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Simple Fitness Truths

June 2015
-By Mark Olson-

Why is it that most of us have a sincere desire to manage our health and finances to their highest potential but few have effectively cared for those critical aspects of life over the long haul?

Most of us will acknowledge the primary cause is that life is complex, and the urgent tends to crowd out the important.  Another contributing factor is that we are surrounded by, and vulnerable to, varieties of myths and traps that keep us from taking, and then staying on, that higher road. 

One dominant health myth is that there is a magic diet or product that will allow us to be fit and maintain our target weight with a minimum amount of time or effort.  Six-pack abs in six weeks anyone?

The financial arena is loaded with illusions that financial security is an end-all or that a guru or scheme exists that can magically turn $100 into $1,000 virtually overnight.  The untimely death of a loved one can be a sobering reminder that financial security and blazing returns may not be so important after all.

So what is it that can help us rise above the complexities of life and do what is most important? 

The missing link, that can make all the difference, is a goal-focused plan that flows out of our deepest convictions overseen by someone who can hold us accountable.  One of the first steps of getting there is to be quiet enough, long enough, to define those elements in life that matter most.  Spouses, coaches, pastors, advisers and friends can be invaluable along that path.

If your conviction is that you are a steward of the physical aspects of your life, your goal-focused health plan may be to maintain a target weight and exercise some minimum amount per week.  If so, your long-term success could be assured by simply eating less calories than your body expends, finding ways to exercise consistently with activities that bring you joy and engaging people to hold you accountable.

If your conviction is that you are a steward of the financial aspects of your life, your goal-focused financial plan may be to maintain giving and saving at some target level and living on the rest.  If so, your long-term success could be assured by giving to the people and causes you care about most, investing in a globally diversified portfolio with a target return that flows out of your plan and engaging with some type of coach to help you adhere to your plan until your needs change.

In health, as well as finance, I have found that the differentiating keys to success over the long haul are defining reasonable goals and maintaining consistency through an appropriately balanced pace.  It’s all about average speed over a lifespan; not maximum speed at any emotionally charged point in time.

See you on the journey.

“There is no shortcut to anywhere worth going.”  Beverly Sills

“Slow and steady wins the race.”  Robert Lloyd

“The glory of God is man fully functioning.  Find your place to do that, and you will find the peace that passes all understanding.”  Irenius

Know Your Financial Math

May 2015
Please keep in mind that these are simple estimations and are not to be treated as precise technical calculations. They can be influenced by a number of factors and don’t take any personal information into account. The formulas help call attention to parts of your budget, but do not calculate exactly what you should expect.

The easiest and best place to start. Your cash flow is the total surplus or deficit you have each month after paying your expenses. If you find you are running a deficit most months, you need to cut your expenses down or find a way to boost your income.

Another easy formula, calculating how much a monthly (or weekly) expense will cost you over a whole year is an important insight for a budget. Paying $8 a month for a subscription may seem cheap, but you should realize it’s costing you $96 over the course of a year.

The EPA estimates that the average car owner uses about 500 gallons of gas a year (almost 700 if you drive a truck or SUV). While volatile gas prices make it impossible to project your exact gas expenses for a year, this formula makes it easy to understand how much a change in gas prices is worth: for every $0.01 gas drops, you could expect to save $5 annually.

Have you ever wanted a quick estimate of how long it takes for money to double? Try the “Rule of 72.” Just divide 72 by the annual growth rate of your account and you get an approximation of how many years it takes to double. (Example: 6 percent growth would be 72/6 = 12 years to double). If using this formula for investment account, remember that the market is unpredictable and average market performance does not guarantee future returns. Investments can be subject to losses, which will greatly change their nominal rate of return.

Although there are some major outliers, most new cars depreciate around 10% when driven off the lot and another 10% each year they are driven (for the first 5 years). So when looking at new cars, remember that most lose their value fast. Without a down payment, you’ll likely be underwater on the loan for the first year or two.

This equation is a bit more complex, but it’s pretty handy for people wondering how their rent cost compares to a 30‐year mortgage. Take 75 percent of the expected mortgage interest rate and add 3 percent to get the annualized rate of repayment. If you multiply this number by the initial mortgage amount, you get the annual cost. (Example: A 30‐year mortgage issued at 4 percent would have an annual repayment rate of (3+4×.75) = 6%. If the mortgage was for $200,000, you’d pay ($200,000×6%) = $12,000 a year ($1,000 a month) to stay on the 30 year schedule.) Keep in mind that this is an estimation of the mortgage costs only and does not include home insurance, mortgage insurance, property expenses or any of the other various costs of owning a home.

