A Modest Tribute to Nico Palania

I can count on one hand the number of times I met Nico Palania, but I didn’t need another hand to know that he was a gem of a human being.  What I lacked in personal interaction I knew from my daughter Jessica – that he was kind, caring, creative, ebullient, and most importantly, that he loved and cared for her and she did the same for him, which is really all a father could hope for. Last week I met Nico’s parents, sister, extended family and friends under terrible circumstances.  I heard their stories about a life that was far too short but also well-lived, and it only reinforced what I already knew. 

We don’t need reminders that life can be cruel.  Twenty-three is far too young to die, and twenty-one is far too young to experience this kind of heartache.  And then there’s the heartache of losing a child. My buddy Jim phrased it well when he said you never know when life is going to reach over, grab the wheel and turn it on you.  When it happens, all you can do is hold tight and carry on as best you can. 

Prior to Nico’s passing on June 1, my wife and I didn’t know exactly where things would lead, but we suspected that we would one day call him our son-in-law.  I wish time had allowed for that to happen.

So long, Nico, and thank you for loving my daughter for as long as you could.

Index Funds and Financial Planners

There’s been a lot of hubbub in recent financial publications about index funds, and not surprisingly financial planners have had the most to say about it, since index funds in many cases make financial planning largely unnecessary.  When something starts to encroach on your turf, you do what you can to protect your turf. 

This appears to be the case for Robert C. Lawton, who wrote an article for Forbes last month, making the claim that index funds are often not the way to go because they absorb 100% of market downturns and by definition ensure only average returns. His advice?  To use index funds for asset classes that are “widely covered and researched,” but to use actively managed funds for all other asset classes.

But Rick Ferri – also for Forbes – wrote a sort of rebuttal to the aforementioned article, summarizing research done by Jason Zweig of the Wall Street Journal that shows how Lawson’s conclusions were based on a Fidelity report that excluded “high fee active funds and poor performing active funds.”   Fidelity has since removed public access to the study.

Oops.

If all of this is gobbledygook to you, I highly recommend reading about index funds, asset allocation, asset growth and financial planners’ abilities to beat the market.  I’m not a financial genius, but here’s what I’ve learned:

1)     Financial planners typically charge you 1% of your assets to manage your money.  Sometimes even more.  So if you have $1 million in assets, you’ll pay your financial planner $10,000 a year.

2)     This means that a financial planner will have to beat the market by at least 1% in order to justify the expense.

3)     This also means that financial planners don’t have an incentive to recommend index funds because that will ensure you lose to the market.  Instead, you’ll earn exactly what the markets dictate MINUS the financial planner fee of 1%.  (I HIGHLY recommend that you read this article, especially if you don’t know how losing 1% of earnings year after year affects your portfolio.)

4)     Financial planners therefore have an incentive to invest your money in actively managed funds to try to beat the market.  The result?  Again, READ or LISTEN to this excellent Freakonomics episode from 2017 called “The Stupidest Thing You Can Do With Your Money,” in which Kenneth French, professor of finance at Dartmouth discusses a study that concluded that only 2-3% of actively managed funds cover their cost.  That’s ON TOP of the 1% you might pay a financial planner to manage your portfolio.

Allow me to reiterate: if you allow a financial planner to manage your portfolio for 1% and invest in index funds, you automatically earn 1% less than the market.  If your financial planner invests in actively managed funds, you not only lost 1% to the market, but 98% of the funds you invest in won’t even cover their costs.  It’s a lose-lose situation. Here are a few more articles you might want to consider reading.

So what to do?  Well, I would suggest reading a lot, figuring out an asset allocation model that makes sense for you, and investing in four or five index funds that cover different asset categories.

But what if you really don’t know anything about finance and you find it terribly intimidating?  Heck, I remember working at a credit union for teachers back in the early 90s, and these were educated people who often had $50,000 in loans for things like boats, RVs, credit cards, etc. and who were only making $40,000 a year!  I get it.  Some people truly aren’t educated when it come to finance.  So what to do?  Well, again I suggest reading.  If you can read you can learn.  I highly recommend a book I purchased for my daughters called The Index Card. It’s an easy read.  It’s concise.  And it includes very specific rules you should follow.

In addition, there is another way to benefit from a financial planner without breaking the bank.

Even though I’m somewhat literate in finance (but only somewhat), I pay a financial planner a fixed fee every five years or so to review my portfolio, my tax strategies, my insurance, etc.  I couldn’t be happier with this arrangement.  Just last month I spent $500 to my planner – so only $100 a year – and in return he offered some suggestions about where to tweak my portfolio, adjustments I should consider making in insurance, and a few tax-savings strategies I might want to employ.  I’ll spend the next few months following up on his advice, and in five years I’ll pay him again to review my portfolio.  I can tell you that one simple tax strategy he suggested five years ago has saved me $1000 a year for the past five years and will continue to do so for the next two or three.  So for $500 I saved about $8000.  So I’m not saying financial planners don’t have something to offer.  They do.  I just don’t know if managing portfolios is one of them.

