Newsletter Volume 9 | January 2018

The Patient and Disciplined Investor…  

Ruminations on long-term wealth building and retirement- income strategies                           

written by Todd M. Kirsch                 

Volume 9/Issue 1 | January 2018

“Sell everything! 2016 will be a ‘cataclysmic year’ warns RBS.” – headline on January 12, 2016 from market maven, Jim Boulden of CNN.[1] The S&P 500 closed that day at 1939. As of this writing, it is 2781.

Well, it’s a bull market, you know…

As the story goes, Old Turkey was a well-known Wall Street trader at the beginning of the 20th century. He was more interested in catching trends than catching small dips and pullbacks in stock prices. Apparently, the wise, old fox was adept at answering succinctly when asked about stock prices, “It’s a bull market, you know.”

A bull market it is, indeed. Investors celebrated a solid year in 2017. Yet I can’t seem to go a day or two without some dire prediction in the media that the end is near for rising stock prices – if, for no other reason, that the economic expansion has been going on for nine years, stocks are “overvalued” – yawn. Ignorance of financial markets bandied about by a blind, hyperbolic media stupefies the mind. The media quickly celebrates exactly the wrong behavior by “investors” – i.e., on December 22nd, CNBC ran a headline: “Investors yank billions out of market following Trump’s tax win.”[1] Now that was dumb – they’ve missed quite the rally here in early January.

People, we are in a bull market, and these runs can go on for a long, long time. You should feel good about this. It’s been said that a person will experience three bull markets in their lifetime: the first one, you don’t have the money to invest; the last one, you’re in retirement and cannot take full advantage (one could quibble with this conclusion, but I want to stay on track here); but the one that takes place during our peak-earning years is where one can really generate wealth. The two long-term – or what we call “secular” – bull markets since World War II were from 1947 to 1968 and 1982 to 2000. I wrote about this in my last newsletter, so I don’t want to belabor the point, but here is an excerpt:

[T]he S&P 500 increased from 102 to 1527 from 1982 to 2000. The long-term bull market prior to 1982-2000 was 1947-1968.  The index went from 14 to 108 over that 22-year period.  Consider that these two long-term bull markets – from bottom to top – went up nearly 8 times from 1947 to 1968 and…15 times from 1982 to 2000.  Moving to our current market, the S&P 500 bottomed on March 9, 2009 at 677.  As of today, the index is at 2475…that’s up only about 3.7 times off the low.

First, that analysis is correct if you assume that March 9th, 2009 is the correct beginning of this current bull market. The good folks at Raymond James have lately been arguing that perhaps the current bull market didn’t start until 2013. If that’s true, we could be closer to the beginning than the end of this bull market. Second, an index like the S&P 500 ONLY reflects price appreciation of the securities in the index. It does NOT include dividends – add in dividends, and the returns during bull markets become even more impressive.

Where Did the Volatility Go in 2017?

Before you get too complacent about stock prices, 2017 was a statistical outlier. The largest pullback in stock prices during the calendar year of 2017 was about 3%. We have to go back to 1995 for such a small drop in prices. And that’s the only year since at least 1980 that this has been the case. Do…not…get…used…to…this! Set your expectations lower. I can almost assure you that we will see some kind of unexpected pullback in stock prices of maybe 5% to 15% that will take everyone by surprise in 2018. Maybe it’s inflation, maybe it’s a Trump tweet, maybe it’s a geopolitical issue. Who knows, but do not be alarmed when it happens. Pullbacks are normal and natural, even during long-term bull markets. Consider that there were three significant pullbacks around 20% each in the 1982-2000 bull market.

Is that a Hint of Euphoria I Smell?

Jeff Saut and Andrew Adams of Raymond James have been writing lately about their theory of long-term bull markets. They broke it down into three segments. Initially, bull markets begin when we recover from a recession, and the Federal Reserve lowers interest rates. Low interest rates encourage borrowing and tend to raise all boats. The second segment is the earnings-driven period of the bull market. Earnings accelerate, and we begin to see company stock prices separate based on the quality of management teams, markets, products, etc. The third segment of the bull market is euphoria – investors lose sight of risk, and money pours into stocks. You get stock tips from the Uber driver, the neighbor, the shoeshine boy, and – well – you get the picture. Everyone is excited and talking about stocks, and they cannot stand the thought of someone else making more money than they are.

Messrs. Saut and Adams of Raymond James are currently saying that the second segment of the bull market began in February of 2016 – and that the second segment of bull markets is the longest and most powerful of the three segments. It’s certainly true that we are now seeing some companies/sectors pull away from others – think Amazon vs. traditional retail, for example.

While I do not think we are close to collective euphoria, I wonder if the seeds are being planted. Consider Bitcoin. In the fall, that certainly looked, smelled, and felt like mania. Perhaps blockchain technology will prove to have many useful applications. But Bitcoin does not pay interest or a dividend. While I concede that this a deep and wide discussion – that won’t be attempted here – buying Bitcoin is a lot like buying gold. It has no value other than what someone else is willing to pay for it. Buying bitcoin as it is skyrocketing while hoping that someone else will eventually pay you even more seems closer to euphoria than sober thought.

Lastly, I will relate a story that was in the Wall Street Journal on December 22nd. A company called Long Island Iced Tea Corp was founded in 2011 and makes drinks like, well, iced tea. They recently changed their name from Long Island Iced Tea Corp to Long Blockchain Corp. They have not posted a profit since 2012. Yet, they released a statement saying they want to “explore and invest in opportunities that use the technology that underpins bitcoin and other digital currencies…” The stock shot up as much as 531% before closing that day up 183%. Okay…sometimes my adult memory sabotages me, but sometimes it’s helpful. Does this insane behavior by “investors” remind you of anything about 20-25 years ago? How about when companies put “.com” after their name while people were arguing that the traditional metrics of valuing businesses were for Neanderthals – but in today’s modern times, businesses should be valued based on how many “eyeballs” were looking at webpages.[2] I’m not making this up – you probably remember this, too. It sounds ridiculous to say it out loud now, but I remember those articles. And I think we know how that movie ended for many euphoric speculators. Which leads me to my next point.

Do Not Chase “Hot”- Stick to a Diversified Portfolio

If things keep going the way they are, we will get to the euphoric stages of a bull market. When that happens, you are going to be tempted to chase what’s “hot”. My friends, don’t do this. I could quote Warren Buffet probably a hundred times here, but I will give you a few of his sagacious quotes to give you a sense of how he thinks about these things:

“Never invest in a business you can’t understand.”

“What the wise do in the beginning, fools do in the end.”

“Be fearful when others are greedy and greedy when others are fearful.”

“The ability to say ‘no’ is a tremendous advantage for an investor.”

“Risk comes from not knowing what you’re doing.”

Stocks Won, Even When Buying “High”

That’s right, buying high can be an effective investment strategy. I closely follow a gentleman named Brian Wesbury from First Trust Advisors. He wrote an outstanding piece on October 2, 2017 titled “Stocks Won”.[3] In the piece, he posits this scenario: imagine it is Monday, October 9th, 2007, which was the day when stock prices peaked prior to the so-called Great Recession. In walks “Doctor Doom”, and he tells you that the banking system would soon burn to the ground, well-known financial firms will fail, the unemployment rate will soar to 10%, and the economy would experience the deepest recession since the 1930s. A president would be elected – and I am not getting political here, just relaying the message J – who would raise taxes and “socialize” much of the health care system. The federal deficit would balloon to more than 100% of GDP. Then you were allowed one investment choice. You could put all of your investable assets into the S&P 500, 10-year Treasury notes, gold, oil, housing, or cash. Now pick one! Which investment would have done best when October 2017 rolled around?

The answer: Stocks won!

The S&P 500 generated a 7.2% return, doubling your capital over those ten years. Gold did well for gold – it increased 5.7%. The 10-year Treasury notes returned 4.7%. Oil was down 4.3% per year. Home prices increased about 1%, and cash averaged 0.4%. The consumer price index went up 1.6%, so you went backwards not only with oil, but with home prices and cash, too.

All of this supports my sometimes rather cavalier statement that you’re a better investor if you put your money to work by owning publicly-held companies and then look out the window for 20 years.

Bottom Line: Stay invested, my friends. Stick to a diversified portfolio that matches the goals you set in your financial plan. And do not be tempted by something that seems too good to be true.