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Remember that past performance may not indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, strategy, or product referenced directly or indirectly in this newsletter will be profitable, equal any corresponding historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any information contained in this newsletter serves as the receipt of personalized investment advice. If a reader has questions regarding the applicability of any specific issue discussed to their individual situation, they are encouraged to consult with a professional adviser. 

This article was written by Advicent Solutions, an entity unrelated to Guidestream Financial, Inc.. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. Guidestream Financial, Inc. does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2014 Advicent Solutions. All rights reserved.

The Dollar Vacation

May 2015
Every day, there are countless pressures on national currencies. Exchange rates are in constant flux, while supply and demand change the prices of a country’s goods and services. For those vacationing abroad, a sudden shift in the market can make big differences in how much money they can spend.

In 2014, the U.S. economy delivered a gift to its travelers: a strong dollar. Hitting its highest value in years, the dollar’s performance drove up U.S. exchange rates, decreasing international prices. While tourism costs followed the exchange rate down in most countries, some destinations stand out as especially good (or surprisingly bad) deals for Americans planning a vacation.

Better Deals Abroad:
Russia: Provided you know where to travel and how to get around safely, there is a great deal to be found in traveling Russia right now. International conflict and falling oil prices have crushed the ruble in currency markets over the past year, decreasing tourism costs by 30‐50 percent.

Romania/Bulgaria: As economic growth remains low in Eurozone countries, these countries have decreased their already low tourism costs over the past year. Many Americans do not realize that both these countries have extensive Black Sea coastlines that attract many vacationers.

Norway/Sweden: Although these Scandinavian countries are still some of the priciest destinations in Europe, both the krone and the krona have lost a considerable amount of strength over the past year. If you’ve been thinking about traveling to these countries, now might be the time.

Argentina: The disastrous bond default by the Argentine government has damaged the national economy and has upped the dollar’s exchange rate to the peso by about 50 percent. High consumer price inflation will limit how far these extra pesos go, but the overall effect is still cheaper tourism.

The Neighbors: The U.S. dollar made significant gains on both the Mexican peso and the Canadian dollar. Though neither country may feel particularly “foreign,” the money saved on short travel times can make them two of the easiest destinations for exploiting the strong U.S. dollar.

Countries Bucking the Trend:
China: Although it remains fairly cheap compared to the United States, China’s growth has outpaced the United States for decades, and its currency has grown in strength. China is no longer the bargain earlier travelers remember, and chances are good vacations there will only get more expensive.

Switzerland: Already a fixture on the list of most expensive places to visit, Switzerland threw off any dollar advantage in January when the Swiss Franc jumped in value after breaking ties with the Euro. Americans eager to see the Alps may wish to stay in the slightly more affordable Eurozone countries of France and Italy instead.

India: While the nominal exchange rate between the dollar and the Indian rupee remained relatively flat throughout the year, the country’s high inflation (over 5 percent annually) means your dollars will get you less. Much like China, India is still affordable in many areas, but its rapid growth likely means its cheapest days are behind it.

Alternative: See America First U.S. National Parks: Traveling around the United States won’t provide you with any currency advantage, but the recent drop in gas prices has
certainly made American road trips drastically cheaper than last year. The U.S. National Park Service protects 407 places of natural and historic significance and offers an annual pass for just $80.

The current strength of the dollar is a bonus for American travelers, but smart planning will always be the biggest factor to a successful vacation. Hunting for deals on airfare and choosing the best seasons to travel will have a bigger impact on the quality and price of a trip than any currency fluctuation. By taking time to detail your spending and itinerary, you can get the most out of any vacation.

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Remember that past performance may not indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, strategy, or product referenced directly or indirectly in this newsletter will be profitable, equal any corresponding historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any information contained in this newsletter serves as the receipt of personalized investment advice. If a reader has questions regarding the applicability of any specific issue discussed to their individual situation, they are encouraged to consult with a professional adviser. 

This article was written by Advicent Solutions, an entity unrelated to Guidestream Financial, Inc.. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. Guidestream Financial, Inc. does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2014 Advicent Solutions. All rights reserved.

