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HFH Planning Services

HFH Planning Services

The process we use to fit your pieces together is customized. We begin with our 20-30 minute initial consultation (Free) to discover your needs. After a thorough interview to identify issues, the goal setting is developed. Then the data gathered will be examined for alternatives. We will ensure that these plans are implemented and executed effectively. A quarterly report will then reveal detail results, that will be reviewed and possibly revised due to performance and other factors.

1. Initial Consultation and Data GatheringThe initial consultation is free. During this twenty-to-thirty minute meeting, we will introduce ourselves and discuss what you can expect from HFH Planning, giving you an opportunity to discover if your needs will be satisfied by our approach. We present a list of documents to bring to the next meeting to start the process of creating your personal financial plan.2. Identification of IssuesA thorough interview to identify pertinent issues and establish short and long-term financial goals. We emphasize a holistic approach to your financial situation by examining your values, attitudes, expectations, and risk tolerance.3. Goal SettingFew of us have ever sat down and truly clarified our goals. During this process we assist you in defining, refining, and prioritizing your ideas into realistic concrete goals.4. Examination of AlternativesAfter the meeting we analyze your data. We then present viable alternatives to you. We discuss the pros and cons of each plan of action. You will be able to make an informed decision about your financial future.5. ImplementationWe will work with you to ensure that the plan is executed effectively. This may be accomplished exclusively through HFH Planning, or in combination with your existing professional team.6. Review/RevisionA quarterly report detailing the results of your individual holdings and comparing them to relevant benchmarks, is submitted to you. We will suggest changes to your portfolio due to performance, shifts in goals, or life events. See a sample of our Quarterly Report.

The HFH Way and two newspaper articles

There were two articles in the papers this past weekend (Jan 18) that have a lot, in my opinion, in common. They also address the investment philosophy of HFH Planning Inc.

Jason Zweig starts his article with “Nowhere to run, nowhere to hide – – and no one to get unbiased advice from.”

One was Zweig’s column talking with a man, Dean LeBaron, who made millions founding Batterymarch Financial, an investment firm, before selling it to Legg Mason in 1995 for over $90 million in today’s value. First he suggests that one must look to those areas that did not ride the tide that raised all stock areas in 2013 and second to invest for safety. The “invest for safety” is a favorite of people who have been in the markets and have enough money that even a very small income from those investments is enough to live a life style they choose. Ross Perot was a famous advocate of investing only in Treasury Bills. But the other he mentions is developing markets plus China, Gold, Real Estate and Inflation Protected Bonds (TIPs). We don’t like the Chinese market because of government control of the companies and the lack of transparency. We are not investing in TIPs because inflation adjustment only adds to the principal after six months and the interest is very low

The second article, in the New York Times by Nobel winner in economics, Robert J. Schiller, talks about how he believes that investing is controlled by the irrational behavior of human beings and that the markets cannot be predicted. That view is in opposition to a fellow Nobel winner, Eugene F. Fama, who believes that research is the answer.

At HFH Planning, we walk a line between these different views. First, we believe that asset allocation designed for the individual takes into account the amount of risk to which that individual should be exposed. The more time to retirement the more risk one may take.

Next we choose mutual fund managers who have, over an extended period of time, shown the ability to choose investments that do well.

Third we analyze returns on a quarterly time frame to examine the results of the allocation we’ve chosen and do an asset rebalancing. That rebalancing adds money to areas that have underperformed by taking money from the areas that performed extremely well. The procedure means we miss out on some of the upside. We are willing to accept that loss of potential in order to protect the gains from the exuberant “bubble” and the damaging fall that follows. Safety first.

How To Evaluate Your Financial Adviser. How To Compare Reults

The wealth Management Section of The Wall Street Journal had an article by Charles Passy. In it the people he interviewed suggest all kinds of ways of finding indexes to match the portfolio. What no one suggests and what we at HFH Planning think is the only way to examine a portfolio is to compare each holding against the appropriate benchmark. Yes it’s not easy. Yes, it takes time an effort, but how can an investor know how the portfolio performed. The article talks about bonds (the media term for fixed income) and doesn’t differentiate between long, intermediate and short term investments. They are very different in the risk and therefor very different in their returns.

In the equity area, not differentiating between “Growth” funds and “Value” funds and using “Blend” index which suggests a combination of the other two.

We at HFH Planning Inc. use Morningstar’s categories returns as the benchmarks. In doing so each holding is compared with the return that is comparable so we (and you) know that the 8% return is good, bad, or mediocre.

Take a look at our website,, to see a quarterly report.

Putting Emergency Funds Aside

On Thursday, 12/5/13, Andrew Blackman, writing in the Wall Street Journal, took on the conventional wisdom of having an emergency fund equal to 6 months of expenses and that those funds be in a bank account. He suggested as possible alternatives: a 5 year CD (with a low withdrawal penalty) and a diversified equity portfolio. While the first one would be fine, the latter just puts more money into the broker’s pockets in place of it going into banker’s pockets.