The Media Just Can’t Help Themselves

Continuing on this theme: the financial media likes to celebrate dumb decisions by investors. A writer with more sensitivity and class would refrain from writing about this. But I am unburdened by such restrictions. On November 3rd in the gall, that inestimable publication, Money Magazine, highlighted a Roz Warren, who is a 62-year old librarian – we’re not sure from where, but probably Never Never Land where people never experience inflation and never experience increasingly higher medical and long-term care expenses. The title of the story is “I Took All my Money Out of the Stock Market and It Feels Amazing.”[4]

So here goes the story: Ms. Warren inherited $50,000 in the early 1980s. She invested in a balanced fund of 60% stocks and 40% bonds. “And I left it there.” It grew to the “high six figures.” Okay, so far, so good. She fits my advice of invest and look out the window, not only for 20 years but for 35 years! As the story notes, the S&P 500 closed at 208 when Ms. Warren began her investing career – it’s up over 10 times since then (again, without dividends). But here is where poor Ms. Warren goes decidedly wrong. “I cashed it all in last week….Now all my money is stashed in U.S. Treasuries…TIPS [so-called inflation protected bonds], and laddered CDs.” Ms. Warren is now experiencing “peace of mind” and “feels amazing”.

Okay, whew-wee! Where on earth does one begin with this one? First off, here we go again with a seemingly respectable financial publication celebrating dumb investor decisions. Do they not have enough topics to cover that might actually help their readership? Second, how is one’s confidence in our markets at such a low point considering that she has turned $50,000 into high six-figures over 35 years? Third, has she considered that she might have another 35 years to go? The reader cannot determine whether her money will outlive her – there is no mention of any financial plan, calculations, etc., though there is a vague reference about living into her 90s. If inflation begins to rear its ugly head, one has to wonder how Ms. Warren’s assets will hold up. She concedes that she is leaving it to her “wealthy ex-husband” to leave money to their kids, but she says that she “expects” to pay for her grandchildren’s college. Good luck with that one, Ms. Warren – has anyone besides me noticed that college tuition has been going up much faster than the general rate of inflation?

She finishes with, “The stock market has been very good to me” and that there is “no way” she could live the life she is living as a part-time librarian without those good investment returns. She acknowledges that her investments have allowed her to “continue to do the work I love, which provides me with a small but steady income.” Okay, all of this would be like me heaping effusive praise onto an employee, telling her what a wonderful job she is doing. And that I could never have built this business and enjoyed the success I have without her continuing to work her you-know-what off. Sure she stresses me out at times, but we are a great team, and clients love her. “However, I’ve decided to fire you anyway.”

Bottom Line: Don’t be like Ms. Warren.

 “The future’s so bright, I gotta wear shades.” – The band, Timbuk 3

 The future is arriving faster and faster. Here were some breakthrough developments in 2017.


Please check out an interview with a life-like robot named Sophia.[5]  “She” was recently granted citizen status by Saudi Arabia.  I can’t tell if it’s exciting or creepy, but the robots are coming.

 Cleaning plastic from the oceans

A Norwegian billionaire is preparing to launch the “world’s largest yacht” to scoop up and melt up to 5 tons of plastic per day from the oceans.[6]

 Graphen-based sieve turns seawater into drinking water

Clean drinking water remains an issue for millions of poor people around the world. A new development might now finally allow researchers to turn seawater into drinking water cost-effectively.[7]

Artificial Intelligence beats doctors at predicting heart attacks

Doctors are using more devices to help them identify and treat deadly diseases. Artificial intelligence can evaluate significantly larger datasets and more effectively analyze more variables and their relationships than human doctors.[8]

 Robotic dental surgery is a success

For the first time, a robot has successfully implanted two 3D-printed teeth into a live patient. Many poor people do not have access to quality dental care, and artificial intelligence and robotics could fill that void.[9]


Todd M. Kirsch, CFP®, JD, CHFC®, CLU®

Kirsch Wealth Advisors

8191 Southpark Lane, Suite 110

Littleton, CO 80120



Securities offered through Raymond James Financial Services, Inc., Member FINRA & SIPC

Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.

Kirsch Wealth Advisors is not a registered broker/dealer and is independent of Raymond James Financial Services

Todd’s Background

Todd has been serving clients since 1993. Prior to that time, he attended Boston University School of Law and obtained his law degree.  He practiced law with a large international law firm in the areas of taxation, securities, and corporations.  He also graduated from Kansas State University.  He obtained the prestigious CERTIFIED FINANCIAL PLANNER™ (CFP®) designation in 2002 and also holds the well-respected Chartered Life Underwriter and Chartered Financial Consultant designations from the American College.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material and does not constitute a recommendation. Any opinions are those of Todd M. Kirsch and not necessarily those of RJFS or Raymond James.  Expressions of opinion are as of this date and are subject to change without notice.  Investing involves risk.  You can lose your principal.  There is no assurance any strategy will be successful.  Please consult your financial advisor before implementing any investment strategy. Past performance is not a guarantee of future results.
The prominent underlying risk of using bitcoin as a medium of exchange is that it is not authorized or regulated by any central bank. Bitcoin issuers are not registered with the SEC, and the bitcoin marketplace is currently unregulated. Bitcoin and other cryptocurrencies are a very speculative investment and involves a high degree of risk. Investors must have the financial ability, sophistication/experience and willingness to bear the risks of an investment, and a potential total loss of their investment. Securities that have been classified as Bitcoin-related cannot be purchased or deposited in Raymond James client accounts.
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Newsletter Volume 8 | August 2017

The Patient and Disciplined Investor…  

Ruminations on long-term wealth building and retirement- income strategies                           

written by Todd M. Kirsch                 

Volume 8/Issue 2 August 2017

 “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” – Peter Lynch, mutual fund manager, author and philanthropist.

 Does This Bull Market Still Have Legs to Run?

This is purely anecdotal, but I seem to be reading more and more articles lately in financial publications that are calling for an end to the bull market in stocks, or at least citing all the reasons why this market could end. Now, please understand that someone, somewhere is always predicting gloom and doom – there’s money to be made by instilling fear.  But even the more sober publications are featuring more of these articles.  While it’s certainly possible – in fact, it’s eventually inevitable – that this bull market will end, I am going to lay out the reasons why this bull market could have plenty of room to run.  Please remember that pullbacks in stock prices are healthy for markets (more on that later), and it’s very possible we get the dreaded drop.  But even if we get a sharp pullback in stock prices, the underlying trends look positive.  As always, it’s always best to mentally prepare, in advance, for corrections rather than react to them.  Successful investing asks us to act rationally under uncertain circumstances.  My hope is that these newsletters help further that objective.

Why Do Bull Markets End?

There can be many reasons, but generally bull markets end (and recessions begin) because of excessive speculation or risk-taking due to investors becoming less sensitive to risk. Banks lend too much money, bad ideas masquerade as good ideas, people and companies get extended on debt, investors get euphoric – and, well, it’s great until it isn’t.  One need not think too hard to understand this.  Think of the boom of the 1990’s – or the housing excesses of the mid 2000’s.[1]  The history of markets is filled with these examples.[2]

People fear recessions – and for good reason. Oftentimes a job is lost, investment values decline, and collectively we are more stressed and glum.  But recessions and bear markets are a wonderful way that capitalism purges itself of irrational and unnecessary excesses.[3]   This is good.  This is healthy.  I know the media likes to focus and assign blame for these episodes (i.e., greedy corporations, rapacious bankers, inept government policies), but this is a waste of energy.  Booms and busts will always happen when human nature is involved.  And you should thank your lucky stars that recessions and bear markets come around every so often.  For if they didn’t, then you wouldn’t be paid a long-term rate of return of about 10% to own stocks.[4]  Your returns would be more akin to those received by bondholders – which is about half.  Markets are relentlessly efficient over time, and there are good reasons why investors who hold stocks accumulate more wealth if they can stay invested through all of the market cycles.

Average Intra-year Decline of S&P 500 is 14.1%

 Since 1980, the average correction in the S&P 500 has been 14.1%. Yet the index has been positive 28 of 37 years.  So please expect corrections – they are normal.  So far in 2017, we have only seen a 3% pullback in stock prices.  Please see the accompanying chart.

picture1 Source: JP Morgan Guide to the Markets 3rd Quarter 2017.


There are ALWAYS Reasons to Worry – But Focus on Earnings

There are always reasons to worry about financial markets – always, always, always. I could list the current concerns here (some of which are significant), however there isn’t enough room in this newsletter.  But if there is one piece of information I would encourage you to watch – if you must watch anything – it would be corporate earnings.  This brings to mind the memorable line from the character Rod Tidwell in Jerry Macguire when he exhorts his agent: “Jerry, show me the money!!”  Without getting too technical, the price of a stock is the value of a company’s future earnings (discounted back to a present value).[5]  Earnings for 2017 have so far been solid, and future estimates are very positive.



