A Request to Parents of Gen Xers and Baby Boomers
Thursday, August 18, 2016

To parents of my fellow Generation X members, as well as parents of Baby Boomers, we—your adult sons and daughters—want to hear from you. We want to know how your health is. We want to know how financially stable you are. We want to hear about any potential problems as soon as they occur, not after the fact.

Communicate with us. Tell us what your long-term plans are. How do you want to be cared for? If you can no longer live alone without assistance, what do you want us to do? How can we bring up the topic of getting you assistance without an argument ensuing? Have you set up all of the necessary estate documents? Can we have the name and contact information of the estate attorney you worked with? Who do you want to us to contact if there is an emergency? What are the telephone numbers of the friends you see most frequently? Are there specific wishes regarding your funeral we should honor? Have you purchased a plot and/or prepaid for funeral services? Is there anything in terms of bequeaths we should know about? Where are the important documents such as your insurance policies, wills and powers of attorney located? Do your lawyer, adviser, accountant and doctors know who we are? How about your clergy?

What banks and credit unions do you have accounts with? What brokerage firms and mutual funds do you use? What pension(s) do you have? What life insurance and annuities do you have? If you use a planner or an adviser, who is it? Can we meet them? What’s your investment strategy? Have you changed it recently? What is your strategy for taking withdrawals? When was the last time you checked to ensure the beneficiary information on your accounts is correct? If we need to access your checking account to pay bills, how do we do so? Do you have any loans outstanding or a reverse mortgage? Are you owed anything? Are you current on your income and property taxes? Do you have a safe deposit box and, if so, how do we get access to it if necessary?

We realize that you don’t want us to worry to about you. We realize that you know how hectic and stressful our lives are. We even realize that we don’t call or visit you as much as you would like us to, and we apologize for that. None of this affects our feelings. Regardless of what is occurring in our lives, you are still our parents, so talk to us. We might be many things, but we are not mind readers.

In asking for details, we are not trying to be nosy. We are not trying to take away your independence. We are simply trying to make sure you are okay and that we have enough information to be able to step in and act as your advocate when necessary.

Acting as an advocate may make us seem like we we’re trying to reverse the parent/child roles; we’re not. We’re simply stepping in when you have a legitimate need for help. It can mean assistance with paying bills, speaking to doctors, looking for new housing or meeting with your advisers. All of this will be easier if you communicate what you want before we need to step in to provide assistance. It will also increase the odds of us making the decisions you’d want us to.

Realize that the less you communicate to us, the more our frustration grows. A lack of communication puts us in a situation of having to make big, and sometimes critical, decisions without a full understanding of your wishes. It can also lead to situations where smaller problems become bigger problems, especially if you don’t meet us halfway on requests to do certain things (e.g. get a hearing aid, use a walker, create a will, etc.). Most importantly, understand that we only ask these questions, make requests and, occasionally get frustrated, because we care.

Your Sons and Daughters

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Highlights from the AAII Journal

AAII Model Portfolio Update

No changes were made to the AAII Model Portfolios, though four stocks currently held by the Model Shadow Stock Portfolio met our buy rules at the end of July, meaning they qualify for purchase.

The Model Shadow Stock Portfolio gained 6.2% in July and is now up 9.5% year-to-date. The DFA U.S. Micro Cap Index fund (DFSCX) gained 5.0% during July and is up 8.1% for the year. Since its inception in 1993, the Model Shadow Stock Portfolio has a compound annual average return of 15.5%, while the Vanguard 500 Index fund has gained 9.0% a year, on average, over the same period.

The Model Fund Portfolio’s 6.0% gain in July compares to a 3.7% increase for the SPDR S&P 500 ETF (SPY). The Model Fund Portfolio has gained 9.1% year to date, while the SPDR S&P 500 ETF is up 7.6%. Since its inception in June of 2003, the Model Fund Portfolio has a compound annual average return of 8.5%, which is slightly better than the 8.4% return of the SPDR ETF over the same period.

The new Level3 Passive Portfolio, which James Cloonan introduced last month, was up 4.3% in July. This surpassed the SPDR S&P 500 ETF’s gain of 3.7%. Since its inception at the end of May, the Level3 Passive Portfolio has posted a 5.7% gain, compared to the 3.9% gain for the SPDR ETF over the same period.