TEACHERS – THEIR IMPACT ON OUR COMMUNITY

March 2015
-By Kirk Hoffman-

My life experience allows me a unique perspective in regard to top teachers.  I come from a long line of educators.  My great-great grandfather helped found two universities and was the president of a third.  My great grandfather was a teacher, professor, and university president.  My grandmother was a public school teacher.  Both of my parents were public school teachers.  My wife works for Jackson Public Schools and my daughter is a public school teacher.

I also have worked in financial planning since 1986 and obtained my Certified Financial Planner™ certification in 2003.  This background has let me see the effect that top teachers have on individuals, businesses, and communities.

Over the years, I have witnessed individuals sharing the positive impact that my family of educators has had on their lives.  They’ve been thankful for the encouragement that they received as students.  They’ve appreciated having an adult in their life that cared about them.  They were happy to have someone help them identify their gifts and strengths and get them passionate about it.  They were thankful that someone was successful in inspiring them to go after their dreams.  They were grateful for the preparation that they received that made them successful in their careers.  Some of these appreciative students even became top teachers themselves.

I have also seen the impact of top teachers in working with individuals on their financial plans over the last 28 years.  I’ve had the opportunity to work with executives, business owners, and high net worth individuals.  A common theme among these accomplished individuals is how they equate their success to the educational opportunities that they had, and the teachers and professors that influenced them.  The individuals I’ve worked with who are supervisors within their companies report that the educational experience of their employees has a positive impact on the life of the entire company. The cumulative effect of top teachers positively impacts business success and entire communities.

From my perspective, we all benefit from having top teachers in our community.  Therefore, it is important to encourage those teachers and be supportive of educators in our community.  Financial and moral support is critical.  I know from my own family experience how difficult and frustrating the teaching profession can be at times.  Entering the teaching profession has been much more challenging for my daughter than it was for my parents.  My wife and I have been long time supporters of Jackson Public Schools.  Both of our daughters graduated from Jackson High.  They had a good experience, received a great education, and had some wonderful teachers.  They were well prepared to move on to university and have been successful there.  We’ve also been pleased and impressed over the years with how the Jackson community values education and supports the schools in the district. 

The Jackson business community, especially local manufacturers, have done an impressive job in collaboration with the schools.  My family of educators appreciates the community and business support, and encourages our community to continue that support.  Top teachers do make a difference.

Silicon Apps Overtake Silver Screens

February 2015
No one would debate that the mobile app market is huge. But just how big of a deal is it? Take a look at these stats:
•    The iOS apps catalog contains 1.4 million apps.
•    People spent $500 million on iOS apps in the first week of 2015 alone.
•    In 2014, Apple paid app developers a total of $10 billion.

Those numbers don’t even include Android apps. Android numbers are more difficult to compile, since multiple companies offer app stores. But, to give some perspective, Google paid out about $3 billion to its developers in 2014 for sales made through its official store. 
Compare all that with Hollywood, where U.S. movie revenue came in at about $10.35 billion, and you can see just how important app revenue has become. 

Although the numbers aren’t the complete story (iOS data doesn’t include Android apps or service businesses, and the Hollywood number doesn’t include international box office revenues), app revenues have been growing exponentially for years while Hollywood revenues have remained relatively stagnant. If the app economy hasn’t completely overtaken the U.S. movie industry yet, it soon will.
This surge in technology revenue isn’t limited to mobile apps. The tech sector is seeing sweeping growth in many areas. Everything from online software to IT services is growing at an incredible rate. Though there are exceptions, of course, the trend has significantly raised the value of many tech companies over the past several years. 

The question for many economists is whether the current trend is a normal growth spurt or whether the market is experiencing a new tech bubble. You don’t have to be ancient to remember the last tech bubble—it burst only 15 years ago. The so-called “dot-com” crash saw dozens of unbelievably fast-growing companies disappear overnight. 

So, are we in the same position? There certainly are major differences between now and then. In the late 1990s and early 2000s, tech companies were able to draw investor capital bases with little more than a hint of potential success. The running joke at the time was that all a company had to do to increase its share price was add “.com” to its name. Companies were going into debt renting office space and buying computers to rush into a very uncertain industry.  