Source: JP Morgan Guide to the Markets 3rd Quarter 2017.

You might note the earnings drop in 2015. The steep drop in energy prices depressed overall earnings for the S&P 500 that year.  In addition, the U.S. dollar weakened during this time – and arguably this also helped bring down the price of energy.  But the other story with the stronger dollar is that it hurt the earnings of large U.S. companies because they get nearly half of their revenues overseas.  Foreign earnings are worth less when companies exchange those earnings back to U.S. dollars.   These two trends are most likely behind us for now.  If so, then the optimistic profit forecasts (in green on the chart above) bode well for stock prices.



Source: JP Morgan Guide to the Markets 3rd Quarter 2017.



Source: JP Morgan Guide to the Markets 3rd Quarter 2017.


Ignore the Media and Control What You Can Control

For investors, it matters little, if any, whether the Russians impacted our election, what Trump tweets, what OPEC does, which political party is in charge, whether 85 million Americans take opioid drugs, whether Wall Street bankers are greedy, whether consumers are “confident”, what interest rates did last week, who is getting fired at the White House today, whether Brexit happens…need I go on? These are all important issues for someone, but they’re irrelevant to the long-term price of stocks.  It probably doesn’t even matter much what the Federal Reserve does – or at least I would argue that the Fed doesn’t impact stock prices as much as many observers believe.[6]  I cannot overstate this often enough:  do NOT base your investment decisions on what the media is vomiting out to you, and certainly do not base them on your politics.  Regardless, you cannot control any of these things.  Instead, focus on what you CAN control:  How much do you spend versus save?  Have you established a financial plan?  And are you diligently sticking to your plan?  Have you done everything you can to remove emotion from your investment decisions?  Can you delay claiming your Social Security (and receive an additional 8% per year for each year that you wait?).  Have you bought the proper amount of insurance to protect your assets?  Have you ever reacted to a negative news event and sold an investment?  Can you work an extra couple of years before you retire?  Are your estate planning documents in place and up-to-date?  Are you beneficiary designations matched up with your estate plan?  Have you done the tax planning so that you minimize taxes for your heirs?  All of these things are within your control.  Play the percentages, and there is a very good chance you will reach your financial goals.

 Stop “Anchoring”

If I had a hundred dollars for every time I’ve heard an “investor” say they lost a bajillion thousand dollars in the 2008 Great Recession, I could probably retire. I still hear this nonsense in person and read it in the media.  When people say this, they are guilty of something that the well-known Israeli psychologists, Amos Tversky and Daniel Kahneman, called “anchoring”.  Think of it this way.  You walk into a casino with $500 and immediately win a few hands that takes your cash up to $800.  You then lose the next two hands and walk out with $600.  Well, did you win $100 or did you lose $200?  For most people, it’s very tempting to “anchor” your cash at $800 and feel like you “lost” $200.  Many investors do the same thing with investing. Please consider how this impacts your future investment decisions.  You might know someone who sold their stocks in 2008 and stayed out through the recovery…tragedy.  So don’t do it!  Focus on the progress towards your financial goals (in a financial plan) and stop using these mental machinations to measure your investment performance.  It would be foolish to abandon a beautifully-crafted investment strategy in your financial plan because you convinced yourself how much money you “lost”.


And Now, For the Good News…

 To counter the media negativity, here are some facts that you might not find be seeing in the news:

  • Household net worth for Americans is $96.4 trillion – the prior peak was $67.7 trillion in 2007.[7]
  • Household debt service ratio as a percentage of disposable income for Americans is 10.0% – down from 13.2% in 2007.[8]
  • The average FICO score of U.S. consumers reached an all-time high of 700 this year.[9]
  • The unemployment rate is 4.4% versus the 50-year average of 6.2%.[10]
  • Core inflation is 1.7% versus the 50-year average of 4.1%.[11]
  • The U.S. is producing nearly ten million barrels of oil per day for the first time since 1970.[12]
  • The average dividend paid on a share of stock in the S&P 500 was $45.03 in 2016 versus $27.73 in 2007, a whopping 62% increase![13]


Corrections Within Long-Term Bull Markets

The last long-term bull market took place from 1982 through 2000. But consider this:  we had three bear markets during this time period.[14]  They happened in 1987, 1990 and 1998.  The S&P 500 bottomed at 102 in 1982, and then it peaked on March 24, 2000 at 1527 – a nearly 15-fold gain.  The three bear markets in 1987, 1990 and 1998 took the S&P down to 224, 295 and 957, respectively.  Had you abandoned your investment strategy during one of these bear markets – and stayed out of stocks – you would have missed out on massive sizeable gains.  And remember, the index values do NOT include dividends!

To be sure, the years 2000 through 2009 were difficult, but many astute observers think we could be back in a long-term bull market.[15]  I noted that the S&P 500 increased from 102 to 1527 from 1982 to 2000.  The long-term bull market prior to 1982-2000 was 1947 to 1968.  The index went from 14 to 108 over that 22-year period.  Consider that these two long-term bull markets – from bottom to top – went up nearly 8 times from 1947 to 1968 and, as noted above, 15 times from 1982 to 2000.  Moving to our current market, the S&P 500 bottomed on March 9, 2009 at 677.  As of today, the index is at 2475…that’s up only about 3.7 times off the low.[16]

Does any of this mean anything? Maybe – maybe not.  But remember that bad news sells, and the information I am providing here is getting drowned out in the cacophony of media negativity.


Bottom Line: Stay invested, my friends. 

New Rules Governing Delivery of Financial Advice

 The federal government implemented new rules on June 9th on financial services firms.  The new rules will be phased in over the coming months.  Essentially, the new rules require all financial advisors to act in a fiduciary capacity on IRA accounts.  As an “Investment Advisor Representative” and CERTIFIED FINANCIAL PLANNER™ professional, I have already been operating under a fiduciary standard for many years.  But many advisors have not, and this is a big change for those advisors and the firms supervising those advisors.

A fiduciary essentially means that I owe clients the highest duty of care under the law – that all recommendations and advice must be in your best interest. Many other financial advisors have been operating under the “suitability” standard, which essentially means that any investment or strategy they recommend needs to be “suitable”.  It doesn’t necessarily need to be in the client’s best interest – just suitable.

The issue has received some media attention, and a few of you have been asking me about this change. As always, I am available to discuss with you if you have questions.  The new rules will not impact how we are currently providing advice…in your best interest.

The Ladies in the Office….

Kelly in our office is getting married on October 14th.  Sorry fellas, a good one has gone off the market.  Crystal got married last September.  If that wasn’t enough J, she is now fostering dogs that have been rescued. If you’re looking to adopt a dog, please keep Crystal in mind.  Jericha is busy raising her two children alongside her husband, when she’s not here.  They’re beautiful kids – Beyla and Gavin, ages 3 and 1.


Todd M. Kirsch, CFP®, JD, CHFC®, CLU®

Kirsch Wealth Advisors

8191 Southpark Lane, Suite 110

Littleton, CO 80120



Securities offered through Raymond James Financial Services, Inc.



Todd’s Background

Todd has been serving clients since 1993. Prior to that time, he attended Boston University School of Law and obtained his law degree in 1989.  He practiced law with a large international law firm in the areas of taxation, securities, and corporations.  He also graduated from Kansas State University.  He obtained the prestigious CERTIFIED FINANICAL PROFESSIONAL™ (CFP®) designation in 2002 and also holds the well-respected Chartered Life Underwriter and Chartered Financial Consultant designations from the American College.

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Inclusion of these indexes is for illustrative purposes only.  Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance.  Individual investor’s results will vary.  Past performance does not guarantee future results.
 The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material and does not constitute a recommendation. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete.  Any opinions are those of Todd M. Kirsch and not necessarily those of RJFS or Raymond James.  Expressions of opinion are as of this date and are subject to change without notice.  Investing involves risk.  You can lose your principal.  There is no assurance any strategy will be successful.  Please consult your financial advisor before implementing any investment strategy. Past performance is not a guarantee of future results.  Certified Financial Planner Board of Standards Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER™ in the U.S.




[1] A similar, though less noticed period of excess was the boom in oil prices until 2015 that eventually washed out the excessive speculation and drilling when oil prices were above t $100 per barrel.

[2] For a contrary view that this bull market could end without euphoria, see Coping With the “Foie Gras” Stock Market in Barron’s, July 29, 2017. Not sure I agree with his position, but it’s yet another reminder that some very smart people remain pessimistic.

