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Asset Protection & Investing; What’s Your Defensive Position?

September 27, 2011 By Leave a Comment

I’m not a financial advisor but I work with some of the best ones in the United States because they often have clients that understand the finite and fragile nature of wealth and that we must take proactive steps to protect it. 

One of the top financial advisors I regularly turn to for solutions and answers on insurance and investment issues is my friend Jeff Christenson of Christenson Wealth Management in Phoenix Arizona. Jeff has been an exceptionally important part of the planning of many of my clients, and many more who are not, and works with a very demanding group of people that like all those we work with are substantially more concerned with loss than growth.  Jeff is one of the people that for years insisted that even his HNW clients save for a rainy day, protect their assets and use strategies that limit losses – the last ten years have made his clients loyal believers… many of them survived the losses of their income and businesses by using these assets.

Below is a recent commentary on the markets that Jeff shared with me. His position is honest, open and frankly brave given the very strong opinions many people have on these issues. I hope your investment strategy and advisors have taken these issues into account. I’ve shared Jeff’s message in its entirety. If you’d like to know more about him or receive his updates directly, see his firm’s contact information below. – Ike Devji 

Jeff Christenson, President Christenson Wealth Management

Dear Friends and Clients, 

I have moved, or will be moving, most portfolios to a defensive position. 

We seem to be skating on thin ice, with our economy, our government, and our national deficit. 

This can be viewed as a “contrarian indicator” (for markets) but I think it is actually just ….. bad. 

It is my opinion that the Fed and the President don’t know what to do about the economy, jobs, entitlements, and the staggering debt that could DOUBLE in less than 10 years. 

We were downgraded as a COUNTRY for our own borrowing purposes.  This has never happened.  The short term results can be neutral to unthinkable… 

There are many people and businesses that are just barely hanging on, month to month. 

Gary Shilling believes home values will FALL another 10-20% to simply regress to the MEAN.  Many homeowners are living in their homes without paying their lender.  I have 4 good friends who just went bankrupt.  Who will pay for that?  How many more? 

Gold…..be careful, too many people interested in it right now.  It may also double again, but it is indeed speculative    

The middle class has shrunk, and there are now fewer people with more money, than ever before.  These people are currently sitting tight on that cash. 

Inaction is the wrong thing as a country and as an investor. 

There are things you should be proactive about, asset protection and conservative financial strategies are certainly 2 of them.  

I feel we are EXACTLY where the FED and the President were hoping we would NOT be 3 years after the financial meltdown.  

I recently came across an interesting article* that simply illustrates our government’s fiscal problems by comparing the 2011 Federal Budget to a typical middle-income household’s budget.  Here are the results: 

U.S. Tax revenue:     $2,170,000,000,000 

Fed budget:                 $3,820,000,000,000 

New debt:                    $1,650,000,000,000 

National debt:             $14,271,000,000,000 

Recent budget cut:    $38,500,000,000 

Let’s remove 8 zeros and pretend it’s a household budget: 

Annual family income:                                      $21,700 

Money the family spent:                                 $38,200 

New debt on the credit card:                         $16,500 

Outstanding balance on the credit card:    $142,710 

Total budget cuts:                                               $385  

The harsh reality is that our current level of productivity (or lack thereof) requires revenue (tax) increases, AND spending (entitlement) cuts BOTH.  Politicians get voted OUT for doing these things.  Our household financial woes in this example, have become a popularity contest – not what’s prudent. 

I urge you to Google and do your own research on our national debt.  If we do NOT do this, and FAST, our lenders may soon just stop.  There is no contingency for that.  We are addicted, and Washington has given everyone what they want – when they want it – and the “Physics of Money” simply won’t allow it to continue.  Something has to (and will) give.  It is like giving your kids everything they want and wondering why they grew up to be spoiled and lazy. 

TO BE CLEAR!  I am in favor of raising taxes ONLY if there is a cut in spending.  We have to PAY AS WE GO.  Ask an economist that is NOT a politician or lobbyist.  

When you factor in the demographic shift (Social Security, Medicare, Medicaid etc) and our current low productivity, it is sobering to think of where this money will magically come from in the future….   It is like watching two trains heading toward each other on the same track. 

9-11 should have taught us to be prepared and conservative, but Washington kept taxes low and spent out of control.  

The DOW is currently at about 11,000.   The market is in denial, apparently because these companies are “profitable and cash rich”.  

Consumer confidence is low and the mood of the working and (middle) class is pessimistic.  President Obama (and W too) wrote a bigger check than he could cash, I think.  He (they) made promises to the masses that can’t be kept. 

We are in a period of deleveraging, and asset values can (and I believe) will go lower.  The Pontiac Silverdome was recently purchased for $583,000.   

We MUST prepare. 