Today, investors are more digitally savvy and know how to analyze “internet” companies more rigorously. Still, the risk of overvaluation is always possible. Some point out that several tech startups have unnaturally high stock prices and speculative sustainability. The rapid advance of technology coupled with quickly shifting cultural preferences for mobile technologies prevents investors from making anything more than educated guesses. 

If the tech market finds itself with another bursting bubble, beneficial technologies may still survive. For example, despite the dot-com crash in 2000, no one thought that online services were going to disappear or that they would never be lucrative. Individual companies were in danger, but it was obvious the tech sector as a whole would bounce back. 

What should you take away from all this as an individual investor? Even if you can’t predict the future, it is still valuable to be aware of how technology can shift the value of markets. Knowing the broad changes can keep you from acting on speculation, fear or greed. You should know what drives your investments’ success and how they fit into your personal portfolio. The best decisions are always made within the context of your personal financial plan, so speak with your financial advisor before making any changes. 
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Remember that past performance may not indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, strategy, or product referenced directly or indirectly in this newsletter will be profitable, equal any corresponding historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any information contained in this newsletter serves as the receipt of personalized investment advice. If a reader has questions regarding the applicability of any specific issue discussed to their individual situation, they are encouraged to consult with a professional adviser. 

This article was written by Advicent Solutions, an entity unrelated to Guidestream Financial, Inc.. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. Guidestream Financial, Inc. does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2014 Advicent Solutions. All rights reserved.

Chinese Economy Now Largest in the World

February 2015
For decades, the U.S. has had the largest economy in the world, and by a wide margin. Though other countries, such as China and India, have had much more rapid growth in recent years, the U.S. GDP still dwarfs that of any other country. In fact, it’s almost double China’s, at least in terms of nominal GDP. However, the International Monetary Fund (IMF) recently reported that China is the world’s largest economy in one regard: purchasing power parity (PPP). 

First, some background: When comparing the size of economies, normally each country’s GDP is converted to U.S. dollars using current market exchanges rates to create an easy means of comparison. A country’s GDP expressed in U.S. dollars using this method is called its nominal GDP. It is in this regard that the U.S. still towers over every other country. The U.S. nominal GDP is roughly twice the size of China’s economy using this method and multiple times the size of every 
other country. 

But economists have pointed out that nominal GDP doesn’t give us the whole picture. The same goods or services in one country don’t cost the same in another, even taking into account market exchange rates. This is especially true in underdeveloped countries, where goods and services are often much cheaper. Tourists often recognize this concept intuitively when going to a restaurant or market in a less developed country than their own and noticing their money goes much further. Purchasing power parity applies this concept on a much larger scale.  One country may have less money (nominal GDP) than another, but the amount of goods and services that money could buy within that country (PPP) is effectively the same. 

In terms of PPP, the IMF reports that China currently outputs $17.6 trillion in goods and services annually, while the U.S. outputs $17.4 trillion. This may come as a surprise for many who had heard that China’s economy won’t become the world’s largest until 2020 or later. That’s still true, as those estimates are based off nominal GDP estimates, not PPP estimates. Most tend to regard nominal GDP as the more important measurement, because it better states the position of the country in a global economy. However, the reason the PPP estimate is so significant is that the time that China will become the largest economy by any measure is not so far off. 

This isn’t to say that China’s economy is similar to the U.S. economy—far from it. The U.S. still has much more purchasing power globally, even if it has less inside its own borders. While China may be able to purchase more domestic goods, like cars, missiles or soldiers, than the U.S., the U.S. has greater access to foreign goods due to the strength of the dollar. China also has a much larger population than the U.S. This means that while the country’s economy is large, its per capita GDP is drastically lower than the U.S. Additionally, China is still mostly a communist state, and many of the companies are state-run with limited access to foreign investment. However, that is changing as China has been becoming more public. Just last November, China’s Shanghai stock exchange linked up with the Hong Kong exchange to become open to foreign investors. It’s too soon to tell how well the exchange will do, but the long-term implications are significant. 

Does this mean Americans need to start converting their dollars to Yuan and learning Mandarin? No. But it does mean that the global economy, as always, is changing in big ways. If things continue in the direction they are heading, America will soon lose its tenure as the world’s economic leader—in size, at least—and China will step in to take its place.
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Remember that past performance may not indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, strategy, or product referenced directly or indirectly in this newsletter will be profitable, equal any corresponding historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any information contained in this newsletter serves as the receipt of personalized investment advice. If a reader has questions regarding the applicability of any specific issue discussed to their individual situation, they are encouraged to consult with a professional adviser. 