I’ve met several financial planners over the years.  Some nice, some absolute tools.  Some smart, some no smarter than you and me.  To me, it’s just too much of a crapshoot to trust someone enough to manage your portfolio and pay him/her 1% to do it.  It makes no sense to me.

For me, reading a lot and investing in index funds are the way to go.

Record Night Returns: the Recently Departed

Music fans everywhere have been ruminating for a while about how difficult these next twenty years are going to be, as our rock and roll heroes leave Planet Earth just in time to avoid the developing catastrophe that will be the latter half of the 21st Century.  But upon further reflection, we really don’t have to wait to feel the pain because the last decade has already been rough.  I hadn’t realized the extent to which we’ve lost our musical brothers and sisters until last week, when Record Night festivities resumed at the Wall of Sound in Menomonee Falls, Wisconsin.  A dubious crew gathered to honor those artists who died within the last decade.  Songs were celebrated, drinks were consumed, and mistakes were made, as noted below.  But even avoiding the obvious casualties – Michael Jackson, David Bowie, George Michael and Tom Petty (until the very last song) – there were a staggering number to choose from.  True, we reached pretty deep with some of these, but that’s what makes these types of outings fulfilling. 

Without further ado, celebrate with us as we pay homage to the recently departed.  My apologies for any errors.

Southern Nights – a twofer tribute of singer Glen Campbell and songwriter Allen Toussaint.  We also played a bit of God Only Knows, which was unfortunate
Massachusetts – Robin Gibb of the Bee Gees
Glory Days – Clarence Clemons of the E. Street Band (though, sadly, no saxophone on this song!)
Fool for the City – Craig MacGregor of Foghat
Drown in my Own Tears – Pat Dinizio of The Smithereens
It’s the Singer Not the Song – Jimmy Jamison of Survivor
I Was a Teenage Werewolf – a twofer of Lux Interior of the Cramps and producer Alex Chilton
Beyond Belief – producer Geoff Emerick for this Elvis Costello and the Attractions song
Starrider – Ed Gagliardi of Foreigner
Dreams/Zombie – Dolores O’Riordin of The Cranberries

It should be noted that in the midst of these record selections, one could hear Kevin uttering while checking Google, “That sucks!  I thought he was dead!”  Such is the competitiveness of song selections on record night.

Peaceful Easy Feeling – Glenn Frey of The Eagles
Home and Dry – Gerry Rafferty

This has been my favorite song for the past two weeks.  I’ve played it perhaps twenty times and figured out the unusual chord pattern on the piano.

Creep – Scott Weiland of Stone Temple Pilots
Thank You For Being a Friend – Andrew Gold
Say It Isn’t So – John Spinks of The Outfield
The Cover of Rolling Stone – Ray Sawyer of Dr. Hook & the Medicine Show
Touch and Go – a twofer of Keith Emerson and Greg Lake of – in this case – Emerson, Lake and Powell
Knocking at Your Back Door – Jon Lord of Deep Purple
Burning Bright – Roger Ranken of General Public
20th Century – Shawn Smith of Brad
Saturday Night – Alan Longmuir of Bay City Rollers
Looking Around – a twofer of Peter Banks and Chris Squire of Yes
Love at First Feel – Malcom Young of AC/DC
God Only Knows (again!) – this time with Daryl Dragon of Captain & Tennille
Snortin’ Whiskey/Boom, Boom – Pat Travers
Call Me a Dog – Chris Cornell
Flying Cowboys – producer Walter Becker for Rickie Lee Jones
Livin’ Thing – Mike Edwards of ELO
Queen of the Night – Whitney Houston
Be Like That – Matt Roberts of Three Doors Down
People are Strange – Ray Manzarek of The Doors
Think – Aretha Franklin
Might Mighty – Morris White of Earth, Wind & Fire
Ride My Seesaw – Ray Thomas of The Moody Blues
I Go Crazy – Nick Marsh of Flesh for Lulu
In the Dead of Night (Presto, Vivace and Reprise) – a twofer of Allan Holdsworth and John Wetton of UK
I Can Feel Your Heartbeat – David Cassidy

Note: Paul thought it was 10cc!

To Be With You – Pat Torpey of Mr. Big
Getting Closer – producer Phil Ramone for Billy Joel, who was playing not 30 minutes away at Miller Park
Space Station #5 – Ronnie Montrose of Montrose
Jammin’ Me – Tom Petty

That was all we had time for, but there were others we could have chosen, most notably the aforementioned superstars, but I was ready to go with George Martin productions, songs co-written by Jerry Lieber, Chuck Berry, etc. were it not for a two hour drive home awaiting me.

There will be more heroes to fall, as there must be.  Hang on tight, music fans.  It’s going to be a rough ride.

An Antidote for the Cynic

Jerry Maguire once uttered in Dorothy Boyd’s living room, “We live in a cynical world, a cynical world,” and while I normally wouldn’t be one to dispute this, things sometimes happen that turns this assumption on its head.  Case in point: two months ago my family encountered a state of upheaval after my wife’s surprise ankle surgery, and the outpouring of assistance and care we received from friends, family and co-workers was heartwarming, turning difficult days into manageable ones. 

