In the midst of all the angst and legitimate concern over loss of jobs and economic turmoil, there is also an underlying implication of what my wife terms “financial Darwinism”. The herd is being trimmed. People that did stupid things with their money are paying the price for their stupidity.

Part of the lesson of this economy is that most people are really rather incompetent when it comes to managing money. Like brainless wood ticks that find fresh blood, they will gorge themselves on easy credit and go on wild spending sprees that a little household budgeting would reveal to be insane. It is a bit hard to feel too sad for the 65K-a-year insurance salesman that lost his beach house and classic Corvette when the bank suddenly realized his payments amounted to 125% of his salary!

And this financial Darwinism not only extends to individuals, but we are also trimming the herd of silly and short-sighted institutions that literally “bet the bank” on unserviceable loans. The good news is that ultimately the strong survive, and hopefully future generations will be a bit more financially savvy.

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Author Dan Buettner has been analyzing the habits of people who live in areas where people commonly live healthy past age 100, and he tries to break down the common factors that seem to lead to a vibrant old age. He travels to these “Blue Zones” in Sardenia, Okinawa, California, and Costa Rica to learn the secrets.

I would encourage you to read the book (I read the Kindle edition). It is a fast and interesting read, but here are a few highlights on how to reach age 100 while still enjoying life.  Most are certainly not suprising, yet most of us don’t follow the tips:

1. Walk – don’t run.  Walking 5 miles a day or more was a common trait among the elders.  It keeps you healthy and slim, and unlike running which can damage joints, it builds bone mass, a key to living longer.  Many elderly break bones because of low bone density, so keep your bones and joints healthy is key to longevity.
2. Stay slim.  It appears part of the key to living longer is to be slightly underweight.  Blue Zoners ate smaller meals and took in 2000 calories or less per day.
3. Cut down on the meat. Most of the Blue Zoners were either vegetarians, or they ate meat infrequently, maybe a couple times a week.  And somewhat suprisingly, those who ate meat tended to eat pork, which seems to offer some benefits.
4. Foods you should eat more of:  nuts, green vegetables, berries, beans, fish. citrus.  No real suprise here, but Blue Zoners particularly ate a lot of nuts and beans.  These seemed to be key foods.
5. Have a purpose.  Perhaps one of the most consistent attributes of Blue Zoners was their place in their family and community.  Many worked well into old age.  There is a surgeon in Loma Linda, CA that still practices. They tended to have very active family lives in which they still played a key role, and/or were active in churches and community organizations.  They have a reason to live.

And I was particularly pleased to read a glass or two of wine a day is truly a good thing too.

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For many years diet experts have agreed that tracking your food intake is a great way to stick to a diet, but writing down food and then looking up the caloric count is too time consuming.  Lose It automates it all, and I have found it to be a great way to track how I am doing.  It also gives you a different perspective on food.  When you understand how many calories are in that cookie it is a lot easier to give up dessert.

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Zion Bank – 1.92%
Capital One (use the Costco version and get the bonus) – 1.75%
ING – 1.65%
HSBC – 1.55%
Emigrant Savings – 1.55%

Zions is a new one on my list.  I just opened an account so don’t know about the ease of use yet. Etrade fell completely out of my list as the lowered their rate to .65. Also, consider the Charles Schwab Bank.  The brokerage giant also has a bank that offers good returns on savings – 1.75% – as well as a full suite of banking services.  This week they also made accounts available for family trusts.  I love Schwab’s website and their smooth integration to Quicken, so I found this to be great news.  They also have a decent credit card.

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And before I forget, my special congratulations to Ray Link for recently being named Oregon “CFO Of The Year”.   Unfortunately I missed the award ceremony, which included what I heard was some pretty facinating in-depth discussions on the new GAP rules, and a special performance by the LIBOR ballroom dancers (nobody parties like accountants!).  But seriously, Ray well deserves the honor, and I wish he had been at the financial helm of many of our big banks and car companies the last few years.  We might all have money to invest!

What to Do Now.

by Ray Link

About a year now I wrote an article entitled “Why Investing in Stocks Might be a Bad Idea” where I tracked the returns of stocks compared to a simple and safe money market fund for 10 years.  The results so surprised me I felt compelled to write my article. What I did not contemplate was the historic melt-down of most all markets to come about just a few months later wreaking havoc on most American’s savings and retirement dreams.  Many people have lost so much I hear stories of people not looking at their monthly statements, or worse selling out of stocks completely and “tossing in the towel” and placing all their assets in low interest money-market funds.  So the question is what to do now?