The Week Ahead

Only 13 members of the S&P 500 are scheduled to report earnings: Best Buy (BBY), Intuit (INTU) and J.M. Smucker (SJM) on Tuesday; HP (HPQ) and PVH Corp. (PVH) on Wednesday; and Autodesk (ADSK), Dollar General Corp. (DG), Medtronic PLC (MDT), Patterson Companies (PDCO), Signet Jewelers Ltd. (SIG), Tiffany & Co. (TIF) and Ulta Salon (ULTA) on Thursday.

The week’s first financial report will be July new home sales, released on Tuesday. Wednesday will feature the August PMI Index (PMI) Flash and July existing home sales. Durable goods orders for July will be released on Thursday. Friday will feature the first revision to second-quarter GDP, July international trade, and the University of Michigan’s August preliminary consumer sentiment survey. 

Federal Reserve Chair Janet Yellen will speak at the Kansas City Fed’s monetary policy symposium in Jackson Hole, Wyoming, on Friday.

The Treasury Department will auction $26 billion of two-year notes on Tuesday, $13 billion of two-year floating rate notes (FRNs) and $34 billion of five-year notes on Wednesday, and $28 billion of seven-year notes on Thursday.

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AAII Sentiment Survey

Optimism about the six-month direction of stock prices is at a five-week high in the latest AAII Sentiment Survey. Neutral sentiment fell and pessimism is slightly lower.

Bullish sentiment, expectations that stock prices will rise over the next six months, jumped 4.3 percentage points to 35.6%. Optimism was last higher on July 13, 2016 (36.9%). The increase is not large enough to prevent bullish sentiment from staying below its historical average of 38.5% for the 41st consecutive week and the 74th out of the past 76 weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 3.9 percentage points to 38.1%. Neutral sentiment was last lower on June 29, 2016 (37.7%). Even with the decline, neutral sentiment is above its historical average of 31.0% for the 29th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, declined 0.4 percentage points to 26.4%. This is the seventh consecutive week that pessimism is below its historical average of 30.5%. It is also the fifth time in seven weeks that bearish sentiment has been within a 0.3-percentage-point range.

The improvement in sentiment is occurring as the large-cap indexes continue to trade at or near record highs and small-cap stocks are experiencing upward momentum. Most individual investors are keeping their outlook tempered, however. This week is just the sixth in this calendar year with more than one out of three survey respondents describing themselves as being bullish about the six-month direction of stock prices. Optimism has not been above its historical average of 38.5% since November 4, 2015, when it registered 39.0%.

This summer’s upward movement in stock prices, the perceived lack of investment alternatives and sustained, albeit slow, economic growth are giving some individual investors reason to be optimistic. Causes for concern are prevailing valuations, the presidential election, global economic uncertainty (including Brexit) and disappointment with corporate earnings growth.

This week’s special question asked AAII members for their opinion on the current pace of economic growth. More than one of three respondents (36%) describe economic growth as slow, weak or anemic. An additional 16% say economic growth is too slow and 10% say growth is disappointing or otherwise unacceptable. Just 6% said they are encouraged by the pace of growth or otherwise describe the economy as growing.

Here is a sampling of the responses:

  • "Economic growth is growing at an unacceptable pace.”
  • "It’s slower than I’d like, but at least it’s going in the right direction generally.”
  • "It is anemic for far too long; changes are needed on multiple fronts.”
  • "Slow but steady.”
  • "Slow and sluggish and likely to stay that way for some time.”

This week’s Sentiment Survey results:

Bullish: 35.6%, up 4.3 points
Neutral: 38.1%, down 3.9 points
Bearish: 26.4%, down 0.4 points

Historical averages:

Bullish: 38.5%
Neutral: 31.0%
Bearish: 30.5%
Take the Sentiment Survey.

Local Chapter Meetings
AAII Local Chapter Meetings offer you a variety of presentations from expert speakers who will give you their view on the world of investing. A bonus of attending a Chapter Meeting near you is the opportunity to meet other AAII members who share your interest and enthusiasm for investing. You can even share the Chapter experience with your family and friends by inviting them to attend Chapter Meetings with you!