This article was written by Advicent Solutions, an entity unrelated to Guidestream Financial, Inc.. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. Guidestream Financial, Inc. does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2014 Advicent Solutions. All rights reserved.

For Today’s Children, Retirement Planning Starts Young

February 2015
We all hope for a long, healthy life, but—from a financial standpoint—the length of our lives may be starting to get out of hand. One projection from the U.K.’s Office of National Statistics estimates that more than 30 percent of the nation’s children born after 2011 will reach age 100. That means that for every couple that reaches age 65, more than half will have least one partner live another 35 years.

If today’s children continue to retire at what we currently consider a “normal” age, many could spend almost as much of their life in retirement as they spend working. Since a majority of U.S. citizens already face insecure retirements with current financial planning norms, extended longevity may become an overwhelming monetary challenge.

One solution to the problem may lie in changing when people begin to plan for retirement. A few extra years of growth can have a massive impact on the value of a retirement account. If we can train today’s children to make good financial decisions earlier in life than most adults do now, they’ll be better able to handle the cost of an extremely long retirement. 

But it’s today’s adults who will need to teach them.

In general, adults usually impart their financial habits to children—whether they mean to or not. Kids are observant, and adults’ financial decisions can imprint upon them easily. However, retirement planning, though essential, is an obscure subject. Children get to see how adults spend their money, but they don’t often see how they save it.

Obviously, trying to lecture a young child about 401(k)s and investment strategies won’t be helpful to anyone, so adults will need to take a more basic approach. By teaching children the underlying principles of saving, planning and money growth, you can turn their future financial decisions into a matter of obvious choices.  

Getting Kids to Learn
Though teaching financial habits takes more than a piggybank, it’s still a great place to start. Providing a younger child with both an allowance and savings goals is a great way for them to practice budgeting. Help the child set goals that are simple and attainable; if they set an ambitious goal, offer to help them by covering the difference if they reach a significant percentage of the total value.

But saving alone isn’t enough: children need to understand that value can grow over time. This can be taught by providing them with interest: offer a small amount of money for each dollar they saved from their last allowance. They’ll quickly learn that by forgoing some immediate gratification, they can reach their savings goals even faster.

Later on, you can reverse this process to teach a child about debt. Allow them to borrow money from you for a small purchase, but plainly explain that they’ll have to pay the money back with interest. When they hand their money over to you later, it becomes a golden opportunity to explain how debt means paying extra.

If you prefer a more direct route of education, there are numerous online resources to help teach kids about money and smart planning—one of the most interesting examples being Warren Buffett’s own online cartoon series “Secret Millionaires Club” (www.smckids.org).
As a child grows, help them get the ball rolling on retirement planning. Our team at GuideStream Financial would be glad to help them take some first steps. We can help you explain the importance of planning ahead for retirement and avoiding heavy credit debt (especially during college). Financial maturity doesn’t happen overnight, so stay patient and don’t try to cover everything all at once. 
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Remember that past performance may not indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, strategy, or product referenced directly or indirectly in this newsletter will be profitable, equal any corresponding historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any information contained in this newsletter serves as the receipt of personalized investment advice. If a reader has questions regarding the applicability of any specific issue discussed to their individual situation, they are encouraged to consult with a professional adviser. 

This article was written by Advicent Solutions, an entity unrelated to Guidestream Financial, Inc.. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. Guidestream Financial, Inc. does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2014 Advicent Solutions. All rights reserved.

Cell Phones: The New Way to (Safely?) Pay

November 2014
One would be forgiven for mistrusting credit cards these days. It seems like every month for the past year, some company announces that it’s had customer credit information stolen. For some companies, the thefts were isolated to a few thousand individuals; others, like Target and Home Depot, exposed the data of millions of customers.

In September, the world of digital transactions took a sudden turn when Apple announced its new “Apple Pay” service. Having already popularized digital revolutions in cell phone and tablet technology, Apple wants to facilitate a safer and more convenient way to pay at stores and online. Using near-field communication (NFC)—a short-range wireless signal—Apple Pay allows you to touch your phone to a special credit card reader and make a transaction.

