​How LBW See’s It​
Every quarter it seems we start our commentary with a new “OMG” (yes, LBW used “OMG” as an acronym for “OH MY GOSH”) event and Q2 of 2016 did not disappoint.  Headlines were flooded with the BREXIT (a hype word for the United Kingdom exiting the European Union) event to our very own reality TV show, that is the United States (“U.S.”) presidential race.  All joking aside, it seems that the U.S. as well as the world has become even more unpredictable, from slow anemic growth across the world to central banks’ monetary policies that seem to be changing every other month.  This erratic environment has assisted in the creation of volatility we have seen in the markets year-to-date.  Combine the impulsive nature of the world today with the U.S.’ almost seven-plus-year bull market[1], your result: “The tides have raised all ships, now the storm is causing choppy waters”.

As most of you already know, as of yesterday the United Kingdom (“UK”) voted on whether to stay in the European Union or to exit (hence the media hype word BREXIT).  Many pundits believed that due to the “status quo bias”[1] that Britons would vote to remain in the European Union (“EU”), and the markets seemed to price this decision in as of yesterday.  However, waking up this morning the world was “shocked” that Britons had decided to leave the EU, which sent global markets awry.  The next rational question is: why? 

​As we all know the investment industry is filled with jargon and multiple types of accounts such as a Roth IRA, Traditional IRA, Rollover IRA, Inherited IRA, SIMPLE IRA, SEP IRA, and many more.  As stated in the name of the blog post, we will focus on one type, the Roth IRA.  At LBW, a frequently asked question is: “Should I contribute to a Traditional or Roth IRA?”.  More often than not, people are not as familiar with Roth IRAs as they are with Traditional IRAs.  So, we are going to break down the Roth IRA into four sections: History of the Roth IRA, Advantages of a Roth IRA, Roth IRA vs. Traditional IRA, and Why and What the Government Wants to Change.

​How LBW See’s It​
The first quarter of 2016 did not disappoint.  The S&P 500 hit a quarter low on February 11, 2016 equating to an approximate decline of -10%[1], falling to what pundits call a correction.  How did the S&P 500 finish the quarter?  Up approximately 1%[2].  In short, we experienced more than a 10% swing during LBW’s first full quarter - what a ride.  The swing was caused by the usual suspects: the continuing commodity rout, the strengthening U. S. dollar, the unpredictable Federal Reserve’s (“Fed”) interest rate moves, and continuing fears of a global slowdown.  Was this volatility valid, or in other words, was the market overvalued on a valuation basis?

​Let it be known, we had to look up how to review a movie.  Remember, we are not professional spellers (if you recall the last LBW INSI”G”HTS) nor professional movie critics, although we try our best!

Summary:​
“In 2008, Wall Street guru Michael Burry realizes that a number of subprime home loans are in danger of defaulting. Burry bets against the housing market by throwing more than $1 billion of his investors' money into credit default swaps. His actions attract the attention of banker Jared Vennett (Ryan Gosling), hedge-fund specialist Mark Baum (Steve Carell) and other greedy opportunists. Together, these men make a fortune by taking full advantage of the impending economic collapse in America."[1]


[1] http://www.imdb.com/title/tt1596363/plotsummary

​Working in the financial services industry requires significant trust.  Unfortunately, too often that trust is, at least initially, one-sided where the client places their trust in the advisor.  In the wake of the 2008-09 financial crisis’ recovery, and recent misappropriations such as Bernie Madoff’s Ponzi scheme, it is understandable for clients to find it difficult to trust their finance professionals.  That trust needs to be established over time, but it must begin as a two-way street and on an appropriate foundation.

​How LBW See’s It
2015 was full of notable events: American Pharaoh captured the Triple Crown, the new Star Wars movie was released, and the Federal Reserve (“Fed”) increased the federal funds rate for the first time in nine years.  The Fed had been indicating an increase was imminent throughout the year as they continued to see increased productivity in the US economy.  On December 17, 2015, the federal funds rate increased by a quarter of a percent from 0.25% to 0.50%.  Chair Janet Yellen specified that future increases will be gradual in nature and likely be below their normalized projection for some time.

The new year is upon us and what a start it has been for the markets. The market has declined significantly in the first week of 2016 with the Dow -6.21%, S&P 500 -5.98%, and the NASDAQ -7.26%*.

2015 was full of uncertainties and 2016 is no different. China, the world’s second largest economy, seems to be slowing with the government setting a target growth rate of 6.5% for 2016, half of what it was in 2010 (Driebusch, Corrie & Gold, Riva. “China’s Woes Reverberate”. The Wall Street Journal 8 Jan. 2016: A1-A8. Print). Oil prices continue to drop to levels not seen for some time and the Federal Reserve has set a policy to raise rates; however, it is unclear how fast it will happen. We are currently riddled with the unknowns and simply put, uncertainty in the short term creates volatility. So, what should you do during such turbulent times?

​Saving money is a difficult task.  Even though I am a Registered Investment Advisor, I still fall into the temptations of spending a few bucks on fishing lures.  In order to curb such temptations, I view savings in a different light.  Savings should be looked at as a non-discretionary expense, or a need such as your rent, when developing a personal budget.  In simple terms, savings is an expense.  If you build savings into your budget, you are automatically saving money thereby allowing you to spend additional excess cash flows on items like fishing lures.