Volume 5, Issue 7, July/August 2014
PROS AND CONS OF INEQUALITY by Mitch Levin, MD CWPP, CAPP How different from winter in Park City is our current now concerns income inequality. With- summer in Florida. No big surprise. Moose and moun- out the fear of poverty or the opportu- tain lions are replaced by manatees and dolphins. Snow nity of wealth, too many of us would storms are now replaced by thunderstorms. not expend effort, labor, capital, and risk to improve our lot in life. Although it is hot here in summer, the waters of the beautiful blue-green gulf are delightfully tepid and And I wonder; who exactly would decide what equal- calm. And we, and a very few other weekend beach go- ized income would be like? And how would that be ers, enjoy the cooler evening breezes at determined? And what would the con- sunset. sequences be? Pareto’s Principle 80-20 Rule states that for many events, roughly Meanwhile, in the world of geo-politics 80% of the effects come from 20% of the situations are heating up in spots, and causes. some say there is a new cold war brew- ing. Inequality it seems is everywhere. This reminds me of another conversation insiders in asset management are having While we enjoy the bounty of our con- regarding “equal-weighted index” invest- stitutional freedoms, and celebrate our liberties on In- ing. Equal weighting has had success over the past de- dependence Day, people in other countries are deal- cade that exceeds the more traditionally and widely ing with their country’s sovereignty under attack, their known cap weighted indices. politicians’ selfishness and corrupt actions. However, it is how that success occurred that bears It often doesn’t seem fair. We know that all things are scrutiny. Most index investing critics say that onlya not equal. One of the big American political arguments small percentage of the largest companies have an continued on Page 10
CHAD RUN YOUR AN AMERICAN Q2 Summer Sol- OWN RACE: PATRIOT: stice 2014 Jason runs sprint Brother goes Army Page 2 triathlon. Page 8 Page 4
July/August 2014, The Rational Optimist.1 SUMMER SOLSTICE 2014 By Chad A. Warrick, Chief Investment Officer
I hope you were 2015, so does a show able to enjoy the of improving growth in Independence holi- the U.S. economy. Infla- day with your friends and families. tion is hovering between Celebrating and demonstrating 1-2%, well below histori- patriotism is especially meaning- cal averages. ful when you have loved ones who have served or who are serving our According to the Invest- country. To all service men and ment Company Insti- women, please accept our heartfelt tute’s 2014 Fact Book, gratitude. You, more than anyone, cash and money markets know that freedom is not free. still remain above aver- age levels. These fac- Political and financial freedom is tors continue to support very important to all of us. Here at equity exposure over Summit, financial freedom for our fixed income, given- in clients is our goal. It requires an dividual risk tolerance. enormous amount of resources in- For the past year, both cluding planning, knowledge, expe- the emerging markets rience, and technology; we strive to and the developed in- present to our clients the very best. ternational markets trail tinue to include escalating tensions As we begin the second half of U.S. markets. This remains an im- in the middle east, with the poten- 2014, it is important to take a look portant allocation for us, as we see tial spike in oil prices. And long- at where we’ve been and where we their economies on the glide path term employment remains an issue are going. of improvement, which offers -op for the Federal Reserve, hence the portunities for excellent values for quarter end support. Although stocks hit a multi-year strong growth potentials. high, they delivered modest re- We know that market timing is not turns, after the first quarter - pull Our portfolio focus, at these new a winning strategy for most inves- back, when economic numbers levels, are comprised of equity posi- tors. Time in the market will always suggested signs of slowing down. tions that offer lower volatility than prevail over the long run. As our A low interest rate environment the broader markets; particularly, economy continues to improve, remains steady and below 20-year our research shows, that dividend U.S. economic data will be the larg- averages. As monetary policy con- paying companies offer higher re- est benefactor. And a pullback will tinues to relax towards quantita- turn characteristics during a slower continue to be a concern. It could tive easing now and possible into growth economy. Headwinds con- ignite an inflation scare, which Summer Solstice continued on Page 8
2 The Rational Optimist, July/August 2014 PLEASE WELCOME SUMMIT WEALTH PARTNERS’ NEWEST TEAM MEMBERS Patricia Mc- Gary Glover Before joining Summit, Gary en- Nair joined our is managing joyed a successful career in Major client service advisor rela- League Baseball consisting of 10 team in the tionships using organizations, as well as playing in Naples office. third party in- Japan, Korea, Australia, and Ven- Before joining vestment man- ezuela. He played at the Major Summit Wealth agement pro- League level with the Toronto Blue Partners, Patricia managed the lead grams powered by Summit Wealth Jays, Chicago White Sox, Anaheim generation and CRM system for Partners, Inc. He brings an enor- Angels, Milwaukee Brewers, Tampa a life insurance company. While mous amount of knowledge and ex- Bay Rays, and the Detroit Tigers. working closely with clients in the fi- perience to our team. During his baseball career, Gary nancial industry, she has developed earned six championship rings. He valuable experience.
