Business

ON THE MONEY: When it comes to assets, it’s all about preparation

WAVE NEWSPAPERS — It’s worth noting that on a per capita basis, more Americans became millionaires after the Great Depression than any other time in history

Published

6 years ago

January 11, 2019

John Grace Contributing Columnist

By John L. Grace

About four years before the 2000-02 “tech wreck” where the NASDAQ dropped 80 percent, according to Yahoo Finance, former Federal Reserve chairman Alan Greenspan warned of “irrational exuberance” at a dinner speech.

In an interview with CNN Dec. 17, Greenspan said, “It would be very surprising to see [markets] sort of stabilize here and then take off.”

Greenspan went on to say leading stock indexes may have a little upside left. But that’s only going to make the inevitable drop more painful. So, “at the end of that run, run for cover,” he said.

Now I don’t know if Greenspan is correct, nor do I offer an opinion as to how much time there might be before a major downturn. But I do know that no one needs to foresee the future to prepare for it.

Who told us in 2007 that credit default swaps and sub-prime mortgages could ruin the world as we knew it? So if no one told you about the last crisis, who do you think will alert you in advance of the next one?

Nearly half (48.6 percent) of chief financial officers in the U.S. believe this country will be in recession by the end of next year, according to the Duke University/CFO Global Business Outlook survey released on Dec. 12. The Duke survey also found that 82 percent of CFOs believe that a recession will begin by the end of 2020.

It seems like just a minute ago the CFOs were embracing the mistaken notion that this country could enjoy 4 percent gross domestic product growth. We’ve been saying for some time now what former Fed Reserve Chair Janet Yellen said that, “quite high” levels of corporate debt are “a danger.”

Yellen is absolutely correct with her observation, “High levels of corporate leverage could prolong the downturn and lead to lots of bankruptcies,” she said on CNBC, Dec. 10.

According to me, it’s not about the prediction, it’s all about the preparation. We put far more emphasis on the work necessary to keep client assets intact than attempting to predict what might happen or when it might happen.

I was asked to speak to 100 of my peers recently. I started by asking, how do you think that two-story white house in Mexico Beach, Florida survived Hurricane Michael?

The first answer was, “It was God,” and the second answer offered was, “It’s a miracle.”

I said you can believe what you want to believe, but the third response is the correct answer, “They built it for the big one.”

The point I was making is that just as most houses are built in the same pattern, most portfolios are going to do the same thing at the same time. Like ordinary houses after a Category 4 hurricane, assets could be devastated.

As we see one of the few houses left standing after Hurricane Michael, I did everything I could to inspire my colleagues to approach the task as those homeowners did.

“It’s the first house that either one of us had ever built,” said Dr. Lebron Lackey, one of the homeowners.

The house was built with concrete walls. The foundation included 40-foot pilings. Rebar was placed through all of the walls to increase stability. The additions added about 15 to 20 percent more expense than usual.

In the investment world, cost is king. The lower the cost the better. But that answer addresses a different question. To “run for cover” by keeping your assets intact begin by determining how much loss you can accept. Followed by how active management strategies can be applied on behalf of your personalized goals.

Then look to see what asset classes outside of cash, bonds and stocks can be added to your portfolio. I count eight asset classes at Yale Endowment, for example. A stool with eight legs is simply stronger than a two- or three-legged stool to hold up the weight. Even in a hurricane.

When it comes to cost, it is often the case that you get what you pay for.

Suppose the CFOs are wrong about the severity and the timing. Just suppose it’s not another recession around the corner, because it could turn out to be a worldwide Great Depression II.

Something astrophysicist Michio Kaku said at a 2014 conference I attended should have happened 10 years ago. Act as if another depression is in the cards. If it doesn’t happen, who cares? If it does happen, prepared investors may be able to take advantage of opportunities they never saw coming.

It’s worth noting that on a per capita basis, more Americans became millionaires after the Great Depression than any other time in history. As I wrote just before Thanksgiving: Be thankful for cash. And get ready. Winter is coming.

John L. Grace is president of Investor’s Advantage Corp, a Los Angeles-area financial planning firm that has been helping investors manage wealth and prepare for a more prosperous future since 1979.

His On the Money column runs monthly in The Wave.

John Grace Contributing Columnist

Posts by John Grace Contributing Columnist

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Black History

Alice Parker: The Innovator Behind the Modern Gas Furnace

Born in Morristown, New Jersey, in 1895, Alice Parker lived during a time when women, especially African American women, faced significant social and systemic barriers. Despite these challenges, her contributions to home heating technology have had a lasting impact.

Published

36 minutes ago

December 22, 2024

Oakland Post

In 1919, Alice Parker patented the design for a gas-powered central heating system, a groundbreaking invention. Image courtesy of U.S. Patent Office.

By Tamara Shiloh

Alice Parker was a trailblazing African American inventor whose innovative ideas forever changed how we heat our homes.

