Page 26 - The Edge - Spring 2016

AASBO WINTER CONFERENCE

BY DON HARRIS
Keith DeGreen O ers AASBO Members

a Financial Word of Caution

KEITH DEGREEN
Despite prospects for a substantial increase in
public school funding, AASBO members were “Within 10 years of retirement, you need to know how to
cautioned against getting too complacent.
Keith DeGreen, a certi ed nancial planner and allocate. Just because you retire, that doesn’t mean your
the keynote speaker at AASBO’s Winter Conference money doesn’t need to grow. You’ll need a pay raise.”
on Jan. 27, gave attendees a glimpse of the economy
for the rest of 2016, and the view wasn’t as bright as — Keith DeGreen, an attorney and certifi ed fi nancial planner
school o cials would like.
“For 2016, economists estimate U.S. GDP (gross
domestic product) growth to be 2.2 percent, a very slow rate of on other sources of income you will have in retirement. Within
growth,” said DeGreen, who heads DeGreen Capital Management 10 years of retirement, you need to know how to allocate. Just
in Scottsdale. “We might even have a brief recession along the because you retire, that doesn’t mean your money doesn’t need to
way. e net result is that tax revenue in Arizona might be reduced grow. You’ll need a pay raise.”
accordingly. On the other hand, Arizona’s economy is pretty The investor knows that over reasonable periods of time,
resilient.” prudent investing is proven to be more productive than saving.
is economic outlook could impact funding for schools and “ e investor accepts that in most years one or more of the
how they manage their budgets. “Tax revenue may be a bit more four major asset classes will experience a correction of at least
depressed than the Legislature has projected,” DeGreen said, 10 percent, and that going into cash is the last resort,” DeGreen said.
noting that 2.2 percent growth for 2016 compared to 2.4 percent On the other hand, the saver seeks guarantees. “Savers just
growth in 2015. “With even slower growth, school business o cials want to know that they can get all of their money back either now
will need to take that into consideration with regard to budgeting.” or when their guaranteed CD (certi cate of deposit) expires,”
Recognizing the nancial woes AASBO members have been DeGreen said. “ ey are unwilling to accept asset class volatility,
facing, DeGreen said, “You already have a fairly thankless task. even within a balanced portfolio designed to limit aggregate
You’re given 25 cents and asked to produce a dollar’s worth of volatility. ey accept, knowingly or unknowingly, that purchasing
value. I’m afraid it may get tougher before it gets easier.” power risk may limit their lifestyle later in life, or may limit what
Commenting on investments in general, DeGreen said up to they leave behind to others, including a spouse.”
90 percent of results are driven by how funds are allocated among If the markets continue to struggle this year, it could be because
the four major asset classes – stocks, bonds, alternatives including of a worldwide slowdown, he said, adding, “Prices could also be
commodities and real estate, and cash. He said 2015 was an hit because many companies, particularly in the oil and mining
anomaly because it was only the fourth time since 1931 that none sector, got overextended and increased capacity. ere could be
of the asset classes showed a positive return except for cash, which more price challenges. Prices could possibly decline.”
inched up barely one-tenth of 1 percent. DeGreen said he wouldn’t attempt to advise AASBO members
“For the past two months, it might have been tempting for many where to buy pencils or bus tires. He alluded to Proposition 123
investors to go to cash or just throw up their hands,” DeGreen said. on the May 17 special election that, if approved by voters, will
“It has been a horrible start for 2016.” increase school funding by $3.5 billion over 10 years. “Some of the
But in an interview on Feb. 12, DeGreen said events of that proposals I’ve heard about with respect to the Arizona Land Trust
particular day show how quickly the markets can reverse. “Oil may re ect unrealistic expectations regarding total return for the
increased 12 percent in a day, the largest increase in a day since fund over the years. As school business o cials, you need to be
2009,” he said. “Major U.S. indices – the Dow and the S&P, both aware that what’s getting promised this year from overly generous
were up about 1.7 percent in a single day. at’s why it’s important projections may not materialize.”
to sharpen your axe twice and cut once. Be very speci c on how
you should be allocated among those four major asset classes.” Keith DeGreen, an attorney and certi ed nancial planner, was
Every potential investor needs to know whether they are investor Arizona’s Republican candidate for U.S. Senate in 1988, and
or a saver, even before they start, DeGreen said. “It’s not enough was the leading Republican candidate for governor in 2005 until
to say you will be more growth oriented, as a general rule, but as he withdrew due to a family illness. He hosts a popular personal
you get older you will pay closer attention to diversifying among all nance radio show – now in its 27th year on NewsTalk 550, FKYI.
classes. And I don’t mean 25 percent in each class. It really depends He can be reached at keith@degreen.com or (480) 609-9900.

THE EDGE | SPRING 2016
26 THE EDGE