Like any new type of transaction, the technology has been met with varying degrees of skepticism. Some believe the wireless broadcast of a payment leaves them exposed. Others point out that adding banking information to an already data-loaded phone only increases the risk of full identity theft if the device is lost or stolen. In fact, resistance to NFC payments has been so strong that Google Wallet, which offers NFC payments on Android devices, still has few users despite launching three years ago.

Of course, broadcasting your credit card number through radio waves (even very short-range ones) would be extremely dangerous. That is why NFC payments don’t store or transmit credit data in the traditional sense. In fact, Apple Pay holds no raw card data on the phone or in cloud storage. It creates one-time, digital “tokens” to verify transactions. During a transaction, a token is sent to a creditor, where it is decrypted and authorizes the release of funds. Once an exchange is complete, the token created for it is useless.

In addition to making any “skimmed” banking data useless, transactions using disposable tokens also hide you from retailers. Apple Pay tokens only facilitate monetary transactions, preventing a retailer from collecting any personal information. Apple has also said that their devices will not keep any information about your purchases, just a basic record of transactions.

Apple Pay’s final layer of security comes through human authorization. For each purchase, a device requires verification from the user by PIN or fingerprint scan on the device. This not only means that a user must acknowledge every transaction, but that a phone thief will have great difficulty making a purchase even if the phone were stolen.

Given its ability to secure and obscure data, Apple Pay is being praised as one of the most secure ways a person could make a retail purchase.

Or so we think.

The reality is that Apple Pay and other NFC credit systems are still too new for us to be certain of total security. As they grow more popular, hackers and data thieves will become increasingly interested in finding ways to break in and steal data. Just because the creators can’t think of a way to beat the system doesn’t mean someone else won’t.

The important thing to remember as the digital age progresses is that convenience through consolidation always adds a certain kind of risk. Apple has made a strong effort to make Apple Pay a safe service; now the responsibility is on us as consumers to protect our information. If we want to turn our phones into wallets, we need to be prepared to guard them as if they were both. We cannot continue to give identity thieves easy jobs by being lazy with passwords, linking accounts or leaving our phones unattended. It’s not wrong to put all of our eggs in one basket—we just need to be sure we watch that basket closely.
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Remember that past performance may not indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, strategy, or product referenced directly or indirectly in this newsletter will be profitable, equal any corresponding historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any information contained in this newsletter serves as the receipt of personalized investment advice. If a reader has questions regarding the applicability of any specific issue discussed to their individual situation, they are encouraged to consult with a professional adviser. 

This article was written by Advicent Solutions, an entity unrelated to Guidestream Financial, Inc.. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. Guidestream Financial, Inc. does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2014 Advicent Solutions. All rights reserved.

Oil Goes On A Slide

November 2014
All over the country, Americans are getting relief at the pump. Gas prices dropped an average of about $0.50 per gallon from June through October, and market trends are expected to keep the price down for a few months more.

So, what’s going on? Did we suddenly find a lot more oil? Are fossil fuels reversing their decades-long march upward? In this case, the shift in oil has to do more with business strategy than availability or politics. Here are the major factors responsible for the relaxed prices:

Competition

The boom in shale oil fracking has turned the United States into a major producer in the world oil markets. Since the United States uses more oil than anyone (almost double that of the next highest consumer, China, in 2012), a change in its importing and production is likely going to have a big impact on market value.

However, while the United States is moving toward energy independence, its fracking boom has been sustained only by high oil prices. Fracking costs around 10 times more than the traditional oil pumping done in some OPEC countries. Fracking needs expensive oil to be profitable and practical.

To smother the success of fracking, Saudi Arabia and Kuwait have increased their production to drive down oil prices. At the moment, they are more interested in discouraging fracking operations than they are in getting the highest price. With their strong cash reserves, they have few qualms about a temporary drop in profitability to prevent countries from developing their own oil reserves.

Demand

The other major factor is OPEC’s desire to protect and grow the global demand for oil. When oil prices are high or the economy is bad, most countries cut back on consumption and look for alternate fuel sources.

Economic news from the past few months has been far from stellar. Many Eurozone countries are facing renewed recession, and growth in developing economies like China and Brazil has been slowing. Lowering oil prices can help support economic growth in these countries and, in time, create greater demand for oil when things improve.

As for the United States, demand for gasoline has been somewhat slowing despite the growing economy. The total number of miles driven in the country has been flat or down since the Great Recession, while vehicle fuel efficiency is greater than ever. This trend is expected to continue to increase as older cars continue to drop out of the market and more people move to metro areas. A drop in gas prices reduces the pressure for these improvements and encourages driving, helping to keep demand for oil high.