[3] Unfortunately, economic downturns tend to hurt the most vulnerable in our society the most. As such, recessions – and how to lessen their impact – has become an extremely difficult political issue.  But combatting them can be a lot like trying to lessen the impact of food-poisoning.  Your body just simply needs to expel the poison to move on.


[5] Technically, it’s future dividends, but dividends are paid out of earnings and will suffice for purposes of this discussion.

[6] To stay on a similar theme, the projected insolvency of Social Security and Medicare, the Fed’s bloated balance sheet, North Korea’s nuclear weapons (and other geopolitical issues), climate change and income inequality – all of which are concerning – are difficult, if not impossible, to craft an investment strategy around.

[7] JP Morgan, infra.

[8] JP Morgan, infra.


[10] JP Morgan, infra.

[11] JP Morgan, infra.



[14] Bear markets are generally defined as declines of 20% or more in stock prices. The declines in 1990 and 1997 were 19.9% and 19.3%, respectively.  Though not technically 20%, these declines produced plenty of panic in markets, so I am generously labeling them a bear market.

[15] Many market observers write about something called “secular” bull and bear markets. The essential point of these observers is that markets tend to run – psychologically – positive and negative for long periods of time based on strong underlying trends (demographics, war, interest rate cycles, technology, etc.).  I will be the first to admit that many people in the securities profession tend to see patterns in the fuzz that simply are not there, but I think the “secular” bull and bear market analysis has considerable merit.

[16]Arguably, the right number is 1099 for calculating the trough of the S&P 500 reached on October 3, 2011. That was the bottom of a 19.4% drop from April 29th to October 3rd in 2011.  Based on that number, we’re only 2.25 times off the low.

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Newsletter Volume 8 | January 2017

The Patient and Disciplined Investor…  

Ruminations on long-term wealth building and retirement- income strategies          

written by Todd M. Kirsch         

Volume 8/Issue 1 January 2017

“Permanent loss in a well –diversified equity (or stock) portfolio is always a human achievement, of which the market itself is incapable.” – Nick Murray, author and speaker

The Year 2016 Provided a Tutorial on Investing

The year 2016 certainly brought surprises that rattled investment markets. But there are some valuable lessons to be gleaned that might help you going forward. Consider how we started 2016 a year ago. The S&P 500 closed at 2044 on December 31st, 2015. It closed on February 11th, 2016 at 1829 – a 10.5% drop.[1] Headlines from early last year seem rather amusing now. CNN Money’s headlines included: “The crash in oil prices continues to ruin your portfolio.”[2] Ruin? Business insider: “Chaos on Wall Street: Here’s what you need to know”[3] Chaos? “Recession watch, 2016” Recession watch? “Investors are nervous” Nervous? It was a buying opportunity. Bloomberg was still running hyperbolic headlines into May: “Bank of America Strategist Warns of Imminent ‘Vortex of Negative Headlines’ to Send U.S. Stocks Plummeting.”[4]   So was CNBC: “This bank thinks the S&P could fall 15% this summer.”[5] Do these people actually get paid to write these things?

Whenever stock prices drop like this, the media trots out the usual suspects who make a living peddling fear. There is wringing of hands and gnashing of teeth. Bad news sells, and some market “experts” have figured out that they can make more money selling fear than reminding readers that the capitalist system, though imperfect, has historically been, and continues to be, a juggernaut of wealth creation.

But 2016 wasn’t finished – another buying opportunity arrived in late June. The Brexit vote caused the S&P 500 to drop 5.3%. Then the overnight futures the evening of the election were also off about 6% when it started to become clear that Donald Trump would be elected president.[6]

So what have we learned? Well, it’s essential to realize that basing your investment decisions on headlines is a mistake. And I don’t think I would take politics into consideration, either. Headlines and political issues tend to be fugacious – i.e., sensational and here today, gone tomorrow. Principles, on the other hand, tend to endure. Speculators (i.e.. gamblers) might be basing decisions on headlines. But you, my dear reader, are an investor. As such, you should be basing your investment decisions on a financial plan whereby you (and your spouse) have set a variety of very important personal and family goals, most of which are long-term.

With these thoughts in mind – and 2016 presenting an obvious learning example – we turn our thoughts as to some general principles:

Principle #1 – Most clients are working on a financial plan that covers multiple decades, if not multiple generations. For this reason, investment decisions are based on client goals – and what gives them the best chance of reaching those goals….not on the transitory, hyperbolic media headlines of today.

Principle #2 – I do not and cannot forecast the economy – much less what stock prices will do if and when people get emotional around buying or selling stocks. I don’t believe anyone can consistently predict these things. My greatest value to clients is to be the calm, steady voice that tells you everything will be okay in the midst of uncertainty.[7] Clients hire me to help them separate their emotions from their investment decisions. Consider this: the GDP of the U.S. contracted 4.1% in the 2007-2009 so-called Great Recession – yet the S&P 500 plunged a whopping 57% from October 2007 to March 2009.[8] Yes, you read that correctly – 4.1% vs. 57%! Think of the regret you would have if you had sold out in March of 2009 when the S&P bottomed around 670. I have personally heard some of these stories, and it’s near impossible to recover from those mistakes. In a nutshell, I am a planner, not a fortune teller. You will want me on your side – and in your ear – when the spaghetti hits the fan the next time.

Principle #3 – My approach to portfolio management consists of essentially three objectives (1) what type of investment portfolio gives you the best chance of reaching your goals, (2) benchmarks, such as the S&P 500, are mostly irrelevant – the only benchmark we should be measuring is your progress towards your financial goals (one can “beat” the S&P 500 over a given time period and still run out of money in retirement), and (3) volatility of stock prices isn’t risk (the media tells you otherwise) – risk is that you, based on fear or panic, will sell part – or heaven forbid – all of your portfolio at exactly the wrong time thereby permanently impairing your capital and your ability to reach your financial goals.

Principle #4 – Once we have painstakingly developed a comprehensive financial plan for clients, I rarely suggest that we make changes to the investment portfolio unless client goals have changed.[9] The media is constantly urging, nudging even begging you to “do something!” My rather unscientific sense – though verified in various ways by a number of scholarly sources – is that investment performance is negatively correlated to activity within the portfolio. In other words, the more you “tinker” with your investments, the worse it generally does. Or think of investments as soap – the more you handle them, the smaller they get. There have been plenty of studies suggesting that women are better investors than men because of this. Sorry fellas, tinkering is in our DNA, but it doesn’t help us as investors.

Principle #5 – Going back to 1980, the average intra-year decline in the S&P 500 is 14.1% – that’s average! This means that, at some point during the year, stock prices – on average – have dropped 14.2% from a previous high.[10] Many years – like 2008 – it’s been much more. Yet, the S&P 500 ended positive 27 of those 36 years. The S&P 500 has gone from 106 in 1980 to about 2250 as of the date of this writing – and that doesn’t include dividends. The lesson is simply this: leave….your…. portfolio…..alone. Let it do the heavy-lifting and go live your life without pretending that you’re smarter than the market. I like the quote from Warren Buffet: “Our favorite holding period [for stocks] is forever.” That might be overstating it a bit, but you get the point. Finally, consider that stock prices since 1926 have, on average, hit a new high a mere 3.3 years after a bear market begins.[11] I have no way of predicting that the future 37 years will be as good as the last 37, but I certainly favor the idea of placing stocks in portfolios for long-term goals – and then let the money managers and stocks do their job.

Principle #6 – We can never, ever, EVER be certain of a rate of return by owning stocks (or bonds). The only thing asked of us is to be rational in a relentlessly uncertain world. The world can be an ugly place. You might have noticed the name of this newsletter – the Patient and Disciplined Investor. I could have named it the “Irrational, Reactive, Time-the-Market, Cutting-Edge, Psychotic Investor” – but that doesn’t fit my practice. Patience, discipline – and faith in capital markets is, by definition, RATIONAL. And it is based on the last 225 years of market returns since a collection of 24 men began trading stocks under a buttonwood tree in New York City that eventually became the New York Stock Exchange. Acting rationally under generally uncertain and sometimes completely irrational conditions is the hallmark of truly successful investors. We’re not here for a quick kill – or the right to brag to your neighbors at the block party how you got out of the way of the 2007-09 crash (only to, uh-um, still be in cash). We are investing to reach real life, tangible, family-oriented goals that we can look back on and say: We did it! It was tough to maintain the faith during those difficult times, but look at what we have now – and what our kids, our grandchildren, and perhaps a charity have as a result of our hard work, prudence, and rational approach to investing.

Rationality will continue to be the building block that I will base my practice on going forward.

