My Advice for Dr. Yellen: Skip $1,000 Jackson Hole and Head to $20 Family Game Night

The smell of fresh popcorn filled the room as a table of confident would-be tycoons prepared to enter tget-out-of-jail-free-cardhe fast-paced world of real estate and finance. Each smiled and contemplated the wheeling and dealing for property, houses, hotels and GET OUT OF JAIL FREE cards.

An hour later, pleasantries and snacks long gone, the formidable traders emerged and our micro-economy changed its character. An unfortunate bankruptcy seemed inevitable for the unseasoned among us. Unsure of how this game would unfold, I surveyed the bubbling emotions of the table and decided to step-in as central banker. After all, I had been a professional Fed Watcher over the course of my twenty years in wealth management.

I quickly implemented a few minor tweaks to the rules as relied upon since 1935. Surely, a few rent-free passes around the board, lower mortgage rates and a special one-time QE program would be accepted by our participants as a fair tradeoff for a prolonged cycle of family fun. Begrudged by some, who will remain nameless, the new rules of engagement seemed to work as anticipated in our (me, myself and I) central tendency analysis. Shew…I thought to myself, I am a Maestro of Finance. *More details to follow in a paper on ambiguity aversion and non-parametric estimation during family game night: WHAT?!

Before you judge this history and the rest of the story, let us be clear that my dual mandate of fun and no tears originated from the top. Let the record show this bazooka was loaded by my wife. The tweaks forced a new set of incentive behaviors. I started to lose control as to exactly when “normal” rules would return, and the artificial nature of our “new normal” game introduced an evolution of hypersensitivities. Formerly rich, now tears slowly welled up on the face of a well-known conservative saver. As the most powerful central banker in the house, I could not reveal my own lack of confidence on how this game may end. A bead of sweat attempted an appearance on my brow as daggers shot across the table from another highly levered player who dared me to change my dovish course. I shouted out an idea as I pushed myself from the game table, “I need a bathroom break!”

Further details from my central bank Monopoly minutes shall be sealed for a time in order to digest the facts as I plan to recall them and to avoid critique of my reign over family game night. Meanwhile, The Federal Reserve Bank of Kansas City is sponsoring a symposium of “Re-evaluating Labor Market Dynamics,” this week at Jackson Hole. Prominent central bankers, finance ministers, academics, and financial market participants from around the world will convene to discuss important economic issues, implications, and policy options. The symposium proceedings include a plethora of intelligent papers, commentary, and discussion. The financial markets will clearly be focused on U.S. Federal Reserve Bank chair, Janet Yellen’s, speech and its implications for the future path of interest rates and stocks. The annual exercise is all great fun held in a majestic landscape with mountains of digital coverage generated for Fed Watchers to ponder over the weekend.

Unfortunately, market players put too much faith in the ability of humans (or machines for that matter) to legitimately map an outcome for real growth, unemployment levels, interest rates and behavioral reactions. The well-intended programs and tools unleashed by global central bankers may have produced a ratio of two new risks for every one generated reward. Aided an abetted by political dysfunction, demographic trends, geopolitics and a multitude of unforeseen variables, it is impossible for anyone to predict an exact transition from policy-induced tweaks to a self-reliant global economy. Even Dr. Janet Yellen could not have predicted the outcome of our family game night, and this is precisely why it is so instructive!IMG_2880

More than 275 million Monopoly games have been sold worldwide and are available in 111 countries and 43 languages. Your family and the U.S. Federal Reserve should invest in this classic econometric tool for a cost of less than $20.

Michael D. Hakerem, CFA is a leading Chief Investment Officer and Portfolio Manager utilizing custom portfolio solutions and securities analysis to help Advisors and clients meet their unique asset management needs.


Behind Every Strong Man: A Family of Strong Women


The largest transfer of wealth in history presents
monumental threats to those we love.

Blessed with strong women in my life, both personally and professionally, a special place resides in my heart for a careful and trustworthy approach to wealth management. I vividly recall sitting at the breakfast table as a child caught staring at my mother’s tired expression. A single mother, she had just completed another 12 hour nursing shift after studying for night school. That moment fired up passions of advocacy as I increasingly realized, at a very young age, that most investors, women and seniors in particular, need a trusted advocate when dealing with the stock market and financial concerns. Now, several decades past this career epiphany, my daily existence is supported, organized and occasionally scrutinized (pardon me…gently corrected) by my spouse and the strong women in my life.

Statistics infer that daughters, mothers and sisters will inherit at least $30 trillion in assets over the next four decades. Studies also show that the financial services industry fails to serve their needs. Will you leave a clear, concise and manageable plan for the financial security of your loved ones? Everyone knows Uncle Sam lurks and looks for his share at that precious estate opportunity—so proper planning goes without saying. The Fiscal Cliff, budget deficits, fairness of markets and higher costs are big threats likely to impact your family, too—just not the biggest. You certainly cannot control threats like Iran, terrorism and political gridlock. Still, the monumental threats to your daughters, mothers and sisters arise when trusted advisory relationships are not established well prior to your scheduled ascension (?). An emotional time; a time of extreme vulnerability; the world on her shoulders…even the strong need the support of an integrated team of legal, tax and wealth management professionals who will listen and deliver wisdom for years to come. Strong Men, this legacy of support is under your control!

