The Road Ahead…. The Virus, the Markets, Job Market, Our Country. Where are we going? But first, a Peek at What Georgiana, me (I), and my portfolio have been doing these past three months.

 

 

 

 

It is that time of the year for my quarterly report, and what a three-month it was! At the end of March on my first-quarter report, my portfolio was down about 7%. The 2nd Quarter has ended with my year-to-date portfolio returned a positive .5%. The stock market came roaring back because of the Feds cutting interest rates and Congress passing massive stimulus packages. So my portfolio followed suit. My portfolio performance is not only my YTD report but just when one thought the virus was slowing down, then May 25 highlighted another “epidemic,” social cancer that keeps coming back with no end in sight. There is a lot going on with our country, and unfortunately, much of it is not good.

COVID19

Georgiana and I are in excellent health, as we have been isolating for almost four months. It is now July, and the numbers of infected people keep going up. The county we live in, Riverside, is the second worse in turns of numbers only to Los Angeles County in California. Everybody was hoping and wondering if summer and the warmer weather would contain the spread. Nope. Recently learned of a friend who has it and he is going to be OK. When it hits close to home, this disease is scary and severe.

Despite the shutdowns, Georgiana and I married in our backyard as scheduled on March 21. I have already documented the week leading up to exchanging our vows (Click here).

Newlywed!

The 2nd Quarter of this year provided me with a positive portfolio and newlywed status. I love being married! I was married for 40 years to a wonderful man, Dan died suddenly 4.5 years ago. And now I married a wonderful woman, Georgiana. I am beyond fortunate to be loved and love two people in my life. Georgiana is smart, frugal, fun, loves to travel, spiritual, loves all types of music, and we talk about anything.

I have always been health-conscious, but Georgiana took a conscientious healthy diet up a big notch thanks to her discipline. Thus, we have a huge salad, fish or poultry, and a fresh vegetable every evening for dinner. I always liked salads, but now I love them more. I look forward to a salad so much that I quit snacking in the middle of the afternoon. Salads are light and, of course, healthy, and I feel good physically. I am fortunate that I LIKE healthy, fresh vegetables and can afford to buy them from Spouts, Whole Foods, or Bristol Farms. When organic and dark natural soils grow our food, they taste good! Yes, veggies can taste great.

I bought a bread making machine 10 years ago and used it now and then. But since our isolation, I have been making bread like I was a baker. I made so much bread that I sometimes could not eat it all, so I gave some away to the homeless.

For a 1.5 lb Loaf of whole wheat homemade bread, here is what you need:

Breville Bread Machine from Williams Sonoma. This expensive machine is well worth it. I must have made at least 100 loaves in the last ten years.

Simple bread recipe that is high in protein and super healthy:

1. 1. 3 cups of flour (one cup of stone-ground wheat, one cup of unbleached all-purpose white flour and one cup of half almond flour and the other half, flaxseed meal).
   2. 1.5 teaspoons of honey, or regular sugar, and if watching calories, 1.5 teaspoons of erythritol.
   3. 1/3 cup of olive oil (I love olive oil).
   4. 1 Tablespoon of gluten (optional).
   5. 1.5 teaspoons of Celtic Sea Salt.
   6. 2.5 teaspoons of dry yeast.
   7. Half-cup of ground almonds. I love the crunchy texture of my bread. (variations of nuts: walnuts, pine nuts, etc).
   8. Approximately 1/3 to 1/2 cup of filtered water. I start with a little and add as the machine is kneading.

 

                                                                                    

Exercising 

Despite not going to the gym and working out hiking on the uphill “bump and grind” trail, we have not gained weight. I avoid popular trails because people are not wearing masks. We walk every morning in our neighborhood all spring long, but now it is too hot most mornings. We are being creative by working out indoors. I walk up and down a flight of stairs that goes to my loft office and Georgiana is watching aerobic classes on TV and she has a stationary bike.

Former Plans for this Summer: Get out of the HEAT!

