Stewardship IV Report for June 2015A.D.

www.davidholmesagency.com
Dated July 3, 2015A.D.

Welcome new investors! Let your light shine! Matt.5:15, Mt. 6:33

Report for June 2015: For June we netted -5.0% but for last 12 months: 26.8%.
June was hectic with the Greek debt problem, Puerto Rico debt problem and the internal finances
Periods

2013

Fund/month/s
Psalm 23

Year
80.0%

2014

Latest
month

3 months
4/1 6/30

Last 12
months

2015

Year

June 2015

1/1 6/30

7/1 6/30

29.5

-5.0

5.1

10.4

26.8

SP500

29.0%

11.5%

-2.4

4.0

RYVYX

58.0%

34.0%

-5.6

3.7

7.0

20.0

3%

-2.6

-2.8

-1.7

-2.0

VBTLX

-5%

of China. As usual, there are as many opinions about the market. A concerned investor called
(July 1) about Gold? Buy Gold now? How much, what form?? Essentially, I recommend that 5%
of ones cash and savings be in gold coins also recommending not larger than 1/10 th ounce. Do
see my comments in the included article on page 3: The Last 3 Years

Life insurance is very, very important for family stability.

Knowledgeably chosen and purchased, low priced Term life insurance affordably provides the
immediate means for a family replacement income in the event of dads death prior to age 70 or
so. It is very inexpensive and very flexible. For elder years when there are substantial investment
assets, an appropriate policy can offset a temporary decline when death occurs with cash
available without the need to make major investment decisions when investments are best left
alone. Lastly, I do encourage purchasing from my agency. Since 1972 (43 years) I have advised
and taught these matters of course, the commissions assist me in this service and the advice,
counsel and understanding are not found elsewhere. Upfront, I recommend and quote the best
competitive prices available in America and how the money should work with profitable
investing!
I seek to include informative and factual papers with each monthly report some personally
from my Biblical Christian point of view, others that are third party ones that illustrate the issues.
Some third party articles are contrary but very enlightening, like the Editors Note on Page 3.
Whether men accept and act as if we are in a rational world or not, the ongoing harsh corrections
being experienced in Greece, Venezuela and Brazil are but sure fruits to be experienced.
Erroneous beliefs do not change truth or Gods rule! He teaches us all shall reap as they have
sown. And while He is good, kind and merciful, the Cross clearly teaches that He is just. Only in
timely repentance, faith and obedience in-Christ is there assured hope in this life and the next.
Again look at the Cross and Jesus resurrection. He rules and is returning.
The 5 year chart on page 6: my Assessing the Pending Despair of Lo-Returns paper
should be of interest. Its not how many people do you know that average 22 and 44% average
annual gains, but how many know it is being done and been done and the huge future
differences and flexibility offered and all a choice!
Always remember, 20% Average Annual Gains goal is first priority; Program is second.
For a blessed Summer

David

Facing the Age-Facts

by David Holmes Registered Investment Advisor June 8, 2015A.D. Money

The included Editors Note should be read by all over 40 and especially those near 60. His
conclusion, most retirement plans will not work, especially as life expectancies increase to 100
and beyond thats those living today! He mentions the need for a good set of knees as well as
a full set of teeth. Still listening?
Todays usual Savings/Investing assumptions
are well known though not so clearly stated:
1. Average 5% annual gains,
2. Needs to save 15 to 20% annually for 40 years,
3. Realize Social Security is inadequate and
4. Withdraw no more than 4 to 5% annually.
The arithmetic is straightforward. Estimating an $80,000 annual
income and needing $80,000 in retirement, withdrawing 5%
requires a beginning estate of $1,600,000. Withdrawing more
than the 5% assures that the fund will run out!
Nonetheless, the facts are stubborn: If the estate is to be built in
20 years earning 5%, savings must be $46,083 annually, a little
over of income! If saved for 40 years, then only $12,614 yearly
for 40 years is required, about 16% of annual income. Facts are
facts.
Some relevant conclusions: according to a GAO Report and
the Federal Reserves 2013 Survey of Consumer FinancesMost

