A Church in Finland

For Christmas, my wife bought me a subscription to Ancestry.com. My maternal grandparents were born in Finland and my paternal great-grandparents in Sweden. So I set off to learn a little more about where I came from. I didn't expect this to be the start of a Great Adventure that will not end.

It didn't take me long to find several Swedish 5th great-grandparents, including Nils Jonsson, born in 1691 in Ostra Boda, Sweden. At the other end, I also located several distant cousins in the U.S., many that I remember from when I was young, a flash back to a world so long ago.

Old Church of Isokyro

But I wasn't prepared for what I found in Finland. My maternal grandparents immigrated separately to the Upper Peninsula of Michigan around 1902 when they were about 20. They married and brought up ten kids in the hovels of Ishpeming, my hometown. My grandfather and later my uncles worked underground in the iron ore mines. 

I heard endless stories of life without plumbing or central heat, sleeping three in a bed, living off poached fish and deer. But even with the deprivations, they all made it to adulthood, all held reasonable jobs, all married and only one divorced. Together they had 27 kids, nearly half of whom completed bachelor degrees. Not bad for grandparents who never spoke English.

I found 2nd great-grandparents from my grandfather's side. I discovered that he wasn't born John Wuorenmaa, as I had I always known him. He was born Juho Kustaa Vuorenmaa and anglicized it when he arrived in the U.S., a common immigrant practice.

On my grandmother's side, though, I discovered 34 great-grandparents going back twelve generations to the 16th century. For those twelve generations, they mostly lived and died in and around Isokyro, a small village thirty miles inland from Vaasa on the west coast of Finland, on the Kyronjoki River. It's not far from where my grandfather and his family lived in Kauhava. I suspect the records of these twelve generations (and more) come from the Old Church of Isokyro, a massive grey stone church built in the early 1500s that is still standing. 

At this time, Finland was governed by Sweden. Presumably my relatives were peasants living generation after generation in the same small area, probably engaged in farming and fishing, with not much changing through dozens of decades. Eventually, Russia took control from Sweden and before Finland was freed to be their own country, my grandparents had relocated to the U.S. 

This was part of mass migrations from this area due to a lack of jobs and Russia's repressive attempts at Russification of Finland. Still today, 16% of the Upper Peninsula is Finnish, with some small townships approaching 50%. I've heard that the U.P. has the largest concentration of Finnish people outside of Finland. Ironically, two generations later, I immigrated to Minnesota due to a similar lack of jobs.

Most of my life, I've heard about premodern life without medicine, electricity and cars. But now it's more than some esoteric discussion. I have the names, birth and death dates, and towns across centuries where half of my DNA comes from. Maria Bertilintytär ("Bertil's daughter") Kiikka was born June 1, 1725 in Isokyro before the U.S. was established, and died there at age 74 on March 16, 1800. 

Which was another shocking revelation. Yes, many died before reaching adulthood but if you survived long enough to procreate, at least my relatives lived to a median age of 64. Contrary to impressions given by life expectancy data, centuries ago even peasants apparently did not normally die of old age at forty and some lived to eighty.

Walking through generations of my ancestry, I'm struck by some aspects of life. First, people are born and die at a time and a place, and they are given a name that remains a fact regardless of whether it is changed (which they are for more reasons than marriage). Second, marriage and children helps in giving one a place in life's book, which is the closest to immortality many of us will get. 

Finally, most of the rest of our lives - our thoughts, work, accumulations, successes and failures - are lost behind the amazing fact that we have been part of a DNA chain that's still alive. My wife and our three kids are by far the highest priorities in my life. As they should be.

Also, when I envision the life a dozen generations of my ancestors lived in Finland over hundreds of years, I'm also aware of some similarities. By choice, I live in a geography and climate that is very similar to where they lived. By choice, I live in a smaller urban area and we have a vacation home in a small rural community north of here.

