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Ancient Adult Beverages

Written by Gerald E Gasber, CFP®, CIMA®, CPFA & Bob Veres.

People have been drinking alcoholic beverages for a very long time. Recently, a team of researchers found evidence of large-scale wine making in 6,000 BC—in clay vats big enough to hold 400 bottles of wine, in the Caucasus mountains in the modern nation of Georgia. The grapes came from vitis vinifera, the only grapevine species known to have been domesticated, and the grandparent of all 8,000-10,000 modern wine-making grape species.

This is the first evidence of large-scale production, but not the earliest archeological evidence of adult beverages. Traces of a concoction made from wild grapes, hawthorn fruit, rice beer and honey mead have been found on pottery from China that dates to around 7,000 BC.

More recently—as in, in the past few years—Patrick McGovern of the Biomolecular Archaeology Project for Cuisine, Fermented Beverages, and Health at the University of Pennsylvania Museum has been recreating ancient beverages. Among them: an ancient ale made with cacao, dated to 1400 B.C. in Honduras, and an early Etruscan ale based on residues found in 2,800-year-old tombs in central Italy. The Etruscans used malted heirloom barley and wheat, mixed with hazelnut flour, pomegranate and myrrh.

One of the most interesting is the Midas beverage, made in bronze vessels recovered from the Midas tomb in Turkey, which dates from 700 B.C. The ingredients included wine, barley beer, and mead. By adding some saffron as a bittering agent (hops were not available in the Middle East 2,700 years ago) the researchers produced a sweet, aromatic blend which Dr. McGovern describes as a little like white wine, with delicious, piquant qualities.

But Dr. McGovern points out that ancient beverages probably varied dramatically from one batch to the next. Different "vintages" would have been made up of whatever ingredients happened to be available, which means the alcohol manufacturers alternated between beer and mead along with wine, and sometimes producing mixtures of all of the above.

Sources:

https://www.economist.com/news/science-and-technology/21731456-viticulture-was-big-business-ancient-caucasus-wine-making-existed-least?fsrc=scn/tw/te/bl/ed/

http://www.slate.com/articles/health_and_science/medical_examiner/2017/11/mixing_opioids_with_other_drugs_makes_them_particularly_risky.html

 

Savings Rates Decline

Written by Gerald E Gasber, CFP®, CIMA®, CPFA & Bob Veres.

You don't hear much about America's personal savings rate these days, and the reason may be because the news is discouraging: collectively, the percentage of our income that we save is trending downward again, and may be about to hit record lows. The Federal Reserve Bank of St. Louis tracks the U.S. personal savings rate, going back to the late 1950s, when when people were setting aside a thrifty 11% of what they made. Americans achieved a record 17% savings rate in the mid-1970s before a long decline set in. In 2013, the rate briefly spiked again above 10%, but Americans have become less thrifty since then. The most recent data point shows Americans saving just 3.6% of their income.

How does this compare to the rest of the world? A chart on the Trading Economics website shows that most countries fall in the 4.5% to 10% range, but with considerable fluctuation. For instance, Spain experienced a negative savings rate just last quarter, but this quarter reports a rate of more than 14%. Japan and Mexico seem to be consistently the thriftiest of the reporting nations, each with savings rates above 20%. (India's rate on the chart appears to be in error.)

Does any of this matter? Economists will tell you that when the savings rate is high, it cuts into consumption, which lowers economic activity. But at the same time, countries with high savings rates have more capital to invest in their future, and their citizens tend to be less vulnerable to economic downturns. On the whole, we should probably prefer more savings to less.

Sources:

https://tradingeconomics.com/united-states/personal-savings

https://fred.stlouisfed.org/series/PSAVERT

Health and Financial Wellness

Written by Bob Veres & Gerald E Gasber, CFP®, CIMA®, CPFA.

Your financial plan is about your goals and finances. But is it also about your health?

In a recent blog post on the Forbes.com website, financial planner and medical professional Carolyn McClanahan suggests that your health status may be a crucial input into your overall financial plan.

Why? Because it helps you know how long your money will need to last—in other words, your longevity. If you have significant health issues at an early age, then you can probably spend more during retirement, and use up your nest egg faster, than if you're hale and your family history has close relatives living past age 100.

The default assumption has been that people will live to the age on a standard life expectancy calculator—which would say, for instance, that a person age 49 has a 50% chance of living past age 85. But people who live a healthy lifestyle probably have a proportionately greater "risk" of outliving their life expectancy, while a chronically oveweight smoker might be expected to contribute to the other side of the statistics. In general, financial planning clients tend to be smarter and wealthier, which suggests that they'll outlive the statistical averages.