one third to two thirds

of workers (age 55 and older) are at risk of falling short
Older Americans , CNBC.com, by Tom Anderson, June 2015

of their retirement savings targets . In English, they are

going to be hurting, running out of funds. Arithmetic is
arithmetic. Arithmetic is not a cure but it gives us light.
Lets talk frankly and soberly. The 55 and older are up against
it and time. They now do not have 40 years to save, over half of
their income before taxes and FICA is absurd and 5% gains are
obviously and clearly not going to work.
Largely unaddressed by these professionals is going with the
crowd and accepting 5% Average Annual Gains. The
editor mentions entirely new financial planning models will
have to be created. How about not just saving an unrealistic
sum of 50% of our incomes but seeking and making more with
what we have and are saving both now and in retirement?
Consider that saving the maximum $6,500 allowed for IRAs @
20% grows to $202,477 in 10 years vs. only $85,844 @ 5%.
$100,000 now @ 20% in 10 years is $619,173 vs. $248,832 @ 5%. In 20 years, the $6,500 @
20% is expected to grow to $1,456,166. Further, $500,000 producing 20% Average Annual Gains
would allow $85,000 indefinite annual withdrawals (17%) but only $25,000 with 5% annual withdrawal.
The Berkshire fund has averaged annual gains of over 20% for several decades! Others do well
from time to time. So, how about looking at an advisor that cant promise but learns, adapts
and expects Average Annual Gains of 20% or more?
David Holmes

The Last 3 Years

(July 1, 2012 thru June 30, 2015)

By David Holmes Registered Investment Advisor

July 1, 2015A.D.

One picture is worth a thousand words is familiar to most of us. And so it is with charts.
For perspective purposes, I have chosen to show our most-used base fund (RYVYX), its reference
the NDX, the largest bond fund in the world (VBTLX), the best known index (SP500) and also the
Precious Metals index (XAU).
The three year BigCharts.com chart goes beyond merely reporting and showing the performance
and changing values of the immediate past three years of
the indicated funds plus the 15 day Simple Moving Average
of the NDX. What does it show beyond the following
numbers?
What is the economic and stewardship meaning that
$100,000 has grown to $257,000* (37% Average Annual Return)
vs. $174,000* (20.3%), $155,000* (15.7%) and inverse
compoundings to $98,000* and $40,000*? *These are
approximations from the chart.
Again, What does the Chart show and teach beyond the
mere number variations?
In a recent 6 page article of a professional applied
economic and investment journal Financial Advisor, June 2015 Half a
Bubble Off Dead Center,
John Mauldin ponders the past six year
Obama-failure, short-term and ominous but noncalculable longer term consequences of Keynesian
Economics (Big Unlimited Gov), Quantitative Easing
(printing credit), high unlimited debt and numbers that
dont make sense like the above inverse compounding
but necessity of gains for future retirement payments
payments that arent going to be happening at least not as now promised and naively
expected!
Is he talking about Social Security, Pensions, Annuities, what exactly? He is not specific. And,
while he is largely talking to a non-government audience, Mr. Mauldin understanding surely
includes all. Thus, I am persuaded that we do well to make hay while the sun shines. Id rather
start with a millionFRN than 30,000FRN any day.

