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The Coffeehouse Investor newsletter provides you with brief bursts of inspiration in your journey toward simplifying your investment decisions and increasing your investment returns!


The Coffeehouse Book

The New Coffeehouse Investor Book

The Coffeehouse Investor

How to Build Wealth, Ignore Wall Street & Get On With Your life by Bill Schultheis

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Somewhere in one of the many articles I have read about Vanguard founder John Bogle, I seem to recall he was quoted as saying  “I am a master at stating the obvious,” or something like that. 

I was drawn to that quote in part because it was the same feeling I had when I originally started working on The Coffeehouse Investor back in 1993. 

I felt an enormous opportunity existed to “state the obvious” – to reveal to investors that by trying to beat the market, you are virtually guaranteed to dramatically underperform it. 

Today I want to state another obvious. 

As a society of investors, we obsess over short term swings of an asset class that is meant to be long term in nature.

To put it bluntly, if you are worried about losing money in the stock market over the next five years because it will negatively impact your lifestyle, you shouldn’t invest that money in the stock market.

(Furthermore, if you keep it in CDs paying .1%, you will never keep up with inflation, and likely to invest it back in the market when the market is 3,000 points higher than today.)

That is where your financial plan comes in to the picture. 

Your financial plan should reveal that you “don’t” need to draw from your stock market investments over the next five to eight years. 

What I am talking about today is serious stuff, especially in light of market activity the past two months.

If you were sitting there, watching your stock market investments drop like a rock, and then come rebounding back with a vengeance, you need to stop watching. 

This type of volatility is here to stay.  It isn’t going away.

If it isn’t the U.S. debt crisis, it is the European banking crisis. 

If it isn’t the European banking crisis, it is the U.S. Super committee crisis.

For instance, here are this morning’s headlines. . . . See what I mean? 

The Next Big Market Events: Fed, Jobs & the Super Committee After an extraordinary October rally –that’s sent the S&P 500 up over 13% month-to-date– it’s time to drop the debate over its validity and sustainability and start looking ahead to the market events in November that will impact your investment dollars.


If it isn’t one thing, it will always be another. 

It isn’t going away. 

It will drive you bananas if you keep watching it.

So stop watching it, and get on with your life.     

You need to have a little heart-to-heart talk with yourself. 

Trust your financial plan. 

Start looking at your financial plan twice as often as you look at your account statements. 

If it is properly constructed, it will remind you that during the next bear market, you will be OK. 

Oh, by the way, how often do you watch your accounts? 




Summer in Seattle

I guess you could say I work in the trenches. 

No, I am not a ditch digger, though I have spent many a hot summer days (and rainy autumn days) digging ditches while growing up on a wheat farm in the Southeastern Washington. 

(That is a different story for a different time, and had a profound impact on my Coffeehouse journey.)

I work in the trenches of the financial world.

No, I don’t have a doctorate in economics from Windy City U. 

I don’t have papers published on the theoretical maximum utilization point of the CAPM.

I don’t think much of the Trinity Study and the perfect portfolio withdrawal rate.

I don’t need a Dalbar Study to tell me something I already know. 

I work in the trenches of the financial world.    

I help people get from point A to point B. 

With as much confidence as possible on their part, and as little worry as possible.

Every day I engage with clients and prospective clients from around the world while working at Soundmark Wealth Management.

I talk to them about their hopes. 

Their anxieties. 

Their concerns. 

I take calls all day long when the market is having one of its worst months ever – September, 2011.

I take calls all day long when the market is having one of its best months ever – October, 2011.    

In the evenings I respond to e mails received from you at The Coffeehouse Investor

In the 28 years I have been working with people in this role, the past 11 as a financial advisor, it is amazing to see the results. 

Amid the bull markets and horrible bear markets,
people are getting from point A to point B. 

With confidence.  




Stay tuned.


It is not just how much the United States spends on health care that is important, it is also how fast that amount is growing. For more than 30 years, health care costs have been growing 2 percent faster than the general economy. That means every year we spend ever more on health care and therefore have to spend less on other things — or borrow money to pay for the extra health care.

If we continue this rate of growth, health care will be roughly one-third of the entire economy by 2035 — one of every three dollars will go to health care — and nearly half by 2080.

Rarely do OP-ED writers from The New York Times and The Wall Street Journal agree on anything. 

One topic they do:  Our country’s future financial woes are largely centered around one issue:

Out of control health care costs (primarily for the elderly). 

The above passage is from a thought provoking column  written by Ezekiel J. Emanuel that appeared in today’s Times

I don’t know what the answers are, but the first step is to articulate the problem in a concise manner so that enough people can actually admit there is a problem.  Emanuel does a great job of accomplishing this in a way that even I can understand

This is the first in a series of articles he will write on the escalating costs of health care. 


I guess I shouldn’t be surprised when smart people make dumb mistakes.  Everyone is entitled to a slip-up now and then.

But when seemingly smart people consistently make the wrong decisions, well, you have to wonder. 

Earlier this month, The Wall Street Journal ran an article titled “Pensions Wrestle With Return Rates.” 

In this piece, the author points out the high return expectations state pension funds are placing on employee retirement portfolios. 

The rate of return number is used in projecting how much the state has to sock away each year for future pension obligations.  A high rate of return means less money is needed each year.

Per the article, here are some projection numbers different states are using. . .

 Oregon  8%.
Minnesota  8.5%
Illinois 8.5%
California  7.75%
Texas 8%

From the article . . .

As with many other investors, optimism prevails among many pension-fund managers. “We are in a low-return environment with a lot of downside risk,” said Joseph Dear, Calpers chief investment officer. Nevertheless, Mr. Dear sees little reason to change the fund’s 7.75% assumption, because that target is achievable over the long term, he said.

Let’s say 25-40 percent of the pension portfolio is allocated in fixed income securities (bonds) yielding 3-4%.  This means the remaining portfolio is going to have to generate returns north of 10% to capture that 7-8% return.

We ARE in a low-return environment, as acknowledged by California’s pension fund manager.  Yet they are still plugging for lofty rates of returns.  

They admit reality.

Yet they don’t do anything to address reality.

No wonder so many pension funds across the nation are in dire straits when it comes to funding retirement obligations.

Are you on track to fund yours?   




What is the rate of growth you are using for your portfolio when building your financial plan?

If I want to retire when I am 70 years old, and am using a 5% growth rate in my projections (and 4% after retirement), that means I will have to save a lot more each year than if I use an 8% growth rate.

That leaves me with two choices, or potential scenarios.

I can use the 8% return projection, which means I don’t have to save as much today, but it also means that if, as the years go by, I don’t capture the 8% return, I am going to have to save a lot more as I approach 70, or I am going to have to work many years past 70.

Or, I can project my portfolio returns out at 5%, which means I have to save more today.  As the years go by, if I do capture the 8% return, it means I can save less as I approach the age of 70, or retire earlier.

Which scenario would you prefer?


What number do you use for your projections?

If you are using projections used by many state pension funds, you are not dealing with reality.

More on that next time.