Thursday, April 26, 2012

The World is Upside Down

I just returned from lunch and a discussion with a colleague from the economics department about China.  This discussion began due to my telling him about our work in China and a presentation we heard at yesterday’s Personal Finance Symposium IV.   Margie Carpenter, CFP®, CIMA® a financial planner with Bell Tower Advisors, LLC presented her research on “Allocating to Emerging Market Equities: Why, How, and How Much”.  I will try to introduce some of her work here.  (All facts are referenced in her PowerPoint which is online here.)


To begin, think about the world in 1900.  At that time, the entire market capitalization of the world, the total value of all the publicly traded corporations, was $18 billion.  The United States of America represented a mere 18% of the total.  By the year 1985, the United States’ success as an economic power grew to 66% of the world’s total market capitalization of $2 trillion. 


However, by the year 1995, the share of the world’s total market capitalization of $15.6 trillion had fallen to 55% - from 66%.  Continuing this trend, by 2010, the market capitalization of the world had grown to $47 trillion and the share represented by the United States continued its downward trend to 32%.  By the year 2030, Goldman Sachs predicts this will fall to 25%, while Jeremy Siegel says it will fall to 17% by 2050. 


Graphically, this looks like this:


Why do you care?


Most of the growth in the world is also expected to occur outside of our 50 states. Currently, Asia accounts for 46% of the composition of the world’s Gross Domestic Product (GDP) growth.  The International Monetary Fund predicts this will change to 53% over the period 2012-2016 and, by the year 2015, there will be seventeen economies with a GDP of over $1 trillion.  Clearly, the lead we have enjoyed as citizens of the United States is disappearing.


This is not dismal, however.  Many of these lesser developed countries are able to grow much faster, because they are beginning from a relatively meager base.  They can grow faster while remaining behind the United States in development.  Yet, growth is a key to earnings and earnings are a key to the value of companies.  What does this mean for you, the twenty-first century investor?  (Regardless of your age, you are a 21st century investor.)


First, we must reconsider our asset allocations to include more investments outside of the United States.  Many people have a home country bias that they need to examine and find value and growth where it is most likely to be found.  Ms. Carpenter asks us to consider reconstructing our equity allocations to a regional approach where the Americas, both North and South) would receive 45% of our investments, Asia would receive 32%, Europe 20% and Other only 3% (mostly the Middle East and Africa).  If we did this, our equity ownership would reflect the “ownership” of the world.


Admittedly, this is contrary to many people’s sense of patriotism.  We also know that many US companies, such as Coca-Cola and McDonald’s, are rapidly growing their sales overseas.   Thus, we’ve many threads in this weave we call ourselves and our world.  The point is, however, that the world is changing and we have a primary responsibility to the financial success of our families.  It is my belief that the success of our families adds together to become the success of our country, as well as our world.  And, yes, the times they are a changin’.


Thursday, April 19, 2012

What Do You Know About Missouri Landlord-tenant Law?

By Brenda Procter


Missourians do not always know everything they should about laws to protect the rights of landlords and tenants. Unfortunately, some landlords do know the law and take advantage of renters who do not. Landlord-tenant law is specific to each state.  Here is a quick quiz to help you learn about Missouri law.


1.                   Which of the following actions can get a tenant evicted?


a.       Damage to the property

b.      Failure to pay rent

c.       Violation of the terms of the lease

d.      Allowing drug-related criminal activity on the property

e.      All of the above


The answer is e. All of the above!


2.                   You return to your apartment one day and find all of your belongings outside and new locks on the door. Your landlord says she had the right to evict you for failing to pay rent.


a.       True

b.      False


The answer is b. False!


Not paying rent can get you evicted, but a landlord must get a court order first.  For a legal eviction, you must get a written notice from the landlord that an eviction lawsuit has been filed, and you get a chance to tell the court your side of the story before they issue an order.


3.                   You ask the landlord to make a repair to your apartment. She doesn’t do it, so you can legally quit paying rent.


a.       True

b.      False


The answer is b. False!


Landlords must make needed repairs, but not paying rent can get you evicted. In some cases a tenant may make repairs and deduct the cost from the rent, but only if certain conditions are true.  Go to the Missouri attorney general’s Web site at or call the toll-free consumer protection hot line at 800-392-8222 to find out what your rights are.


4.                   You pay your rent late, so your landlord decides to turn off your electricity and water until you pay rent. The landlord is legally allowed to turn off utilities to punish late rent payments.


a.       True

b.      False


The answer is b. False!