Before COVID, we planned on traveling this summer, staying in Airbnbs in the cooler climates of Long Beach, traveling around the state, Boston, or Wisconsin to escape the desert heat while visiting family and friends. COVID changed everything. The nearby mountain town, Idyllwild, beckons us. If we like it, we will go back in August.

The 2nd Quarter started with our intensive wedding plans were coming into fruition. I wrote in my journal as we were getting ready for our Wedding on March 21, but it was not to be.

Friday, March 13, 2020, I wrote in my journal:

A week from today we have rehearsal at 4:00 pm and get married the following day, Saturday, March 21. That has been the plan since late January, but OMG! have things turned terribly negative just in the last week! All NBA and the college March Madness games are canceled! The “president” on Wednesday evening on his state to the nation banned Europeans from coming to America, and nobody else. That sent the stock and bond markets crashing yesterday. I lost $60,000 in one day! My portfolio is down about 8.0% so far YTD. In all of 2008, my portfolio declined 11.8%. The financial news is titling yesterday’s decline as the worse since the 22% decline in one day in 1987. We are in terrible times. While we are fine and healthy, yesterday was a bad day for us too. We had some inquiries from a few of our 50 invited guests about our status. We talked with our wedding planner who has been in the business for 20 years, says that so far nobody she knows has canceled their weddings. But things change for the worse every day. We always thought that since our ceremony will be outdoors and only 45 adults and 6 kids attending, the risk would be minimal. My family from Walnut Creek are still coming and they booked Airbnb. We are going to get married but the decision to cancel the formal ceremony may be decided for us by next Saturday. We are going to talk to the site manager this morning, and we might have to make an exceedingly difficult decision. (end of journal entry)

 

As prophesized by my journal entry above, and what has happened all over the world, we had to cancel our formal destination wedding with 50 guests. We decided to get married. It will be held in our back yard with only the officiant, Val, and my best man, Frank. With a week to plan a virtual wedding, we had our hands full.It turned out fantastic. Some family and friends chimed in virtually. Georgian’s Goddaughter sang a heartfelt song playing the guitar, and three girls sang another song for us. It was like they were all attending. Still, we were disappointed that our formal wedding was canceled. Neither one of us ever had a formal wedding (Unfortunately, there was little time to give family and friends the opportunity to watch the ceremony on Facebook live because some people do not want anything to do with Facebook. Also, people who frequent Facebook would have to be friends with Georgiana’s Facebook page. There was no time to get everybody on board).

“Honeymoon”

After the ceremony, our “honeymoon” was isolating at home and ordering 90% of our groceries and other needs online. We have our projects and commitments which keep us busy. We have been Zooming like energetic 20-year-olds with family and my 403(b) 457(b) committee responsibilities.  Like most responsible citizens, we are cautious and wore a mask once we exited our home, 100%, no excuses. To get out of the house, we took short driving trips into our neighboring towns and local mountains.

 “History may not repeat itself, but it certainly rhymes” a famous quote by Mark Train 

I remember my parents talking about the Great Depression of the 1930s and WWII. They operated a small farm in Northern Wisconsin, remote from a city or town. Yet, people would be walking on the local dirt roads looking for work or food. My mother said that America came close to a revolution there were so many people out of work and hungry. My oldest brother and several of my uncles served during WWII. My brother would say to those people later on during his life that they would like to go back to the “Good ole Days!” He was the first to say that “that the good ole days were not good!”

I was born in 1947. Thus, I lived through the Cold War, Cuban Missile Crisis, in particular, was scary (I was 15 at the time). Then came the JFK, RFK and MLK assassinations, Civil Rights Movement, Antiwar protests, killing of four unarmed students at Kent State by the National Guard, and racial equality protests of the 1960s. You would think the worst was over by the end of the turbulent 1960s when all hell broke loose. The 1970s did not disappoint. More terrible times invaded our country with a corrupted vice president and the power-obsessed president both resigning, the oil embargo, and hyperinflation.

