Ceaser Capital Management | Financial News in Dearborn, MI

COVID-19 Regulations: New York

April 14, 2020

A recent Executive Order issued by Governor Cuomo, together with recent amendments to the insurance and banking regulations (the “regulations”) issued by the New York State Department of Financial Services (“Department”), extend grace periods and give you other rights under your life insurance policy or annuity contract if you can demonstrate financial hardship as a result of the novel coronavirus (“COVID-19”) pandemic. These grace periods and rights are currently in effect but are temporary, though they may be extended further. Please check the Department’s website at https://www.dfs.ny.gov/consumers/coronavirus for updates.

A copy of the Executive Order and regulations can be found at https://www.governor.ny.gov/news/no-20213-continuing-temporary-suspension-and-modification-laws-relating-disaster-emergency and https://www.dfs.ny.gov/system/files/documents/2020/03/re_consolidated_amend_pt_ 405_27a_27c_new_216_text.pdf, respectively.

Insurance Payments - Grace Period

If you can demonstrate financial hardship as a result of the COVID-19 pandemic, your insurer must extend to 90 days the applicable grace period for the payment of premiums and fees under your life insurance policy or annuity contract. If you do not make a timely premium payment and can demonstrate financial hardship as a result of the COVID-19 pandemic, your insurer may not impose any late fees relating to the premium payment or report you to a credit reporting agency or a debt collection agency regarding such premium payment.

Catching Up on Overdue Insurance Payments

The regulations also require your insurer to permit you to pay the overdue premium over a 12-month period if you did not make a timely premium payment due to financial hardship as a result of the COVID-19 pandemic and can still demonstrate financial hardship as a result of the COVID-19 pandemic. This also applies if the insurer sent you a nonpayment cancellation notice prior to March 29, 2020.

Policies Financed by Premium Finance Agencies – Grace Period

If your life insurance policy or annuity contract has been financed through a premium finance agency, and you do not make an installment payment, the premium finance agency may not cancel your life insurance policy or annuity contract for a period of at least 90 days, including any contractual grace period, if you can demonstrate financial hardship as a result of the COVID-19 pandemic, and subject to the safety and soundness of the premium finance agency. In addition, if you do not make a timely installment payment to the premium finance agency and can demonstrate financial hardship as a result of the COVID-19 pandemic, the premium finance agency must extend the due date for the installment payment by at least 90 days, may not impose any late fees relating to that installment payment, and may not report you to a credit reporting agency or a debt collection agency regarding that installment payment.

Catching Up on Overdue Payments to Premium Finance Agencies

If you do not make a timely installment payment to the premium finance agency due to financial hardship as a result of the COVID-19 pandemic, the premium finance agency must permit you to pay the installment payment over a 12-month period if you can still demonstrate financial hardship as a result of the COVID-19 pandemic, subject to the safety and soundness of the premium finance agency. This also applies if the premium finance agency issued a non-payment cancellation notice prior to March 29, 2020.

How to Demonstrate Financial Hardship

If you are unable to make a timely premium payment due to financial hardship as a result of the COVID-19 pandemic, you may submit to your insurer or premium finance agency, as applicable, a statement that you swear or affirm in writing under penalty of perjury that you are experiencing financial hardship as a result of the COVID-19 pandemic, which the insurer or premium finance agency, as applicable, shall accept as satisfactory proof. Such statement is not required to be notarized.

Questions

If you have any questions regarding your rights under the Executive Order or regulations, please contact your insurer, broker, or premium finance agency.

Happy Thanksgiving

November 17, 2017

With Thanksgiving just around the corner, now seems like a good time to talk about being grateful, but also about realistic expectations. I’m sure many of you are familiar with iconic Norman Rockwell painting, “Freedom From Want” depicting what appears to be the “ideal” Thanksgiving dinner. For a multitude of reasons (good, bad, or other), for most of us, Thanksgiving doesn’t look quite like that painting—and that’s ok. And that leads us to the topic of this month’s (second) letter.