A dedicated and skilled business professional with a versatile client service and support skill set makes Patricia a valuable addition to our team.
Patricia earned her B.S. degree from Pace University. She and her husband Jim live in Naples. She was born and raised in Greenwich, Con- necticut. Patricia enjoys cooking and arranging flowers in her free time. Jake, Kaylie, Vanessa and Gary Glover
As a professional baseball player, attributes his 19 year tenure to per- Gary witnessed many of his peers severance and remaining healthy. making poor financial decisions, which developed into a passion to Gary and his wife Vanessa live in enter the financial world after his Lutz, Florida with their son Jake and playing career concluded. His goal daughter Kaylie. Their family is ac- is to bring the truths of investing to tive in the community, especially ensure financial security to as many with youth sports. Gary also volun- people as possible. teers with non-profit organizations Jim and Patricia McNair such as SCORE International.
July/August 2014, The Rational Optimist.3 RUN YOUR OWN RACE By Jason Print, Senior Wealth Advisor, CFP
Recently, I com- packet, attend some question and pleted my first sprint answer events, and see presenta- triathlon. There is a tions on the logistics, register your big difference between the sprint bike, etc. Surprisingly, there was triathlon and the Ironman triathlon quite a bit to do the day before the or ultra triathlon held in Hawaii. It race. There were about 2,000 peo- would be similar to the difference ple who had signed up for the sprint between a penny stock and stock in triathlon. I chatted with a gentle- Google. The sprint triathlon consist man who was standing in front of sof a .47 mile swim, a 12 mile bike me. He said that he competed in ride, with a 3.1 mile run at the fin- about 10 races a year. Also, he was ish. The Ironman consists of a 24 competing in the Olympic distance, mile swim, a 112 mile bike ride, and which is about twice the distance of a 26.2 mile run at the finish. my sprint triathlon, and he was, ob- viously, in terrific shape. He looked For me to complete a sprint triath- to be about 6’5” tall and similar lon has been a personal goal for a percentage of body fat to Lebron number of years, but this was the James. He told me that he had won first time I actually put a date on several of these events and was the calendar. I registered and be- hoping to place in the top 2 or 3 gan training for the event about in his age group, which happened six months in advance. I had never to be my age group. I have no idea biked more than a few miles be- what his time was or when he fin- fore and I have never been much ished, but, I would be willing to bet of a swimmer; I figured these two that he finished with a much faster portions of the race would be my time. most challenging. I cannot say that As a matter of fact, most people I I trained as hard, or as much, as I talked to that day, had different had planned. With two toddlers goals, different focuses for what under the age of three and work- they were hoping to achieve. Some ing full time, that is probably to be under my own power, and to be of them were competing to raise expected. However, I was confident able to walk back to the hotel with money for loved ones with cancer, that I would be able to complete my children. I thought this would be others to celebrate a milestone the event without any major inju- pretty cool and I was excited about birthday. I thought about all of them ries. That too was part of my goal. competing. and how different and unique they I was not concerned with my time, were, as were their goals and inspi- or placement within my age group. The day before the event was sign rations. I learned that running a tri- My goal was to cross the finish line, up day, when you pick up your race athlon was not any different than continued on Page 9 4 The Rational Optimist, July/August 2014 SUMMIT’S 2014 STAFF RETREAT
Each summer, Summit hosts a retreat for the staff and their families, main- ly so the staff can brainstorm about how we can improve our services. Also, it’s an opportunity to bring to- gether our teams from Naples, Jack- sonville and Orlando and have fun in a relaxed atmosphere. We hope you enjoy these photographs as much as we enjoyed making them.