One positive event of the 1970s was getting out of the most destructive war experienced, Vietnam.  Things settled down a bit with occasional scandals that affected the Reagan and Clinton presidencies. Another positive event occurred in 1989 with the collapse of the Soviet Union and the end of the Cold War. But the turn of the century when everybody seemed to be looking forward to the new millennium, the 2000 presidential election and the stock market ended badly. Not only did I lose $1.1 million because of the tech wreck, but the Supreme Court in a 5 to 4 also voted, along party lines, to stop the count in Florida, essentially electing one of the worst presidents over the popular vote. I could not believe this, but it was the start of more horrible news.

Then came the real shocker, 9/11. The attack on NYC and the Pentagon was bad enough but the reaction is now what every sane policy expert agrees. For 19 years, we have been engaged in costly and endless wars and the terrible divisive politics here at home. Lester Thurow wrote in his book, The Future of Capitalism, “The facts are clear. Income and wealth inequalities are rising everywhere…. The social contract between the middle class and corporate American has been ripped up.” Thurow wrote those words 25 years ago in 1995! Little wonder Americans are angry and frustrated with the direction of our country in 2020.

Still, I remember 1968. That year I not only got wounded while serving in the Marines in Vietnam, thank God I was sent home during the 1968 Tet offensive. But when I got home, and while I was still recovering in the Oakland Naval Hospital, Martin L. King was assassinated! Then 3 months later in June 1968 Robert Kennedy was also shot and killed. During this terrible time, violence in the streets across the country was almost a weekly event culminating in the 1968 Chicago Democratic Convention where Chicago was a war zone. The world was turning upside down with no ending of one of the most destructive decisions made to send up to 550,000 troops in a land war in Asia. What a terrible mistake for thousands of American service people and the country. 1968 was a horrific year that still saddens me when I think about what would have happened to our country with a Robert Kennedy administration and with Martin L. King still protesting peacefully. 

But I acknowledge that plenty of good things have happened in the last half-century. Thanks to technology and modern medicine, we live longer, are a little healthier, and more people, especially women, are getting educated, elected, and running their own businesses. But we seem to be stuck at the moment. In 2020, we are currently living in terrible times with another unpopular, belligerent, and divisive president, COVID19, never-ending racism, and worldwide protests, and millions of people out of work.

Our Country Will Survive

As I documented and personally experienced in my long life, our country has lived through terrible times, and we survived. Sometimes we have to remember that manure grows flowers. When we get through this with some vaccine (100 companies are working on a treatment), an election in four months may change the political atmosphere for the majority of American voters, and people opening up their businesses permanently, we will be OK. The only issue that concerns me is our culture is so divisive that it will eat up any positive changes.

To wear or not to wear?

Wearing a mask is not comfortable and it takes discipline, but neither is the terror you will feel if you get infected! I take wearing a mask to protect myself and others anytime over getting sick. I can only guess that nonmask wearers have not been hospitalized and/or they could care less about others. When illness hits, all bets are off, and that radical individualism (“Don’t Tread on Me”) along their delusionary “freedom” goes out the window. There is neither freedom and individualism when you are in ICU with a respirator. I have seen people in that situation and it is NOT PRETTY! Dan, my late hubby, died in an ICU.

Hospitals are a place to be avoided. Believe me, I have already been through my share health challenges with cancer and my wounded knee. I have been in enough hospitals. IMO, we can open businesses and be safe if everybody wore a mask. Masks, social distancing, washing our hands frequently, and not touching our face have worked in other countries with other contagious diseases, COVID is no different.

May 25, 2020, “A Date That Will Live in Infamy.”*

I grew up about 90 miles from Minneapolis in northern Wisconsin. We locals simply dubbed Minneapolis/St. Paul, “The Cities.” I know The Cities. My mother and all her seven siblings grew up in St. Paul. My grandfather, my mother’s father, made whiskey during prohibition 100 years ago and spent some jail time. My mother said that the politicians visited to get his whiskey; it was so good.

Minneapolis!

When I heard of George Floyd’s horrific death, I was shocked and angry about another death of a yet another unarmed African American male handcuffed and lying on the ground!!!! I kept saying to myself and Georgiana, but this time this ongoing national tragedy happened in MINNEAPOLIS!? I was shocked as much as the location of yet another killing as the needless killing itself.