Why not start at the root?

The six month figure sounds fine, but as a starting point not an ending.

Why should we not go back to the source to find the funds needed?

True, if you are an “At Will” employee and the employer may come to you at any time and say that you are not needed you need six months of reserves. However, what if you know you will receive at least some number of weeks or months in the form of a severance package? How about unemployment insurance? Shouldn’t those sums be subtracted from the six months figure to reduce the need for the six months cash reserve and let people feel better about investing in alternative ways.

Technical Ananlysis – Gold and Commodities

I WAS NOT ABLE TO POST THE CHARTS> Contact me directly for me to send them to you.



There are many traders who follow the movements of an investment by using trend lines and other “technical” tools.

I recently received a report from a company that using these tools.

The company is suggesting that commodities are set for a fall and that gold will plunge.

I don’t ascribe to the theory. I do think that, since it is not an absurd way of looking at the prices of stocks that it should be presented.

Let’s start with a chart of the Power Shares Deutsche Bank Commodity Index Tracking Fund(NYSE:DBC), one of the more popular and liquid ETFs on the market, and, for our purposes, a reliable gauge of movements in the broad commodity sector.



We start by noting that all the stock’s moving averages are unfurled and trending lower – a bad sign.

Also a head and shoulders top (in blue) with the neckline broken three weeks ago occurred at the same time that a longer term trend line (in red) was also broken.

Strike two.

Third, and perhaps most damning, support was undercut just two weeks ago when the stock hit a new 52 week low at $25,

At that point we were all but assured lower prices from the commodities and understood that any bounce higher in the interim would be of a temporary nature only.

And yet…

If there’s a ray of hope for those still bullish on commodities, it resides in the currentRSI reading (black square, at bottom). Whereas both RSI and MACD indicators have been on-and-off underwater for two and a half months now, RSI just peeked its head above the surface in the last two trading sessions.  And this comes at a time when price action has also risen to the junction of the head and shoulders neckline and the short term moving average (red circle, at right).

If there’s to be any hope for commodities over the mid- to long-term, DBC will have to rise above this level and stay there.

And the chances of that happening are very slim.

We look for an almost immediate breakdown in DBC to occur that should bring the stock some twelve to eighteen percent lower in the next three to six months and believe the lion’s share of that drop will occur very quickly once the existing lows at $25 are taken out.


We also believe there’s money to be made playing the broad commodity slide.  But we’re not going to do it using an index tracker like DBC.

Very simply, there will be segments that crash, others that hold up and a few others that even climb, given the manifold forces at work in the commodities pits at any given hour on any given day.  So we’re going to focus once again on the sub-sector that we believe stands to take the harshest beating.

It’s without any pleasure that we return to what’s now become our three year old whipping boy, gold.

Please take a look at the daily chart for gold proxy, the SPDR Gold Trust (NYSE:GLD), for the last six months –

 The picture here is fairly simple.

1)     We have a head and shoulders top that’s just millimetres from a breakdown (in blue).

2)      We have old lows sitting just a hairsbreadth below that level – a 4% decline away(in black) – a target which, if reached, would set off a manic bout of selling in the gold pits.

3)      We have RSI and MACD (red squares) trending below their respective waterlines, a bearish indicator that doesn’t look like it’s about to change direction.

4)      And we don’t see any solid support emerging until GLD $110, a stopover that we now expect to reach sometime around New Year’s – if not before.


Look also at the longer term, weekly chart –


Here, there are also some ominous signs, foremost among them 1) two declining moving averages, including the all-important 137 week MA, 2) both RSI and MACD indicators sub-waterline, and 3) no sign whatsoever of panic in the volume figures.

That last bit is crucial.  Until we see a massive turnover of shares, we can’t consider a full-on long position in GLD or any other precious metal stock.  It makes no sense to do so.  A short term decline of a week or a month, or even four or five months might be reversed without a massive capitulatory event.  But after close to three years of declines, forget it.  You will not see higher gold prices until daily average volumes at least double from today’s levels.  Period.  And as we see no sign of that in the charts today, we don’t expect it to occur for at least another eight to ten weeks.

Science??? When is it Science and when Not?

An article in the Wall Street Journal the other day about mistakes doctors make reminded me that I was supposed to write this blog about what is science.

My definition of science is that it is a discipline that always produces the same results when carried out in the same way.

Two hydrogen atoms and one oxygen atom always equals water. If you substitute nitrogen for hydrogen you always get “laughing gas.”

Drop a weighted object from the roof and it will hit the ground in exactly the same amount of time each and every time.