Observations for 2017

“Looking ahead to 2017, with U.S. markets appearing to be reasonably undervalued (in our view from an accelerating earnings, free cash flow and dividend perspective-three of the most important measures) on most fronts.” – David Schaffer, Managing Director, Institutional Equity Sales, Raymond James (12-29-30)

Observation #1 – As mentioned above, investment markets put on a tutorial for investors last year. After the initial 10.5% drop, we ended 2016 around 2,250 – that’s about a 23% increase from mid-February and about a 10% gain on the year. Throw in about a 2% gain due to dividends, and those numbers increase to 25% and 12%. Not bad for such an allegedly slow-growth economy.[12] The lesson is don’t invest based on politics, headlines, or – as much as I would like to – the Chicago Cubs. Though, wait just a second, the Cubs won the World Series on November 2nd when the S&P closed at 2097 – and markets have really done well since the Cubbies won the World Series, so doesn’t that mean that…..nope, don’t go there. There is no correlation between the two, but heaven knows – somewhere, somehow, someone is making a case for such an “investment strategy”.

Observation #2 – Participants in the trading of common stocks – aka “the market” – don’t like uncertainty. Bad news – which can be digested and accounted for – is better than uncertainty. The uncertainty surrounding the presidential election is over and voila, stock prices increased. My sense is that stocks would have also bounced up had Hillary won the election – though perhaps the bounce would have looked different. There will always be uncertainty, but don’t let “bad news” dictate your investment decisions. It could be good news for stock prices.

Observation #3 – It is almost comical how the financial media is constantly classifying the market as “overvalued”. But then again, if it wasn’t overvalued, then it wouldn’t be at imminent risk of “crashing” – and well, not as much nonsense journalism could be vomited out to the public. A common approach to measuring the value of stocks is to compare the prices of stocks to the earnings for that company – otherwise known as the Price/Earnings (P/E) multiple. But remember that there is a past P/E and a future or anticipated P/E. Based on past (12 months) earnings, I agree that an argument could be made that perhaps stock prices are a bit high, at least historically. But included in the last 12 months are some very poor earnings from a now relevant and significant energy sector. If we look to future, anticipated earnings, stock prices are quite consistent with historical averages. This is especially true considering that the 10-year U.S. Treasury bond is only yielding about 2.45%…not exactly stout competition for stocks.

Observation #4 – It’s possible that we are only at the beginning to mid-stage of an epic bull market run. That might sound naïve and trite to a pessimist – and I understand that. But when you carefully consider how bull markets in stocks have ended historically, you might reconsider. Bull markets generally end when there is a general feeling of euphoria around stock prices. People lose sight of investment risk, and unsophisticated investors are lured into the market thinking they can make easy profits. Demand overwhelms supply – it’s good until it isn’t and then bam! – the market begs for – and sometimes gets in brutal fashion – a correction that knocks some “sense” back into the market. Stocks are then returned to their rightful owners – the long-term accumulators of ownership in America’s companies. The media shrieks about the end of the world and how much money “investors” lost, and well, the process starts over. Consider the euphoria before the housing bust in 2007 – consider the bust in 2000 – and consider the Granddaddy of them all – the bust of 1929 that didn’t end until 1932 (for an outstanding review of the euphoria during the 1920s, pick up Rainbow’s End, the Crash of 1929 by Maury Klein.)

History certainly does not have to repeat itself – and this bull market, since March of 2009, could certainly end in different fashion. There could be a significant terrorist act or some other major act of aggression by another nation that changes things quickly. But I sure don’t sense any euphoria going on in investment markets. Company earnings are beginning to accelerate on a sound base of financial stability within corporate America. We might be transitioning from an interest-rate driven bull market to an earnings-driven bull market. It could be good for some time, yet.

Observations #5 – The U.S. still has the world’s most vibrant, resilient, innovative economy in the world. Stock returns in other parts of the world for 2016 were not near as good as the U.S. Once again, it appears that the U.S. is going to have to lead the way out of a relatively sluggish world economy going forward.

Observation #6 – All things being equal, rising interest rates cause bond prices to fall. With rates most likely on the rise going forward, a reasonable investor might reevaluate how much money to commit to bonds – which have, for over 35 years, been considered a relatively “safe” asset class. This could be good for stocks – or at least be an underpinning of strength for stock prices. Another source of strength could be a lower tax rate on U.S. corporations and tax-relief for funds held overseas by U.S. corporations.

Observation #7 – Let’s hope our newly elected leaders do not engage in tariff legislation that causes other nations to retaliate with substantial tariffs on our products. Trade wars don’t end well – consider the 1930s.

Bottom Line: There are many reasons to be hopeful for 2017 and beyond. Don’t sell your investments based on politics, headlines, or rising interest rates, – and certainly don’t sell on the “news”. Stay invested, my friends.

The Firm

We transitioned to Raymond James over 3 years ago – but it seems like yesterday. We would not be enjoying our success without the hard, diligent work of the ladies in my office. I am very appreciative of their efforts. Let’s hear it for Kelly, who has been here nearly 11 years, Crystal 3.5 years, and Jericha 5 years. Thank you, ladies! We make a great team, and I am very thankful for your efforts.

On a Personal Note…

My son Ryan is now a junior at CSU studying civil engineering. I’m glad someone in the family understands those topics – too hard for me! My two daughters, Zoe and Julia, are 16 and 14 and are both attending Mountain Vista High School. Zoe has become an extremely skilled violin player (I’ve always liked those string musicians!), and Julia is playing volleyball for both the high school and club. They all make Papa Bear very proud. 🙂

For those of you who have trusted me with your money, thank you – I am deeply moved and grateful for the confidence you have shown in me and Raymond James. While money is important, it doesn’t mean much without our health and relationships. I have gotten to know many of you and your family members over the years, and that is one of the greatest joys of my work. I probably have the best “job” in the world! Happy New Year for 2017, and as the French say, “à votre santé!” – to your health!


Todd M. Kirsch, CFP®, JD, CHFC®, CLU®

Kirsch Wealth Advisors, an independent firm

8191 Southpark Lane, Suite 110

Littleton, CO 80120



Securities offered through Raymond James Financial Services, Inc.


Todd’s Background

Todd has been serving clients since 1993. Prior to that time, he attended Boston University School of Law and obtained his law degree in 1989. He practiced law with a large international law firm in the areas of taxation, securities, and corporations. He graduated from Kansas State University in 1986. He obtained the prestigious Certified Financial Planner® (CFP®) designation in 2002 and also holds the well-respected Chartered Life Underwriter and Chartered Financial Consultant designations from the American College.

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material and does not constitute a recommendation. Any opinions are those of Todd M. Kirsch and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Investing involves risk. You can lose your principal. There is no assurance any strategy will be successful. Please consult your financial advisor before implementing any investment strategy. Past performance is not a guarantee of future results.






[6] And these are not insignificant events. Consider that the U.S. has a total stock market capitalization of about $25 trillion. And we’re only talking about the U.S. here. That’s a loss of $125 billion – with a B – that was lost in the emotional knee-jerk reaction to headlines.

[7] I am also the calm, steady voice that will tell you to be careful when the “next, big thing” captures the imagination of the investing public. We haven’t seen this in some time, but most of you remember the dot-com craze of the late 90’s. Many investors lost sight of their goals paid the price in the recession of 2000-02.

[8] Congressional Research Service: – see page 6.

[9] Please keep in mind that the money managers we hire are making many of these decisions as to when to buy/hold/sell various securities – and in what percentages.

[10] See page 13.

[11] The study measured returns after inflation and dividends – which is the correct way to conduct the study.   Ned Davis Research, Robert Shiller; Eugene Fama & Kenneth French; Hulbert Financial Digest; The Wall Street Journal, March 7, 2014, Mark Hulbert, Don’t Fear the Bear.

[12] To be sure, international markets are not doing near as well, but market leadership has a funny way of rotating around.

Posted in Uncategorized

Newsletter Volume 7 | January 2016

The Patient and Disciplined Investor…  

Ruminations on long-term wealth building and retirement income strategies

written by Todd M. Kirsch | Volume 7 | Issue 1 January 2016

“Growth is an erratic forward movement: two steps forward, one step back. Remember that, and be very gentle with yourself.” – Julia Cameron, American author

Investment Markets Remain Volatile

At times, it can be very difficult to stay the course as an investor, because we must periodically endure retreating and sideways securities prices. U.S. stock prices “corrected” about 12% from May to August-September, and – as of this writing – are retreating again. Stocks have struggled this year, and there are many areas that look like they will finish substantially down for 2015. Those areas include emerging markets, “value” and dividend-paying stocks (especially utilities and transportation), certain areas of the bond market, gold mining stocks, and the energy sector, which has really been hit hard. While corrections are painful when they are happening, we should be thankful that they do, in fact, occur because if investment prices did not periodically correct, then you could not reasonably expect to earn a higher return over time versus holding investments (or savings) that have little or no volatility.


