Like it or not, understand it or don’t, the Golden State Warriors is now a ‘super team’ as they become NBA champs by winning the second time in three seasons. This time in the playoffs the Warriors only lost one game in the series.
No matter the sport you play or watch, you always want your team to play smart so you can stay in the game. According to me, the same logic applies with managing your money. So what can we learn from the best teams in a league? Let’s start with the structure. It all starts with the foundation. “The majority owner of the Warriors is Joe Lacob, a partner at Kleiner Perkins, one of the top three venture capital firms in the Silicon Valley. Kleiner manages more than $1 billion in assets and its investment portfolio is a murderer’s row of big tech names: Airbnb, Nest, Jawbone, Slack, Snap, Spotify, Stripe, Square, Twitter, and Uber, to name a few,” reports Daniel Roberts, Yahoo Finance on June 13, 2017. A group of venture capitalists purchased the team for $450 million in 2010, when none of us gave them much credit for anything. According to Forbes in 2016 it is the best team in the NBA by a large margin in the number 3 spot with a value at $2.6 billion. Lacob was interviewed in a 2016 New York Times article where he explained who earned the credit for the team’s success, “The great, great venture capitalists who build company after company, that’s not an accident. And none of this is an accident either.” Yahoo Finance writer Roberts found that “Tickets to Game 5 in Oakland ran for an average $1,731, a 20% spike from Game 5 last year (in a series between the same two teams).
AssetMark is a money management firm that doesn’t advertise that arranged for my team to kick the tires in Walnut Creek about a year ago. A car and driver were provided to make the trek back and forth to San Francisco International as easy as possible. The driver represented that he owned the company that also transports the Warriors to and from the airport. He said when Steph Curry practices hitting his 3 ball, his personal goal every time is to hit 100 - 3 pointers in a row. When he doesn’t get to 100 he starts over. Now that is raising the bar. No wonder he makes it look so easy. I can’t even imagine how much Curry age 29 and only 6 foot 3 practices to make the complicated look so beautifully effortless.
To help you stay in the game, let’s separate the noise from the news. “What’s up? Travel is booming. Hotel occupancy is booming. Domestic airlines have flown more passengers each year since 2010, and last year U.S. airlines set a record, with 823 million passengers. The rise of restaurants is even more dramatic. Since 2005, sales at “food services and drinking places” have grown twice as fast as all other retail spending. In 2016, for the first time ever, Americans spent more money in restaurants and bars than at grocery stores,” wrote Derek Thompson, The Atlantic, April 10, 2017.
“U.S. retail sales recorded their biggest drop in more than a year in May amid declining purchases of motor vehicles and discretionary spending,” reported Reuters, July 14, 2017. The same day, “May’s decline was the largest since January 2016 and confounded economists’ expectation for a 0.1 percent gain.”
Please note how economists were ‘confounded.’ In explanation, Dent Research keeps it beautifully simple with two words; Baby boomers. Those who started working at age 19 peaked in spending at age 46 back in 2008. College educated boomers who entered the workforce after school seemed to have peaked about 5 years later at age 51. It is clear to me that Father Time and Mother Nature are the true ‘trump’ cards. By observing such trends one may be less ‘confounded.’
As you may know, Donald John (Wayne) Trump, Bill Clinton, and George W all turn 71 this year. And here come 76 million boomers who must start taking withdrawals from traditional retirement accounts. Michelle Obama, for example, turns 53 so those her age have awhile before withdrawals must begin. But starting in 2035 every boomer will be taking Require Minimum Distributions from their traditional retirement accounts. Let’s not miss the point that such withdrawals must be taken, will be 100% taxed, and must increase annually for life!
The funny thing here is looking at how many clients become mad as hell as they complain, ‘I don’t need the money. I never paid tax and I don’t want to pay tax now. And on top of that you tell me my account this year is lower than it was last year, but I must take income on last year’s retirement account value?’ Sorry, don’t kill the messenger. I didn’t do it to you. It’s your tax dollars at work.
How can boomers prepare for mandatory and increasing withdrawals? With traditional investing the investor gets whatever the yield is. We just met with a prospect where the yield is an incidental 1.74%. How about designing the portfolio where there is a reasonable expectation of 4% or more? If you wake up in your 90’s and have to take out at 11% that’s a tall order. This is especially serious if there is a severe account decline, say 50 percent or more, the year before. But in your first decade of taking income it would be good to see that the expected annual yield is higher than necessary or offsets as much of the required withdrawals as possible. Planning your financial success isn’t an accident either.
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