Take a number of jelly beans and add a like number and you always have twice as many jelly beans.

Medicine isn’t that way. We are all slightly different and what works to stop the coughing in one person may not stop it in another. Yes, there are areas of medicine that are replicable, surgery for example, but, on the whole that’s not true.

Economy is not a science. If it were, three different economists with conflicting theories would not have all received Noble prizes for their work.

Which takes us to the investing area. There are those who, to convince clients that the plan they have devised for the client is going to work 95% of the time use some formula or other – very often the “Monte Carlo Simulation.” The problem is that the input is based on extrapolated historical results. Now, since we have no crystal ball to look ahead it behooves us to study historical information to give us information to use in moving forward. We do that when we drive somewhere. Route one has taken us 30 minutes, route two 35 and route three 50 minutes. So we take route one. Sometimes an accident creates a situation where route one takes an hour. That’s life. Well, in investing the same is true. We use historical data and recognize it will work sometimes. However, we don’t want to gamble on that information as if it were a holy grail. We want to use historical input and do not want to drive “looking through the rear view mirror”.

As advisors we want to do the best for you and we also want to make you feel comfortable. Just don’t get too comfortable.

More reason to be careful in choosing to use a LTC (Long Term Care) Insurance Policy

Add together prolonged low interest rates to advances in both health care and life expectancy, sprinkle in spiraling costs of healthcare and you have a recipe for major change in the long-term care (LTC) insurance industry. These industry dynamics, as well as a few others, have many LTC insurance carriers rethinking how to balance consumer needs with achieving long-term profitability. Many carriers are beginning to make significant adjustments to their product offerings, increasing premiums, changing pricing strategies and reducing product benefits. Even more dramatic, some are exiting the long-term insurance business entirely.

While long-term care insurance (LTCi) isn’t for every client, preparing for long-term senior care is prudent and oftentimes pays off. As we progress through life and age into retirement, it is common to expect new health concerns to greet us. As such, clients may want to consider long-term care planning early because once certain health issues set in, LTC planning gets much trickier and much more costly. LTC insurance can pay for extended care needs that often result from normal aging, and help pay for quality long-term care services that are not covered by health insurance or Medicare.

LTCi is a relatively young industry with a shorter history when compared to other coverage such as life insurance. Although the first traditional LTCi policy was issued close to 40 years ago, actuarially speaking the application of mathematical and statistical evidence to assess risk in this industry is in its infancy. Actuaries across the board have admitted to missing the mark when initially pricing this new form of insurance. Short medical histories as related to activities of daily living, low interest rates and increasing payouts for claims means today’s LTC insurance products are not priced appropriately (i.e., not generating acceptable profit margins for insurance carriers).

Major insurance carriers have begun announcing significant changes to their LTC products and requirements. Just recently, Genworth instituted a new pricing strategy and underwriting practice to reduce risk and improve the sustainability of their LTC insurance portfolio.

While there have been several changes announced recently across the industry (reduced advisor commissions, suspension of new sales), two significant developments on the horizon and already with one major carrier are:

  • Gender-based pricing with premiums for females increasing across the spectrum, substantially in some cases
  • Expanded underwriting requirements for applicants such as paramed exams, and blood/urine samples

Though long-term care is a concern for both men and women, there is greater risk for women. Industry studies show up to two-thirds of new claims are for female policyholders. New policies in gender-based pricing translates into increased cost for future female policyholders anywhere from 15 to 50 percent, while for men it may decrease 15 to 20 percent.

In the U.S., women live longer than men (81 years on average versus 76 for men), according to data released in 2013 by the Institute for Health Metrics and Evaluation.¹ This longevity translates to potentially more unhealthy years on average for women — 11 years compared to 9.7 for men, according to² Women are also more likely to live alone in older age or to be a caregiver for their spouse. Women who need care themselves in old age are less likely to have a family caregiver, which may further increase their potential expense to an insurance company.

With Regard to Investments, What does HFH Planning do?

We, as almost everyone alive, attempt to view the future.
When I say everyone, don’t we expect the place where we get our breakfast to be there when we get up in the morning? We expect the travel time to the office to be almost the same, etc.
We look at what has worked in the past and, although we know we cannot drive looking through the rear view mirror, we use history to predict or forecast.

Prediction: to calculate (some future event or condition) usually as a result of study and analysis of available pertinent data; especially: to predict (weather conditions) on the basis of correlated meteorological observations

Forecast: to declare or indicate in advance; especially: foretell on the basis of observation, experience, or scientific reason

We use only “value” oriented funds because, over an extended period of time, they return the same as “growth” funds with less volatility.