2017 has been, so far, a great year for investors. The market is up fairly dramatically across most asset classes both foreign and domestic, despite many predictions for a down year or marginal increases by experts back in January. Clients are happy with statements, reviews are easier, and maybe most importantly, account values are up. One may even start to think that this snapshot is what investing looks like all the time, but like “Freedom From Want,” there is a difference between perfection and reality. This isn’t a prediction of doom—far from it, in fact. We remain optimistic about the long-term performance of the market, but we also want to remind our clients to be realistic. Next March will mark 9 years without a significant decrease in stock market performance, the second longest period in history. Volatility is a part of investing, and at some point in the future, there will be a dip in performance. So while we are thankful for the gains we’ve seen over the course of the year, we want to remain cognizant of the fact that there is a decline in our future, and that’s ok. Of course, if you have a concern about your allocation, we’re always happy to discuss it with you.

There is one thing that we are thankful for without reservation this year, and that’s the person reading this post; we are eternally grateful for the trust that you place in us. We wish you and your loved ones a wonderful Thanksgiving, and one that is truly, free from want.

Thanks for reading, and have a great day.

Disclaimer: Investments in securities do not offer a fixed rate of return. Principal, yield and/or share price will fluctuate with changes in market conditions and, when sold or redeemed, you may receive less than originally invested. No system or financial planning strategy can guarantee future results.

Halloween and Whole Life Insurance

October 17, 2017

It looks and feels like fall is upon us and Halloween is fast approaching. This month we’d like to talk about something that has been coming up with a number of clients. These clients have approached us asking about “avoiding paying income tax” on retirement savings based on either something they’ve heard about from another advisor or something they may have seen on public television. Obviously, this sounds like a great idea—avoid taxes and pass on retirement savings to heirs without them paying a tax, too! As we’ve said before, if it sounds too good to be true, it probably is, and in this case, it definitely is. So, what is this story here?

The answer is insurance salespeople masquerading (just in time for Halloween) as financial advisors selling whole life policies. For those that don’t know, whole life insurance is (from Wikipedia): “a life insurance policy which is guaranteed to remain in force for the insured's entire lifetime, provided required premiums are paid, or to the maturity date. As a life insurance policy, it represents a contract between the insured and insurer that as long as the contract terms are met, the insurer will pay the death benefit of the policy to the policy's beneficiaries when the insured dies.” Yes, it is true that there is not taxation on the death benefit, however the big catch (and it’s a big one) is that the policy has to be purchased with after-tax dollars, which means cashing in your 401k or IRA and paying all of the tax on the entire amount up front which could mean as much as 40% to the IRS. The whole idea of a tax-deferred retirement account is to defer taxation in retirement when your assumed tax bracket will be lower than during your working years, so why pay all of it at once?

The other “benefit” of a whole life strategy is “withdrawing” money from the policy “tax-free.” This is somewhat misleading as well. What you’re actually doing when you “withdraw” in this scenario is borrowing from the policy. You reduce the death benefit by any amount borrowed. So, while it is technically non-taxable, you do pay interest on the loan, meaning you end up putting more back in than you took out.

Here’s the interesting thing: Most of the time, these “solutions” are sold by insurance salespeople generating a hefty commission (BOO!). While both my dad and I are licensed to sell insurance as well as having securities registrations (for stocks, bonds, mutual funds), many of the people selling whole life policies only have insurance licenses. They also are not required to act in a client’s best interest as we are under the CFP® Code of Ethics. If they were, it would be fairly difficult to justify recommending whole life as a retirement solution for most clients.

If you have any questions regarding this post or any other alternative retirement “solutions” you may come across, please feel free to get in touch. Thanks for reading, have a great fall and a Happy Halloween.

The Recent Equifax Breach

September 17, 2017

This month we’d like to respond to the recent Equifax breach. For those of you that are unaware, Equifax is one of the three major credit reporting agencies in the U.S. During the breach, the sensitive information (including Social Security numbers, birth dates, addresses and, and even driver’s license numbers) of approximately 143 million Americans was stolen and can now be purchased at some seedier places on the web. What makes this breach different than those in the past is that with this type of information, thieves can potentially not just make fraudulent charges to your accounts, but open new accounts in your name.