Remember that the financial media is not your friend when stocks are correcting. The media is always eager to stir up your emotions. Given the “collective car crash” that markets endured in 2008, you can be excused if your emotions have been pulling at you lately to lose sight of your long-term goals and satiate the short-term need “do something” with your investments. The media likes to use terms like “soar” and “plunge” when referring to stock prices – and lately, oil prices. Stocks on any given day might move 1-2%, sometimes more, but do they really “soar” and “plunge”? I could perhaps understand the use of the term “plunge” if stock prices dropped, say, 30% in a day…but 1-2%?? Can you imagine getting on an elevator, and your button choices are “plunge” and “soar”?

The financial media doesn’t know you, isn’t familiar with your financial goals, and certainly doesn’t care about you. You will be a better investor if you tune out the media and stay focused on matching your investments to your goals in a financial plan. What they care about is selling you more media by keeping you addicted to the next news “event” that they believe is moving markets. Have you ever wondered why they always provide a reason why stock prices go up or down each day? Maybe there were simply more sellers than buyers that day. Maybe more college tuition bills came due that day, or more cars and homes were purchased, or retirees needed a little more money to fund their retirement lifestyle. Why is it that “investors” would be “dumping” shares of American companies because of “growth concerns” in China or the Federal Reserve raising the short-term interest rate, gulp, a whopping ¼ of 1 percent? Some traders undoubtedly are doing this, but investors tune out this garbage.[1]

Despite the media hyperbole, the correction to U.S. stocks prices last summer was tame by historical standards. Peak to trough from May 21st to August 25th, the S&P 500 was down 12.4%.[2] The average intra-year decline since 1981 in the S&P 500 is 14.2%.[3] If you are still saving for retirement, then periodic stock price declines work to your advantage because you are buying more shares for the same amount of money when they “go on sale”. On the other hand, if you have retired, more caution must be exercised. But there are retirement strategies to protect against such difficult periods…a topic for another time.

Stock prices are up about three times where they were in March of 2009 – a very steep increase. It’s hard to know when a bull market like this will end, but in general, bull markets typically end when investors feel euphoric and lose sight of risk. This isn’t happening. The week of August 25th (when stocks were correcting the most), we saw the greatest one-week outflow of funds from equity investments on record.[4]  That is clearly not an indication of euphoria – investors still feel plenty of fear, most likely from 2008. Surprises happen, and I could be wrong in the short-term.   But interest rates remain low, energy is cheap, the labor force continues to expand, S&P 500 dividends have increased 10.6% January through September this year versus 2014,[5] and investors appear to be fairly risk averse. As such, by historical metrics it seems this bull market should have more room to run.

In the meantime, consider what opportunities might arise the next time stocks prices go down. What additional funds or cash might you contribute to your long-term financial goals? Would it make sense to convert a traditional IRA to a Roth IRA? – remember you will pay less tax on a lower valuation when converting. Thereafter, as markets recover, stock prices recover inside a tax-free vehicle. Lastly, don’t forget to consider taking losses inside taxable accounts this year on areas that have performed poorly – and rebalance inside your IRAs.

Bottom Line: Stay invested, my friends – but we might continue to see difficult markets into 2016.

Social Security Claiming Strategies – and Congress Just Changed the Rules

When to claim your Social Security benefits has become a popular topic the last few years, and for good reason – too many people leave money on the table and/or file for benefits too soon. Social Security plays a surprisingly big role in lessening the risk of running out of money – and thereby whether retirees will enjoy a more tranquil retirement. Unfortunately, Congress recently amended the law terminating a couple of advantageous options.[1] Despite these changes, however, when and how to claim will remain very important within the context of a financial plan. The rules are more complex for married couples, but singles should pay attention, too. I will go over the basics, but please call the office if you would like us to take a closer look at your individual situation.


Let’s review the Social Security basics:

  • Your Social Security old-age benefits (i.e., retirement benefits) are based on your earnings record. In general, you need 40 quarters or 10 years of work subject to Social Security withholding to file for old-age benefits. Social Security uses the highest 35 years of wages, indexed to a wage inflation formula.
  • You can collect Social Security retirement benefits as early as age 62 and as late as age 70. You also have an age known as your “full retirement age” (FRA). Your FRA depends on your date of birth, but people born from 1943 to 1954 have a FRA of age 66. Your “primary insurance amount” (PIA) is the amount you can expect to receive from Social Security at your FRA. Claim prior to FRA, your benefit is reduced. Claim later than your FRA, your benefit is increased.
  • Once you begin receiving benefits, they are increased each year based on the consumer price index (cost of living adjustment – or COLA).
  • Social Security pays you to wait. Your individual benefits will increase 8% per year that you delay claiming. For example, if you wait four years, then you will receive a 32% higher benefit.
  • You can claim your benefits on your own record (assuming you have the required credits) or claim on a spouse’s record. You can even claim on an ex-spouse’s record (assuming you were married at least ten years and are not currently remarried).
  • Social Security is “use it or lose it”. You must be alive to collect either your own benefit, your spouse’s benefit, or a survivor benefit.


Social Security is Longevity Insurance

One of my roles is to represent the elderly version of you when financial planning decisions are being made, and Social Security is a good way to reduce the risk of running out of money late in retirement. It is an annuity that will pay you for as long as you live. Moreover, your benefits increase with inflation (i.e., cost-of-living adjustment). As such, you cannot outlive Social Security, and your benefits maintain their purchasing power. Assuming inflation averages the long-term rate of 3% per year going forward, then your Social Security benefits will double in approximately 24 years. Annuities paid from private-employer pension plans generally do not increase with inflation – that is what we call a “fixed income”. People underestimate Social Security, but it is a very valuable retirement income source for the overwhelming majority of Americans.

When Should I Claim?

In general, if you don’t need the money AND you’re in good health…then you should consider waiting to claim your benefits. The government will pay you 8% per year to wait. As noted above, if you wait just four years, then your benefits will increase 32%, plus cost-of-living adjustments.

Unfortunately, most people claim their benefits early.[2] I understand the emotional tug towards claiming: you’ve been paying into the system for decades, and now you want your money. Plus, people have heard that the system is underfunded, and they are concerned that the system will not be there in later years to pay benefits. While the system has its challenges, it’s still relatively solvent, and it’s hard to see the government changing the rules for people who are either in or near retirement. Lastly, there is this misguided idea that you can collect Social Security, invest the proceeds and earn a better return than the government. With today’s low interest rates, you cannot do this without taking outsized investment risk.


If you are single – and many women are single due to longer life expectancies – then the general rules apply: it’s best to wait to collect as long as you don’t need the money and are in good health.

There are a couple of additional considerations. Even if you decide to wait until age 70, you should file and suspend your benefit at your FRA.[1] That way if, for example, you are diagnosed with a terminal disease just prior to age 70, you can collect your benefit back to your FRA. Also, you can collect a spousal benefit (50% of your ex-spouse’s “PIA” – primary insurance amount) on your ex-spouse’s record if you were married over 10 years and have not remarried. It can make sense to collect a spousal benefit while you delay filing a claim on your own record.

If your ex-spouse passes away while you are collecting a 50% spousal benefit, you can increase the benefit to 100% survivor benefit. (Interestingly, this would seem to create a bit of “moral hazard” if you have a financial incentive for your ex-spouse to pass away, but I digress.) If you are widowed, you can collect a survivor benefit as early as age 60. Neither survivor nor spousal benefits increase after FRA. If it otherwise makes sense, then it’s best to claim them at that time.


John and Jane were married for 18 years but recently divorced. John is 68, and Jane is 66. Jane has not remarried. John’s PIA is $2,200/month, and Jane’s PIA is $2,000/month. If she waits until age 70, she can collect $2,640, plus COLAs. In the meantime, Jane can claim a 50% spousal benefit on John’s record for $1,100/month. When she turns 70, she can then collect her own benefit of $2,640. Let’s assume John then passes away shortly thereafter while Jane is collecting $1,100. Jane would then be able to collect $2,200/month (a 100% survivor benefit) until she turns age 70 – and then claim on her own record and increase her benefit to $2,640.

Married Couples

Married couples have more to consider, and the recent legislation will substantially affect some couples’ options. The correct claiming strategy can get complicated, so it’s important to take the time to get it right. Let’s review the married-couple basics.