We use mutual funds. Not index funds. The ETF industry has made a big deal about using index funds because the cost is lower than managed funds and indexes beat 85% of managed funds. So it gives us a job for two reasons.
1. Index funds always underperform their index (there are fees and expenses).
2. We need to find the funds that are part of the 15%.
We use Morningstar as the search vehicle and then cross check our selection by using Standard & Poor’s ratings and the Lipper rankings.
We monitor the funds on a quarterly basis and analyze the fund’s returns compared to their peers. We compare not only apples to apples, but Granny Smith to Golden Delicious.

We use managers who stay consistent. Large Cap managers who don’t stray into the Small Cap field, etcetera.

That is the services we bring to the investment area of our practice.
It is part of what we do to help clients to navigate the “financial jungle.”

I’ve just received a brochure from my Credit Union talking about Cashier’s Checks

The availability of scanners and high quality printers as made it much easier for scam artists to create genuine-looking counterfeit documents.
Those people who are bright enough to use HFH Planning Inc. (an HOURLY ONLY financial advisor) are smart enough to know if it sounds too good to be true it likely is too good, except for the scammer.
You, however, might have family or acquaintances who need to be cautioned.
The brochure lists a number of ways these fake checks might be used. I’m not going to list them because the solution is easy. Look up the bank (make certain it’s not a phony number) and call to assure the check is not bogus. Even better, deposit the check on a “collection” basis. Only turn over the “extra” proceeds or the goods when the bank informs you the funds are good. That may take up to two weeks.
Yes, I know the person isn’t willing to wait that long. The price he is willing to pay for the goods is 15% above what you could get from someone else. Sales are sluggish, at best. And, put away your sales hat and put on your credit hat and figure how much you can lose if the check is bogus.
Even worse, if the check is for more than the bill and she wants the difference in cash.
If the incidents are enough for a financial institution to send out a brochure it is not happening only a few times a year.
PS I just learned that a number of car dealers were scammed in this way. Person came in, negotiated on a car, came in the next day, as he had stated, with a cashier’s check. One week later, check bounced – car and individual not to be found.
So it aint just dummies that are gullible.

Buying a Lottery Ticket – Is it really worth it?

A common behavioral error occurred this week: Many people thought they could increase their odds of winning the $587.5 million Powerball jackpot by purchasing more than one ticket. On the surface, the logic makes sense. Buy two tickets instead of one and you double your odds. Buy 50 instead of one, and your odds are 50 times better. The problem with such logic is that it doesn’t consider whether buying the extra tickets has any significant impact on the probability of winning.

Powerball, like other forms of gambling, has a fixed number of outcomes. The lottery game picks five unique numbers between 1 and 59. A sixth number, the “Powerball,” is then drawn. The Powerball number ranges between 1 and 35. A total of 175,223,510 combinations can be formed. Since there are a fixed number of combinations, it is easy to calculate the probability of winning the jackpot for any number of tickets purchased. We simply need to divide the number of tickets purchased (assuming each has a different combination of numbers) by 175,223,510.

If you bought one ticket, you had a 0.00000057% chance of winning. Not very good, but a ticketholder in Missouri and a ticketholder in Arizona did win last night. Buying two tickets increased your odds to 0.00000114%. Yes, this was technically twice as good, but your odds were still very low. Splurged and bought 100 tickets (a $200 expenditure)? Your probability of winning only improved to 0.00005707%.

If your goal was to just to have a 1% chance of winning, you would have had to spend $3,504,470, at a price of $2 per ticket. (You would also need several very patient store clerks, the free time to have all of those tickets printed, a system to avoid any duplicate tickets being selected and a method for checking all of those tickets.) Even with the large expenditure, there was a 99% chance you wouldn’t have won the jackpot. You also didn’t have any guarantee of winning enough of the smaller prizes to compensate for the money you spent on tickets.

I bring this up because part of both gambling and investing is understanding the probabilities of winning (making) or losing money. In a game with known fixed odds (e.g., the lottery, poker, roulette, etc.) you can assess how risky a bet is with math. When it comes to investing, the outcome is not always finite (a stock can theoretically keep appreciating in price), but you can still assess the risk by considering what has worked historically. Over the long term, we know value stocks perform better than growth stocks and small-cap stocks beat out large-cap stocks. Companies that initiate or raise their dividends deliver higher total returns than those that don’t pay a dividend. Investment-grade bonds are less likely to default than junk bonds. Funds with lower fees have to beat their benchmarks by a lower margin than funds with high fees to give shareholders the same amount of profit. Diversification and a long-term view will help your portfolio more than a concentration in a few investments and a short-term view.

Keep in mind that, by definition, probability is not the same as certainty. You could do everything right with your portfolio and still not be happy with your returns. Similarly, you could ignore the statistics above, spend $250 on Powerball tickets and win the jackpot. But, if you stop to consider the probabilities of making or losing money, the odds of you making better financial decisions (and not overspending on lottery games) are likely to improve.