It’s that time of year. Fall. College football. Major League baseball playoffs. How bout those Orioles! One of my favorite events is my college fraternity, St. Anthony Hall’s fall pig roast. It’s always before a Virginia football game. Naturally, the boys in the “Hall” have the hottest dates on Grounds, and the absolute joy I feel at these events puts me in a top of the world mood for about 3 weeks. To see these nice, well-dressed and well-mannered kids having fun, drinking beer, eating pig and listening to the exact same music my crowd did makes one feel like there is hope for the future. Did I mention their hot dates? Short skirts and cowboy boots. Yes, fall is a wonderful time.
Right after Labor Day, my phone rings more than it usually does as folks start thinking about their legal and financial affairs. My firm, Chartwell Capital Advisors represents wealthy families and their businesses. We take a holistic approach to all their needs as you can see in this VIDEO.
We don’t have a magic bullet to make clients money or some sort of snazzy pitch about how our investment gurus can outperform the market. Our approach is one of general principles. We focus on topics that have little to do with new-fangled investment strategies. Ken Fisher’s recent Real Clear Markets article sums up our approach. Fisher cited Jesse Livermore’s famous quote: “The big money is not in the buying and selling, but the sitting.” Patience. If you’ve read my past articles, you may know that I look to history in understanding the present and the future. Here’s what history teaches us. All the pundits, especially the government experts are wrong about almost everything. Why should you get anxiety over predictions from people who are almost always wrong? If you are like me, you get dozens of market reports where some jacked up, cocaine sniffing Wall Street whippersnapper tells you what the market is going to do. News flash. He doesn’t know, he’s guessing, and he’s probably hawking a particular product he wants to sell you. Every pundit has an agenda, keep your cool and remember the lessons of history are important because human behavior is predicable.
All kinds of economic and global events can sink markets. No one knows when they are going to happen. But here is what we do know, man is made to produce and to better himself. There is tremendous pressure within any stock company to make money. These entities are generally filled with smart people. What’s the point of working if you can’t make money and increase profits and value? Sit tight and it’s a better than average bet that a stock is going to grow in value while kicking out dividends. Humans act in predictable ways, they think, they labor, they produce and they adjust. We’d all be extinct if this was not true. Stock companies are made of humans.
We live in a negative headline world, so I often get asked about “gold.” The big problem with gold is it is not a company made of humans, yearning to produce and make money. It just sits, same with Bitcoin.
There may be some good reasons to own gold, such as if the Yankees start another war, burn down half the South and ruin the Confederate dollar. Gold is also a great backstop to make a currency stable. It might be great to own if a currency collapses. However, the way I look at it, if the currency collapses, the government collapses, and we are in a civil war. Guns are going to be a lot more valuable than gold, besides you can’t shoot a Yankee officer trying to burn your house and take all your stuff with a bar of gold. If economic apocalypse happens, the government is going to try and confiscate all you own anyway. Buy guns and ammo.
Now, I’m going to preach. The surest way to be successful in wealth creation and in relationships is through discipline and good judgment. This doesn’t cost you a dime. The surest way to ruin your good judgment and self-discipline is by being a drunk. I used to not proselytize about drinking for fear of sounding holier than thou and judgmental. Now, I don’t care. I’ve seen great potential wither into nothingness and many ruined lives. You want to be rich and have great relationships, it won’t come about from having a great stock picker at your disposal. Quit drinking, it’s like a miracle drug. More productivity, better judgment, more time, clearer thinking and you don’t do dumb shit. No wealth advisor is going to tell you this, but Mr. Rob Is Right doesn’t mind pissing you off because he knows he is “right.”
Along these lines, never make an outright bequest to a drunk in your estate plan. Put it in a trust with conditions.
Here are a few other observations to keep in mind.
The 60-year old guy who sells his business and makes a pile of money often thinks he has the Midas touch. Generally older, with other interests, a bit less energy, he starts making wild investments in going concerns and real estate. He then loses it all. I’ve seen this happen a million times, sometimes ending in jail or suicide. If you know this guy, especially if he is your father, divert his attention by introducing him to a buxom blond named Candy, but make sure he doesn’t marry her.
Speaking of second wives, beware. Dad gets older and she has total emotional control of him. Dad becomes a big weenie and you dear children will not get any inheritance. Just this week, a second wife died and the old man had all his loot going to her side of the family instead of his own kids. No longer around to nag him, he was free of her control. We fixed it and now all his immense wealth will go to his children.
As a general rule, the first generation makes the money. Grandad might be a little rough around the edges, but he worked his ass off. The second generation, witnessing Dad’s work ethic is a decent steward of the fortune that dad made, but they don’t have his drive or charisma. The third generation are entitled imbeciles. There are ways to keep them from squandering the family wealth. Your advisor needs to have the balls to speak up, and if he is a cheap son of a bitch like yours truly, nothing pains him more than to see money wasted.
It's easy to run a family business into the ground. Let’s say dad started the business and Jr., your big brother is running it. You are an artist in Soho, but you own 33% of the company. Running a family-owned business is emotional. Emotion gets in the way of sound decision making. Jr. can’t make decisions he should make because he might have to fire employees, discontinue a product line, sell assets, etc. He’s in charge of preserving a legacy and doesn’t want to take action that he absolutely should because he is weighed down by the past. Every business needs independent judgment from folks that have no skin in the game. We often perform these duties.
Who’s watching the hen house? Lawyers, trustees, family members, anyone entrusted with someone else’s money is subject to thinking that that money belongs to them. One of the most respected and well thought of guys I know took money from a client’s trust account. After they first dip their hands in the cookie jar, it becomes easier for them to do it again. There are things that can be done to prevent this from happening.
I’m a lawyer, and I generally dislike the bastards. Conniving little weasels charging you for their time, not the value of the product delivered. With this disclaimer out of the way, one of the biggest financial returns you will ever receive in your life is to pay a “non-weasel” lawyer to construct an estate plan using advanced planning techniques that protect wealth from creditors, avoid taxes and provide for good stewardship of assets.
A wealth advisor who doesn’t know you likely is not serving you well. When I meet with a client, I want to know all the juicy personal stuff. I often take what I’ve learned and draw up an estate and investment plan and then sit down with the client and tell him why I did what I did.
There is no one way to do things. When I hear advisors talk in terms of absolutes, such as never rent, never buy annuities, never do this, never do that, they lose credibility with me. People are different, their personalities and capabilities are different, and they need to be treated in a way that understands them as individuals. Different strokes for different folks. Think Gary Coleman.
Not all crooks are bad people. When people are under financial stress, they don’t think clearly. Men don’t want their wives and children to lose their status. Nice house, tony private schools, country club, etc. I am convinced if they were single with no children, they wouldn’t care if they lived in a tarpaper shack with a dirt floor. Sometimes these men do stupid things to keep the lifestyle up and they end up in jail. This happened to one of the finest gentlemen I know. The key to prevent this is not to live above one’s means.
Debt. Oh boy. Leverage can make you a bunch of money, but it can also wipe you out. If you owe 1 penny on your million-dollar house and can’t pay, the bank can take your home. In advising people and businesses on no debt v. leverage, many factors go into the decision-making process, but the biggest is understanding the personality of the individuals involved. Some folks are Casper Milquetoasts, others are Mario Andrettis, it makes a difference how you advise them.
Helping others is about understanding the foibles of human nature, and often protecting people from their worst habits.