So what should you do to protect yourself? The Federal Trade Commission is recommending these steps:

Find out if your information was exposed. Go to www.eqifaxsecurity2017.com and click on the “Potential Impact” tab and enter your last name and the last six digits of your Social Security number. Your Social Security number is sensitive information, so make sure you’re on a secure computer and an encrypted network connection any time you enter it. The site will tell you if you’ve been affected by this breach.
Whether or not your information was exposed, U.S. consumers can get a year of free credit monitoring and other services. The site will give you a date when you can come back to enroll. Write down the date and come back to the site and click “Enroll” on that date. You have until November 21, 2017 to enroll.
Check your credit reports from Equifax, Experian, and TransUnion — for free — by visiting annualcreditreport.com. Accounts or activity that you don’t recognize could indicate identity theft. Visit IdentityTheft.gov to find out what to do.
Consider placing a credit freeze on your files. A credit freeze makes it harder for someone to open a new account in your name. Keep in mind that a credit freeze won’t prevent a thief from making charges to your existing accounts.
Monitor your existing credit card and bank accounts closely for charges you don’t recognize.
If you decide against a credit freeze, consider placing a fraud alert on your files. A fraud alert warns creditors that you may be an identity theft victim and that they should verify that anyone seeking credit in your name really is you.
File your taxes early — as soon as you have the tax information you need, before a scammer can. Tax identity theft happens when someone uses your Social Security number to get a tax refund or a job. Respond right away to letters from the IRS.

If you don’t want to or are unable to perform these measures on your own, a service like LifeLock can help do it for you at a cost. Keep in mind that distribution requests from your accounts here require verbal authorization, and can never be processed via voicemail or email for your protection. We have begun recording those requests as well as an additional layer of security.

Unfortunately, we expect that this will not be the last time we see a breach this broad in scope, so we encourage all of you to be vigilant when it comes to protecting your identity and finances, we hope this helps guide you on how to protect yourself. If you have additional questions, please feel free to get in touch.

Gutenberg Moments

August 17, 2017

Recently, I attended a conference near Washington D.C. regarding financial planning. One of the most interesting speakers didn’t really talk about investing at all though, instead he spoke about the changes going on in the world of technology and its impact on society. He spoke about what he described as “Gutenberg Moments”–landmark changes in technology that would have dramatic impacts on the world. From automation, to gene sequencing, to Internet connectivity, we are on the cusp of several of these transformational moments that will change society as we know it today. And the changes are occurring at an exponential rather than linear rate usually exceeding what most of us would expect.

What does this mean for us as investors? The impacts of such innovation are not just societal, they have dramatic economic consequences as well. Productivity increases will lower operating costs potentially increasing profits, connectivity for developing markets will provide millions of new customers in a truly global marketplace, the likes of which have never been seen. We never will make short-term projections for the market, but the pace and magnitude of the innovation we are seeing today is unlike anything we’ve seen in our lifetimes and we expect its effect will be positive long-term.

On a somewhat related note, last month marked my 10th year anniversary with our firm. It doesn’t seem that long ago that I left the advertising industry to help our clients reach their financial goals. I started in this business just in time for the worst market downturn since the Great Depression and have also had the good fortune to witness multiple new all-time highs for the market, which was a great introduction to the financial services industry. During that time, I’ve gotten to know so many of our clients and help to guide them through the ups and downs, which has been the most satisfying part of the career change. I would like to take this opportunity to sincerely thank you for working with our firm and for placing your trust in my father and me.

Thanks so much for reading. If you have any questions regarding this post, please feel free to get in touch—we love hearing from you. Enjoy the rest of the summer!

Happy 4th of July!

July 4, 2017

Greetings, and happy summer! We hope you’re enjoying the great weather we’re having so far. As most clients are pretty busy during the summer, this month’s letter will be brief, but timely.

All of us at Ceaser Capital Management would like to wish you a Happy 4th of July. Amidst the barbeque, the fireworks, and celebrating, we hope you take a moment to reflect on the significance of the day. Two hundred forty-one years ago, our forefathers fought, bled, and perished to give us the freedom that most of us take for granted today. Because of their sacrifice, we have the freedom to speak freely, to own property, worship as we wish—freedoms that many in other countries are unable to enjoy. Please take a moment to reflect on how lucky we are to live in America, and have a great holiday!

Passive Investing

May 17, 2017

We hope you’re enjoying the final weeks of spring. For this month’s post, we’d like to revisit a topic we wrote about a while back as it relates to something recently in the news.