We have a garden with asparagus, lettuce, beets and peas. We regularly hike in the surrounding boreal forests and I still occasionally hunt and fish. And although we have central heat, Internet and SUVs, we live a somewhat minimalist life focused on experiences, nature, relationships and simpler pleasures. Finally, like my ancestors, we are involved in a church that, unfortunately, will probably not be around in half a millennium. 

So where next? I'm not done flushing out my maternal grandparents. I'm trying to solve why one lineage in this same area ends so abruptly (I suspect an incorrect name translation). Then I intend to do the same look at my Swedish lineage. A cursory look through my wife's relatives gets me back at least two centuries into Norway, Ukraine, Switzerland and England. When I'm comfortable with my findings, I will share them with any of our relatives that care to look, and I may even pay a professional to review it.

And I finally have something on my bucket list: I am going to visit Isokyro and its medieval church.

A Health Care Directive

Recently, I reviewed our wills that we had written years ago. Our kids have moved out and we are fifteen years older than when we wrote them. Our wills also include health care directives. I was intrigued rereading what I wrote so long ago. I stand by it still and here I share with you its key elements (with a few insignificant edits). I suggest you have one done and file it with your primary health care facility.

“Whenever I am unable to decide or speak for myself, my health care agent has the power to make any and all health care decisions for me, including the power to give, refuse or withdraw consent to any care, treatment, service or procedures, including deciding whether to stop or not start health care that is keeping me or might keep me alive.

“Ultimately, I am interested in my life continuing provided there is a reasonable probability that I will eventually return to leading a somewhat normal and productive life. But I am not interested in expensive or painful procedures that have little probability of returning me to a degree of normalcy. I am also concerned the impact my living or dying has on my wife and my children, and what their wishes may be. The critical point is that I do not want money and energy spent to keep me merely alive. I have loved my life but I have little fear of dying. I am primarily afraid of physical and emotional pain, and I do not want my last act on earth to be spending mine or my wife’s or anyone else’s money to keep me alive only for the sake of being alive. I especially do not want to be a burden to my family, financially, emotionally or otherwise.

“I have little tolerance for pain and do not want it, whether physical or emotional. An example of emotional pain would include consciousness but inability to communicate or move. Another would be living permanently in a group facility such as a nursing home.

“I do not believe that allowing death by omission is wrong. You are free to let me die or even help me die if that is appropriate.

“My life would no longer be worth living if I were an emotional or financial drain on my wife, children or society; if I could not live a reasonably productive life; if I could not basically take care of myself; if I were to spend the remainder of my life in a nursing facility; or if I were unconscious with little expectation of returning to a somewhat productive life.

“Standard medical treatments may be used to try to improve my medical condition or to prolong my life but they should be stopped if they do not help.

“If I had a reasonable chance of recovery where I return to being a somewhat normal and productive person, I would want reasonable efforts made to recover me. But if recovery means, for example, permanent blindness, loss of arms, permanent pain and other major disabilities, I do not want efforts made to prolong my life.

“If I were dying, I would want all efforts made to minimize pain and no efforts made to prolong my life. If I were permanently unconscious or otherwise completely dependent on others for my care, I would want to die as soon as possible.”

“I would like to die at home. I remember when our dog, Sam, was dying. Rather than putting him alone into a sterile medical facility full of tubes in an effort to extend his life a few days or weeks or months, he laid in the family room with us until he couldn’t eat or drink. Then we brought him to the vet where he was euthanized while my wife held him. I only wish that you treat me as well as she treated Sam.”

A New Healthcare Paradigm

Last summer, in reply to an interesting set of Tweets from Paul Krugman regarding healthcare, I wrote, “The biggest problem in healthcare is cost. And that will get fixed when people have skin in the game and start price shopping.” Little did I realize the hornets’ nest I had stuck a stick into.

So I’m going to explain myself. In the country with the most amazing medical system imaginable, the system has broken down in two ways: access and cost. But a large part of the access problem is the cost.