There are opportunities RIGHT NOW, and there will be many more for the prepared. 

I reserve the right to be wrong, and maybe the stock market (Dow) might shoot straight up and make me look too conservative and over-concerned. 

But I doubt it.  

Call me for specific strategies. 

Jeff Christenson 

P.S. Please see the attached commentary I emailed out on September 17, 2008.  Interesting to note that at the time, the Dow was at 11388, followed by a market low of 6507 on March 9, 2009**. 

P.P.S.  Times of adversity can yield amazing things.  

I challenge the people reading this letter to one or more of the following: 

  • If you can, hire someone.  If you can’t, MENTOR someone.  You are reading this because you are a successful person, and were handpicked by me to receive it.  SHARE your genius.
  • Ask your neighbor if you can help them with anything.
  • Invent / improve / innovate something.
  • Find something of value that you have that would be of much greater value to someone else, and give it to them.  Help someone less fortunate.
  • Stop complaining about the government and start DOING something about it.  (purpleletter.org)
  • Treasure things money cannot buy.
  • Stay positive, some great things are coming your way! 

*Source:  Federal Budget: http://www.usgovernmentspending.com/ and Federal Revenue: http://www.usgovernmentrevenue.com/#usgs302a  

**Source: http://finance.yahoo.com/echarts?s=%5Edji+interactive#symbol=^dji;range=5y;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=; 

The views are those of Jeff Christenson and should not be construed as investment advice.  All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.  Investor cannot directly invest in indices.  Past Performance does not guarantee future results.  

Securities offered through Multi-Financial Securities Corporation, Member FINRA/SIPC 

Christenson Wealth Management and Multi-Financial Securities Corporation are separate companies. 

Please consult with a qualified tax advisor prior to implementing any tax related strategy. 

For more information on Jeff, Christenson Wealth Management or to receive future economic commentary please visit www.HabitsOfWealth.Com or call (602) 808-5580.

Filed Under: arizona economy, Asset Protection, economy, investing, investment exposure, Jeff Christenson, recession, recession survival Tagged With: , , , , , , , ,

THE VAULT: Asset Protection, Cash Alternatives and Life Insurance – UPDATED

September 2, 2011 By Leave a Comment

In the week ending august 14th another 24 Billion dollars left the securities market for the relative perceived safety of cash. These billions  of dollars simply added to the trillions of dollars already allocated that way because of fears of instability in the securities and real estate markets. 

This large liquidity position has not gone un-noticed, unfortunately many of those who noticed are those who would like to separate you from your wealth. They see an opportunity for litigation in your liquidity.   

 

Their timing couldn’t be worse, especially if you are like most successful Americans who have lost huge percentages of their net worth through home equity loss, stalled or negative investment momentum and decreased profits or compensation.

 

 

 

The “Vault” was developed out of a need to have additional options for clients who:

-Are unhappy with their current cash returns (earning less than 1% and getting taxed on even that);

-Have concerns about the stability and FDIC insurance limits on banks and various govt. bonds given the debt crisis     (See this article on bank solvency Risk in the Wall Street Journal)  http://online.wsj.com/article/SB10001424053111904800304576478872384312208.html ;

-Have a need for Asset protection due their net worth, visibility and professional liability, or some combination thereof;

-Understandably have larger than normal cash positions because they are afraid of both R.E. and securities                             (See this article on ”Why Investors Should Worry About Money Market Funds: the Wall Street Journal)  http://online.wsj.com/article/SB10001424052702304520804576343093940388186.html ;

-Like having additional death benefit (10 to 20 times deposit amount if something happens to you);

-Like relying on the statutes in their state or the well proven operation of law as an additional way to hedge risk;

-Had an absolute desire to have a true, fully liquid cash alternative.

 

FAQs:

Q: Why haven’t I heard of this before or through my local advisors?

A: We have been using this strategy for a number of years and it was developed as part of our narrowly focused practice in the area of Asset Protection and wealth preservation. Most financial advisors are (rightly) focused on turning nickles into dimes (growth). Our clients are typically affluent and successful and while they value growth make loss prevention an even higher priority. They understand that the current economic environment makes KEEPING existing dollars even more important than chasing new ones.

Q: Can my advisors do this?

A: Only if they  have access to the specific, specially selected policies, knowledge and legal structures we describe and use. These policies are designed and chosen to benefit the client and provide maximum liquidity and protection based in the law, not to benefit the advisor and their bottom line and commission. Most advisors DO NOT even have the ability to use the best policies this way, its takes special permission and qualification.

Q: My advisor says he has something just as good. 

A: Our search for viable alternatives and options for those we work with has been exhaustive. He’s most likely selling you what he has on his shelf and not disclosing the features that his version is missing which are often fatal to your planning. We are working with specially qualified and trained advisors across the country and can get you the best informed help.