As you may have heard/read, recently Ford replaced their CEO, Mark Fields after a three-year tenure that saw Ford’s stock price drop 40%. Investors and the board felt that he failed to expand the company’s business and lagged behind in developing the high-tech cars of the future. This came after a plan to cut 1,400 jobs and before executing a plan to expand Ford’s lineup and invest in autonomous and electric vehicles. In addition, multiple personnel changes have occurred in the wake of Mr. Fields’ firing including communications and marketing.

So, you’re probably wondering what this has to do with investing. Actually, there are two points here. The first has to do with “passive” investing. While it’s true that we strongly believe in a buy and hold strategy when it comes to equities, that doesn’t mean the investments themselves are stagnant. All of the companies we invest in, from the largest companies in the U.S., to the smallest in emerging markets like Indonesia, want to increase their share price. In order to do that, they have to be ever-changing (active!)—becoming more efficient, increasing profits, and innovating to stay competitive in the marketplace. This brings up the second point, which is the difference between investing in a stock vs. a commodity. Clients often mention investing in commodities (gold, silver, concentrated orange juice, pork bellies), which we discourage for the reasons above. Companies can adapt and make active changes to increase their value, while a commodity’s value is based purely on speculation about how much people/companies are willing to pay for them.

Thanks for reading, and as always, if you have any questions regarding this post or any other investment topic, please feel free to get in touch. Happy spring!

Date-based Performance

April 4, 2017

It’s hard to believe that spring is finally here. Spring “officially” began this year on March 20th, though here in the Detroit area, the temperature that day was only 38°F—barely spring-like. Friday of that week, the 24th, was decidedly more spring-like, with a high of 75°F. The difference between those temperatures is the topic of this month’s letter.

As investors, we often peg performance based on specific dates, whether it is the quarter or the year, usually beginning on the first day of the month. Last year provides an excellent example as to why the somewhat arbitrary nature of choosing the first day of the month can dramatically affect our perception of performance. Here’s an example using two clients with the same moderate portfolios (69% stocks 31% bonds): Client A has beginning date of January 1st through the end of last month and shows an increase in value of 8.71%--not bad. But Client B has a start date just 16 days later (eliminating the worst start for the Dow in history), and he would have seen an increase in value of 15.62%--nearly double the performance of our start date of January 1st. The portfolio is exactly the same, but by simply changing the day we begin, our perception of the portfolio’s performance is drastically altered.

Now some of you may counter, “You’re always telling us that we shouldn’t pay attention to short-term performance though.” And that’s true! But here is another important thing to consider: Regardless of performance going forward, over the next 5, 10, 20 years and beyond, Client A’s inception to date performance will never match that of Client B’s simply because of the difference of two weeks in their respective starting dates. The point is, constructing and evaluating portfolio has more to do with a long-term strategy than simply looking at performance, it should reflect your particular goals and situation.

Thanks for reading this month’s post. If you have any questions regarding this or any other investment related topic, or if you’d like to go over your portfolio’s performance, please get in touch—we love hearing from you. Have a great spring!

Dow Hits 20,000 and the Fiduciary Rule

February 17, 2017

Only the second month into the year, and it seems like a lot has happened already, but there are two things in particular we’d like to address in this month’s letter.

The first of these is a “milestone” of sorts: The Dow hit 20,000 points back in January. Some clients have asked what this means for investors. In short, the answer is very little. Some investors may fall into the same trap many did in 1999 when the Dow reached 10,000: “The Dow at 20,000 sounds really high, maybe I should sell some stock.” This is a form of what behavioral finance experts call “anchoring,” which is using a reference point to make investment decisions whether the information is relevant or not. Since the Dow reached 10,000 back in 1999, 2/3 of the time the next 1,000 points was reached in under a year’s time. The nominal level of 20,000 is not all that significant, rather a rational investor should consider only what’s to come. Those who look to time the market may in the long run miss out on the opportunities and growth that the markets can provide.

The other thing we’d like to mention is an update of sorts to a familiar topic: the fiduciary rule. President Trump recently issued a memorandum to the Department of Labor calling for a study of the soon to be implemented fiduciary rule, which has been viewed by many as the first step in rolling back what would require financial advisors to act in their clients’ best interests. Regardless of party affiliation, we believe strongly that the fiduciary rule is great protection for investors and would go a long way toward building trust in what many view as a less than transparent industry. We stand with the Certified Financial Planner® Board, the Chartered Financial Analysts Institute and others in support of this measure. Again, as a reminder, we have been meeting the fiduciary standard for all advisory clients since 1997.

