February Power Hour – State of the Union

February 6, 2023

Dream Story – Jim and Dori, Little Wolf Farm CBD

One of the biggest questions in retirement for people is what to do.  Jim and Dory have answered that question for themselves and have a great story to share.

Dori has always had a passion for women in business and wanted to start a little business and when the opportunity came in the state of Wisconsin to have a pilot program growing CBD, she grabbed that opportunity and brought Jim along for the ride (and his experience). Jim spent about 20 years in the Farm Credit System doing finance and banking and then managed manufacturing plants around the country for a large agricultural cooperative. Jim retired from all of that in 2004 but is enjoying his retirement career with Dori.

They worked with farmers and plant specialists to grow their first crop, then worked with a chemist after harvest to formulate their own product. The Global farm in October of 2019  and it’s grown and prospered. We get great support from the local community, Mineral Point, Dodgeville, Darlington, and all the neighboring little towns. It’s primarily a retail store of CBD products pain creams, gummies, and tinctures along with chocolate shop ice cream and famous boba teas.

Dori has always had a real passion for trying to help people and try to offer natural products to assist with some pain relief, anxiety, and stress.  This is not a cure for everything, but it certainly provides a lot of pain relief and comfort to many people.

We like people, we like community and socializing. I would encourage those coming into retirement to make sure that when you do that you have a purpose. So often you hear about people who don’t have a plan or don’t have a purpose and become depressed and pretty lonely. I’d give good hard thought to the future, even when you retire. A lot of people now don’t fully retire, they stay active and do some things to help the community be that volunteering or having a small business. I think that’s really important. ~ Jim

Be sure to stop by and visit Jim and Dori at Little Wolf Farm next time you are in Mineral Point and if you are dealing with any ongoing pain, anxiety, or stress, be sure to ask them about their products and what might be best for you. Many of our clients have already benefited from what Jim and Dori provide!

Market Update

Green Money
Fixed Index Annuities (FIA) are used by many retirees because of their ability to protect against market losses. Returns in an FIA are based on an index, you receive up to a cap or percentage of the upside in exchange for 0% losses in a bad year.

Cap rates are very much affected by interest rates as the companies use long-term bonds as one of the main underlining holding to secure the accounts and use some of the interest they make from those in their index strategies. Low interest means lower cap rates.

With interest rates being higher now, cap rates are also going up. The annual cap rates for FIA’s are now around 9-10% and participation rates are even higher. Simply put, if the market goes up 12%, you receive 10% and that is locked in, you cannot lose it even if the market drops -20% the next year!

That is pretty good upside potential for zero downside risk!

A few years back, Roger Ibbotson, PHD and CIO of Zebra Capital Management wrote a white paper on using FIA’s as an asset class to replace bonds. (download the Whitepaper here)

FIAs have many attractive features as both an accumulation
investment and as a potential source of income in retirement. In
the simulation, the FIA performed better net of assumed fees than
long-term government bonds. We showed the FIA had comparable
volatility to bonds but with better downside protection. In our
study, when bonds underperformed, the FIA performed quite well.


Gold and Silver
Wall Street Silver on Twitter posted a video from an FDIC meeting of bankers talking about the banking system and their lack of faith in it. FDIC as about 125B in assets to insure 9T in deposits.

Buy Gold and Silver to insure your wealth! (about 10% of your overall portfolio) Watch an interview with our Gold and Silver experts here or just schedule a call to talk more about this!

State of the Union with our United Asset Management team

(please note, this portion of the video is more technical in nature, you do not need to understand it all, but it is important to know our team does!)

Guy Riccardi
Last year was the worse year on record for 60/40 portfolios with extreme volatility in both stocks and bonds.

While there were positive earnings in the overall stock market, stocks experience a bear market as defined by a pullback of 20% or more.

The easy explanation of why this happened is the Fed.

Rising interest rates at the pace they did caused sock valuations to drop and bonds to see a 15-year reset.

There are two main ways to achieve risk management – avoid major pitfalls and position into a strength.

In 2022 the 20yr treasury experience a 25% decline and some low-margin and growth stocks were down 60-80%.

As mentioned in last year’s State of the Market, we were already positioning into defensive stocks as they were the strength and had higher amounts in cash, hedges, inverse indexes, gold as well as stop losses in place inside portfolios.

