It’s Christmas Eve. Some will be opening presents, others will be wrapping, and still, others will be doing last minute shopping for any number of reasons. Generally speaking, a lot of items will be purchased in boxes or placed in boxes, wrapped, and given as gifts.
Since many will be looking at, opening, and throwing boxes away, let’s consider nine boxes as a way to look at one's asset allocation for January 1, 2019, which will end in nine days. Herman Cain might like our use of nine, nine, nine.
Begin by taking a pen or pencil to paper. You can do this on your computer or tablet, but I prefer if you would do this the old school way. If you have a tablet, such as an iPad and Apple pencil, that too will work. Once ready, begin by drawing five horizontal lines. Be neat and keep the spacing wide enough to write a comment or two between each line. Now draw five vertical lines, but before you do, make sure to draw the first vertical line so that it connects the left edge of the top line with the three middle lines, ending with the bottom line. Then do the same on the right side. You now have a square or rectangle of lines. Now find the approximate middle of the top and bottom horizontal lines and draw a vertical line connecting the five. You now have two columns of four which will now be split by finding the middle of the left column and drawing a vertical line, then doing the same for the right column. There are now four columns and four rows that make sixteen squares.
In the bottom left square write the word “cash.” In the square directly above, write “income,” and in the square above income write “growth.” Now go to the top row and begin with the square on the far-right side. Write the words “tax-free.” In the square directly to the left of tax-free, write the words “tax-deferred,” and to the box left of tax-deferred, write “taxable.” Leave the box on the top row to the far left blank.
You now have nine empty boxes below your labels along the top row and left column. Those instructions are pretty basic, and something most elementary school children have done a few times in their lives. Yes, one could use graph paper and avoid drawing lines on a blank piece of paper, and a computer spreadsheet will do this quickly and neatly; however, if you read and did this exercise contemporaneously, there are several things that one can learn about themselves before the purpose and utility of the nine boxes is revealed.
On a separate piece of paper, draw three columns. The heading for the first column is “description,” the heading for the second column is “ownership,” and the third is “value.” Take your time and list everything you own with a realistic value based on what an independent third-party would pay you today. And yes, grandmother’s three little pig ceramic Christmas decoration is a heart warmer because she made it for you years ago, and now she’s deceased, but for 99.999% of the rest of us, we’ll give you ten cents for the three, and that’s being generous. Mean? Probably. But you get the point now. The list should be complete with all tangible and intangible items at true liquidation value.
When done, enjoy Christmas eve and the growing number of boxes, but return tomorrow for Part 2. Yes, it’s Christmas, but you’ll need a distraction at some point, and the timing is perfect for our Nine Box Process.
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Benny Goodman - Santa Clause - Came in the spring Because of the passae of time, I suspect most Americans have not heard of Benjamin David Goodman (May 30, 1909 – June 13, 1986), best known as Benny Goodman, was an American jazz clarinetist and bandleader known as the "King of Swing". In the mid-1930s, Goodman led one of the most popular musical groups in the United States. His concert at Carnegie Hall in New York City on January 16, 1938 is described by critic Bruce Eder as "the single most important jazz or popular music concert in history: jazz's 'coming out' party to the world of 'respectable' music." I mention Benny to highlight an old saying: "Those who do not know their history are destined to repeat it."
The stock market rallied early in the day on Friday, and then reversed course by late morning. In the end the market finished sharply lower as a pending, now actual, government shutdown added to building concerns about higher interest rates and slowing global growth. Note and remember that the stock market and economics are two different things. The Dow Jones Industrial Average fell 1.8%, while the Nasdaq Composite declined 3.0%, and the S&P 500 was down 2.1%. For the week, stocks had one of their worst performances in a decade, with declines of 6.9% for the Dow, 8.4% for the Nasdaq and 7.1% for the S&P 500. Year-to-date, the major benchmarks are now well into negative territory, with drops of 9.2% for the Dow, 8.3% for the Nasdaq and 9.6% for the S&P 500. The Nasdaq has also entered a bear market, down nearly 22% from its late August peak, while the S&P is currently 17.5% below its late September high.