InSight

Critical questions that investors should discuss

Financial Planning Dentist
  1. What is the investment objective, and what is the time horizon for achieving it?
  2. What is the risk tolerance of the trust or family office?
  3. What is the desired return, and what is the asset allocation required to achieve it?
  4. What are the investment restrictions, such as asset class limitations, ethical constraints, or legal restrictions?
  5. What is the process for selecting and monitoring investment managers?
  6. How often will the investment portfolio be reviewed and evaluated?
  7. What is the process for making changes to the investment strategy?

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Healthcare
Articles
Peter Locke

Focusing on the Health in Healthcare Cost

Healthcare Cost hasn’t gotten any cheaper so what are we doing to help clients reduce its expense? InSight was founded on the belief that there is more to financial happiness than being wealthy. People that want to enjoy their lives after their employment years or even during need to be healthy and it starts with how you’re treating your body now. Growing up I was the proud son of a Personal Trainer, my mother. So for me, living a healthy life was always the focus.  But throughout my career of working with individuals and their families, I got to work with some where health wasn’t a big focus and it was in those interactions I learned the importance of health and wellness.   There is a stark contrast between those that exercise daily, eat well and take care of their mental wellness to those who don’t.  Although being in Boulder, CO makes it easy for most of us it doesn’t mean we all can’t improve.  When clients choose to focus on their wellness the results are incredible.  First and foremost, they go to the doctor typically just to get their annual checkups which saves them money, time and over all Healthcare Cost. They get to spend more time with their friends, spouses, kids and grandkids leading to stronger relationships which results in a longer life expectancy.  When they reach the age of 75 they’re thriving instead of deteriorating. They’re playing golf, tennis, hiking, biking, rafting, and exploring this incredibly beautiful state without worrying about if they can do it because it seems difficult.  My grand-father in law is 89 years old and gets up and down from the ground after playing with his great grandkids with pure finesse. Everyday he is exercising for a couple of hours, whether it’s jiu jitsu, walking, or riding his bike he is always moving.  He also focuses on what he puts in his body for every meal as he knows what you put in has an immediate effect on what you get out of it. I worked with a client for about 7 years that played tennis every single day and yet every time he came into the office he had a tootsie roll or ten because that gave him joy.  He wasn’t living a life full of restrictions and rules but a life of joy and gratitude. At InSight, it’s our primary objective to help our clients and their families live a fulfilling life.  We do this by focusing on the two areas that give clients the most difficulty, finance and health.  We want our clients as we like to say, to be Fiscally Fit. When we do this clients reframe their mindset to what is truly important.  They break away from the distractions like shiny objects and erosive behaviors and begin focusing on the more fundamental aspect of happiness.   One of the best series of questions I’ve read about comes from George Kinder and goes like this: I want you to imagine that you are financially secure, that you have enough money to take care of your needs, now and in the future. The question is, how would you live your life? What would you do with the money? Would you change anything? Let yourself go. Don’t hold back your dreams. Describe a life that is complete, that is richly yours. This time, you visit your doctor who tells you that you have five to ten years left to live. The good part is that you won’t ever feel sick. The bad news is that you will have no notice of the moment of your death. What will you do in the time you have remaining to live? Will you change your life, and how will you do it? This time, your doctor shocks you with the news that you have only one day left to live. Notice what feelings arise as you confront your very real mortality. Ask yourself: What dreams will be left unfulfilled? What do I wish I had finished or had been? What do I wish I had done?  [Did I miss anything]? It is here where my co-founder and I have devoted our attention to help support our clients through different events in order to build a stronger community.  From events like cooking classes in order to create healthy eating and drinking habits that are sustainable and fun, group fitness classes or events, trail maintenance with friends and family, yoga and meditation, walks, golfing, planting and gardening, and whatever else we want to do. Healthcare Cost are manageable in our daily lives.  Click on our community events section of our website to join us for our next event! We can’t wait to have you there. 

