dsmWealth August 1, 2019

From left: Chris Cook, Steve Jacobs, Linda Cook, Keri Jacobs and Brandon Grimm.

Growth Trend 'Very Slow But Steady'
BY STEVE DINNEN

If there’s an overriding theme to today’s economic environment, financial planner Chris Cook believes it's that "there is no overriding theme."

The economy is good (although this historically long recovery from 2008-09 is somewhat anemic). After stumbling in the fourth quarter of 2018, equities got off to their best start of the year since 1987 and, as measured by the Dow Jones and S&P 500 indexes, have posted year-to-date 2019 gains in the double-digit range.

"This growth trend has been very slow but steady," said Cook, chief investment strategist at private wealth management firm Gilbert & Cook. He made his remarks at the midyear economic outlook sponsored by West Des Moines-based Gilbert & Cook.

No one is yet predicting an end to what by now is the longest expansion in history. Steve Jacobs, a president of business valuation firm BCC Advisers, hazarded a guess that "we’re in later innings of the game." Yet, from his perspective, the mergers and acquisitions business remains strong. There is by now plenty of capital to fuel purchases, said Jacobs, although there is a problem in that not enough companies are available.

On the minus side of the ledger, Keri Jacobs, an economist and associate professor at Iowa State University, said storm clouds – literally – have persisted in the agribusiness sector.

Tax law changes first threw complications to farmers. Then the Trump-initiated trade war with China brought about retaliatory measures that have curbed sales of two cash crops that are near and dear to Iowans – pork and soybeans. And then the weather misbehaved, with heavy spring rains stalling or completely preventing planting, especially in southern Iowa.

"It was a trifecta of the worst things" to hit Iowa’s farmers, said Keri Jacobs. Government payments from insurance and trade relief will lessen the impact somewhat, but she still envisions more than $1 billion in losses.

If there is any good news here, Cook said, it is that on a macro scale, ag sector losses are targeted to a limited percentage of the national economy. Further, Keri Jacobs said that farmland values have not fallen as much as might be expected.

Though all good things come to an end, Cook noted that the nation had an economic expansion of 92 months that was interrupted in August of 1990 and then resumed for another 120 months starting in March of 1991 – 18 years in total. So it’s not chiseled in stone that the current expansion of 122 months is doomed to sudden collapse.

Returning to baseball analogies, Steve Jacobs asked whether the economy can now "go into extra innings."

Iowa Is Second-Best State to Retire In
BY STEVE DINNEN

In the last issue of dsmWealth, we wrote about retiring in Italy. But Iowa’s not such a bad place, either – Bankrate.com has ranked us as the nation’s second-best state in which to retire.

The personal finance information provider looked at five aspects of retirement living, giving them percentages of the total ranking:

· Affordability (40%). A new home in Des Moines costs around $200 a square foot. My daughter in Boulder, Colorado, is looking at $500 per square foot. For $975,000, you can pry yourself into a one-bedroom, one-bath condo in Manhattan, or spread out in a four-bedroom, 4,650-square-foot home South of Grand.

· Wellness (25%). This score looked at the percentage of people who needed to see a doctor, said Bankrate analyst Adrian Garcia. Other factors include access to quality physical and mental wellness facilities.

· Culture (15%). We have opera, symphony, theater, art shows, thoughtful inquiry coming from our many universities. I think even the State Fair and the butter cow have a place at this table.

· Weather (15%). Yes, there are milder climes around. But do you really favor a perpetual steam bath, like Miami, or rain, rain, rain in Seattle?

· Crime. It’s pretty safe around here.

Bankrate says the top state for retirement is – Nebraska! Missouri and South Dakota are right behind us.

What Is Driving the Factor Frenzy?
BY EVAN SIMONOFF, for Financial Advisor Magazine

Factor investing has been around for nearly three decades, but in recent years many advisers and investment companies have embraced it with a new intensity.

Underlying the uptick in interest is a growing belief that factor investing, when used correctly, can generate superior returns for client portfolios. That’s the view of Mark Balasa, co-founder and chief investment officer of Balasa Dinverno Foltz in Chicago. An early adopter, his $4 billion RIA now uses factor funds and ETFs for 90% of its equity portfolios.

For many advisers, examining the investment landscape through a factor lens produces a more granular picture of the choices and exposures they can create for clients. Some see it as an advanced, second-generation version of the traditional style-box perspective used by giant fund research concerns like Morningstar. Most academics in finance believe there are five genuine factors—value, quality, momentum, small cap or size, and minimum volatility—that create more targeted options than capitalization size and growth versus value. Read more here.

Considering Commodities
BY SIMON MOORE, for Forbes

U.S. markets seem at relatively elevated valuations. That may pose a risk to long-term returns. Will diversification rescue your portfolio? Unfortunately, there are reasons to think that bonds, though useful, may not provide the same level of protection they offered in 2008-09. This is because of current low or negative yields and central bank positioning when compared with the late 2000s. So might there be another path to protect your portfolio?

Commodities march to the beat of their own drum. That can help diversification. Though for many commodities demand has a link to sectors of the economy, supply movements can be independent of the economic cycle offering some protection. Indeed, a sharp spike in the oil price can even cause economic problems directly. As such, historically owning oil has been a natural hedge to certain economic shocks, most obviously in the 1970s.

There are challenges to owning commodities too, though. One main one is that assets like stocks and bonds typically pay you to hold them as an investor whether through a dividend or an interest payment. Commodities don't typically have that benefit; all you get is the change in price of the asset. Often those changes average around zero over time. That's one reason commodities have lagged other investments for the longer term. In fact, you can end up paying a small cost associated with the management and storage of the commodity. Read more here.

Harvard Has the Highest Number of Ultra-Rich Alums
BY NICOLE LYN PESCE, for MarketWatch

Going to an Ivy League school seems to seriously pay off.

Six of the eight Ivies made the Wealth-X top 20 list of universities with ultra-high-net-worth (UHNW) alumni, which ranks the schools with the wealthiest grads in the U.S. and abroad, as well as how their wealth was made. Each of the top 20 global universities on the 2019 University Ultra-High-Net-Worth Alumni Rankings had at least 2,000 UHNW alumni, and the top five had more than 3,000.

But Harvard is in an Ivy League of its own, with more than 13,650 estimated UHNW alumni worth $4.769 trillion — more than double the figure for Stanford (where Google co-founders Larry Page and Sergey Brin met) and the University of Pennsylvania (alma mater of Berkshire Hathaway owner Warren Buffett and Tesla CEO Elon Musk), who were in second and third place on both the global and national lists. Read more here.