Top: Andrew Hambleton, Angelika and Bradley Towle, Mitch and Swantje Levin Middle: Amanda Morris and Russell Pate Bottom: Jake Glover, Ariel and Andrew Dickens, Mitch Levin, Thelma and Kiera Dickens
July/August 2014, The Rational Optimist.5 TOUGH CHOICES (Part One) by Andrew Dickens, Wealth Advisor
The children of the medicine are such that what used ful, divisive, and emotionally -in greatest generation to kill us is now much more likely tense. I have experienced it per- are retiring so -rap to make us chronically ill. And be- sonally, and heard countless stories idly and in numbers so great that cause of that, more people than with a familiar ring. The one lesson it’s putting pressure on all aspects ever before will live into their nine- I’ve learned is how much better a of our social system. You’ve heard ties. In fact, the U.S. Census record- properly planned and coordinated the media and politicians rambling ed a ninety plus population that tri- healthcare event can be. That’s on about “fixing social security and pled in the last three decades and Medicare”, but the greatest pres- it is expected to quadruple again sure will be felt in an area that is in just the next decade. This aging seldom discussed. population is creating pressure on a healthcare system that is simply I’m talking about extended health- not prepared to handle it. care, and if you haven’t been through it in your family, then you When an illness or injury strikes probably know someone who has. that results in an extended health- why I became passionate about it; A parent with diminished capacity, care situation, more often than not, I saw how quickly a family unit can a spouse recovering from a car acci- the dependent will want to stay at break down into a divisive, frac- dent, or a special needs child; all are home. And sometimes staying tured entity with interference and examples that may require rehabili- at home may not be possible for indecision ruling the day. All of tation, assistance or supervision for any number of reasons. Once you which could have been prevented, extended periods of time. The ma- know that care at home may prove if only someone had helped us pre- jority of the pressure on the system to be unsustainable, you’ll have pare for it. some tough choices to make. If you need help drafting a plan, or And this is where, in my experience, would like to learn more, please so much pain and anguish could be feel free to reach out to us here at minimized if proper planning had Summit, we can help. been done ahead of time. The time to talk to mom about selling her home and going into an assisted is coming from baby boomers who living facility is when she’s healthy have been fortunate enough to live and happy, not when she’s sick and through a medical renaissance over struggling. The time for you to the last century and are now living make those decisions for yourself longer and in greater numbers than is now. ever before. The decisions made for extended Simply put, advances in modern healthcare scenarios can be pain-
6 The Rational Optimist, July/August 2014 BOOKS; IN THE NEWS AND ON THE GO
BOOKS WE’RE READING behavior. And investors are aided higher than that in a prudent port- by certain misguided financial -ad folio is unrealistic.” – Mitch Levin, Passion for Reality: The visors, who don’t know better or Summit Wealth Partners, Inc., Or- Extraordinary Life of the who are also emotional investors. lando, FL Investing Pioneer Paul Too bad investors and their advis- Cabot (Columbia Busi- ers aren’t encouraged to purchase ness School Publishing) evidence-based, rules-based, risk- by Michael R. Yogg and John C. Bo- adjusted portfolios that exist but ON THE GO gle lack sex appeal.” – Mitch Levin, Or- iShares invited Chad Warrick to the lando, FL opening bell ceremony at the NYSE, Why Philanthropy Mat- ters: How the Wealthy Barron’s May Give, and What It Means 12, 2014 pub- for Our Economic Well- lished Mitch Being (Princeton University Press) Levin’s letter to October 15, 2013 by Zoltan J. Acs the editor and used his comments as their tag line And May 7, 2014 iShares invited A Land Remembered response to Robert Arnott’s article. (Pineapple Press, Inc.) Chad Warrick to the closing bell cer- by Patrick Smith “The 16 countries that have had emony at the NYSE. markets over the past 240 years show that inflation has averaged Mitch Levin was a guest speaker at close to 3.5%; bonds have returned the Marcus Evans Private Wealth IN THE NEWS 1% over inflation; real estate, 2% Management Spring Summit at over inflation; and equities, 4% over Amelia Island,FL, June 1-3 inflation, with almost half of that re- turn coming from dividends. (None of these numbers is net of fees, The Wall Street Journal, May 14, costs, and taxes.) 2014 published Mitch’s letter to the editor in response to “Retirement With current inflation at 2%, it is Mitch Levin attended the TD Ameri- Investors Flock Back to Stocks” (WSJ sensible to expect stocks to return trade Elite Summit at Dana Hills, CA, page one on May 2) that vividly about 6% over the next one to two June 10-12 demonstrates why most investors generations. And since most port- buy high and sell low. folios have some bonds to mitigate Chad Warrick attended the ETF short-term fluctuation in values, Managed Portfolio Summit at - Chi “There is a reason why most inves- investors should expect something cago, IL, June 17-18 tors under perform — their own less than 6%. Any projected return