Collateral Damage

The goal of the major OPEC players is clearly to drive out smaller competition and secure a larger future market. However, the damage of cheap oil goes beyond the falling margins of shale oil companies.

In particular, countries that have limited, but essential, oil exports are taking a beating from the low prices (e.g. Russia, Iran and Venezuela). These countries, some of which are OPEC members, have limited markets to service—they need reasonable profits from what they manage to sell and have little chance of getting a larger market share from this whole ordeal.

To a lesser extent, green technology may also be hurt by this recent shift. Any time fossil fuels get cheap, interest in renewable energy dips. However, it will likely require several quarters of low fuel prices to really damage long-term interest in the green energy sector.

Right now, American drivers are the ones getting the most from the oil price war. However, if we lose our domestic oil production and increase our gas dependency, this current relief will have a negative long-term effect on the country.

It’s difficult to estimate how long OPEC will allow prices to decline or when crude prices will climb again. Despite all the known factors, oil prices are a notoriously difficult commodity to anticipate. Even the best theories cannot account for surprise factors like international conflict, terrorism or technological developments. The safest way to profit from the current oil market is to just enjoy the extra savings the next time you fill up.

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Remember that past performance may not indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, strategy, or product referenced directly or indirectly in this newsletter will be profitable, equal any corresponding historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any information contained in this newsletter serves as the receipt of personalized investment advice. If a reader has questions regarding the applicability of any specific issue discussed to their individual situation, they are encouraged to consult with a professional adviser. 

This article was written by Advicent Solutions, an entity unrelated to Guidestream Financial, Inc.. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. Guidestream Financial, Inc. does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2014 Advicent Solutions. All rights reserved.

Financial Planning – 30 & Under

December 2014
-By Caitlin Koppelman-
While I was in college, people told me I had fewer obligations and more financial flexibility than I’d have in my entire life. I could not comprehend that at the time. In retrospect, I can see it now:  No mortgage, no kids, and those blessed student loans were still in deferment!  Life was so simple: almost no liabilities and a high percentage of discretionary income. Now, I have to remind myself that I’m in the “accumulation phase” of life. I’m accumulating valuable assets for the future: an education, our first home and starting a retirement savings plan. Those assets aren’t cheap, but I’m making an investment for the future. Every mortgage payment and every retirement contribution is like money in a future bank account.

Even though it’s natural to want to pay more attention to your present bank account, now is the time to make deposits for that far off phase of life. Do it now, while it’s easier than ever. Notice I said, “easier” not “easy”. It is never easy to delay gratification, but if we want to reap the benefits at harvest time, we have to sow and tend the garden along the way. With 35+ years on your side, a little bit now can multiply if handled wisely.

Who has time to tend that financial garden? There are only so many hours in the week and who wants to spend their down time planning a future retirement that they can barely imagine?  As a 28-year-old, I can’t blame you for being skeptical. You’re probably a little jaded by the whole idea of savings, debt, and retirement. It comes down to risk and reward. If a Traverse City cherry farmer is hopeful for a good crop, he faces the risk of frost, pests and drought, head on. It’s worth the risk for him because of the potential reward. His potential reward is higher because he took the risk and planted the trees. For me, I’m not willing to live a life of limited influence in the future because of financial constraints. So, I plant now and plan for a harvest.

Here are a few simple steps to get you started:

  1. Many employers offer 401(k) matching programs. Take full advantage of that by deferring at least the percentage at which the company will match your contribution. That’s free money! If your employer doesn’t offer a match, at least do your own contributing.
  2. Connect with a financial adviser you trust. Be brave and share your goals. Take advantage of their expertise. You’re a professional with your own expertise in a specific area. Let them use their wisdom and experience to set you free to focus on the things you care about.
  3. After you’ve made a trustworthy connection, make a plan and stick to it! Come flood or draught; keep your eye on the prize!

Remember, delayed gratification is not natural. When something threatens your cherry trees, you’ll be tempted to give up. Stay the course! The harvest is coming! 

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Name: GuideStream Financial, Inc.
Phone: 800-325-8975
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Address: 8050 Spring Arbor Rd., PO Box 580, Spring Arbor, Michigan 49283