That's all for this month, we hope you’ve enjoyed this post. If you have any questions regarding these or any other investment-related topics, please feel free to get in touch. Thanks and have a great day.

Happy New Year!

January 17, 2017

Happy New Year! As we begin 2017, we wanted to ask for your help with something: Some of you may recall that we held a Veteran’s Day luncheon this year with a speaker from the State of Michigan Veterans Affairs department. It was a great success, and inspired us to investigate doing additional events this year, and that’s where you come in. We are considering a number of topics and would like your input on what topics you might be interested in most, here are some examples of topics we are considering.

Wellness/Health in Retirement
Estate Planning
Aging in Place – Caregiving in the Home
Increasing Social Connections and Reducing Loneliness in Retirement
Social Security Strategies

If there is one of these you’re more interested in than the others or if you want to pick a couple that you might want to learn more about, we would be extremely grateful if you’d let us know. Or, if there is another topic not mentioned here that you’d like to know more about, please tell us that, too. Just send me a short email or give us a call, whatever is easier for you. We’re looking forward to our next lunch with you!

Also, we do have one housekeeping item to mention: tax forms. We anticipate that most tax forms for most accounts will go out no later than February 23rd, however, we do not generate your forms and have no control over when they are mailed to you. If you haven’t received your tax forms by the end of February, please reach out to us and we can try to determine if they were lost in the mail. We want to help you avoid needing to file an extension or an amended return!

If you have any questions regarding this month’s post please get in touch—we love hearing from you. Thanks and have a great January!

Buy Low, Sell High: Truth or Superstition?

October 24, 2016

Greetings and happy October, we hope this post finds you well. It seems that around Halloween, we tend to get a little superstitious. Black cats, full moons, and bats all become a little scarier this time of year. As investors, one thing that tends to spook people is when the market reaches an all-time high. Intuitively it seems logical to want to sell when the market is at its peak, after all “Buy Low, Sell High” is the mantra, but is there any truth to that, or is it simply superstition? Below is a table showing the performance of the Dow Jones Industrial Average following an average of all record high days vs. an average of all other days:

*Dow Jones Industrial Average Performance (Annualized):*
Time Period:	2 Months	3 Months	6 Months	1 Year	2 Years
After Record Highs	7.12%	7.23%	7.23%	7.39%	7.18%
After All Other Days	9.78%	9.54%	8.29%	7.64%	5.88%

As you can see, on average, during the short term (6 months or less), a non-record day outperforms a record day making it seem like maybe the superstition is true, but the gap narrows over time. Looking at 1 year after a record high day, on average the Dow is up 7.39% while the increase for all other days is 7.64%. Looking at 2 years after a record high day, the Dow actually performed better (7.18% higher) than a non-record day (5.88% higher).

What can we learn from this? A few things. One, markets are rational. A record high is only a record relative to where the market has been previously. Second, there is no lasting effect from what is an “all-time high” on any given day, we should always be looking forward not at past performance. Third, and most importantly, the right time to invest is today, regardless of where the market is on any given day. Trying to time the market on a low point or a high point may result in missing the growth the market can provide. Bottom line: Don’t fall for superstitions when it comes to Halloween or when it comes to investing.

If you have any questions, please don’t hesitate to get in touch.

Fiduciary Rule and Market Update

May 19, 2016

Despite the lobbying efforts of many in the financial services industry, we are happy to report that the Department of Labor has issued new rules taking effect in 2018 that will require financial advisors handling retirement account to act as fiduciaries. As you may recall we talked about this in 2015 and encouraged our clients to make their opinions known about these rules, so if you participated, congratulations are in order. We are proud to join with the Certified Financial Planner® Board as well as the Financial Planners Association in supporting this rule.

Clients that have been around long enough know that we started meeting the fiduciary standard for our advisory clients way back in 1997. The final details as to how this will affect our business going forward are still being hammered out by the DOL and the Obama Administration, but we don’t anticipate radical changes—unlike many brokers that are used to only meeting the suitability standard.

