A Lady With Problems?

Sometimes facts aren't easy to grasp:

• Gloria C. Mackenzie formerly of Maine now of Jacksonsonville Florida
• 84 years old in mid 2013
• mid 2013 wins $278 million after taxes lottery

So, you're thinking "great" she rides off into the sunset and enjoys the latter years of her life? Not so fast. Fast forward to today.

Her son, who has a power of attorney, hired an "advisor"/radio personality who apparently put her into cash equivalents and charged her $2.0 million/year. Her son is trying to get half of her winnings saying he helped in some round about way to pay for the ticket.

By the way, she won because a couple allowed her to move ahead of them in line when the ticket was purchased.

Anyways now at the age of 90 she has brought a lawsuit against her son Scott and the advisor on the grounds they violated their fiduciary responsibility.

This case is interesting from a couple of different angles but for us it is mainly in the asset allocation and whether it is appropriate. Because it is so much and because she is so elderly she should very probably have some exposure, at least 30%, to equities simply because the investment horizon goes beyond her to someone or some entity considerably younger. In fact, I would have pushed pretty hard for at least 50% equities. 

Secondly, she should have pinned down the advisor on his fee. Obviously, $2.0 million for a portfolio of cash equivalents is egregious. 

If you are interested in following developments just Google "Gloria C. Mackenzie".

Putter Around On Your Broker Site

Choosing a discount broker is not difficult today. There are several good ones out there and there are unbiased evaluations of them that prospective customers can exploit. Here is one at

NerdWallet .

Sometimes I counsel people who are looking for a broker and I suggest Schwab but point out that there are others that are also good such as Fidelity, TD Ameritrade, Vanguard etc.

I also suggest that if they are really on the fence they can open an account with the minimum and then do a couple of transactions to see if it is a good fit.

But beyond this it is also useful for just about every investor to putter around on their brokerage account. So many times I hear "I didn't know they had this". Many times investors are paying for information in other places that is available for free on their brokerage site.

With this in mind I thought it would be useful to go over some of the things I look at on Schwab and elsewhere when I consider a stock. To be clear I am basically an index fund guy but I do invest in individual stocks from time-to-time and I also have a dividend portfolio where I research individual companies.

So, suppose I'm interested in Home Depot (HD). I go to the Schwab page and put HD in the quote box:

Under "Symbol" click on "HD", This opens a lot of information.

I started formally in the investment business in 1980. The challenge then was to get information. I started with a dial up phone each morning calling several brokers (Lehman Brothers, Goldman Sachs, Merrill Lynch etc.) to get T-bill rates. T-bill rates for crying out loud!

Today the challenge for the investor is to figure out what information they want to look at. Behavioral finance teaches us that there can actually be too much information causing investors to throw their hands up and just walk away. Winnowing it down is a challenge.

So as I look at this page I look at eps earnings date first because i don't want to get surprised by a volatile movement because of the announcement:

Next I scroll down and look at the right hand side where you find opinions of various researchers and Schwab's rating:

This of course is just a smattering of the data on the page. Again, it is a challenge to pick and choose what to look at. For example, I'm not a huge fan of ratings but if Schwab's rating is "D" or "F" I'll do a bit more digging to find out why.

I'll admit also that I am a fan of Ned Davis so I'll typically take a look at their report ,for which you see there is a link.

I next go to Yahoo Finance put HD in the quote box and scroll down the right hand side:

This gives a nice view of the all important earnings versus earnings estimates going back a year. In other words, does the company tend to perform better than expected.

All of this takes longer to explain than to do and is easily carried out to compare two stocks. For example, you may want to compare HD with LOW.

So the bottom line is to putter around on your site to see what is available.

Full disclosure: I am not affiliated with Schwab and I own HD.

Warren Buffet's Advice

In the last post I presented Warren Buffet's often repeated advice to the average investor to invest in low cost index funds. He simplifies and recommends an index fund tracking the S&P 500.

This got me to recalling a recent post on LinkedIn about an Uber Driver who got advice from his passengers. He asks his passengers for the one message in life that they would suggest and then he asks them to write it down for him. He then says he plans to publish the "life suggestions" in a book.

Well, as you might imagine this got a terrific response with many people stating they couldn't wait to read the book! Many responders thought this a novel idea.

To be clear I am all for sharing life living advice especially from those with the experience  of decades manuevering  the pitfalls of the free market capitalistic  hyper-charged consumer driven U.S. economy.

Circling back it is interesting to recall Buffet's advice. After all, this is the advice from the premier investor of our age and has embedded in it the key to a successful retirement for the last 25 to 35 years of our life! You would think that every high school in the country would present this as worthy of consideration for young people. Good luck finding it in a single economics curriculum.

But, given Buffet's investment prowess, why wouldn't better advice be to invest in his company? Well, let's take a look at his record:

                                   YTD     1-yr     5-yr     10-yr     15-yr     20yr
Berkshire Hathaway   4.1%    7.9%   10.8%  13.7%    8.5%    7.7%
S&P500                     17.5%   13.1%  11.7%  15.3%    8.7%    5.9%
(reported in Barron's  from Bloomberg, 4/29/2019, p.16)

As shown he has underperformed from 15 years on in,  weighed down by the tremendous size of Berkshire Hathaway and the significant cash position he holds.

So, to me the bottom line is this: few know as well as Buffett how difficult it is for the average investor to beat the market. His advice to stick with a low cost index fund is worth heeding. That's what I would tell the Uber driver.