Common and Costly Mistake With Life Insurance

Copied from WSJ.com 6/10/15 written by Ted Jenkin Ins

Everyone dreads talking about with family or a

financial professional about how much lifeinsurance coverage they need. In many
marriages, it is still usually one spouse who
drives the conversation about how much life
insurance the family needs. Usually it is the
major breadwinner of the family.
Recently, I heard yet again another sad story
from a surviving spouse whose husband
passed away way before his time. When I
learned a little more about the situation, she
revealed that he had been approved for a large
sum of life insurance a few years back but didnt take it because he felt he could get a better
rate. A couple of years later, he reapplied for life insurance and actually got a better rating.
However, after being wishy-washy over which policy to take when he was approved. He never
made a decision to purchase any of the policies and left the family without any life insurance
at all. The face amount of insurance had actually been approved, but he just didnt accept and
pay for the policy to put it in force.
This is where the term conditional receipt becomes very important. There is a period from the
time you sign the application until the date the application actually gets approved. In between
those dates, youll have to do a phone interview, request medical records and likely take a
blood sample, EKG and other medical exams, depending on the amount of coverage you are
applying for.
You have the option at the time of the application to submit a first months premium or submit
no premium at all. The important part to attaching an initial premium called conditional receipt
is that if the policy gets approved (it must get approved and not just be in underwriting) and you
die prior to the policy being delivered, it will still be considered binding by the insurance
company.
(A reminder here to check the exact meaning with each insurance company when you apply for
life insurance.) Imagine that the policy is approved and waiting delivery as referenced in the case
above. The family would still have qualified to get the death benefit.
Many people simply forgo paying this amount with the application, however. I would
recommend that you always submit an initial amount with the application if you are serious
about the insurance because you can never know what unforeseen circumstances could arise
between application and delivery. This small amount could make a huge difference for your
family should something prematurely happen to you.

Holmes says: How sad, thoughtless, penny-pinching, disreputable, reckless and unloving!
While most may not comprehensively understand how life insurance works, all husbands
innately know we need provisions for the family! Those who know the Bible know that God says
if any provide not for his own, and specially for those of his own house, he hath denied the
faith, and is worse than an infidel.1Tim.5:8 This certainly is clear.
Once I learned how life insurance works and provides an immediate temporary estate while a
permanent estate is being built, I became dedicated to making adequate low cost life insurance
available to whoever would listen. Those who refuse to learn and responsibly understand how to
successfully save and build an owned estate for elder years are ungodly and closet Socialists.

Investment Advice Evaluated/Validated

By David Holmes

Registered Investment Advisor June 13, 2015A.D. Money

There is more to stewardship investing than Mr. Zweigs excellent comments WSJ that just miss
the point. Those who fail to change and have a target goal of 20% Average Annual Gains,
remain as monkeys throwing darts.
What Small Investors Can Learn From a Pension Giant
Mr. Zweig does present good points and
in many ways his points identify what I
have sought to do. However his
statement Active management can
only be worth the higher costs if
the
portfolios
are
distinctly
different from the overall market,

misses the mark.

Arithmetic, time and family-need require
not 5 stars or being distinctly different
but Average Annual Gains of at least
20%. Period, period, period.
Indeed, his observation the key to
earning more is doing less may
well identify what we are doing. But,
streamline

your

investing

plan,

again misses the point.

Without the 20% AAG target, we or
anyone else are only randomly
throwing darts like monkeys! Mr.
Zweig is not a nobody in the investing
arena, but it is strange that he focuses
on and teaches low expenses but not a
meaningful target goal.
Its to be noted that a 1% expense while
earning 6% is nearly 17%. It really is
huge especially with low expectations of
5 to 6% gains.