 

Note: this article originally appeared in WORTH magazine,

you can see the original here: http://www.box.net/shared/iyb9kea6yr

“What is an alternative to my current cash position that will protect my money from litigation?”

 

In our current economic environment, all clients want their money both safe and liquid.

When most people consider “safe” and “liquid,” they immediately think of their bank. However, what most people do not know is that their checking or savings account is unprotected from a very real threat: the exposure to an increasingly hostile and predatory litigation system. Consider this:

There are tens of thousands of lawsuits filed each day in this country. The average legal cost of defending a frivolous lawsuit is $91,000, plus the settlement amount itself. The number of lawsuits increases in tough economic times as people look to your wealth as an additional source of income.

Our team often takes commonly used tools and redesigns them to provide protection of client assets, while allowing clients to retain control and liquidity. This where the sciences of Financial Planing and Asset Protection meet. The situations below demonstrate the benefits of a strategy we are using in which we take a universal life insurance policy and design it to provide 98 to 102 percent cash surrender value in the first year.

Current Situation—Cash in the Bank: A healthy 45-year-old male client has a bank checking account with $1 million. He rarely uses this account, but he keeps his money there because he likes to have a certain amount of funds liquid in case he needs to access it quickly.

Here is how a regular, personally held bank account works:
· The account earns about 1 percent interest per year, with income taxable as ordinary income.
· If the client is sued for any reason and loses, the judge can require the transfer of the assets from the client’s checking account and into the plaintiff’s pockets.
· If the client dies, the named beneficiaries will receive the $1 million minus the taxes due.
· If the client needs to use the money, he is able to take the amount needed.

BETTER: Creditor-Protected Cash Alternative:
The strategy our team has designed allows the same client to place the $1 million into a specially designed universal life insurance policy by paying a premium amount of $500,000 in each of the first two years.

The policy will provide the following benefits:
· The account will earn a net interest of about 1 percent annually invested in the policy’s fixed account, and the gains are allowed to grow tax-deferred. If the client is sued for any reason and loses, the money in this account is 100 percent creditor-protected from day one.
· If the client dies, the named beneficiaries will receive a death benefit of $10,624,682, the face amount associated with this specific example, free of any estate taxes.
· If the client needs to withdraw all or part of the money in the account, he is able to do so at anytime with no fees or surrender charges, and he will have access to the money within a week. To Summarize the benefits again:

- Creditor Protection

- Wealth Multiplier Effect of 10X (in this illustration)

- Liquidity and borrowing options with no penalty

- Death benefit of $10MM plus that passes outside the estate and free of estate tax

My thanks to Insurance and Investing Expert Jeff Christenson for his help on the technical details of the insurance policy. Together we implement this strategy for clients and advisors nationwide.

Filed Under: Asset Protection, Best Money Market rates, creditor protected cash alternatives, Family Office, finacial advisors, Finance, financial advisors, high net worth, investment exposure, Jeff Christenson, Jumbo CD Rates, Life Insurance, Life Insurnace Conversions, Municipal Bonds, physicians, professional athletes, recession survival, Uncategorized, worth magazine Tagged With: , , , , , , , , , , ,

MUNI BOND BOND EXPOSURE – WARNING

January 18, 2010 By 2 Comments

This article by investment expert Jeff Christenson was originally published in this month’s issue of WORTH magazine. It sheds light on how the economy and depressed tax revenue threaten the value of Muni Bonds, what many consider to be the safest part of their portfolio. A must read for advisors, investors and CPAs. – Ike

As State Budgets Troubles Worsen, What’s Next for Muni’s?

A new crisis, that has not yet been addressed, exists within state and municipal
budgets. According to the Center on Budget and Policy Priorities in Washington, DC, an unprecedented level of state fiscal problems have been brought on by the worst decline in tax receipts in decades and these revenue declines show no signs of letting up.

The current recession is expected to be more severe than the last one, causing state fiscal problems to deepen and last longer than previous recessions. At least 48 states are addressing budget shortfalls for fiscal year 2010 totaling $168 billion and an unusual number of these states are still struggling to adopt a budget for fiscal year 2010, two months after the July 1st start date.

These fiscal problems are expected to continue into fiscal year 2011 and likely beyond. At least 36 states are anticipating significant deficits for fiscal year 2011, and these shortfalls are estimated at an additional $180 billion. Combine the shortfalls for the 2010 budget and those estimated for 2011, and the estimated total is at least $350 billion.