My opinion remains that fixing health care is primarily about lowering its cost. ACA did the opposite: It broadened access and then tried to lower cost while its use was expanding.

That healthcare is costly and needlessly inefficient is mostly obvious, supported by different analyses done, and by visits to any medical facility. Healthcare misses many of the basic efficiencies that exist in other, more competitive industries. But the heathcare system has little incentive to control costs since costs are mostly passed along to payment systems.

My suggestion is that we reduce costs by providing incentives for some users of the system to shop their needed healthcare - to allow some of capitalism to filter into a system that today is largely socialized, whether directly through the government or indirectly through tax incentivized employer insurance.

The retort to any use of capitalism in the healthcare industry is the proverbial emergency ambulance trip where a dying patient is researching ER costs. Well, I can’t quickly name anyone who has been in an ambulance, including myself. In reality, most healthcare is not urgent. Physicals, complex operations, birthing and counseling are examples that could be shopped for. I’ve had five surgeries in my life and only one was urgent.

I suggest that we start this change with our younger, healthy people whose healthcare is largely handled through their employer. The idea is that we give this group incentives to be deliberate on what healthcare they receive, and what it costs. Our current system offers little here. My fellow workers pay for my healthcare and I pay for theirs. We individually have little financial interest in its cost.

If younger, healthy workers had a financial incentive in the healthcare they receive, a new market could arise where costs and value are known. Although the healthcare industry would claim that they are special, the truth is that whether a physical, vaccine, appendectomy, colonoscopy or heart surgery, they can provide these prices.

And as consumers, we can make a value judgement between service and price. We do it every day. But the healthcare systems insists on some mystical discussion of “family physician” and “talk to your provider,” instead of recognizing that healthcare is largely a heavily regulated industry of highly trained technicians largely doing very routine things.

How do we provide financial incentives? Primarily by eliminating the healthcare payment system and return today’s healthcare “insurance” to what it is called: insurance. That is, insurance should kick in only for healthcare issues that exceed some level of cost, to spare us financial ruin, as insurance is meant to work. We do not need this system to manage a flu shot, just as we don’t need an automotive payment system to handle oil changes. And this insurance should be selected from an array of providers and options that balance the amount of risk one is willing to take.

What might happen in this environment of cost transparency and limited insurance use? Healthcare users would quickly find that there is a wide difference in pricing between providers for nearly identical procedures. No, they may not be blessed by your family physician, but they work just the same.

With just a subset of people starting to shop their healthcare, private for-profit entrepreneurs would find there is a lot of money to be made by lowering the costs of procedures and undercutting the current industry. We would find that some healthcare would remain very expensive but much of it can be provided more efficiently at a much lower cost. And eliminating a middle payment system alone would start saving money.

Lowering costs includes challenging whether the healthcare sought provides much value at all. A simple example is the mostly needless and common emergency room visits for rashes and other skin problems. Most disappear on their own, rarely requiring medical attention.

Here’s another way to look at it. In our quite typical middle-class family of five, the total cost of our healthcare is less than the combined cost of our housing and transportation. I can’t recall the last car or homeowners insurance claim I’ve filed but I do know very well the price of vehicles, gas, utilities, and maintenance and repairs.

The same can be done with healthcare. It is ludicrous that healthcare is considered so esoteric, urgent  and expensive that working families can’t manage their healthcare as they do other critical aspects of their lives. It’s just a bad story planted in our collective conscience.

The last chapter in this scenario is what happens when the young and employed start receiving healthcare that’s significantly less expensive. It would be natural for the old healthcare system to learn from the new system, enabling them to reduce some of their costs, too.

Most people do not shop at Walmart, but during the 90s, competition with Walmart significantly reduced the price of most retail purchases everywhere. In time, we would learn to measure healthcare somewhat as a value proposition. And much of our often needless healthcare would just drop, whether the young pacing out their “annual” physicals, or elderly passing on a highly invasive and expensive procedure that does not consider the total quality of their lives.