I actually like corrections and dislocations as it gives us an opportunity to buy things cheap and to sort out winners from losers. The vast wasteland brought on by the market collapse also created great opportunities. However those great bargains were in October last year so now we have to be realists in our return expectations. One of the keys to successful investing is to not panic and over-react to a situation.

My suggestions are based on investing retirement assets as these are tax-deferred and assumes you have a long term view and are willing to take some investment risk. Assets in taxable accounts require different strategies.

For starters I like the notion espoused by the late Sir John Templeton, founder of the Templeton group of funds, that your portfolio should have an equity (stocks) exposure of no greater than 100 minus your age. So if you are 55 like me, no more than 45% of your portfolio should be in stocks or equity mutual funds. I like stocks of companies with strong balance sheets, lots of cash and market leading positions and technology stocks with strong intellectual property (patents). Some examples include Cisco, Exxon, IBM, Research in Motion (makers of Blackberry devices), Costco, GlaxoSmithKline-Kline, Zimmer Holdings (makers of joint replacements), Abbott Labs, Home Depot and General Electric. Any portfolio should include at least 10 – 15 stocks with no more than 5% of your total portfolio in any one stock. I also like to use some of the ETFs such as the QQQs which track the Nasdaq, the SPYs which track the S&P 500 or similar securities to add some diversification without the high fees of mutual funds.

Next I like to keep the non-equity portion of my portfolio in relatively straight forward instruments such as 3-5 year certificates of deposits, government bonds and very high quality corporate bonds. An interesting way to “play the market” yet retain the safety of an FDIC insured CD is through “equity-linked” CDs.  These are available through Schwab and other brokers and usually give you some percentage of the return of an index such as the S&P 500 over a period of 3-5 years, but if the index is negative, you get 100% of your money back. Imagine how your portfolio would look today if you had these as opposed to equity mutual funds? Another equity-linked play using bonds is through bonds that are convertible into stocks. These are difficult to buy and have some additional risks so I suggest using a fund such as the Vanguard Convertible Bond Fund (ticker symbol VCVSX) which is 5 star-rated by Morningstar.

So how might a $100,000 IRA portfolio look for a 55 year old planning to not need any of this money for at least 5 years?

$30,000 in 10 different high quality stocks
$15,000 in at least 3 different ETFs such as QQQ, SPY and DIA
$25,000 in CDs ranging from 3-5 years with a yield of around 3%
$10,000 – $15,000 in several equity-linked CDs
$5,000 in a convertible bond fund
$10,000 in a combination of government and corporate bonds with a maturity of no greater than 5 years.

Before you do any investing it is always best to seek the advice of an investment professional as well as you accountant, do your homework and ask a lot of questions and regularly review your portfolio.  Please note that some of the stocks and funds listed above are investments that I currently own and that I am not a registered investment advisor.

Happy investing – it’s time to get serious again and re-work that portfolio!

Ray Link is a CPA and holds an MBA from Wharton. He is EVP/CFO of FEI Company (NASDAQ: FEIC), a world leader in tools for nanotechnology. He is on the Portland State University Business Advisory Council and on the Board of Directors and Audit Committee for Cascade Microtech (NASDAQ: CSCD).

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The most interesting panel I observed at the BMO Thought Leaders Conference was titled “The Agency of the Future”.  CEO’s from large agencies around the country – many of them divisions of the big public agencies – layed out their vision of how advertising agencies will begin to look in the very near future.  A few bullet points from the discussion:

• Accountability in advertising will continue to be the mantra.
• To this end, there will be an increased push towards “media-led creative”, allowing actual response rates to dictate creative approach as opposed to the much more difficult to measure “brand hunch”.  (Actually, they didn’t say “brand hunch”, it is a cute term I just made up, but you get the idea.)
• This will neccessitate a change in the typical creative structure, that now usually includes a creative and art director and perhaps a writer, to include an analyst that will interpret advertising results to be implemented into creative.
• Tracking technologies will increase (see next point).

After this discussion, the next panel was called “The Race for The Digital Media Hub”, which in many ways was an extension to the “agency of the future” discussion.  Participants in this panel, many from digital agencies, discussed how the agency of the future will have a centralized tracking system that will be used to optimize all media channels.  As part of this process, and as mentioned in the earlier panel, this would involve greater interaction between creative and media, and really a fundamental shift in how agencies manage business.  The interactive-based crowd embraced this idea, but I suspect getting brand agencies to warmly greet the concept would be a little more difficult. The panelists also all agreed that performance-based media buying will become much more common, and is already common in almost every digital agency.