Unemployment, which peaked after the last recession at 6.3%, has already exceeded 10%, and many economists expect it to continue to rise. This continued rise in unemployment would further reduce state income tax receipts, thereby significantly increasing demand for Medicaid and other state-provided services. Also, sales tax receipts have fallen more severely than during the previous recession due to a reduction in the consumer’s access to sufficient lines of credit. This reduction in state revenue has forced states to implement a combination of spending cuts, withdrawals from reserves, and use of federal stimulus dollars. When combined with falling property tax receipts due to rising residential and commercial delinquencies and defaults, state and municipal revenues may continue to decline for some time.

Although we see a high level of risk in the municipal bond markets currently, with equity markets rallying, municipal bonds trading at premiums, and more cash moving off of the sidelines and into the markets each day, market conditions may stay positive through year-end or early next year before the sentiment reverses.

Investors who cannot afford to lose their current unrealized gains from the recent rally should be cautious and mindful of the increased risk to capital and strongly consider moving out of municipal bonds to protect capital.

During last year’s financial crisis, municipal bond prices fell by an average of 20%. The current rally has led to a recovery in pricing, with many municipal bonds again trading at premiums. This recovery in pricing is concerning, given the increasing budget shortfalls and the most extensive expense cuts by states and municipalities in history. Given the relatively low yield of most municipal bonds, the ratio of risk to reward seems out of balance. In fact, this may be one of the greatest selling opportunities in history.

Link to the article in WORTH: http://worth.com/index.php/advice?id=168&view=single

Disclaimer:

The views are those of Jeff Christenson and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Past performance does not guarantee future results.

Securities and Advisory Services are offered through Multi-Financial Securities Corporation, member FINRA, SIPC. Christenson Wealth Management is not affiliated with Multi-Financial Securities Corporation.

Filed Under: Asset Protection, high net worth, Ike Devji, investing, investment exposure, Jeff Christenson, Municipal Bonds, worth magazine

IKE DEVJI and JEFF CHRISTENSON featured in WORTH Magazine

June 12, 2009 By Leave a Comment

SEE THE WORTH FEATURE HERE: http://worth.com/index.php/advice?id=5&view=single

Arizona advisors to the Affluent Jeff Christenson and Ike Devji selected as WORTH Magazine national “Leading Wealth & Legal Advisors”

Phoenix, AZ – JUNE 2009

Jeff Christenson, a Phoenix money manager and President of Christenson Wealth Management and Asset Protection Attorney Ike Devji, Executive V.P. of the Wealthy 100, Of-Counsel with the law firm of Lodmell & Lodmell have been selected by WORTH magazine as part of the Leading Wealth & Legal Advisor Program, a vetted venue for top wealth and legal advisors nationwide. This section is designed to introduce some of the country’s leading wealth advisors and attorneys to Worth readers and provide sound guidance on how to maximize advisor relationships. Christenson and Devji will contribute professional columns for the re-launched magazine which has been designed as the essential guide book for the ultra affluent throughout the year.

“Given what’s happened in the market since October, high net worth families are making tough decisions about their investment and legal advisors and the quality of advice they’re receiving,” said WORTH Publisher Patrick Williams. “Giving investors sound information about leading wealth and legal advisors Like Ike and Jeff will help them make a more informed choice when selecting an advisor or adding to their team.”

Devji, who helps protect billions of dollars for clients internationally and who ran one the largest Asset Protection only law firms in the country, agrees, “We find that our client’s needs are increasingly sophisticated and complex as their net worth grows and their business and personal interests and exposures diversify. We often work together to find and refine solutions for each other’s clients and that’s what makes us unique, the team approach and the best of class bench we have built to serve our clients as needed on an a-la-carte basis. That’s what our clients like about us and that’s what Patrick Williams and WORTH found unique about what we do”. Devji has quietly long been the go-to resource for some of Arizona’s wealthiest residents who are interested in proactively protecting their wealth both domestically and offshore.

WORTH has undergone a complete re-invention in the past few months with an aim to enlighten, inspire and serve a select group of high net worth individuals with an avid interest in the intelligent stewardship of their personal wealth. Featuring a contemporary design and compact format (7.875 inches X 10.5 inches) and printed on paper typically reserved for books, the magazine is geared to be an elegant, practical and portable resource for dynamic CEOs, entrepreneurs and investors.

Christenson and Devji, although in different fields, often work together to meet the varied and sophisticated needs of their high net worth clients both in Arizona and across the United States. “Our clients are leaders in every imaginable industry; medicine, real-estate, executives, professional athletes and entertainers and even others in our own businesses”, said Christenson, a 15 year veteran of the financial services industry. “What they all have in common is that they have spent a great deal of time and effort becoming successful and turn to us help them stay that way”.

The duo look forward to being part of the distinguished WORTH community and continuing the work they are known for and which their clients see as more essential than ever.

Filed Under: Arizona, Asset Protection, high net worth, Ike Devji, Jeff Christenson, worth magazine