Month: September 2017 Page 1 of 2

How many of you have enough money?

I asked this question to an adult Sunday school class I was teaching a few years ago. Not many hands went up. I didn’t dare to ask how many were tithing (or giving the first 10% of their income away). That seems to be a topic as sensitive as asking about someone’s sex life.  But when I asked who would give more if they won the lottery, all hands went up.  My observation has been that if someone was not giving 10% now, he or she wouldn’t give any more even if they had more.

Stewardship is not based on what you don’t have, but on what you currently do have .

Stewardship is a New Testament concept, whereas tithing is taught in the Old Testament. “…The purpose of tithing is to teach you always to put God first in your lives” (Deuteronomy 14:23 The Living Bible).  The concept of stewardship puts a new perspective on giving.  It takes the “my” out of what I control, and returns ownership back to God.  I only control its use.  The New Testament teaches that “If you are not faithful in the way you manage unrighteous mammon, God will withhold from you true riches which are spiritual blessing.” (Luke 16:11 paraphrased). So how do I apply these principals to my own life?

I established a lifetime giving goal, and a new accounting system .

I keep a financial statement that reflects temporary and permanent assets.  Temporary assets include assets I still control such as real estate and investment accounts.  Permanent assets include what I have already given away to charities that I believe God would spend His money on.  I have much farther to go to meet my lifetime giving goal, but my permanent new worth has finally exceeded my temporary net worth.  Next time you prepare your financial statement, try this new accounting system.  Mother Teresa said, “Everything that is not given is lost.” I wrote a book a number of years ago, “Wealth Conundrum”, if you would like a complimentary copy, please contact our office.

The Relationship between Liquidity and Certainty

Ralph Doudera is the CEO and head portfolio manager of Spectrum Financial. He has been successfully managing money for 44 years and he will never sacrifice liquidity.

When you are a money manager for 44 years, you learn some lessons, sometimes the hard way.

That is why he chose to manage money with mutual funds and not hedge funds. Even with up to 300% leverage at times in his funds, he can be out of everything by end of day. Liquidity is important to Ralph because he has managed money in the worst bear markets since 1973. When you maintain liquidity, you can rotate into more favorable investments, even cash, depending on the market environment. Liquidity becomes your cornerstone for risk management.

Let’s pretend that you knew 2018 was going to be comparable to 1987 or 2008 – total chaos in the domestic and international financial markets.

How important would liquidity be to you?

There is a positive correlation between the certainty of bear markets and the value of liquidity (and risk management in general). Stepping back into reality, we are not certain there will be a bear market in 2018, but there will be a bear market.

Dr. Michael Burry, the hedge fund manager of Scion Capital (played by Christian Bale in the movie The Big Short), was right early, but he still ended up being right.

Actively managed strategies should always make up a percentage of your portfolios.

At a family office conference I attended in July this year, the CIO of a billion-dollar family office asked the attendees why he would sacrifice his liquidity in the private market if he could get a better risk adjusted return in the public market. He wouldn’t. Diversification does not just apply to manager investment philosophies or market sectors. It applies to the types of investment products you use and the managers you choose.

All clients value making money and not losing it. Do not become a complacent buy and hold investor in an extended Bull Market. The markets, when they correct, will not wait for you to adjust. Austin Kiplinger said, “The foundations of future fortunes are laid in bear markets.” Adversity always has a way of sifting the important things to the surface, like risk management and liquidity.

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