  • Because Social Security is terrific “longevity insurance”, it’s generally best to maximize at least one Social Security benefit in case one spouse lives a very long time….women are generally more at risk due to longer life expectancies. A joint life expectancy is the average date of death for the second spouse to pass away. When you are in your mid-60s, your individual life expectancy is your 80s, but the joint life expectancy for a couple in their mid-60s is in their 90s. In other words, there is a 50% chance that one of you will live into your 90s, so maximizing at least one Social Security check is generally smart.
  • Upon the death of a spouse, the surviving spouse will continue to receive the higher of the two Social Security amounts that were being paid to the couple – (please note: and surviving spouse will end up in a single-filer tax bracket – a tax consideration).
  • You can claim on your spouse’s record as long as the other spouse has filed for benefits. By doing this, you can claim income now (i.e., the spousal benefit) while delaying your own benefit and growing it to a larger amount that you can claim later. (This, too, is going away under the new legislation unless you are turning 62 by the end of 2015).
  • At FRA, you can “file and suspend” your own retirement benefits (under the new legislation, this terminates April 30, 2016). This means that you have technically filed, but you wish to delay collecting your benefits. It’s a legal fiction, but it’s been important and allows your spouse to file a claim for spousal benefits on your record.
  • Social Security is “tax-friendly” – it’s not tax-free (tax-free status went away in 1983), but for couples claiming income from $60,000 to $120,000, the tax savings can be significant if they wait until age 70 to claim their benefits.
  • Spousal benefits do NOT receive delayed retirement credits after FRA. In other words, if you have reached FRA and plan on filing for a spousal benefit later, don’t do this…because you will NOT be rewarded for waiting.

For couples who are in their late to mid-60s, you have until April 30, 2016 to work under the old rules that allow you to collect a spousal benefit on another spouse who has filed-and-suspended his or her benefits.


Bob and Ann both turned age 62 four years ago at the same time (in 2011). Unlike their neighbors who filed for benefits at age 62, Bob and Ann met with their really sharp financial planner four years ago, who told them about the different Social Security claiming strategies. Bob’s PIA is $2,200/month and Ann’s PIA is $2,000/month. After careful consideration, they decided to wait until age 66 to file for benefits. At age 66, Ann will file for spousal benefits on Bob’s record (i.e., 50% of $2,200/month = $1,100/month spousal benefit). By doing this, Ann’s individual benefit will continue to grow to $2,640, plus COLAs. In order for Ann to file for spousal benefits, however, Bob will have to file, too. But they want him to delay his benefit to age 70. Instead of filing and collecting his benefit, Bob can “file and suspend” his benefit. He has technically filed – therefore, Ann can claim a spousal benefit of $1,100/month for four years until she turns age 70.[2] (Again, this favorable provision terminates late April of 2016.)

The new law will add some twists into financial planning. Let’s assume the same example above. In the future, Bob will have to file and receive his benefits before Ann can collect a spousal benefit. If Ann was a low-income earner, then the 50% spousal benefit will provide her more money than claiming on her own record. However, Bob must file first before Ann can claim that spousal benefit. The choice could be difficult – do they wait for four years for Bob’s relatively larger benefit to increase 32% and then file? This would certainly protect the longer-living spouse. Or do they file now because Ann’s spousal benefit will not increase past age 66 (but Bob’s will). These are difficult decisions that should be made carefully with the help of a Certified Financial Planner®.

Bottom Line: Call us today to schedule some time to review your situation and help you get the most from Social Security.


Todd M. Kirsch, CFP®, JD, CHFC®, CLU®

Kirsch Wealth Advisors, an independent firm

8191 Southpark Lane, Suite 110

Littleton, CO 80120



Securities offered through Raymond James Financial Services, Inc.



Todd’s Background

Todd has been serving clients since 1993. Prior to that time, he attended Boston University School of Law and obtained his law degree in 1989. He practiced law with a large international law firm in the areas of taxation, securities, and corporations. He graduated from Kansas State University in 1986. He obtained the prestigious Certified Financial Planner® (CFP®) designation in 2002 and also holds the well-respected Chartered Life Underwriter and Chartered Financial Consultant designations from the American College

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material and does not constitute a recommendation. Any opinions are those of Todd M. Kirsch and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Investing involves risk. You can lose your principal. There is no assurance any strategy will be successful. Please consult your financial advisor before implementing any investment strategy. Past performance is not a guarantee of future results. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Keep in mind that individuals cannot invest directly in any index.


[1] More noteworthy news is that earnings of U.S. companies – the most important driver of stock prices – are under pressure and most likely will be for the next 6-12 months. The energy sector is arguably in depression given that the price for oil has dropped about 60% over the last 18 months. But capital markets have a wonderful way of healing – if the government stays out of the way. One concern is that banks continue to lend to oil producing companies at a surprisingly robust rate thereby keeping some otherwise moribund companies afloat. The sector probably needs some “creative destruction” by washing out the inefficient and leveraged producers. But excessive lending tends to happen when money is cheap and easy – dictated by the Federal Reserve’s monetary policies. Readers of this newsletter know that I consistently argue that distorting the price of money in an economy (i.e., the interest rate) has hard-to-predict and unintended consequences, and it appears this has happened in certain areas of the energy market.


[3], page 12.


[5] Moreover, they have increased



[8] It appears that the new legislation passed November 2, 2015 will be taking this away on April 30, 2016.

[9] You might be wondering if John can then do the same thing and claim a spousal benefit on her record….sorry, the law does not permit filing for two spousal benefits when you’re married.

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Have an Employer Pension Plan? Then It’s Decision Time…

Most employers have transitioned over to 401(k) plans, but many people in their 50s and 60s still have the older defined-benefit pension plans. And they’re understandably confused when it comes time at retirement to decide which option to select. Unfortunately, I’ve seen some inaccurate, unhelpful, and even misleading information from respectable sources on this topic. If the alleged experts are confused, one can easily imagine that pension participants are confused, too.

There are a couple of key concepts to consider up front. First, are you married? If so, then you have to think about the financial security of your spouse if you die early in retirement. Second, do you have a lump sum option or must you receive your pension benefits in the form of monthly payments?

In general, pension participants can receive benefits in one of two ways: either a monthly payment or a lump-sum option. If a monthly payment is elected – and if you are married – then you and your spouse must decide whether to elect a joint-and-survivor option, but this means that your pension payments will be reduced.

Various options are offered to protect a spouse in case you die first. For example, if a $3,000/month payment is offered for your life (“Life-Only Option”), you might also have the option of reducing this amount to $2,700/month, but your spouse would continue to receive 50% of your pension – or $1,350/month ($2,700 x .5). This is called a joint-and-survivor option (“J&S Option”). In my experience, most people elect the J&S Option. But oftentimes purchasing an individual life insurance policy and electing the Life-Only Option from your pension plan may be a better choice. The lump-sum option might even make sense.

Whether a Life-Only option or taking a lump sum is a better choice will depend heavily on a family’s financial situation, health of the parties involved, and their financial goals. It’s important to get this decision right, because there generally are no “do-overs” once you start receiving monthly pension payments.

Lump Sum or Monthly Payments?

The first decision that must be made is whether to elect a lump-sum payment or monthly payments. More plans are offering lump-sum payments to reduce liabilities on balance sheets. Every situation is unique and must be considered with great care. Consider:

  • Can you take the lump sum and buy an annuity in the marketplace that contains different – even better – benefits and guarantees?
  • How financially sound is your employer? Will your company be able to meet all of its pension obligations?
  • Do you need the money now? Most people do, but if you don’t – it might be best to take the lump sum option.
  • Monthly Payments – Life-Only or J&S Option

    If you decide that monthly payments are best – and you are married – now it’s time to consider which monthly payment option to select. Protecting your spouse with a J&S Option is called a joint-and-survivor benefit, but in my opinion, it might as well be called the “cheap, low-quality life insurance option.” This option will protect your spouse, but there might be better ways to do it.

    In general, there are four basic ways your life expectancy in retirement will play out:

    1) You both live your normal life expectancy – the most likely scenario, if you’re healthy.
    2) You both die early in retirement – unlikely, but something to consider.
    3) Only your spouse dies early in retirement (does your plan have a “pop-up” provision?)
    4) Only you die early in retirement – hence the need for spousal protection.
    Let’s examine each scenario.

    You Both Live Your Normal Life Expectancy

    Assuming you are both healthy, the most likely scenario is that you and your spouse live your normal life expectancy. Even if you elect a J&S Option, your pension plan will only pay income if either of you are alive. But this income stops when you both pass away. Fair enough. But what if it’s important to you to leave some money to the kids, grandchildren, or a charity? Then your pension will not help you with this goal. You could fund this goal with other assets, but a life insurance policy – properly structured and funded – would pay a death benefit and satisfy this goal. In this case, we might take the extra pension benefits received from a Life-Only Option (instead of a J&S Option) and use those benefits to purchase life insurance.