Now, someone like Jerry Maguire might say, “Sure, friends and family might come through, but what about the guy on the street?  The average Joe Schmo will swindle you out of your last dime if he’s able.”

I’m not so sure.

Last month my son and I drove through much of Ohio as we visited the University of Cincinnati, Ohio State and Case Western, and upon our return home on Interstate 80, I received a phone call from my still-convalescing wife. 

“I just received a text from someone saying they have your wallet.  Do you have it on you?”  With one hand on the steering wheel, I patted by jean’s pockets.  My wallet was nowhere to be found.

After a frantic transfer of information, I was soon talking to a woman and her husband who were shopping about 60 miles east and who’d found my wallet on the parking lot floor of the Steak ‘n Shake in Elyria, Ohio.  My son and I had made a quick stop for a banana shake, a way of celebrating having visited three colleges in two days, and upon getting back in the car I had apparently dropped my wallet while retrieving my phone from my front pocket. 

We quickly exited the turnpike and turned around, and while we raced along the highway in the wrong direction, I summoned my inner Jerry Maguire, my mind flipping through all the possible ways this could go wrong:  the couple might not show, using this hour of time to go on a shopping spree; they might return my wallet but in time I’ll discover charges on my credit card statement, and on and on.

Instead, I was greeted in the parking lot of an Ohioan McDonald’s by two of the nicest people who not only returned my wallet, but also refused any money in return and who humorously told the tale of how they tracked me down.  After a few false starts on Facebook where a few other Paul Heinz’s happily strung the honest couple along for a while, they found my wife’s business card (I didn’t even know I had her business card) and made the connection.

We bid farewell, and with wallet securely in hand, I returned to the turnpike with my son, a few hours behind our original schedule, but a few lightyears ahead emotionally, our faith in mankind momentarily restored. 

It’s so very easy to sink into the seas of cynicism, but every once in a while, a life jacket gets tossed in our direction.  It’s best to hold on and never let go.

The 2019 Brewers

It’s hard for Brewers fans not to be optimistic for the upcoming season, which is exactly what makes a lot of Brewers fans worried.  It’s so much easier to go into a season with low expectations, but after defying the odds in 2018 by winning the NL Central and making it to Game 7 of the NLCS, owner Mark Attanasio and GM David Stearns are all in, spending an unprecedented amount (for the franchise, that is) to make a run for the World Series.  There’s reason to think the Crew can make it happen again.  There are also a few reasons why they may not.

Offensively, the Brewers have the potential to score a helluva lot of runs, especially if shortstop Orlando Arcia can play up to 2017 levels.  Looking at the likely regular starting lineup, there’s not an easy out in the bunch, and each player can do some damage with the longball, something fans should see plenty of with the addition of catcher Yasmani Grandal and the resigning of (this year) second baseman Mike Moustakas.  The Brewers also have a lot of nice options to play matchups against righties and lefties with the aforementioned additions plus outfielder Ben Gamel.  Yes, this roster is going to strike out a lot, and fans will slap their heads from time to time when guys like Shaw and Moustakas refuse to bunt against the shift (Don’t think this matters?  Review Game 2 of the NLCS), but overall, expect to see an entertaining offense in 2019.

So why the worry?  Pitching.  It’s notable that most Brewers fans had the same worries last year, yet the Crew ended up with the fourth best ERA in the league, largely due to manager Counsell’s effective “out-getter” strategy, eschewing the traditional starter-closer roles in favor of getting outs where it mattered most by any means necessary.  Generally, I liked this strategy, as I hate what the closer role has become and the Brewers can’t afford marque starters, but sometimes the strategy fell victim to overmanaging (taking Wide Miley out in the sixth inning of game 2 of the NLCS after only 74 very effective pitches).

But this year the Crew is going with a group of very young and unproven starters, including three who played important reliever roles last year: Brandon Woodruff, Corbin Burnes and 22 year-old Freddy Peralta.  The success of the Brewers depends largely on whether this trio can pitch reasonably effectively for an entire season.  Starter Jimmy Nelson is still trying to regain his strength after a 2017 shoulder injury that likely led to the Crew missing the playoffs that year.  Whether he will ever pitch regularly in the MLB again is big question mark.  To make matters more concerning, the Brewers recently discovered that reliever extraordinaire Corey Knebel has a UCL injury, and earlier in spring training it was deemed that Jeremy Jeffress would not start the season with the team, as he needs to build up arm strength after a shoulder injury. 

So, a lot of question marks for sure, but it would be wise not to bet against Stearns and Counsell, who’ve managed to find a way to put a winning team on the field even when it seemed unlikely.  So what’s my prediction?  I would be surprised if the Brewers managed to win the NL Central again – it’s going to be a very good division this year, with the Cubs and Cardinals likely contending for the division crown – but I would be just as surprised if the Crew wasn’t at least in the September hunt for a wild card berth.  Their 88-74 finish may get them into their first back-to-back playoff appearance since 1982.