I called my niece, who lives in Minneapolis to find out what the heck is going on. She was just as shocked and anxious as we all are. She said that the subsequent protests destroy much of downtown. But most people knew that the Civil Rights legislation signed into law 56 years ago, that’s right over a half-century, has not changed our country’s race relations. Of course, legalized segregation is gone, and most people agree that discrimination is not openly supported. There is a lot of integration by our major cities and urban areas today. But the effects are still with us after all these years, and it’s not getting better. George Floyd will go down in history as the “Tipping Point” that “enough is enough” and the Black Lives movement and “taking a knee” will be widely supported from now on.

Here’s why. When I turned on the TV to find out what happened in Minneapolis, I was happily surprised to see that most of the demonstrators were young Caucasians! Subsequently, the protests exploded all over the country and the world! in a matter of days.

Black Lives Matter Rally in Palm Springs

Georgiana and I are so supportive of these terrific young people, we decided to attend a rally in Palm Springs. We want to support these courageous young people and Black Lives Matter. It was a health risk to be around so many young people.

 

 

About 1000+ people attended the peaceful rally in Ruth Hardy Park. EVERYBODY wore a mask. They kept social distance except when they marched around the park. Georgiana and I kept our distance. Both of us are happy that finally, young people have a mission to rid our country of this cancer that was never cured. It was treated, but cancer keeps coming back to haunt us. My boomer generation supported the civil rights movement led by Martin L. King and President Johnson signed into law. Still, the job of eradicating racism remains a huge problem with no end in sight.

My Portfolio (All the data was calculated and provided by Morningstar’s Portfolio Feature)

First off, I did not make any asset allocation changes in many years, and the same for 2020. I keep a conservative and boring portfolio with 33% in stocks and 67% in bonds. Tempting to change my asset allocation during the rapid downturn never entered my mind—NEVER. I prepared my portfolio to absorb shocks years ahead for bear markets, and this was no different. There will probably be more declines, and my portfolio will be ready for future declines as well.

Year-to-Date Return (January 1st to June 30th, 2020)

Asset Allocation

While my portfolio is a little complicated, it is still boring in that it merely follows the stock and bond markets. When the stock market goes up, my stock allocation goes up. If the international markets go up and the domestic stock markets go down, the international stocks will go up and U.S. stocks will go down. I designed my portfolio to perform just like I am explaining the ups and down of the market and my portfolio. It is vital I know full well why it goes up, down, or stays the same on any trading day. The important part to remember is that it is not a part of the portfolio that is important, it is how the entire portfolio and its parts work together.

Ask Your Adviser Two Questions

1. What is my Year to Date Return? (see my table of returns above)
2. What are my total costs (the adviser’s and the investment’s fees. Refer to my table of fees below)?

I have heard friends say they do not know why their portfolio has not gained anything for the last few years when the stock and bond markets have gone up! One friend was so angry with her management firm they kept changing her advisers. Finally, she fired them and began transferring her money to Vanguard. Good for her!

Since 67% of my 7-figure portfolio bond and when all of my bonds increased in value more than the stocks decreased, it doesn’t take a world-class mathematician to figure out why my portfolio had a positive increase for the first half of 2020.

Bonds Increased in Value. No Surprise here

The cause of the bonds going up this year is wildly reported. All eyes are on the Federal Reserve which once again lowered interest rates to 0.00% (Books have been written by the Federal Reserve bank, suffice to say that this institution controls the interest rate we pay for home mortgages or the interest paid on our bonds). When that happens, the value of most bonds goes up. While I do not understand the inner mechanisms of the relationship of the Federal Reserve and corporate bonds, the federal reserve is buying up corporate bonds for the first time in history. Why? Who knows? My guess is that with interest rates so low for so many years now, some nefarious corporations have been in serious financial trouble and should have gone bankrupt. That is the natural cycle of open and free markets. But instead, they are still in operation with a lot of debt that sooner or later will come up to haunt some of my bond holdings. I have nearly a third of my money in the Total Bond Market Index and a third of that index holds corporate bonds. At some point, if those corporations finally go belly up, those bonds in the Total Bond will be negatively affected as well.