    You Both Pass Away Early in Retirement

    The analysis here is similar to the analysis immediately above. You both die, the pension payments stop. Again, your family or a charity generally receive nothing from the pension plan.

    Your Spouse Dies Early in Retirement

    Many plans contain a “pop-up” provision, but many don’t. A pop-up provision allows the pension participant to “pop up” to the original Life-Only amount in case the spouse of the participant dies early in retirement. To use our example above, if you elected a 50% JS Option at $2,700/month instead of $3,000/month, then your pension payment would be increased back to $3,000/month if your spouse dies before you. Plans generally terminate the pop-up protection after a pre-determined number of years…i.e., 5 years. In other words, if your spouse dies in year 6, you will be stuck at $2,700/month for the rest of your life.

    You Die Early in Retirement

    This is precisely why you elect a J&S Option – to protect your spouse. You die, and your spouse continues to receive income. The death benefits from a life insurance policy, however, can be used to supplement income or buy an annuity at the time of your death. A little homework must be done up front to determine the amount of life insurance that is needed to purchase the same annuity (i.e., $1,350/month to continue our example). But this can easily be calculated by a financial professional familiar with these issues, if appropriate.


    Whew, that’s a lot to consider. This is an important decision. We’re here to help, if you have an upcoming pension election.

    Bottom Line: Carefully consider your options with a financial professional and do not automatically elect the J&S Option.

    Posted in Uncategorized

    What is Your Financial Advisor’s Net Worth?

    Potential clients rarely ask me about my own financial situation.  This has always surprised me.  During the initial due diligence process, I ask them very detailed questions about their goals, assets, income, liabilities, etc.  I’m sure they would feel a bit awkward asking me the same questions, but it’s a relevant and appropriate topic.  I actually appreciate and respect the courageous individual who asks me for this information because they will see that I’m doing everything I’m asking of them and that I’m invested in many of the same investments which I am recommending to them.    

    The last time a client asked me for this information was about 6 months ago.  I had met with this couple multiple times, and this meeting had the air of “decision time” to it.  She started off asking me detailed questions about the benefits and compensation I offered to my employees (this was also important to her) and then asked me whether she could see a copy of my net worth statement.  I walked back to my office and printed it out – I keep this on my computer and update it quarterly.  The entire conversation on both topics took maybe 10-15 minutes, but that gave her and her husband the comfort they needed to move forward.  There was a sense of “we’re in this together, and we share similar values.”    

     You might be uncomfortable asking for this information, but why would you invest your lifetime of savings with someone who was not also successfully working towards their own financial goals?  On what authority could they possibly make recommendations for financial success when they haven’t followed their own advice?  How can they know your emotional ups and downs during market volatility if they are not invested, too?  Finally, it might simply prompt a better discussion with your advisor – for example, what advantages do see with Money Manager ABC over Money Manager XYZ? 
    Ask the questions.  You’ll do it in a tactful way.  And your financial advisor – if they’re worth entrusting your life savings to – will appreciate the opportunity to share his or her success with you.


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    Investing in 2014

    My inner contrarian investor gets nervous when I begin to see such optimism about investment markets, and I’ve certainly noticed a positive change in investor sentiment lately.  A year ago in early 2013, clients and prospective clients were still voicing a lot concern.  You might recall that the “fiscal cliff”, sequestration, tax hikes, etc. dominated the media.  That seems to have mostly faded from investors’ minds, and stock indexes are powering to record highs as I write.         

     For those of you who read this newsletter, you know that I’ve been relentlessly optimistic on stocks for the last five years, and I remain so for longer-term goals.  But given the recent highs and improving sentiment, I’m feeling the need to calm client expectations for 2014.  I will, however, lay out both sides on how stocks might perform this year.  

    My job is to keep clients focused on their longer-term goals and away from the latest noise in the news.  As always, consume the caterwauling media at your own risk.  But we’ll talk 2014 because it might be best to temper expectations going forward.  We haven’t seen euphoria in a long time, and we’re not likely collectively there, yet.  But given the tremendous rise in equity values since March of 2009, it’s important to remember that euphoria can destroy an investment strategy as easily as fear.  

    I don’t believe U.S. stocks in general are overvalued.  Looking at historical metrics, they appear fairly valued.  Earnings are strong, inflation is low, there doesn’t seem to be any “irrational exuberance” in most markets, the U.S. is becoming a major force in energy production[1], the emerging middle-class megatrend continues, U.S. government debt is coming down (as a percentage of GDP), and gridlock in Washington is restraining the government from trying anything too stupid – well, mostly anyway.   

    International stocks actually look cheap in ways.  Emerging market stocks lagged all year, and it appears that opportunities for bargains are emerging  in Europe. 

    Many investors argue that QE is driving the U.S. stock market and that stock prices are artificially inflated.  Perhaps to a degree, but stop and break that argument down.  First, most of the QE money is not making its way into the economy.  It’s hard to push a string, and most of the QE funds still sit on bank balance sheets as reserves (in other words, it’s not being loaned).  Second, it’s primarily earnings and dividends that drive stock prices, and these numbers look solid.  Third, companies have become very lean and cost conscious and are sitting on a tremendous amount of cash.  Companies could be well-positioned to take advantage of near-term opportunities. 

    The concern going forward is that a large percentage of earnings growth is still coming from cost-cutting, stock buy-backs, and low interest rates…QE has helped large companies refinance debt to lower rates.  And it is here that QE has helped publicly-traded companies.  How will the “taper” affect things?  QE is truly unprecedented, and nobody – I repeat nobody – knows for sure how the Fed withdrawal from QE will play out.  

    I believe QE has done its job – and QE could now be harming the economy by distorting markets and restraining banks from lending.  Remember that interest rates are simply the price of money over time periods, and the Federal Reserve is distorting the price of money by forcing this price lower.  Negative, real interest rates (“real” – meaning, after inflation) have traditionally caused inflation and misallocated capital to projects and investments that otherwise would not get presently funded.  Many economists believe that this “malinvestment” ultimately results in a lower U.S. standard of living.  Low interest rates and over-regulation of banks are causing tighter lending standards than we would normally see in a recovery – thereby perpetuating a stubborn, though improving, unemployment problem.  In the last newsletter I argued that long-term interest rates probably need to increase more before banks are properly incentivized to lend money to small businesses, which are the primary job creators in the economy.  (A huge segment of the homeowner population – with good, but not spectacular – credit could also benefit from this.)  Small businesses must rely on bank financing because they do not have access to capital markets.[2]  Let’s use an example of how government pricing might distort markets:  what if the government, pursuant to some larger, benevolent public policy goal, ordered dairy farmers to lower the price of milk to 50 cents per gallon?  How would dairy farmers respond?  Considering the costs of production and running a business, I imagine they would stop producing milk and look to other farming activities for income.  Less milk would be available and perhaps more meat would show up in grocery stores – all distortions caused by the government pricing of milk. Banks are responding in similar fashion.

    [2] For example, your local bakery cannot issue stocks or bonds to raise cash for expansion. 

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    Which Political Party Has Been Best for Stocks?

    The answer might surprise you…it surprised me.  This chart came from an e-mail to me from Oppenheimer as part of a larger article.  Interestingly, stocks have performed poorly under a Republican president with a Republican Congress.  Political stalemates appear to have worked best for stocks when a Democrat was in charge of the White House with Republicans in charge of Congress.  I wouldn’t read too much into this chart, but I also wouldn’t automatically assume one political party is best for markets.

    S&P 500 Index Annualized Returns/1928 through July 31, 2012[1]

    President       Congress        Return

    Republican      Republican      2.1%

    Republican      Democrat        8.6%

    Republican      Split                 13.4%

    Democrat        Split                 13.9%

    Democrat        Democrat        14.1%

    Democrat        Republican      18.2%

    Stay invested, my friends.

    [1] Bank of American Merrill Lynch, “Election 2012” August 16, 2012.  Standard & Poor’s 500 Composite Index is a market-capitalization-weighted index that tracks the stocks of 500 primarily large-cap U.S. companies chosen for market liquidity and industry group to represent U.S. equity performance.  Indexes are unmanaged.  Their results include reinvested dividends and/or distributions but do not reflect the effect of any sales charges, commissions, or expenses.  Past performance is not an express or implied guarantee of future results.  Individuals may not invest directly in any index.

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