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Market InSights
Kevin Taylor

There Is Too Much Money

You read that right, there is simply too much cash in the capital markets to not see a handful of effects that could impact your investments and plan. The supply of money floating around is massive right now. There is a lot of risk, COVID has us concerned about the economics of the coming year, but it’s getting harder and harder to ignore how much cash has been made available. Even relative to itself, it’s a volume of cash in the money supply that will take at least a decade to settle into long term investments, or be recaptured by the Fed. At the beginning of the year there was roughly $15T in circulation held in cash and cash equivalents. We are in December and the number is closer to $19T of more highly liquid cash in the world. This $4T expansion in only 12 months is remarkable. Here’s some history on money supply. It took until 1997 to reach the first $4T in circulation, the decade from 2009 to 2019 saw that supply double from $8T to almost $16T (the fastest doubling ever), resulting in a major part of the expansion of the stock market for that decade. Now, in twelve months we have seen a flood of almost 27% more money in the supply than there was at the beginning of the COVID-19 pandemic.  One of the best leading indicators for where capital markets are headed, can be found in how much money, especially highly liquid money like cash, is available in the system. This is a reflection of how big the pie is. Usually in investments we are focused on cash flow, and a companies market share – or how effective a company is at capturing cash flow from a given size of market. That’s becoming less relevant as the sheer volume of cash has exploded. The pie is so big right now that there will have to be a a few notable adjustments to make: Inflation – While I have heard that Jerome Powell has not registered an increase in inflation yet, it is hard to believe that as the newly introduced money will not have an expansive effect on the costs of goods and services. Many mark the inflation rate off the CPI, grievances with that benchmark aside, it would be irresponsible to assume that the basket of securities they mark to market does not see an above average increase as more money finds its way into the same number of consumer goods. Additionally, elements like rents will see a disproportionate increase in the coming decade because while supply of say consumer goods will increase quickly to capture this cash, construction of rental properties is a less reactive market and a slower roll out to correct the market. In the meantime expect rental costs and revenues to see above average inflation figures.  Interest Rates – Permanently impaired. As I write this the current observation, the 10 year US Treasury is paying 0.9%, a third of where it was even 2 years ago. It is heard to believe that such a robust introduction of cash doesn’t become a permanent downward pressure on fixed income assets for the foreseeable future. Unless there is a formal and aggressive contraction of the money supply, it will take decades for the amount of cash in circulation to let up that downward pressure on bonds. Interest rates in short term assets will be particularly affected as the demand has become less appetizing in contrast to long term debt, and the supply of cash is chasing too small of demand.  Equities – The real benefactor here. It is hard not to believe that over the course of the coming decade, this cash infusion doesn’t trickle its way up and into the stock market and other asset values. Generally the most “risky” part of the market is the historically the benefactor of excesses in cash. Companies will do what they do best and capture this supply of cash through normal operations, this will expand their revenues and ultimately the bottom line. Additionally, the compressed borrowing costs from low interest rates will lower their operating costs. Compound the poor risk reward ratio in bonds and you will see more of those investments seek out stocks, real estate, and other capital assets. This sector will see a virtuous combination of more revenue, and more demand for shares. Expect permanently elevated P/E reads for the time being.   

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New
Kevin Taylor

Bidenflation should be called Swiftflation: How Taylor Swift is Shaping the PCE Deflator for ‘Entertainment’

