Ikaria or Bust

Last fall I read a fascinating article in the New York Times Sunday Magazine entitled “The Island Where People Forget to Die.”  The article is about the nonagenarians and centenarians of Ikaria, a rugged and remote Greek island in the Northern Aegean.  It explores the possible factors that allow these people to lead longer, healthier lives.   

Dan Buettner, the article’s author, opens with the story of Stamatis Moraitis, a Greek war veteran who had settled in Port Jefferson, NY after the war.  Moraitis claimed that in 1976, he was diagnosed with lung cancer.  He considered going through chemotherapy, but elected instead to return to his homeland and spend his last days in the village of his childhood.  At first, he spent his days in bed being tended to by his elderly mother and his wife.  When childhood friends heard he was back, they paid daily visits, often bringing a bottle of wine to share.  Soon, he was working in the garden and making the walk up the hill to church.  He woke when he wanted, worked in the vineyard, had lunch, took a long nap.  Evenings were spent with family and friends.   Today, he is over 97 years old.  Is this all true?  I don’t know, but Moraitis is 97 and healthy and loving life!

Buettner spent five years studying the lives and habits of the people of Ikaria.  Working with his partner, a demographer from Belgium, they verified that Ikariotes reach the age of 90 at two and a half times the rate of Americans and they are often healthier.  More impressive is the fact that Ikariotes live 8 to 10 years longer than Americans before succumbing to cancer, heart disease, dementia and Alzheimer’s disease.

So, what did Buettner uncover in his study on the centenarians of Ikaria?  In addition to the Mediterranean diet focusing fresh vegetables and fruit, yogurt, olive oil and red wine, Ikariotes are very communal and they spend many hours a day socializing with their fellow villagers.     They don’t drive, so walking is their form of exercise.  They nap every day and attend church every Sunday.  And reportedly, a healthy sex life is enjoyed by more than 80% of Ikairote men over 65.

I just returned from a Retirement Income Summit where the overriding theme was how to prepare our clients for the cost of health care in their retirement.  In my last post http://parsecfinancial.wordpress.com/2013/04/10/remember-wear-sunscreen/, I touched on this topic.

What has become abundantly clear is that it is imperative that we focus as much attention on leading healthy, active and productive lives as we spend on saving for a comfortable retirement.

While I don’t expect I will pack up everything and move to Greece, I think I could certainly find a way to incorporate many of the Ikariote habits into my daily life…now, I just need to find a way to sneak in that nap!

Tracy Allen, CFP®
Financial Advisor

What Price for Cheap Clothing?

I was listening to NPR on the way in to work today, as I do every morning. They were covering the tragic garment building collapse in Bangladesh, where the death toll has climbed above 500 and they estimate that hundreds more people are still missing. Apparently the owner knew the building was unsafe, after an engineer was called to inspect it following the development of cracks. The engineer advised the owner to evacuate the building, but the owner assured factory managers the building was safe and they told their workers to head inside. The building collapsed only hours later.

The engineer has actually been arrested for negligence, because he is accused of helping the owner add three additional illegal stories to the building. So, not only could the accident have been avoided right before it happened, but I imagine a collapse could have been avoided entirely if the building was constructed to code. 

What is the driving force behind such an avoidable tragedy? There are many layers, but money is at the heart of it. Bangladesh is hungry to capitalize on the globalization of the garment industry by offering a very low-cost product. With labor costs rising in China, companies are looking to countries like Bangladesh to help them maintain healthy profit margins. Workers in China make an average of $200 per month, compared to $37 per month in Bangladesh. Due to the incredibly low cost of labor, a shirt that would cost $13.22 to make in the U.S. costs only $3.72 in Bangladesh (these figures are taken from a CNN infographic). According to Elizabeth Cline, author of Overdressed: The Shockingly High Cost of Cheap Fashion, this has made it possible for consumers to buy cheap fashion, but with hidden costs to human rights and the environment.

While you can’t fault a company for trying to maintain healthy margins and deliver on promises to shareholders, the companies do bear some responsibility for ensuring that systems are in place to protect human rights in the factories where their products are produced. Retailers whose garments are made by some of the factories in the building have responded in various ways, some by trying to distance themselves from the factories, others by admitting a connection and pledging support for the victims. While the latter is commendable, more needs to happen on the front end to encourage safe conditions for workers in all countries. Author Elizabeth Cline thinks that the tragedy in Bangladesh will serve as a turning point in the responsible consumption of fashion, much like the locavore movement has encouraged more responsible consumption of food. I hope she is right. 