Orig: Less Is More: What Small Investors Can Learn From a Pension Giant
From WSJ.com 6/12/15 by Jason Zweig
This past week, the biggest public pension fund in the U.S., the California
Public Employees Retirement System, or Calpers, said it plans to cut the
number of outside money managers it uses to approximately 100 from 212. That
move came after Calpers announced last year that it would get rid of its hedgefund portfolio. With $305 billion in assets, the giant retirement plan is trying to
simplify its structure and lighten its loadan objective all investors should
aspire to.
Weve been working for several years to reduce the risk, cost and complexity
in the portfolio, says Calpers spokesman Joe DeAnda. This is the next step in
that effort.
Calpers has saved about $300 million in investment expenses over the past five
years, says Mr. DeAnda, by moving the management of more portfolios in-house
and by negotiating better terms with its remaining external managers. About
two-thirds of Calpers roughly $160 billion in stocks is passively rather than
actively managedusing computers to replicate the markets return instead of
using human judgment to try to beat it. That saves money, too. As the new plan
takes effect over the next five years, Mr. DeAnda says, the 27 outside managers
running Calpers portfolios of publicly traded U.S. and international stocks will
likely shrink to 20. Calpers spends approximately 0.34% of its assets on
management fees, down from about 0.48% three years ago.
That is a reminder that today, individual investors are in perhaps their best
position ever to perform at least as well as the biggest institutions. You can buy a
simple portfolio of exchange-traded funds holding an encyclopedic set of all the
worlds financial assets from firms including Charles Schwab Corp.,
BlackRocks iShares and Vanguard Group for well under 0.1%. Above all, the
key to earning more is doing less. All too many investors still build their
portfolios by bringing on board anything that seems to be working, with little
regard for where it belongs or whether it duplicates what they have already.
Lane Steinberger, chief investment officer at Redwood Wealth Management in
Alpharetta, Ga., which manages about $400 million, says plenty of clients
have come to his firm with portfolios consisting of more than 1,000 different
stocks bought at different times in small amounts. You can have an awful lot
of stocks or funds and still not have much diversification at all, he says
especially when nearly all are larger stocks based in the U.S. The word
diversification comes from the Latin diversificare, to make different. To be
diversified, you have to own stocks, bonds and other financial assets from around
the world that differ by type, size and price.
With its latest move, Calpers is tacitly admitting that hiring many people to do
the same thing doesnt improve results. Going to 30 private-equity fund
managers from roughly 100 is likely to improve its results by lowering fees and
increasing competition, Mr. DeAnda says. Individuals should note that lesson,
says Patrick OShaughnessy, a portfolio manager at OShaughnessy Asset
Management in Stamford, Conn. Once you hire too many fund managers, he
says, you end up owning something that looks like the overall market at much
higher fees, and thats just nuts. He adds, Active management can only be
worth the higher costs if the portfolios are distinctly different from the
overall market. Investors should resist the temptation to act like squirrels that
bury different assets in a bunch of places without an overall plan, says Gary
Karz of Los Angeles-based Proficient Investment Management, a firm that
provides second opinions on portfolio diversification.
As you add similar fund managers, he says, your chances of outperformance
shrink toward zero. The higher the expenses, the longer the time and the more
managers you have, the worse your odds get, he says. So take Calpers move as

But more, the meaningful and huge

economic difference is the long term
results. In 20 years, with $5,500 invested
annually, a ROTH grows to a
meaningful
tax
and
minimum
distribution exempt $1,232,140 while
with 6% only grows to $214,459.
Likewise, the difference of $100,000
invested over 20 years with 20% returns
grows to $3,833,759 while the more usual 6% is a mere fraction: $320,713. These are
magnitudes of difference! CALPERS doesnt say what they expect to earn; do they know what
they need to earn?

In conclusion, there is more to profitable stewardship investing than Mr. Zweigs expense and
duplication observations that just miss the point. Those who fail to change and adopt a target
goal of 20% Average Annual Gains, sadly remain as monkeys throwing darts. They never know
if they or anyone else ever hits the target! And with minimum returns, fear every day!

Assessing the Pending Despair of Lo-Returns

or not investing
By David Holmes

Registered Investment Advisor

800327-8963

5/19/15

The 5 year chart shows the actual changes in the included funds market values
including the
bellwether SP500 ($175,000),
the largest bond fund in the world: PMTPX ($98,000),
the former mutual fund rock star Magellan: FMAGX ($138,000),
Warren Buffetts struggling long-term winner: BRKA ($178,000),
Precious metals index: XAU ($40,000) and
the Psalm 23 Programs base fund: RYVYX ($380,000). Each starting with
$100,000.