In a twist that could only make sense in the modern world, pop icon Taylor Swift has seemingly bent the very forces of economics to her will. Forget supply-side theories or fiscal stimuli; the key player in economic inflation—at least, within the entertainment sector—appears to be the ten-time Grammy-winning artist. To better capture this unique phenomenon, at InSight we have coined the term ‘Swiftflation.’ The Personal Consumption Expenditures (PCE) deflator, is a measure of inflation that takes into account changes in consumer behavior and a wide basket of goods and services. Within this basket, one of the categories that contribute to the overall index is “entertainment.” This category typically includes a wide variety of goods and services, such as tickets for movies, concerts, and sporting events, as well as things like television subscriptions, video games, and streaming services. Additionally, items like books, musical instruments, and other recreational goods could fall into this bucket. The ‘entertainment’ bucket in the PCE deflator can serve as a useful proxy for understanding changes in discretionary spending. During economic downturns, for instance, spending on entertainment may decline as consumers prioritize essential goods and services. Conversely, during periods of economic growth, increased spending on entertainment could reflect higher consumer confidence and disposable income. This is one of the more volatile ‘buckets’ that consumers spend on, and a fantastic bellwether for determining if consumers are experiencing a tightening at home. Buying concert tickets is one of the first things to get cut for families when things get tight. So as Taylor Swift sets new records for tickets, tour dates, and overall monetization of her talent the result is Inflation – or ‘Swiftflation.’  The idea that Taylor Swift has more control over inflation metrics than President Biden is an amusing and whimsical concept. One could argue for the sake of playfulness that Taylor Swift’s influence on consumer spending might have its own microeconomic “Swiftflation” effect. Each time she releases an album, merchandise, or concert tickets, millions of fans rush to make purchases, potentially contributing to increased economic activity and even localized spikes in demand.  In the world of ‘Swifties’, new Taylor Swift products might seem as vital as any commodity, prompting fans to prioritize her albums or merchandise over other forms of spending. This puts Biden and the Fed’s attempts to lower inflation at odds with the market for T. Swift tickets and content. This morning’s announcement to monetize the tour footage is another consequence of the climbing ‘entertainment’ bucket in the PCE print.    Nonetheless, the term “Swiftflation” provides a fun way to examine the cultural influence of high-profile individuals on economic behavior, even if their impact pales in comparison to governmental policy. The Swift Effect on the Entertainment Market The role Taylor Swift has played in raising the Personal Consumption Expenditures (PCE) deflator for ‘entertainment’ cannot be understated. Her music, merchandise, sold-out tours and even her presence in films and documentaries have created a surge in consumer spending that’s unparalleled by any other artist of this generation. When you consider that the PCE deflator is an index used to measure the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services, Taylor Swift’s impact on the ‘entertainment’ category becomes all the more significant. The standard economic indicators have failed to anticipate the seismic shift that one individual could impart on a complex, multifaceted market. The Driving Forces Behind Swiftflation Limited Edition Merchandise As every “Swiftie” knows, limited edition merchandise drops are a frequent and highly anticipated aspect of the Taylor Swift empire. When new merch hits the market, it’s like a mini economic event, causing a surge in consumer demand. This, in turn, drives up prices not just for her merchandise, but also for similar products as competitors seek to capitalize on the trend. Concert Tickets The price of a ticket to one of Taylor Swift’s concerts is nothing to scoff at. The high-demand, high-priced tickets have set a precedent in the live entertainment industry, driving up costs as other artists and management teams see what consumers are willing to pay for a coveted live experience. Streaming and Album Sales Swift’s mastery over the music industry has also skewed the average expenditure on digital music and albums. Her exclusive releases often involve collaborations with streaming platforms or special edition physical copies, both of which come at a premium. The Ripple Effect Swiftflation has had a ripple effect across the industry, encouraging other artists to adopt similar strategies that maximize their revenue, further increasing the PCE deflator for ‘entertainment.’ In an age where digital content could easily be considered a ‘commodity,’ Taylor Swift has managed to make her brand exclusive and elite, driving up the cost of participation for consumers who want to be a part of the experience. Conclusions Whether you find it empowering or alarming, Swiftflation is a testament to the enormous influence that a single individual can have on economic trends. It forces economists and analysts to consider new variables that standard models fail to account for. As long as Taylor Swift continues to innovate and dominate in her field, the phenomenon of Swiftflation is likely here to stay, adding yet another layer of complexity to the ever-evolving world of entertainment economics. So the next time you find yourself pondering why your concert ticket or limited-edition album cost so much, remember: you may very well be witnessing Swiftflation in action.

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