The landlord cannot get your utilities turned off unless it is for health and safety reasons.


5.                   You have given your landlord proper notice that you will not renew your lease. You wake up in the middle of the night to find your landlord inspecting the apartment for damages. The landlord tells you he can inspect for damages any time during the last month of the lease.


a.       True

b.      False


The answer is b. False!


The landlord must notify you of the time and date he plans to inspect the dwelling. You have the right to be present at the inspection, which you should do if possible, and the inspection must be at a reasonable time.


6.                   Your landlord catches you selling illegal drugs from your apartment. You receive a written court order from the local county court ordering you to immediately vacate the apartment.  You argue that you are entitled to more notice.


a.       True

b.      False


The answer is b. False!


The landlord can evict you right away. By law, county courts can order the quick eviction of tenants involved in drug-related criminal activity or violence, even when they do not get arrested. Prior written notice is not required.


7.                   If you get evicted, the eviction will probably show up on your credit report in the future.


a.       True

b.      False


The answer is a. True!


An eviction is a legal proceeding and may show on your credit report. That’s why landlords usually check your credit report before renting to you. If you get evicted, it may be difficult to get into rental property in the future.


8.                   Your landlord keeps all of your security deposit to cover damage that you can prove was from normal use. You may sue to recover up to double the amount that was withheld.


a.       True

b.      False


The answer is a. True!


You have the right to sue to get twice the amount they kept.


Learn more about Missouri’s landlord-tenant laws from a free booklet you can order from the Missouri attorney general’s website at  Or, answer an additional set of quiz questions online at


By Brenda Procter, M.S., state specialist and instructor, MU Personal Financial Planning Extension


Adapted from “You’re out!  Missouri’s landlord tenant laws” by Cynthia E. Crawford, Ph.D.  and Carole Bozworth, Ph.D., specialists, MU Family Financial Education Extension


Wednesday, April 11, 2012

Financial Superstitions for Friday the 13th

I admit it.  My mother and her mother were very superstitious women.  It used to drive them batty when I would walk down the sidewalk with them, stepping on the cracks, as they warned, “Step on a crack and you break your mother’s back.”  Since they were my “mothers”, I couldn’t resist testing this theory and the null hypothesis was always accepted.  On any given Friday the 13th, they were beyond disbelief.  They would refrain from anything the least bit risky, including hosting a party – for fear people wouldn’t come - or going to the doctor – for fear he would discover a dread disease.  So, in honor of the barrels of salt I’ve watched being hurled over a shoulder, should you accidently spill the salt, it seems like a good idea to see what “money superstitions” exist and have some fun on Friday, April 13, 2012.  (These are from the “Don’t Mess with Taxes” website.) My comments are in italics.

1. Never give a person a wallet or purse without money in it, or they’ll always be poor.  One thing is certain, if you don’t put any money in it, you’re not helping them be rich.

2. If the palm of your right hand itches, you will soon be receiving some money, if you don’t scratch it. If it’s your left hand, you’ll be paying out some money.  My advice is to keep your hands in your pocket if you are carrying your wallet and in a bad part of town.

3. If your front door faces your back door it means money in, money out.  Huh? If you live in such an oddly designed house, you are definitely poor.

4. If you put your handbag on the floor/ground you will never have money.  While this is from Trinidad and Tobago, Americans have also been known to leave their purse behind.

5. Money attracts money, so never leave your pockets, purses or wallets completely empty and never completely empty your bank account. Always have at least a coin or two.  This is from Greece.  Apparently, they did not pay attention to the advice of their mothers.

6. Placing a piece of snake skin into your wallet will help you become rich or find money. Snakes are a symbol of money and wealth in Japan. If you kill a snake, you will lose your money.  While this is from Japan, what does one do if they live in Ireland?  How do you get the snake skin for your wallet, if you don’t kill the snake?

7. Find a penny, pick it up and all day long you’ll have good luck!  OK, I was told that it has to be “heads-up” for good luck and “tails-up” was bad luck.  Actually, I never pass up a coin on the ground.  For, a penny found is a penny found.

8. Write with a green pen whenever you can, and profits will flow from your hand.  If this were true, President Obama would be passing out green pens to every American corporation.

9. Shooting stars are rare indeed, but if you happen to see one say “money, money, money”.  Can you tell me why I should say “money, money, money”, other than to look stupid to my fellow campers?

10. Always place a bill with a person’s face on it with the person’s face facing down. If you leave the bills with the faces facing up in your wallet, they will want to peek out and leave. But if they are facing down, they will want to stay buried inside your wallet.  OMG!  My money is alive!