Now two decades into my professional career as an advocate for families, I have cringed at each story told by women taken advantage by unsuitable investments, outright fraudulent practices and schemes or just plain inferior advice. In some cases, advisors, and I use the term loosely, just do not possess the skills, resources or humility to deliver on their advertisement. Often self-centered in motivation, it is just as harmful to have advisory relationships with those who put their financial or leisure decisions ahead of those they are paid and entrusted to serve. Strong Men (and Women too), listen up! As with taxes, I can write with certainty that you need to prepare and protect your loved ones from these potential threats.

Please consider the following as you look to solidify or establish these critical advisory relationships. The fiduciary* promises of customized wealth management must include trust, service and value. The TRUST you establish with an advisor is paramount to a long-term relationship. An exceptional level of SERVICE must be given in good and bad markets with anticipation of your family’s unique needs. Communication should be frequent and information should be shared in a clear and manageable fashion. Any VALUE proposition must deliver unbiased investment advice and financial strategies offered at a pricing structure which avoids conflicts of interest. Every detail that causes concerns over a potential advisor’s commitment to these promises should be satisfactorily addressed. In summary, is the advisor always willing to advocate for your family’s unique priorities?

With the spirit of Paul Harvey in mind, there is much more to this story. Whether you independently manage investment and financial affairs or have an existing brokerage or banking relationship, the below three links are worth further exploration as you solidify in your own mind that you have done all you can to protect those Strong Women you love.

*What Does It Mean to Be a Fiduciary?

Investment Advisors are governed by the Investment Advisers Act of 1940 and applicable state securities laws, which govern conduct and disclosure requirements, creating a high legal standard referred to as “fiduciary” duty. Your advisor becomes a fiduciary once you have entered into a written advisory agreement that explicitly acknowledges an advisory relationship and obligations to you.

As a fiduciary, your investment advisor has the duty to:

  • Put the client’s interest first.
  • Act with due care and in utmost good faith.
  • Act with prudence; that is, with the skill, care, diligence and good judgment of a professional.
  • Ensure that investment advice is suitable to the client’s objectives, needs and circumstances.
  • Not mislead clients.
  • Make full and fair disclosure of all material facts.
  • Avoid conflicts of interest.
  • Fully disclose and fairly manage, in the client’s favor, any unavoidable conflicts.
  • Be loyal to clients.

An advisor will be measured against a higher standard of conduct than a stock broker.

Michael D. Hakerem, CFA is a powerful advocate for families and has a passion for integrated private wealth management and the promotion of finance for the greater good of families and society.

Of Spitzer and Picasso

One crisp fall morning I found myself staring at my mother’s face. The lines and circles plainly told the story of a single mother who worked multiple jobs and took care of her family. Maturing in the post-Depression era, her disposable dollars found their way exclusively to U.S. Savings Bonds. Despite the real after-tax erosion of those investments, my mother never gave a serious thought to securities issued by corporate America. Why? The memories of great losses and Wall Street corruption were only magnified by current events. In spite of new government agencies and laws, the savings of U.S. citizens were sifted from their true benefactors under false pretenses and outright theft. Of course, women and the elderly were especially targeted. My stare soon evolved into a glowing smile as I, at that moment, realized the future of my life’s work.

The clock struck midnight as the East Coast transitioned from Friday to Saturday, a decade hence that magnificent fall morning. As a “twenty-something,” instead of bellying up at the next watering hole, I was leaning on another slab of mahogany, absorbed in a book sponsored by The Institute of Chartered Financial Analysts. It was there that my sincere dedication to helping people went beyond my pursuit of degrees in finance and economics. I never once reached out to greed as a motive for flipping to just one more chapter

Today, an amalgamation of passion, cognitive abilities, academic fortitude, hard knocks, and, yes, even mistakes have earned me a position as managing director in a well-respected wealth management firm. My story, the traits that define me, are by no means unique – countless investment professionals in thousands of firms hold close to their hearts the highest ethical standards and a deep sense of integrity. We ground our advice in sound practices designed to fulfill clients’ unique objectives, needs and circumstances.

In June 2001, the Office of the Attorney General of the State of New York officially commenced an investigation into stock recommendations issued by research analysts at several financial institutions. An onslaught of negative press has ensued since Eliot Spitzer’s well-publicized actions. Hardly a day passes without another revelation of a so-called “alchemist of finance” turned crook. Glib conversations overheard at cocktail parties have turned dramatically from “What’s the hot Internet stock?” to “We should build an island for ALL those Wall Street types and…”

A great many of us financial analysts thoroughly research recommendations, study prior bubbles and economic cycles, and deliver prudent advice. Under the right motivations, we are passionate about our careers and care deeply about those clients whose assets rely on our care. We, too, are embarrassed, angry and saddened as a result of all scandals and criminal activity, past and present.

Please hesitate before painting us with the proverbial brush, reducing and fragmenting our images into expressions of anger. The misdeeds described in the headlines of today will only serve to drive our principled passions into the years to come.