July/August 2014, The Rational Optimist.7 MY BROTHER: AN AMERICAN PATRIOT by Jessica Feliciano, Client Service Specialist
I will never forget March Independence Day has a more Summer Solstice continued from 29, 1996, the day my personal meaning. For years, you Page 2 baby brother was born. looked up to me. Now, it is me who It began chaotically at 1 looks up to you. I admire you very could also cause the Treasury o’clock in the morning, when my much Ivan David Rodriguez! God yields to rise relatively quickly, sister and I were awaken from our speed. at least short-term. As always, sleep and dropped off at Grandma our focus will remain on all risk and Grandpa’s house. factors, as we look for oppor- Several hours later, we were taken tunities for solid growth, that to the hospital to meet our new is safely managed with trusted baby brother Ivan. I was smitten advice. from day one, but at eight years old, reluctant to admit it. Little Thank you for being great did I know then how important clients and allowing us, here he would become to me and how at Summit Wealth Partners, to much I would grow to love him. serve and work for your finan- cial freedom. This June, Ivan graduated from University High School. Then on July 1st, he put on his soldier’s uniform, strapped up his boots Ivan David Rodriguez and left for Missouri’s Fort Leonard Wood’s, One Station Unit Training for Military Police.
Words cannot come close to de- scribing the pride I feel, when I think of his bravery and devotion to his country. Never could I have imagined that my little blue-eyed baby brother would grow up to be- come such a fine handsome Ameri- can patriot.
I will not see him, nor hear his voice for the next six months. Gone is my favorite Monopoly partner who was just a phone call away. To my little brother, I promise to do my best to refrain from crying. I will hold Mom’s hand and support her while you are away.
8 The Rational Optimist, July/August 2014 Run Your Own Race continued from Page 4
get there, I didn’t spend time wor- rying about where others would fin- FINGLISH ish. EXCHANGE -TRADED FUNDS It didn’t bother me that many Securities representing Mutual people would finish way ahead. I Funds that are traded like stocks remained focused on my race, my on the exchanges. Compared pace and what I thought I needed with open-end index funds, ETFs have a number of advantages: to do to swim a half mile, bike 20.8 unlike mutual fund shares, which Team Daddy: Eileen (Jason’s Mom), miles and run the final four miles, Sydney, Jason, Joseph and Jamie Print are priced at their net asset val- with the last mile being the tough- ues at the end of each day, ETFs what we do every day at Summit est running on sand. can be bought or sold anytime Wealth Partners. during the trading day at the market price. It occurred to me that at Summit, When it comes to investing, there we use exactly the same approach STOCK OPTION will likely be some stock index that to help you and every client win Right to purchase or sell a stock at did better, or someone else’s port- their race for financial health. a specified price within a stated folio that did better over some short period. OPTIONS are a popular period of time. However, if you are Our goal is to help you achieve investment medium, offering an able to accomplish what you set out where you want to be, at your pace opportunity to hedge positions in other securities, to speculate to accomplish, shouldn’t that be with your own risk. Our focus re- in stocks with relatively little- in the ultimate definition of a success- mains on you, our client, and what vestment, and to capitalize on ful financial plan? It’s easy to get we, as a team, need to do to win. changes in the MARKET VALUE caught up in benchmarks and lose of options contracts themselves sight of what we are trying to ac- through a variety of options strat- egies. complish. What matters is that you achieved your goals.
Did you accomplish what you set out to do, did you get to where you wanted to be, and do you have the money that you need? And do you have the time to spend on your passions, whether it’s travelling or spending it with your grandchil- dren?