Born in Morristown, New Jersey, in 1895, Parker lived during a time when women, especially African American women, faced significant social and systemic barriers. Despite these challenges, her contributions to home heating technology have had a lasting impact.

Parker grew up in New Jersey, where winters could be brutally cold. Although little is documented about her personal life, her education played a crucial role in shaping her inventive spirit. She attended Howard University, a historically Black university in Washington, D.C., where she may have developed her interest in practical solutions to everyday challenges.

Before Parker’s invention, most homes were heated using wood or coal-burning stoves. These methods were labor-intensive, inefficient, and posed fire hazards. Furthermore, they failed to provide even heating throughout a home, leaving many rooms cold while others were uncomfortably warm.

Parker recognized the inefficiency of these heating methods and imagined a solution that would make homes more comfortable and energy-efficient during winter.

In 1919, she patented her design for a gas-powered central heating system, a groundbreaking invention. Her design used natural gas as a fuel source to distribute heat throughout a building, replacing the need for wood or coal. The system allowed for thermostatic control, enabling homeowners to regulate the temperature in their homes efficiently.

What made her invention particularly innovative was its use of ductwork, which channeled warm air to different parts of the house. This concept is a precursor to the modern central heating systems we use today.

While Parker’s design was never fully developed or mass-produced during her lifetime, her idea laid the groundwork for modern central heating systems. Her invention was ahead of its time and highlighted the potential of natural gas as a cleaner, more efficient alternative to traditional heating methods.

Parker’s patent is remarkable not only for its technical innovation but also because it was granted at a time when African Americans and women faced severe limitations in accessing patent protections and recognition for their work. Her success as an inventor during this period is a testament to her ingenuity and determination.

Parker’s legacy lives on in numerous awards and grants – most noticeably in the annual Alice H. Parker Women Leaders in Innovation Award. That distinction is given out by the New Jersey Chamber of Commerce to celebrate outstanding women innovators in Parker’s home state.

The details of Parker’s later years are as sketchy as the ones about her early life. The specific date of her death, along with the cause, are also largely unknown.

Oakland Post

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Activism

2024 in Review: Seven Questions for Frontline Doulas

California Black Media (CBM) spoke with Frontline Doulas’ co-founder Khefri Riley. She reflected on Frontline’s accomplishments this year and the organization’s goals moving forward.

Published

44 minutes ago

December 22, 2024

Oakland Post

Khefri Riley, co-founder of Frontline Doulas. Facebook photo.

By Edward Henderson, California Black Media

Frontline Doulas provides African American families non-medical professional perinatal services at no cost.

This includes physical, emotional, informational, psychosocial and advocacy support during the pregnancy, childbirth and postpartum period. Women of all ages — with all forms of insurance — are accepted and encouraged to apply for services.

California Black Media (CBM) spoke with co-founder Khefri Riley. She reflected on Frontline’s accomplishments this year and the organization’s goals moving forward.

Responses have been edited for clarity and length.

Looking back at 2024, what stands out to you as your most important achievement and why? 

In 2024, we are humbled to have been awarded the contract for the Los Angeles County Medical Doula Hub, which means that we are charged with creating a hub of connectivity and support for generating training and helping to create the new doula workforce for the medical doula benefit that went live in California on Jan. 1, 2023.

How did your leadership and investments contribute to improving the lives of Black Californians? 

We believe that the revolution begins in the womb. What we mean by that is we have the potential and the ability to create intentional generational healing from the moment before a child was conceived, when a child was conceived, during this gestational time, and when a child is born.

And there’s a traditional saying in Indigenous communities that what we do now affects future generations going forward. So, the work that we do with birthing families, in particular Black birthing families, is to create powerful and healthy outcomes for the new generation so that we don’t have to replicate pain, fear, discrimination, or racism.

What frustrated you the most over the last year?

Working in reproductive justice often creates a heavy burden on the organization and the caregivers who deliver the services most needed to the communities. So, oftentimes, we’re advocating for those whose voices are silenced and erased, and you really have to be a warrior to stand strong and firm.

What inspired you the most over the last year?

My great-grandmother. My father was his grandmother’s midwife assistant when he was a young boy. I grew up with their medicine stories — the ways that they healed the community and were present to the community, even amidst Jim Crow.

What is one lesson you learned in 2024 that will inform your decision-making next year?

I find that you have to reach for your highest vision, and you have to stand firm in your value. You have to raise your voice, speak up and demand, and know your intrinsic value.

In a word, what is the biggest challenge Black Californians face?

Amplification. We cannot allow our voices to be silent.

What is the goal you want to achieve most in 2025?

I really would like to see a reduction in infant mortality and maternal mortality within our communities and witness this new birth worker force be supported and integrated into systems. So, that way, we fulfill our goal of healthy, unlimited birth in the Black community and indeed in all birthing communities in Los Angeles and California.