What is capitalism? How does it work? For some time now I’ve been meaning to write a column on that topic, but it has seemed to be a daunting task more fit for an economist than a financial planner.

Then I remembered this story from my childhood.

One summer, we were visiting my grandparents. I was about ten and my brother was seven. Our grandfather hired us to weed his garden, paying us a dime apiece.

That seems like a paltry sum, but it wasn’t such a bad wage for a couple of kids at the time. After all, a bottle of soda only cost a nickel.

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“Shop locally.” “Eat locally.” Do a quick Internet search for either of these terms and you get a host of results. Plenty of people are interested in saving energy and supporting locally-owned businesses by doing their buying close to home.

So many people are committed to eating locally grown food that there’s even a name for them: locavores. Being a locavore in South Dakota in the wintertime, by the way, can be a challenge.

If buying locally matters to you, here’s another aspect of it to think about: giving locally.

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So the economic train is speeding faster and faster, and the edge of the fiscal cliff is getting closer and closer, and the passengers are starting to scream. Meanwhile, the guys in the cab of the engine are arguing about whether to hit the brakes or blow the whistle.

What’s the best thing for an investor to do? Nothing.

Based on my emails this week from clients and readers of my column, there seems to be widespread concern among investors that we’re on the verge of panic and the markets are about to head south.

It reminds me of the good old days, back in the fall of 2008, when the markets were dropping 900 points a day. I’m sensing that the fear among investors about going over the fiscal cliff is similar to the fear of four years ago. The only difference is that the markets aren’t falling today.

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“What are your ‘Money Scripts’?” The Wall Street Journal asks this question in an article by Thomas Coyle published in the December 9 online issue. Coyle based much of the piece on interviews with Rick and with therapist Dave Jetson, who offers financial therapy to KFG clients.

Read the complete article here.

What’s the difference between a millionaire and a billionaire?

Three zeroes and a comma.

No, this isn’t a bad joke. It takes one thousand millions to make one billion. That’s a huge difference.

Over the past couple of years, especially during the presidential election, one of the hot-button issues has been whether the wealthy are paying “their fair share” in taxes. A great deal of the media coverage and political rhetoric, from President Obama on down, has lumped “millionaires and billionaires” together.

That makes as much sense as putting a housecat and a tiger into the same cage and saying they’re just the same.

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Hurricane Sandy attacked the East Coast, did her worst, and disappeared. Yet cleaning up the mess she left behind will take months and even years.

Even dealing with damage from much smaller disasters can take a long time. As an example, in July 2011 a severe storm with baseball-sized hail moved through southern Rapid City. It only took nature a few minutes to flatten gardens, beat up vehicles, and damage buildings. It will probably take until the second anniversary of the storm to repair all the damage to our house.

Such a delay isn’t unusual. The most common reasons are finding a contractor and negotiating with your insurance company.

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As a young adult, what could you spend money on that would be a wise investment in your financial future? A home? A college education? A money management class?

All of these may be good ideas, but there’s something else you can buy that could make an even greater difference in your long-term financial health: counseling.

What does psychological counseling have to do with money? Sometimes, a lot. I was recently interviewed by a reporter for an article about money disorders. The conversation reminded me just how many problems can result from dysfunctional money beliefs and behaviors. Money disorders can impair people’s functioning and disrupt their lives just as significantly as disorders like alcoholism or other addictions.

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As most of our clients know, we stress test our portfolios against 70 or more potential political and economic scenarios to assess risk and opportunity.  Recently we’ve noticed one scenario would send our portfolio values upward, somewhat significantly.  The event that would do this really has us scratching our heads.

The scenario that could send our portfolios up double digits is Iran successfully testing a nuclear bomb.

You may wonder, as we did, “How can Iran getting the nuclear bomb possibly be a GOOD thing for our investments?!” I  asked our researcher to ‘splain this to me.

He told me that while it sounds counter-intuitive, the research suggests that Iran getting a nuclear weapon will cause a cold war of sorts in the Middle East, which may be a more stable situation than a “hot” war between Israel and Iran. While the result on the financial markets will find equities falling mildly, it will also push treasury yields down, causing a rally in fixed income, absolute return, and managed futures positions. Since our portfolios are so diversified among various asset classes (nine to be exact) this would be a net positive benefit to them.  Continue Reading »

Landlord. The very word implies wealth, authority, and status. Maybe that’s one of the reasons there are so many books and seminars claiming to teach you how to build wealth by owning rental property.

Yes, you can get rich as a landlord. You can go broke, too. And in between those two extremes, you can find yourself dealing with a bunch of problems like leaking roofs, non-paying tenants, and economic downturns. The risks of building wealth with real estate are substantial. This is true whether you want to become the biggest property owner in town or just buy a second home as a rental to help finance your retirement.

With real estate prices still low after the collapse of the housing bubble, and with the current low interest rates, it may be a great time to buy a second home. Before even considering such a purchase, though, here are some important points to consider:

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Whether you’re pleased or disappointed with the outcome of the Presidential election, the question to ask now is, “What does this mean to me?” It’s an especially important question if you own a business or are investing for retirement.

If you have wealth, the implications are not good. Keeping the current tax code would take some type of lame duck session compromise in Congress, which Speaker Boehner has said is improbable. It’s wise to expect a reversion to the old tax code on January 1, 2013, which means higher taxes on income, capital gains, and dividends.

Even if Congress revises the tax code, the changes will probably not include lowering taxes for “the rich.” This is the first Presidential election I remember where both candidates promised not to taxes on “the rich,” defined by the current administration as individuals with an adjusted gross income of over $200,000 and couples with $250,000.

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