11. If you make money on Monday, keep it and the amount will increase during the remainder of the week.  Seems to me that the more you keep, regardless of the day of the week, the amount will increase.

12. Wrap a penny in paper and carry it with you. This will make sure you never go broke.  Good idea, but if you use bills with pictures of presidents to wrap it in, see #10.

13. On January 1, be sure to have greens (spinach is my favorite) and black-eyed peas to ensure prosperity for the coming year. The greens represent paper currency and the peas are for added coinage throughout the year.  Actually, this is true.  If you learn to eat low cost food and refrain from dining out, you will have more money.  Case closed.

If you suffer from paraskevidekatriaphobia, you are probably not reading this, for that means you are totally paranoid about Friday the 13th.  Today, look at your superstitions, consider the irrational “rules” you live by, or the money practices you have learned from others.  Those lessons may, or may not, be ones you need to disregard or relearn. So, even if you walk under a ladder while a black cat crosses the street in front of you, you are able to overcome irrational fears and to create financial success.  Finally, if your hand itches and you see a penny on the ground, pick it up and put it in your snakeskin wallet.

Thursday, April 5, 2012

Choosing your major

by Ryan Law


We have written in the past about the costs and benefits of a college education[i][ii], and I feel strongly that most people can benefit from a good education – after all, college grads make more than high school grads[iii] and have lower overall unemployment rates, but the data researched has generally been for college graduates as a group. Georgetown Center of Education and the Workforce[iv] recently did a study to determine unemployment and earnings for recent college graduates. Here is a summary chart:

Getting a college degree is generally smart, but if you financing it on student loans, it’s important to realize that it may be difficult to make the payments on $50,000 worth of debt if you are making $30,000 as an Arts or Recreation major. If someone is making $55,000 as an Engineering major or $46,000 as a Computers major the payments will probably be more manageable.


The authors of the report feel that for most, college is a good investment, but conclude that “Today’s best advice, then, is that high school students who can go on to college should do so — with one caveat, they should do their homework before picking a major because, when it comes to employment prospects and compensation, not all college degrees are created equal.”


Michelle Singletary wrote about this report[v] and said, “A college education is not an investment in your future if you are taking out loans just for the college experience. It’s not an investment if you’re not coupling your education with training. It’s not an investment if you aren’t researching which fields are creating good-paying jobs now and 30 years from now.”


I completely agree with Singletary – students, parents and advisors should be careful about the amount of student loans they take out and get practical training along the way. Here are two quick stories to illustrate the point:


1.       One student had a combined federal and private debt load of about $150,000. She had majored in the Arts and had lived in nice apartments during school and had travelled abroad a few times, all financed with student loans. She came to get help because she was graduating and had no job yet. Her dream was to work with horses and travel the world. Unfortunately, with that debt load and no job she was moving back in with her parents and taking whatever job she could find. She might have enjoyed her time in college, but will likely spend the rest of her life paying for it.


2.       Another student had been going to school for years and had gone to law school but dropped out because he didn’t like it. He then tried medical school but also didn’t like that. He tried out a number of different majors and had multiple degrees. He finally realized that he really wanted to teach History at the college level so he got a Ph.D. in history. He had about $180,000 in private and federal student debt, and was worried that he was only going to make a salary of about $32,000. When asked why he wouldn’t make more as a professor he said “because history teachers are so plentiful they can pay that little.” He actually didn’t have a job offer yet, and figured that he would end up working any random job to make ends meet. This student, too, will spend the rest of his life paying for his education and may never get to work in the field he really wants and spent so much to get.

Obviously these two stories are extreme examples – after all, most students graduate with about $24,000 in debt and many will find a job and make their payments. If you are a student, though, you can maximize your chances for getting a high-paying job my choosing the right major and getting experience in your field as you go through school. Even if your major doesn’t require an internship you can still try to find work in the field. If you are a parent or advisor you would be wise to sit down with the students you are working with and help them understand the realities of how much people in certain majors make and the realities of paying off debt.


I don’t want to leave the impression that you should choose your major based solely on earnings potential – after all, we would all be doctors or lawyers if that were the case, but considering earnings potential is an important part of the evaluation process.


Ryan H. Law, M.S., CFP(r), AFC


Personal Financial Planning Department

Office for Financial Success Director

University of Missouri Center on Economic Education Director


162 Stanley Hall

University of Missouri

Columbia, MO 65211


573.882.9211 (office)

573.884.8389 (fax)