For me and the sprint triathlon, once I figured out where I wanted “If you keep telling the economy that it is weak or ‘bad’, then that’s how it is going to behave.!” to be and what I needed to do to
July/August 2014, The Rational Optimist.9 Pros and Cons of Inequality continued from Page 1 overwhelming affect on the- in tors far too much. This has been dex performance. Thus the equal- borne out by countless academic weighters say that there should and commercial studies. be more emphasis on the smaller You may have seen what we casually of the large companies. So in ef- We do not want winter in Park City call the “equity quilt” or the “peri- to be equal to summer in Florida. fect, there is an “over-weighting” of odic table of investing”. There is no discernible pattern. The US large Yet, not all inequality is good, either. companies have only been the num- We want equal opportunity, equal ber one asset class once in the last treatment under the law, and equal 20 years. This year to date, Bulgaria rights to pursue happiness. This has had the highest returns. does not give others the equal right to enjoy what we were able to pro- That is why we, at Summit, believe duce and save. We also don’t want you should have all asset classes an unequal return for the same risk properly proportioned. That is one we take in our investing. smaller companies in equal weight of the reasons why our portfolios indexing. perform well. It is exactly the in- I am unaware of any short-term in- equality of asset class presentation vestment that is also a good long- that we depend on to give our in- Nobody knows which asset class will term investment. That is why we vestment strategies their powerful out-perform in any time period. No construct the portfolio models that performance. one can know therefore, which as- we use, and why they are so suc- set class to over-weight or to under- cessful over the long-term. And that We do not want everything to be weight at any given time. Some may inequality is one that we can appre- equal. We do not want the day to guess, and do so correctly — occa- ciate. Enjoy the heat, have a won- be equal to night, nor bonds to be sionally. derful summer, and as usual… equal to stocks. We do not want tax free to be equal to taxable. We That would be a poor investment Make great decisions. do not want low-return and high- strategy — one that has cost inves- return portfolios to have equal risks.
10 The Rational Optimist, July/August 2014 THE SVERIGES RIKSBANK PRIZE IN ECONOMIC SCIENCES IN MEMORY OF ALFRED NOBEL 2012
ALVIN E. ROTH LLOYD S. SHAPLEY Born: 18 December 1951, New Born: 2 June 1923, York, NY, USA Cambridge, MA, USA
Affiliation at the time of the award: University of -Cali Affiliation at the time of the award: Harvard Univer- fornia, Los Angeles, CA, USA sity, Cambridge, MA, USA, Harvard Business School, Boston, MA, USA Prize motivation: “for the theory of stable allocations and the practice of market design” Prize motivation: “for the theory of stable alloca- Field: game theory tions and the practice of market design” Prize share: 1/2 Field: applied game theory Prize share: 1/2
CONTRIBUTION: FINDING STABLE MATCHES
How to bring different players together in the best was critical to successful matching methods. Roth has possible way is a key economic problem. Examples of also developed systems for matching doctors with hos- situations where this problem arises include matching pitals, school pupils with schools, and organ donors children with different schools, and kidneys or other with patients. organs with patients who require transplants From the 1960s onward, Lloyd Shapley used what is known as
Cooperative Game Theory to study different- match “Alvin E. Roth - Facts”. Nobelprize.org. Nobel Media AB 2013. Web. 25 ing methods. Within the framework of this theory, it Jun 2014.
Beginning in the 1980s, Alvin Roth used Shapley’s theo- retical results to explain how markets function in prac- tice. Through empirical studies and lab experiments, Roth and his colleagues demonstrated that stability
July/August 2014, The Rational Optimist.11 EMPOWERING FULL FINANCIAL HEALTH
SOLID GROWTH SAFELY MANAGED TRUSTED ADVICE
CONTACT Special Double Issue www.MySummitWealth.com
ORLANDO One Orlando Centre LOOK INSIDE! 800 N. Magnolia Avenue • Pros and Cons of Inequality, Page 1 Suite 105 • Summer Solstice, Page 2 Orlando, FL 32803 • New Team Members, Page 3 (407) 656-2252 • Run Your Own Race, Page 4 • Tough Choices, Page 6 NAPLES • Summer Reading, Page 7 Vanderbilt Financial Center 9045 Strada Stell Court • My Brother, An American Patriot, Page 8 Suite 101 • Finglish, Page 9 Naples, FL 34109 (239) 254-1875 “America will never be destroyed from the outside. If we JACKSONVILLE falter and lose our freedoms, it will be because we destroyed 4223 Duval Drive ourselves.” — Abraham Lincoln Jacksonville Beach, FL 32250 (904) 273-4550
12 The Rational Optimist, July/August 2014