Federal Civil Service retirees are all based on the CPI. And the CPI has been used to adjust the Federal income tax structure to prevent inflation-induced increases in taxes. On the other hand, some critics believe that inflation is being dramatically underestimated because the Federal Reserve’s calculation of “core inflation” removes the very volatile food and energy prices from the index. The Fed sets monetary policy and makes interest rate decisions based on this core inflation. [It should be noted that the Fed now uses a slightly different index known as the PCE (Personal Consumption Expenditures Price Index) but also removes food and energy to arrive at “Core PCE”]. Fed Reserve Chairman, Ben Bernanke defends the use of core inflation figures as a means of looking beyond shortterm price spikes that food and energy costs may represent. "Inflation can vary considerably in the short run," he told the House Financial Services Committee. "Our objective is to hit low and stable inflation in the medium term." Hmmm . . . it seems that just a year ago we were more concerned with deflation!