Entries by William L. Mehserle, Jr.

Inflation: Absence of Evidence was not Evidence of Absence

The phrase “black swan” is derived from a Latin expression, first credited to the second century poet Juvenal, when he penned rara vid in terries nigroque simillima cyngo (“a rare bird in the lands and very much like a black swan”). You see, once upon a time, well into the 17th century, Juvenal’s phrase was a common expression in England for an impossibility – that is, black swans simply did not exist. In fact, western mankind, for hundreds and hundreds of years, believed that all swans had white feathers since all empirical evidence declared swans possessed white feathers. Thus, the term “black swan” came to represent an impossibility.

Sequence-of-Return Risk: An Uncontrollable Factor to Financial Success that is Often Overlooked

Suppose we have two different individuals, John and Anne, both of whom work the same number of 40 years, have the same salary and salary growth, save the same amount of money, and are identically invested. In fact, they even have identical returns – both returned 5% annualized real (above inflation, or roughly 8% nominal) after fees. The only difference is that John began work in 1954 and Anne in 1967. At the end of their 40-year careers, Anne has $880,000 saved and John has $590,000 saved. How is this possible?

PFS Financial Firm Updates Brand

PFS Financial announced its rebrand today with a press release entitled: “PFS Financial Celebrates New Brand to Highlight Team-Based Wealth Management Approach.”

The purpose of the rebrand was was to highlight the work we do for our clients: provide vertically integrated, precise, comprehensive financial plans paired with tailored investment advice. This rebrand benefits our clients since it will allow us to communicate information more efficiently.

Coffee and Finance

The latest U.S. Census found that the median income of households was $51,017 per year. In 2013, the average U.S. personal savings rate hit a low of 4.2 percent, far less than the 10 percent minimum that most financial advisors recommend you set aside each year towards retirement. These numbers come at a time when, according to an Accounting Principals Workonomix survey, most people spend $1,000 per year on Starbucks, Dunkin Donuts, and other take-out coffees.

Business Owners Have Risk

Hold on. So what you’re saying is I have to actively provide information for my employees for their investments,” a business owner recently asked. “How am I supposed to know what to recommend?” “Yes, as the employer, you have a ‘fiduciary’ responsibility for their retirement plan,” I replied. “This means you need to actively be evaluating the fees they pay, the investment options they can choose, and the investment counsel they have access to.”

Engineering and Finance

Each day, it strikes me how similar the core thinking and lessons from Chemical and Biomolecular Engineering are to finance and economics. With Chemical Engineering, chemicals are used to design a production process in order to achieve a desired result. Likewise, in wealth management, an input is the starting point (often wealth), quantifiable goals are expressed, and then investments are structured to help achieve desired results.