The interest rate environment has also led to opportunities in the bond world. For example, some municipal bonds are paying tax-free yields of 4 to 6% plus they have an upside potential of 15 – 30% based on current pricing. We are taking advantage of those opportunities for our clients.

Bond funds however are limited on how they can participate in those opportunities based on what they can and can’t do as outlined in the prospectus and based upon the size of the fund. Many times there are not enough of these bonds for a large bond fund to be able to buy as their holdings are in the billions. A million-dollar block of bonds isn’t even something they can utilize no matter how great the opportunity, it is not even a drop in the bucket for them.

Tom Healy – Overall Economic Outlook

The Fed’s job is to slow the economy but not to the point of collapse.

We are seeing that manufacturing is weak, but service industries are strong.

Consumer confidence which lends more to job security is growing as is the consumer sediment which also factors into how people feel about their purchasing power.

A major concern and something to watch for is what happens with the debt ceiling. The last time we were at this point in 2011, the S&P saw a nice decline.

Jiorden Sanchez

When interest rates are low, growth stocks sell for more, but lowing interest rates leads to a decrease in what growth stocks will sell for leading to a decline.

Due to this, value stocks outperformed growth stocks in 2022 as we predicted.

Our focus in 2022 was on the rising rates and the effects that would have on stock valuations.

Now, in 2023, the focus is on the lagging effects higher rates have on the economy as we monitor earnings closely.

Besides all the above-mentioned risk management tools, we will avoid areas of risk  – cynical and small caps while positioning in the defensive-based sectors such as staples, healthcare, and utilities with companies that we screen for strong balance sheets and earnings. *

(* This is where holding individual securities vs mutual funds or ETFs is important. Those pooled funds are limited in what they can do as defined in the prospectus.)

No matter if the market is strong or weak, there are always risk management tools that can and are used to protect our clients.

Tax Talk

Many people this year will be surprised by taxes owed on investment accounts that are down. Utilizing tax swaps and tax harvesting is important for tax-efficient investing. Learn more about that here.

Estate Planning Spotlight

Although we can implement these goals anytime, the beginning of the new year is often a good starting point to help us measure our progress.
A favorable attitude towards New Year’s resolutions often points to the following benefits:
  • Having goals provides people with a sense of purpose and a positive, forward-looking perspective.
  • If you do not set goals, it is axiomatic that you will not achieve them!
  • Accomplishing a goal—or at least making significant progress—provides a sense of satisfaction.
Others point out the following cons of New Year’s resolutions:
  • The initial motivation generally wanes over time, making failure likely.
  • Not keeping them could lead to a feeling of failure or shame.
  • They reflect dissatisfaction with oneself or one’s life circumstances.
There are goals that can provide significant security for yourself and your family. Although they may not be the first New Year’s resolutions that come to mind, there are several steps that you can take that will benefit your family.
  1. Choose a guardian. If you are a parent, create a plan to ensure that your children are cared for if you or the other legal parent are unable to care for them by naming a person you trust to be their guardian. Grandparents – talk to your children about this!
  2. Create medical and financial powers of attorney. If you are unable to communicate or make your own medical or financial decisions, your agent under a power of attorney can step in and make decisions on your behalf
  3. Have enough life insurance. If you pass away, will the proceeds of your current life insurance policy provide adequate funds for your loved ones? Have you talked to your kids about this?
  4. Establish a plan for your money and property. Have you decided whom you would like to inherit your money and property when you pass away? If you do not have a written estate plan, your money and property will go to individuals specified in your state’s statute instead of to the beneficiaries you choose.

We serve clients in Mineral Point WI, Dodgeville WI, Platteville WI, Lancaster WI, Fennimore WI, Boscobel WI, Richland Center WI, Muscoda WI, Spring Green WI, Mazomanie WI, Sauk City WI, Middleton WI, Madison WI, Fitchburg WI, Verona WI, Mount Horeb WI, Barneveld WI, New Glarus WI, Monroe WI, Belleville WI, Oregon WI, Stoughton WI, Darlington WI, Cuba City WI, Hazel Green WI, Belmont WI, Dubuque IA, Freeport IL

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