Sarah DerGarabedian, CFA
Director of Research

Market Update through 4/30/13

as of April 30, 2013
	Total Return
Index	12 months	YTD	QTD	April
Stocks
Russell 3000	17.21%	12.89%	1.64%	1.64%
S&P 500	16.89%	12.74%	1.93%	1.93%
DJ Industrial Average	15.39%	14.10%	1.94%	1.94%
Nasdaq Composite	11.02%	10.61%	1.93%	1.93%
Russell 2000	17.69%	11.98%	-0.37%	-0.37%
EAFE Index	19.99%	10.84%	5.26%	5.26%
Bonds
Barclays US Aggregate	3.68%	0.89%	n/a	1.01%
Barclays Intermediate US Gov/Credit	3.23%	0.89%	n/a	0.63%
Barclays Municipal	5.19%	1.39%	n/a	1.10%
		Current		Prior
Commodity/Currency		Level		Level
Crude Oil		$93.46		$88.71
Natural Gas		$4.34		$4.14
Gold		$1,472.10		$1,360.60
Euro		$1.31		$1.30

Mark A. Lewis

Director of Operations

There Is Risk Everywhere

We join the rest of the nation as shocked and saddened by last week’s events in Boston and West, Texas and we offer our deepest condolences to anyone who was impacted. The events of this past week should serve as good reminder to all of us that no matter what you do every day we face risks beyond our control. However small the risk may be there is no way to ensure that you avoid falling victim to these type of events. Also unavoidable are situations that are more likely to be faced by the broader populous like a car accident, or contracting a debilitating disease, or any number of things that can bring an unexpected early death or long term disability. Not that we should live our lives in constant fear – we should just prepare for the worst and then feel very fortunate should we end up living long and healthy lives.

Preparing for the worst doesn’t just mean acknowledging that life is fragile and then living life to its fullest. You need to prepare for such risks financially. This means assessing your exposure to risks beyond your control and then getting protection if you need it. If anyone relies on your life and/or your income stream then you need to have insurance policies to replace that income if you suddenly die or face a long term disability that prevents you from working. You need cash reserves that you can draw from immediately in an emergency. You need proper homeowners insurance. You need an estate plan that allows your finances to pass to your heirs smoothly and at a low cost.

This preparation won’t prevent you from being in the wrong place at the wrong time (and none such preparation exists), but it will help prevent financial risks from being created for your family and heirs should something happen to you.

Recent volatility in financial markets also serves as reminder that risk is also everywhere in the investment world. Gold futures prices saw their largest 2 day selloff in the history of trading on the Chicago Mercantile Exchange with a drop of almost 13% for April 12^th and April 15^th. Other commodities like copper, silver, and oil have also seen significant declines in the last few weeks which put them well into negative territory for the year. Stock markets saw their largest weekly decline of the year with the S&P 500 dropping 2.11%, though the index still remains up about 9.0% for the year.

We believe the best way to protect yourself from investment risk is to construct a diversified portfolio with an asset allocation that fits you, and then stick with it. Go about your daily life knowing that your investment assets can decline at any point due to reasons beyond your control, but know that your investment allocation fits you and over time it will help you meet your financial goals. The same goes for health risks – go about your daily life knowing that your health may fail or your life end short, but know that you have made preparations that will help care for your family in your absence.

And then enjoy the ride every bit along the way while we still can!

Travis Boyer, CFA
Financial Advisor

Housing Market

I’ve been obsessively searching for a new home ever since my third child was born last summer.  I can’t stop looking at the listings in my neighborhood (we won’t leave it).  The tough thing is, the listings almost never change.  There are about three houses in my price range that have been on the market ever since I’ve been looking that won’t sell for one reason or another.  Every other time a reasonable house gets listed, it gets bought right away.  Just last week my husband and I were outbid on a house that had been on the market for 12 hours.  Now I know why.

 

According to Bloomberg.com’s Economic Calendar, the supply of existing homes sold in March reported lower than analysts expected.  The report, released today, showed that sales were at a 4.92 million rate, down slightly from the previous month.  The reason for the lower sales data is that the supply of homes on the market is very low.  The supply of existing homes for sale in March was 4.7 months worth, which is down considerably from the supply in March of 2012, which was 6.2 months worth.  During the housing crisis the supply was closer to 10 months worth, as evidenced by the “for sale” signs in every other person’s yard.  At that time the fear was that housing would continue to spiral out of control and never return to normal.