The compound differences over time are clear, stark and instructive.
No savings is an island. Each and all are affected by the vast and innumerable
multitude of real and perceived changing daily events, demands, taxation,
decisions, and needs. However, in evaluating these actual changes of 5 year market
gains and declines, it continues to appear that the compound gains of the high
yielding funds far outweigh the declines and low gains.
It further appears that the attempt to attain financial safety by CD or bond stability
ignoring returns as with the PMTPX or the XAU fund is at best, misguided,
misunderstood and maybe delusional particularly in light of the above data. Such
chasing of stability would be crushing, particularly
I note that the RYVYX
to those withdrawing funds for living expenses as
could experience a 50%
they would periodically have to consume and
consume more and more of their declining stable
decline (todays
principal Note: two minus two equals zero.
$380,000 to a
I note that the RYVYX could experience a 50%
tomorrows $190,000)
decline (todays $380,000 to $190,000) and still
and still remain well
remain well ahead of all the others! However, as
stated earlier, no fund is an island. Further, these other assets would not retain their
maximum attained value though their market value decline would be less. Hence,
the issue: who can afford or justify the emotionally motivated safety or chasing of
stability? Further, the significant gains offer major flexability.
The Market and Market value are complex daily issues increasingly compounded
by the Congressionally-allowed huge Federal debt, Federal spendings, Fed-set low
interest rates, poverty-guaranteeing Social Security and the persisting practice of
both politicians and money advisors to effectively ignore the growing elderly
poverty issue while pushing usual low returns and silence to the on-going FICA
scandal. The two last as much a personal lack of personal rationality as they are
industry and political corruptness.
In conclusion, an article in a recent FORBES GRANTs LAW: 1920s RECORD, 1/19/2015, says, I
summarize: the accepted unconstitutional government intervention practices since
the 1930s of stimuli, inflation, etc. are proven destructive and counterproductive as

demonstrated by the 1920s two year correction vs. the 1930s 10 year Depression and the
present on-going 7 year malaise! Thus, make hay while the sun shines!

A Picture of Future Dispair & Remorse

Comments by David Holmes

Registered Investment Adviser June 24, 2015A.D.

800327-8963

This pictured ad in
a current
FORBES,
thoughtfully
considered, is both
instructive and
alarming!
While openly reporting
its better performance
compared to an Index
(MCSI EAFE), the
long term disaster
effects of accepting
relative returns as
opposed
to
arithmetically required
20% Average Annual
Returns
to
attain
necessary
family
estate growth and
stability is clear and
shocking! Think about
it: filling the gas tank with 10 gallons of water or even 10 gallons of diesel fuel will never suffice
any more than accepting relative returns for investing. A 5 Star rating neither correctly informs
nor produces! 20% is needed. Facts and numbers not euphemisms!
Of course the 7.1% is better than 5.3% but neither will work for the family! Neither will
work whether building a retirement in 20 years or living on the Estate for 30 or more years.
20% is 20% and a minimum of 20% is required. Paul identifies the error of this relativity
principle in Second Corinthians2Cor.10:12 comparing themselves with themselves as opposed to
truth!
So, lets use the 7.1% while saving $4,000 annually and see (A)what it builds in 20 years and
(B)the estimated annual income it can be reasonably expected to provide with the usual industryrecommended 5% maximum withdrawals as opposed to the arithmetically required 20%
building and my recommended maximum of 17% annual withdrawals.
AAG
7.1%

In 20 years
$177,554

5% Withdrawals
$8,877 annually

Reality / Needed
$40,000 annually (-15.4% of net Principle)

20%

$896,102

17% Withdrawals
$152,337 annually

Plenty of income especially if ROTHed

PONDER: factually and arithmetically, with only 7.1% gains and later withdrawing a necessary
$40,000 annually, we have to and can foresee that in less than 6 years the Retirement estate will
be consumed, gone! Real arithmetic again. The family is not going to live on a mere $8,877
annually. Yes, they can make the funds last some longer by withdrawing less, but The above
Fidelity chart has the usual required cautions about Past Performance but Why would
anyone accept 7.1% when at least three times that is required? Because, many follow the
crowd and fear tomorrow!