McClanahan routinely estimates that her healthy clients will live to age 100. For people with health concerns, she asks that they visit livingto100.com, which is an online questionnaire/calculator that asks health-related questions and then tells you how long you can expect to live based on more than just the actuarial statistics. She tested it out with her "real" (healthy lifestyle) information and the site estimated she would need to financially prepare for living to age 102. When she gave different information—when she described herself as an overweight, beer-guzzling junk food eater and smoker—her life expectancy shifted to age 63. What a difference!

And, of course, the lifestyle component is only part of it. If you have chronic conditions, if you've been diagnosed with cancer or have other significant health concerns, you can throw the averages out the window. The point: your health and lifestyle can greatly affect the assumptions in your financial plan, and should not be ignored.

Source:

https://www.forbes.com/sites/carolynmcclanahan/2014/04/21/why-you-should-discuss-health-with-your-financial-planner/#53b06a2754f9

 

The Challenges of Capturing Bull Market Returns

Written by Gerald E Gasber, CFP®, CIMA®, CPFA & Bob Veres.

You probably didn't notice, but Monday, September 11 marked a milestone: the S&P 500 index's bull market became the second-longest and the second-best performing in the modern economic era. Stock prices are up 270% from their low point after the Great Recession in March 2009—up 340% if you include dividends. That beats the 267% gain that investors experienced from June 1949 to August 1956. (The raging bull that lasted from October 1990 to March 2000 is still the winningest ever, and may never be topped.)

With the benefit of hindsight, it's easy to think that the long eight-year ride was easy money; you just put your chips on the table when the market hit bottom and let them ride the long bull all the way to where we are today. We tend to forget that staying invested is actually pretty difficult, due to all the white noise that tries to distract us from sound investing principles.

Consider, for example, that initial decision to invest in stocks that March. We had just experienced the worst bear market (down 57.7% from the peak in October 2007) since the Great Depression, and were being told many plausible reasons why prices could go lower still. After all, corporate earnings were dropping from already-negative territory. Was that the time to buy, or should you respond by waiting out the next couple of years until a clear upward pattern emerged?

The following year, investors were spooked by the so-called "Flash Crash," which represented the worst single-day decline for the S&P 500 since April 2009. Then came 2011, two to three years into the bull, when the S&P 500 declined 20% from its peak in May through a low in October. The pundits and touts proclaimed that another recession was looming on the horizon, which would take stocks down still further. Surely THAT was a good time to take your winnings and retreat to the sidelines.

By the time 2012 rolled around, there was a new reason to take your chips off the table: the markets were hitting all-time highs. Of course, historically, all-time highs are not indicative of anything other than a market that has been going up. If you decided to take your gains and get out of the market when the S&P 500 hit its first all-time high in 2012, you would have missed an additional 98% gain.

The headline distraction in 2013 was rising interest rates, which were said to be the "death knell" of the bull market. Low rates [it was declared] were the "reason" for the incredible run-up from 2009-2012, so surely higher rates would have the opposite effect. (The "experts" were wrong. The S&P 500 would advance 32% in 2013, its best year since 1997.)

In 2014, the U.S. dollar index experienced a strong advance, as markets began to expect the U.S. Fed to end its QE program. A falling dollar and easy Fed money were said to be responsible for the "aging" bull market, so this surely meant that it was time to head for the exits. Instead, the index ended 2014 with a 13.7% gain.

The following year, a sharp decline in crude oil prices was said to be evidence of a weakening global economy. The first Fed rate hike (in December 2015) since 2006 led many institutional investors to sell their stocks in the worst sell-off to start a year in market history. The 52-week lows in January and February were said to be extremely bearish; the market, we were told, was going much lower. Instead, the S&P 500 ended 2016 up 12%.

Today, you'll hear that the bull market is "running out of steam," and is "long in the tooth." New record highs mean that there is nowhere to go but down. In other words, you are, at this moment, subject to the same noise—in the form of extreme forecasts, groundless predictions, prophesies and extrapolation from yesterday's headlines—that has bombarded us throughout the second-longest market upturn in history.

This is not to say that those dire predictions won't someday come true; there is definitely a bear market in our future, and several more after that. But investors who tune out the noise generally fare much better, and capture more of the returns that the market gives us, than the hyperactive traders who jump out of stocks every time there's a scary headline. As we look back fondly at gains we have accumulated, let's recognize that holding tight through big market advances and allowing your investments to compound is never easy. But it can be extremely profitable in the long run.