 

The good news is that the lower volume is expected to do very good things for prices.  When the supply is low, but the demand is high, prices will rise.  Hopefully that will help my current house when we sell it.

 

There are a number of  very hot housing markets right now.  Bidding wars on houses are the norm in these areas.  It appears that the forces of supply and demand are at work here.  It’s hard to believe that just a few years after the depths of the housing crisis, there could be bidding wars, too low of a supply, and rising prices.  Markets change quickly, which is a reminder that investments that are either volatile or ill-liquid should have longer time frames.  For houses, a reasonable expected holding period is five years.

 

Harli Palme, CFA, CFP(r)

Partner

Market Update through 4/15/13

as of April 15, 2013
	Total Return
Index	12 months	YTD	QTD	MTD
Stocks
Russell 3000	16.02%	9.42%	-1.49%	-1.49%
S&P 500	15.88%	9.51%	-0.99%	-0.99%
DJ Industrial Average	16.73%	12.19%	0.23%	0.23%
Nasdaq Composite	8.52%	6.86%	-1.53%	-1.53%
Russell 2000	15.60%	7.19%	-4.63%	-4.63%
EAFE Index	18.72%	7.19%	1.80%	1.80%
Bonds
Barclays US Aggregate	3.81%	0.72%	n/a	0.85%
Barclays Intermediate US Gov/Credit	3.37%	0.71%	n/a	0.45%
Barclays Municipal	5.32%	1.00%	n/a	0.71%
		Current		Prior
Commodity/Currency		Level		Level
Crude Oil		$88.71		$96.36
Natural Gas		$4.14		$3.99
Gold		$1,360.60		$1,597.70
Euro		$1.30		$1.28

Mark A. Lewis

Director of Operations

Parsec Supports Brother Wolf Animal Rescue

In this quarter’s newsletter, I talked about volunteering.  We all have a passion for something – helping homeless people, caring for the elderly, providing financial education, et cetera.  My cause is animal rescue. 

I mentioned that some of us at Parsec set up a fundraising team for Brother Wolf’s 4^th annual “Run for the Paws.”  Our team, Hoofin’ for Woofin’, raised $1,275 for the no-kill shelter.  Several people here have pets.  The majority of them are rescues, so we received almost all of our donations from folks here at Parsec. 

Held this past Sunday, the event itself brought in over $15,000.  Brother Wolf will use the funds to provide medical care, food, and shelter for hundreds of animals at the shelter or in foster homes. 

Our mascot, Quinn.

Misty Cardone, her husband Phil, their dog Quinn, Laura Greene, and I participated in the one-mile walk along with lots of other walkers and their dogs.  Barbara Gray and her Yorkie, Brianna, cheered us on from the sidelines.  

Our cheerleader Brianna

The weather was beautiful.  We finally had a warm, sunny day instead of the persistent gloom and cold we have endured all winter.

Our involvement with the shelter does not end with “Run for the Paws.”  For the second year, we are sponsoring Brother Wolf’s Critter Camp.  Children will learn about animal care, pet behavior, pet training, and animal rescue.  In my opinion, teaching children to be caring and compassionate to animals makes them better human beings. 

I encourage all of you to consider what inspires you and get involved in your community.  As I said in the newsletter article, volunteering may not lead to higher portfolio returns or increased financial worth.  It can provide you with personal satisfaction, something money cannot buy.

Cristy Freeman, AAMS
Senior Operations Associate

Remember, Wear Sunscreen

My husband and I spend many an evening discussing world affairs and social issues. The health care crisis is a popular subject. While I will not profess to have the solution to all of our country’s woes, I have come to one important conclusion. Preparing for a financially secure and comfortable retirement is not just about saving and investing wisely; it is about taking care of your physical well being as well.

In a 2010 study, the Bureau of Labor Statistics estimated that the a 65-year-old couple with median drug expenses would need $271,000 to have a 90% chance of having enough money to cover health expenses in retirement (82 for men and 85 for women). This amount includes the Part B premium for physician services and Part D for prescription drugs. Couples with a high level of prescription drug spending could see that number jump to a whopping $371,000!

Medicare currently covers just over 50% of health care expenses. The program does not cover vision, dental or hearing aids, nor does it cover long term care expenses. In addition, health care costs have historically grown at a rate far exceeding overall inflation rate. Some experts suggest you assume a 6% inflation rate when calculating health care expense.

For those of you who are still working, take the right steps to secure a healthy retirement. If your company offers a Qualified High Deductible health insurance plan, you would be eligible to establish a Health Savings Account to start saving for future medical expenses. And think twice before retiring early. Private insurance is expensive, sometimes costing more than $1000 per month for an individual.