Do not get me wrong. Many economists agree the Federal Reserve prevented a great depression. Plus, congress passed legislation to stimulate the economy and for 30 million out of work Americans. Both of my nieces who are waitresses lost their full-time jobs to working about ten hours a week just to keep the “take out” business alive. I am helping them out with rent payment. I have also helped my house cleaning ladies who have been with me since I came out to the desert in 2008. It is the right thing to do.

Especially during a pandemic or when the market’s volatility was very unpleasant, a positive portfolio return is always good. Its one indication that you are sticking with a plan.

Investment Expenses

Back to my original question, WHERE ARE WE GOING?

Georgiana and I will stay put for the rest of the year when we hopefully know a lot more, such as who will be our next President, and are we near a vaccine, or will the virus be contained as more people come to the senses and wear a mask, and practice social distancing. But the bigger question, will we as individuals and our country get through these terrible times? I have to think positively as I have reported all of the terrible events during my lifetime, from the JFK, RFK and MLK assassinations within five years, the horrible and self-destructive Vietnam War, etc. etc. Absolutely, we were damaged but we got through those terrible historical events because the American people came together somehow, some way, and got ourselves back on the road. I have to believe the positive because that’s our history, as the alternative is too cynical.

See you at the end of September 2020 for my third Quarter Y.T.D. Report.

 

Steve’s Bio

Stephen A. Schullo, Ph.D. (UCLA ’96) taught in the Los Angeles Unified School District (LAUSD) for 24 years and UCLA Extension teaching educational technology to student teachers. Steve wrote investment articles for the United Teacher-Los Angeles (UTLA) union newspaper for 13 years. He has been featured and quoted in many mainstream media articles about 403(b) plans, including the Los Angeles Times, NY Times, and U.S. News and World Report. He co-founded an investor self-help group 403bAware for teacher colleagues and wrote 7,500 posts in three investment forums since 1997. He testified at California State legislative hearings and honored with the “Unsung Hero” award by his teacher’s union for his retirement planning advocacy.

For the last 14 years, he serves as a volunteer on LAUSD’s Investment Advisory Committee as a “Member-at-Large” and former co-chair. The committee contains collective bargaining reps from the unions and monitors the district’s tax-deferred retirement plans, 457b/403b, of 55,000 former and current LAUSD employees, worth $2.8 billion in total assets.

He started this blog in 2012 to help all PreK-12 public school educators nationwide, especially his Los Angeles Unified School District colleagues. He belongs to a small national group of 403(b) advocates (mostly teachers) who want to bring closer attention to the 403(b). During the last 25 years, 40 newspaper articles have been published and each one says the same thing, TSAs (Tax Sheltered Annuities) are terrible 403(b) plans and the salesperson gets the benefit from lucrative commissions and high-costs. Nobody in educational leadership reads these articles NOR talk about the proper place for annuity products publically.

We come together at 403bwise.com launched by my good friend Dan Otter 20 years ago this month and 403bwise Facebook page https://www.facebook.com/groups/349968819000560/ Come on over if you want to join us so we can help our colleagues avoid these self-conflicted and high-cost Tax-sheltered Annuities (TSAs). In this Video Dan explains the unique 403(b) problems that plague public k12 educators throughout the country: https://403bwise.org/advocacy/video?gclid=EAIaIQobChMIvvf6zPfJ6AIVTlZyCh0FRwa1EAEYASAAEgLoffD_BwE 

 

Steve is the author of two books, Late Bloomer Millionaires and Fighting Powerful Interests: Educators Challenge Tax-sheltered Annuities and WIN!, a story of how a handful of LAUSD educators struggled for years to improve the 403(b) to no avail. But we never quit! We were instrumental in LAUSD’s implementation of the new 457(b) plan and earned a very rare, but very precious “Plan Design” award.

For a copy of both books, email Steve at steve.schullo@latebloomerwealth.com and he will happily email you both books, FREE with no obligation except to read them and get informed, in a pdf file format.