Sources:

https://pensionpartners.com/myths-markets-and-easy-money/

http://www.businessinsider.com/stocks-bull-market-is-2nd-best-since-wwii-2017-9

 

How to Respond to a Data Breach

Written by Bob Veres & Gerald E Gasber, CFP®, CIMA®, CPFA.

You may have read that hackers broke into the Equifax database and stole personal information tied to 143 million people. The hackers accessed people's names, Social Security numbers, birth dates, addresses and, in some instances, driver's license numbers. They also stole credit card numbers for about 209,000 people and dispute documents with personal identifying information for about 182,000 people. There is no reason to think that data is not for sale to criminals who can use it to open new lines of credit or file phony tax refund requests in peoples' names.

The company compounded its public relations nightmare by sending people to a website to find out if they were affected, and then including language so that anyone signing in to get this information had to waive any right to join a class action suit against the company should their identities be stolen and financial harm come to them.

The negative publicity forced Equifax to delete the waiver, but when you sign into the web page to find out if you were affected (the link is here: https://trustedidpremier.com/eligibility/eligibility.html), the site requests the last six digits of each person' social security number—and guessing first three isn't as hard as you might think since different regions of the country use pre-assigned digits. If you're still worried about Equifax's data security, then the company's request for additional personal information is worrisome.

If you have credit, then there's a high probability that identity thieves now have your Social Security number and address. To contain the potential damage, the U.S. Federal Trade Commission recommends that you take several steps immediately. First, under federal law you're allowed to request a free copy of your credit report once a year from each of the three credit reporting agencies: Equifax, Experian, and TransUnion—at www.annualcreditreport.com. You can do this every 122 days by rotating among the agencies. Look for suspicious accounts or activity that you don't recognize—such as someone trying to open a new credit card or apply for a loan in your name. If you DO see something, visit http://www. Identitytheft.gov/databreach to find out how to mitigate the damage.

Then monitor your online statements. The credit report won't tell you if there's been money stolen from a bank account or suspicious activity on your credit card. Unfortunately, you'll have to turn this into a habit. In most cases, theft happens over time, starting with small amounts stolen from across your accounts.

Finally, place a credit freeze and/or fraud alert on your account with all the major credit bureaus. You can put a fraud alert, for free, by contacting one of the credit agencies, which is required to notify the other two. This will warn creditors that you may be an identity theft victim, and they should verify that anyone seeking credit in your name is really you. The fraud alert will last for 90 days and can be renewed.

If you're really worried, consider putting a freeze on your credit.
A freeze blocks anyone from accessing your credit reports without your permission—including you. This can usually be done online, and each bureau will provide a unique personal identification number that you can use to "thaw" your credit file in the event that you need to apply for new lines of credit sometime in the future. Another advantage: each credit inquiry from a creditor has the potential to lower your credit score, so a freeze helps to protect your score from scammers who file inquiries.

Fees to freeze your account vary by state, but commonly range from $0 to $15 per bureau. You can sometimes get this service for free if you supply a copy of a police report (which you can file and obtain online) or affidavit stating that you believe you are likely to be the victim of identity theft.

Many Americans have opted to sign up for a credit monitoring service, which won't prevent fraud from happening, but WILL alert you when your personal information is being used or requested. In most cases, there is a cost involved, but Equifax is offering a free year of credit monitoring through its TrustedID Premier business, whether or not you've been affected by the hack. It includes identity theft insurance, and it will also scan the Internet for use of your Social Security number—assuming you trust Equifax with this information after the breach.

There's one last way you can protect yourself. ID thieves like to intercept offers of new credit sent via postal mail. If you don't want to receive prescreened offers of credit and insurance, you have two choices: You can opt out of receiving them for five years by calling toll-free 1-888-5-OPT-OUT (1-888-567-8688) or visiting www.optoutprescreen.com.

Or you can opt out permanently online at www.optoutprescreen.com. To complete your request, you must return a signed Permanent Opt-Out Election form, which will be provided after you initiate your online request.

Sources:

https://www.equifaxsecurity2017.com/potential-impact/

https://www.consumer.ftc.gov/blog/2017/09/equifax-data-breach-what-do?utm_source=slider

https://krebsonsecurity.com/2015/06/how-i-learned-to-stop-worrying-and-embrace-the-security-freeze/

http://money.cnn.com/2017/09/09/pf/what-to-do-equifax-hack/index.html