If you are already retired, be a prudent shopper for your Medigap policies. Make sure all of your prescriptions are covered, and if they are not, talk to your doctor about an alternative that is covered. And price policies annually, as the prices tend to change yearly.

Lastly, remember that you need to act fiscally and you need to act physically. Eat right, exercise and of course, wear sunscreen.

Tracy Allen, CFP®
Financial Advisor

Market Update through 3/31/13

as of March 28, 2013
	Total Return
Index	12 months	YTD	QTD	MTD
Stocks
Russell 3000	14.56%	11.07%	11.07%	3.92%
S&P 500	13.96%	10.61%	10.61%	3.75%
DJ Industrial Average	13.37%	11.93%	11.93%	3.86%
Nasdaq Composite	7.39%	8.51%	8.51%	3.49%
Russell 2000	16.30%	12.39%	12.39%	4.62%
EAFE Index	7.80%	4.40%	4.40%	0.41%
Bonds
Barclays US Aggregate	3.77%	-0.12%	n/a	0.08%
Barclays Intermediate US Gov/Credit	3.53%	0.26%	n/a	0.14%
Barclays Municipal	5.25%	0.23%	n/a	-0.43%
		Current		Prior
Commodity/Currency		Level		Level
Crude Oil		$96.36		$93.67
Natural Gas		$3.99		$3.88
Gold		$1,597.70		$1,600.10
Euro		$1.28		$1.29

Mark A. Lewis

Director of Operations

Gross National Happiness

One of the most commonly used measures by which we gauge the health of our economy is GDP growth. GDP, or gross domestic product, is defined by Investopedia as, “the monetary value of all the finished goods and services produced within a country’s borders in a specific time period.” Economists look at GDP growth over time (quarter over quarter, year over year, etc.) to determine a country’s economic health and productivity. If you look at the definition, you can see that the implication is that more money = good. Nothing unusual there – most people tend to agree that more money = good, right? Take the recent winner of the $338 million Powerball jackpot. We all assume that whoever bought that ticket is about to be the happiest person on the planet. I can’t tell you how many times I catch myself daydreaming about what I would do if I won the lottery (note to my employers: I NEVER do this on work time, and it never involves me running out of my office without a backward glance). In talking with others about it we tend to agree that, while money can’t exactly buy happiness, a certain amount can provide the freedom to pursue what makes us happy, unfettered by the drudgery required to pay bills and feed our families. At least, that’s what we think.

I recently watched a documentary entitled, “Happy” which touches on the lives of various people around the globe, and seeks to discover what makes them happy. Surprisingly, some of the happiest people were also the poorest, financially speaking. A common theme among these self-described happy people was a supportive community of family and friends, as well as a sense of purpose in life. Researchers have found that money does affect happiness, up to a point – the point where basic needs are met. Beyond this, levels of happiness do not vary significantly between those making $50,000 a year and those making $5,000,000 a year (note to my employers: this does not get you off the hook for raises). Some of this is determined at a genetic level, almost as if we are all born with a “set point” for happiness, and no amount of good fortune or tragedy will cause a person to deviate from their set point for long.

Getting back to GDP – my favorite part of the documentary was about Bhutan, a country that has chosen to measure growth not by the monetary value of goods and services, but by the happiness of its citizens. Instead of a GDP index they have a GNH index, which stands for gross national happiness. According to the “short” (over 100 page) guide to the index I found online, “the GNH Index is meant to orient the people and the nation towards happiness, primarily by improving the conditions of not-yet-happy people. In the GNH Index, unlike certain concepts of happiness in current western literature, happiness is itself multidimensional – not measured only by subjective well-being, and not focused narrowly on happiness that begins and ends with oneself and is concerned for and with oneself. The pursuit of happiness is collective, though it can be experienced deeply personally. Different people can be happy in spite of their disparate circumstances and the options for diversity must be wide.”

One of my coworkers wrote a piece for our second quarter newsletter about the positive physical and emotional benefits we can reap by volunteering and giving back to our communities. The researchers interviewed for the documentary agreed that the happiest people tend to be the ones with strong ties to friends, family, and community, and who feel they have a sense of purpose in the world. As folks transition into retirement, I think it is especially important to remain active in the community and regularly get together with friends and family. Humans are social animals; we have evolved to thrive in groups and to enjoy helping others. That kind of happiness is free and available to everyone. But I’m still going to buy an occasional lottery ticket.

Sarah DerGarabedian, CFA
Director of Research