In other news, 2016 has been an interesting year so far as investing goes. The year got off to a pretty ugly start, with the first 10 days of the year being the worst in the Dow’s history. Since then we’ve seen strong performance in nearly all asset classes, although we seem to be nearly overdue for international equities to begin outperforming domestic ones. It is not a question of if the current cycle of U.S. stocks outperforming International ones, it is a question of when. There is no denying that since 2011, U.S. stocks along with a strong U.S. dollar have kept returns from International Equities below U.S. Equities since 2011, and is being felt in all of our portfolios and has been a concern of many clients recently. From 2013-2015, Large U.S. stocks vastly outperformed International ones which for many clients has led to a belief that their own portfolios will continue to underperform because of their international holdings. But we don’t have to look back very far to see the flip side of this argument. Going back just a few years, from 2003-2007, just the opposite was true. And by the same token, that performance is reflected in our clients’ portfolios that have been around long enough—a pattern we are confident will repeat itself. Trying to anticipate when one cycle will end and another will begin is where many investors (amateur and professional) make their mistake. One can get lucky occasionally, but not consistently over time which will ultimately affect returns. We remain steadfast in our belief that patience with broad diversification and asset class investing will prevail over the long-term which is why as investors ourselves, we are not making changes to our own portfolios that are invested the same way as our clients.

In behavioral finance (the study of why investors make the decisions they do), there is a concept called Recency Bias, which is the tendency to think that trends or patterns we observe in the recent past will continue in the future. This bias can cause irrational behavior and even advisors are not immune to its effect. We know our investment philosophy works. We have the data to prove it. Yet when we look at portfolio performance over the last couple of years, it does make us question whether we are doing the right thing or not. That’s Recency Bias at work. We feel the need to do something and we know our clients (even if they don’t contact us) are expecting us to react, but what times like this prove is that being passive is not the same as being weak. To give in to that bias, to react irrationally, to try and chase after returns in other asset classes is weak. Strength and discipline are what will prevail, and as your advisors, we remain committed to providing that to you.

My apologies for the length of this month’s post, we felt that this was important enough of a topic to justify it. As always we are more than happy to discuss this or any other investment related topic with you, please feel free to get in touch. Thanks for reading and have a great May.

Rebalancing

March 24, 2016

Greetings. We hope you’re keeping warm this month, hopefully we are across the halfway point for winter weather. Once a week, I try to attend an early morning yoga class. I’m pretty terrible at it to be honest, but one of the things that I do like is that I get to work on is balance. And it just so happens that’s the topic of this month’s letter, though in this case I’m referring to re-balancing. The interesting thing about trying to balance in yoga (for me, at least—I’m sure any experts may disagree), is that I find it to be much easier to instead of looking at my feet or the ground, to instead look at the horizon. Focusing on a point in the distance makes it much easier to hold those poses for longer which (surprise!) is also true when it comes to our portfolios.

For those that don’t remember, re-balancing is what enables us to follow the Investing 101 principle of “Buy low, sell high.” In its most basic form, this is how it works: Suppose you have a hypothetical portfolio worth $200,000. This portfolio is allocated with 50% stocks, 50% bonds, so $100,000 in each asset class. Over the course of a year, suppose stocks have a good year and go up by 10%, so now there is $110,000 in stocks and $100,000 in bonds. Intuitively we might say, “Well, stocks are doing well so we should put more money in stocks, right?” But would that follow the Investing principle listed above? The answer is clearly, no. Rebalancing enables us to bring our portfolios back to their intended allocation, in this case selling stocks (selling high) and purchasing bonds (buying low) to bring us back to a 50-50 mix.

What does this mean to you? Many clients often ask during times of market volatility, shouldn’t we do something? The answer is yes, and we are. As your portfolio drifts we are of course monitoring market conditions, but more importantly, we are rebalancing. Stocks are priced lower than their previous highs, so what do we do? We buy more. Instead of fleeing to the “safety” of bonds, we sell them to purchase stocks and restore our intended allocation. Over time this will help reduce our exposure to risk and can even offer potentially increased returns. Just like in yoga, focusing on a distant point (our long-term investment goals) helps us maintain our balance.

Thanks for taking the time to read this month’s letter. If you have questions about rebalancing or any other investment topics (but please not about yoga), please feel free to get in touch.

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