Business Update:

We are nearly finished with financial plan updates for our family office clients.  Periodically updating your financial plan is critical to helping you manage portfolio risk. For our family office clients we do this at least once a year. Anyone else wanting a financial plan update, please call Don.

For all clients, we will start to generate your portfolio performance reports once we reconcile all of your account statements with our portfolio management system. We will have these reports loaded onto your client portal and/or mailed to you by the third week of July.  Towards the end of July, Patty and/or Kirsten will be calling you to set up a time to review you portfolio performance (and your plan update if applicable). 

D3 staff members will be on vacation during July.  Ryan will be vacationing the first two weeks and Don will be vacationing the last two weeks of July.

D3 Breaking News:

Don Duncan named 5 star wealth manager award image

  1. It is official. Adam is a part owner of D3 Financial Counselors. Please congratulate him the next time you see or talk to him.
  2. Don retired from being the Chairman of the Wisconsin Native Loan Fund (WINLF) at the annual meeting on June 29th.  This grant-funded, not-for-profit, helps Native Americans in Wisconsin improve their lives economically by providing financial literacy and loan funds that otherwise would not be available to these borrowers.  Don was a charter board member and served this organization for over 9 years.  Don is very proud that WINLF went from $0 in assets to over $1million as of June 30, 2015.
  3. Don was named for the fourth year in a row as one of the elite Five Star Wealth Managers in the Chicago area.  This exclusive list will be published in the November issuer of Chicago Magazine.

Market Insight:

Over the last week, we’ve seen increased volatility in global financial markets primarily due to Greece’s inability to repay bailout funds to the International Monetary Fund (IMF) and European Central Bank (ECB).  Additionally, the country’s unwillingness to undertake austerity measures required by Greece’s creditors to receive additional bailout funds has increased the likelihood that Greece will leave the European Union. Greece is technically in default on the 1.5 billion Euros that was due to the IMF on Tuesday and has 3.5 billion Euros due to the ECB next month.  Greece will have a referendum on Sunday, which will essentially allow taxpayers to decide if Greece wants to comply with the austerity measures needed to continue to use the Euro or default on its debt and exit from the Eurozone.

If Greece agrees to the austerity measures to receive additional funding:

  • The austerity required would provide Greece with access to capital, but would impair economic growth (and the ability to repay debt) going forward.
  • Markets would likely favor this outcome in the short term, even though Greece would be further “kicking the can down the road”.

If there is a Greek exit from the Eurozone:

  • There could be a short term financial shock to the markets. An exit from the Eurozone is unprecedented, and could bring into question the viability of other highly indebted countries ability pay their debt going forward.
  • Greece’s depression will likely worsen, as they would lose access to global capital, and have to re-adopt their own devalued currency.
  • The last 5 years has allowed the global financial system to put in safeguards to limit the “financial contagion” of a Greek default (bank stress tests, increased capital requirements etc.).

Puerto Rico:
Puerto Rico’s fiscal issues are very similar to Greece.  Structural imbalances exist between debt and employment, and public pension obligations are staggering.  Puerto Rico’s debt restructuring may be a pre-curser for how some highly leveraged states may deal with their debt problems.  We will be watching this story unfold as well as the soap opera in Illinois.

While both Greece and to a lesser extent, Puerto Rico, are grabbing the headlines, we want to keep a perspective on their economic impact. Greece represents .39% of the world Gross Domestic Product (GDP) and Puerto Rico represents .19% of world GDP.  To put this into context, both are smaller than the GDP of Detroit. Also, history has taught us that remaining invested in periods of short term volatility has paid off handsomely, and that is what we will continue to do, given that we do not believe either scenario poses a significant threat to global growth or long term investment fundamentals.

Investment Strategy:

We continue to look for investments that can act as volatility hedges.  Our challenge continues to be finding investments that can dampen market volatility, do not significantly drag down performance, and do not have extremely high expense ratios.

As you review your portfolio’s performance, we encourage all of our clients to review the level of risk in your portfolios relative to your financial plan.  To the extent your portfolio returns exceed your plan’s required rate of return, consider taking some risk off the table.  Also, please let us know if your time horizon for needing cash flow from your investments changes or if your ability to tolerate risk changes. 

Additionally, we want to make you aware that we updated our form ADV that we file with the Securities and Exchange Commission. This update reflects Adam becoming a part owner. Please use the link below to review this regulatory filing.

Last Thoughts:

Lastly, we thank you all for thinking of us when your friends and neighbors need help organizing, prioritizing, and optimizing their financial lives.

Happy 4th of July.  Enjoy the fireworks.