All this was facinating, but also a bit surreal, as the panel members seemed unaware that the agency structure and the “agency of the future” as they described already exists.  They are called Direct Response Agencies, and the good ones are media-centered and have sophisticated tracking systems to manage advertising based on performance.  Essentially everything the panelists thought would happen sometime in the future already happens right now, they just don’t seem to know it.

I felt like I worked for Toyota and was attending a conference called “the car of the future” in which participants described the “magical hybrid auto that someday will run on gas and electricity” while being totally oblivious to something called a Prius.

Ah, but I guess I should not take it personally.  Direct response agencies seldom gets the respect they deserve, but I have a feeling that is all turning around.  It feels good to be an “agency of the future” as opposed to one clinging to the past.

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Last week I was on a panel in New York at the BMO Capital Markets Thought Leaders conference on advertising.  There were many advertising big wigs much smarter than me pontificating on the future of the industry, and I thought I would pass along some of the more interesting thinking I heard.  First a few compelling statistics that came out:

• General Advertising is in the biggest decline since the Great Depression.
• Over the last three years advertising revenue has declined by $25 billion dollars.

Of course everyone in advertising is quite familiar with the fragmentation of media.  This business got a lot more complicated when three major networks and a few huge newspapers and magazines turned into hundreds of thousands of cable networks, streaming sites, blogs, online newsletters, and other media outlets.  But one speaker spoke of a media outlet I had not considered – the mega-retailer.  An interesting stat:

• In 1970 the most popular show on television was “All In The Family”, which drew 70% of household viewers.
• Last year the most popular show on television was “American Idol”, which drew 17%.
• Every week three time three times more people visit a WalMart store than watch American Idol.

So is the right strategy to drop advertising on American Idol and buy more space in WalMart?  Well, not necessarily, but this does speak to the transformative power of the mega retailer.  As media channels expanded at dizzying speeds, the retail market collapsed in many ways.  Hundreds of thousands of retailers were replaced huge “big boxers”, so the game was changing on multiple levels.

In-store marketing has taken a major role in the advertising world.  Consumer used to be “advertising driven” in their product choices, but now they often made decisions “in-store”.  Interesting switch.

In my next entry I will reveal the thought leaders vision on “the agency of the future”.  This was the most interesting part of the conference!

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You would think that this basic legal nod to public safety would be embraced by almost everyone, but much to my suprise many people called to complain about the idea, reasoning that it was stripping them of their rights.  “Let them take away our right to talk on a cell phone, and the next thing you know they will pass a law against eating while driving”, shouted one caller.  Hmmm, thanks for the good idea.  I think there should be a law against having dinner while operating a motor vehicle.  I don’t want to be rear-ended at eighty miles per hour because some glutton was putting gravy on his turkey while wishing his Mom “Happy Thanksgiving” on his cell phone.

I’m a big advocate of personal freedom and keeping the government out of our lives, but if I have to pay for the right to yell at my friends while operating a motor vehicle with horrible disfigurement and death in a car accident, I’m willing to wait until I get home to make the call.  Talking on a cell phone while driving is a bad idea, and here are a few other things you should not do while driving:

• Bowl
• Arm wrestle
• Have sex (well, maybe Clinton-style, but even that is not a good idea)
• Play Wii on the auto’s DVD system
• Garden
• Sleep
• Work on your blog

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I am in the advertising business, where many would translate business attire as “a darker shade of tee shirt”.  Perhaps I am a traditionalist, but regardless of the position someone applies for, when someone interviews with me I expect them to be in real business attire, which for men includes a jacket and tie.

A couple years ago a fresh college graduate showed up for an interview in shorts and polo shirt, explaining he came to the interview from a game.  I politely refused to interview him, explaining we weren’t playing around at the company.

In my book Warriors, Workers, Whiners & Weasels I profile the legendary entrepreneur Jay Call, founder of Flying J.  Jay told me that during an interview he would closely examine the applicant’s shoes to make sure they were shined, as he found people that took pride in their shoes also took pride in their work.  Jay also liked to follow applicants to the parking lot to take a look at their cars, as he found people that kept clean cars also took pride in their work.  He didn’t care if your car or shoes were old, he just cared about how you kept them up.

I certainly don’t go to those lengths, but I must admit the concept makes a bit of sense.  And if I were in the job market right now, I would do everything I could to tip the scales in my favor.

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