Family Update
The pool lanai extension has officially begun! My orchids are practically bursting at the seams. This new house just doesn’t offer the same space as they had before. If you step outside at night and listen closely, you can almost hear them murmuring in excited anticipation. They know their time is coming.
Meanwhile, my love affair with Stinky the kitten grows deeper by the day. I watched a video on how to get your cat to truly bond: feed them, give treats generously, and play often. Simple enough. But apparently, I’m the only one following the instructions. He’s got endless energy, more than any cat I’ve ever had. If I’m not swinging a feather wand with a bell, he’s ambushing my toes like a tiny jungle predator.
His relationship with the dogs is... complicated. Penny plays with him, tail wagging the whole time. Desmond, on the other hand, just blinks slowly as Stinky pounces on his face like it’s his personal trampoline.
Oh, and the pickleball court? One final coat of paint and it’s done. So close.
It was early Thursday morning. Mike and Connie King were eating breakfast with the TV on in the background when a documentary about Bernie Madoff, the infamous fraudster who ran the largest Ponzi scheme in history, caught their attention.
A Ponzi scheme is surprisingly simple:
•You invest your money with someone.
•They put it into their own account and spend it.
•When some investors want their money back, they pay them using the funds of new investors.
•Eventually, too many people ask for their money, and the whole thing collapses.
Connie stared at the screen. “We have all our money with a financial advisor, too,” she said. “Madoff faked everything: statements, returns, audits. It looked real.”
Mike tried to reassure her. “Our advisor explained this. He doesn’t hold our money. It’s custodied by Schwab. We get statements directly from them, and we can log in anytime.”
“Bernie’s clients got statement's too,” Connie replied. “What if it’s all smoke and mirrors?”
Mike shrugged. “Let’s go ask.”
The Visit to Schwab:
They drove to the Schwab office in Shelbyville. Connie walked up to the front desk and asked to see their accounts. The teller smiled, pulled up the information, and printed a statement. It matched their online account perfectly.
“Have you ever heard of an advisor stealing money?” Connie asked.
“Not when the assets are held with us,” the teller replied. “Your advisor doesn’t actually hold your funds. We do. And the accounts are in your name, not his.”
That helped.
As they walked ou,t Connie got nervous again, “What if Schwab goes out of business?”
So they went back in.
The teller was still cheerful. “Even if that happened, your investments are in your name and not mingled with Schwab’s money. Think of it like a safe deposit box. What’s in there is still yours, even if the bank closes.”
She added, “And we’re members of SIPC. If a firm fails, you’re covered up to $500,000 per account. That means your IRA receives $500,000 in coverage, your husband's another $500,000, and so on. And because Schwab serves high-net-worth clients with accounts exceeding $500,000, they go above and beyond SIPC by purchasing "excess of SIPC"insurance that covers up to $600 million in additional assets.
Driving home, Connie said, “Okay… so we’re protected from fraud. But what if the market crashes?" So Mike pulled over to the side of the road and stared at his wife blankly.
At home, Mike pulled out one of their advisor's newsletters. He had a habit of including long-term market performance data, which provided a perspective in times of fear.
They examined an example portfolio that consists of 50% bonds and 50% in the S&P 500. Here's how that mix has performed over the years:
1990 1.5%
1991 24.0%
1992 9.8%
1993 13.2%
1994 0.0%
1995 28.6%
1996 13.7%
1997 22.5%
1998 18.2%
1999 10.9%
2000 0.2%
2001 2.0%
2002 -11.8%
2003 20.9%
2004 10.3%
2005 4.9%
2006 11.3%
2007 4.3%
2008 -20.8%
2009 24.6%
2010 11.6%
2011 7.3%
2012 13.0%
2013 15.6%
2014 12.0%
2015 0.3%
2016 11.1%
2017 15.7%
2018 -3.5%
2019 23.3%
2020 12.9%
2021 13.4%
2022 -17.9%
2023 9.1%
2024 14.5%
Mike pointed at the paper. “Only four losing years in over 30 years. And even 2008 bounced back within 18 months. Our advisor’s not promising perfection, he’s just reminding us to zoom out.”
Connie smiled. “Let’s go play pickleball.”
Be Blessed,
Dave
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