For sure, nothing will change quickly in the US medical system regardless of the direction it takes. There are too many moving parts. But there are things we can do to move us in a better direction, some of which may be happening with HSAs and high-deductible healthcare plans purchased on exchanges. Start with reducing the use of insurance for every medical expense and then work to move the purchase of insurance into a free market.

Finally, for those who are vulnerable and have lived in the current system most of their lives, assure them that their antiquated system will continue - that, no, they do not have to price emergency rooms while riding in an ambulance.

How Much Should I Save for Retirement?

Periodically, I'm asked this question, and after much thought, I've settled on this answer: Ten percent. But I have some caveats if your goal is to retire comfortably.

First, you need to save this from the start of your career and you cannot make any withdrawals until you are retired. If you haven't saved for years or if you have made withdrawals, you should increase this amount.

Second, this assumes you are debt free when you retire. No credit card debt. No mortgage. No car loans. No student loans that you are liable for. No home equity loans. No boat payments. If you have significant debt responsibilities when you retire, your 10% savings probably isn't enough.

Third, you need to invest this well. And that mostly means low-cost equities that you hold steadfastly to until you're at least half way to retirement.

Here's the simply math for long-term investing. After inflation, equities return about 4%. That is, after inflation they double in less than 20 years, or quadruple over a career. Bonds return about 1%. That is, very little. Cash is the worst of all. If you're paying a 2% fee for some high-flying financial boondoggle, your returns are probably cut in half.

If you try to time your investments, like most market timers you will probably be buying into equities when they are high and then selling them when they are low. That is, you will wipe out most of your returns. If you make many of these errors, such as owning a money market fund when you're under 40, your 10% savings probably will not give you what you need for retirement.

I see calculators and complex investment formulas where you are expected to estimate your income and expense thirty years out. They they tell you something like you need to save 150% of your money or you will be destitute. OK, they aren't quite that bad, but the notion that you can know these things decades out when you're struggling to budget a vacation is ludicrous. So much of the future is unknowable, including whether you will even be alive.

But there are multiple things that you can do to reasonably prepare yourself for that time when you are not able to work and care for yourself as you could when you were younger.

You can stop the terrible habit of borrowing from the future to meet your wants today. You can systematically save a reasonable amount that is moved off the table, untouchable until you are much older. You can invest both rationally and with significant upside to your investments without being risky. And that is because your money will be working for decades, not years.

And always make sure that you are saving at least the minimum that your employer is matching.

So why not 9% or 12%? Because 10 is easy to remember, easy to calculate, and with the tax deferral, is something most workers can reasonably do, especially if your employer provides matching.

Finally, accept that Social Security and Medicare will be there to cover a significant portion of your critical needs. I agree that retirement on these government programs alone is not an easy life. But it can be the floor from which you build.

With Social Security, Medicare and your 401(k) all taking a portion of your salary, the combination of these payments that are based on your past earnings can safely be assumed to keep you living into your retirement at a level that you are already accustomed.

Ten Years of Owning Stocks

I'm an apostle of the no-frills, low-cost indexing investment plan. Unless you have a desire to get very involved with your investments, put your long-term money in some mix of a US stock indexed fund, an international equity indexed fund and an indexed bond fund. Decide on an allocation and then reallocate back to your original plan every year or two. The best results come by putting anything you don't need for the next ten years into equities. If you can't handle the swings, allocate more into fixed income until you can sleep at night. And yes, you may need to talk to someone once in a while but proceed here with caution.

That's mostly it. With a little emotional control, an average person can retire with a lot of money just reaping the wonders of modern capitalism.

If you seek some additional adventure with your investments, indexes provide a lot of options. In general, riskier investments pay off more so buying into emerging markets, small caps and higher risk bonds, such as corporate and international can all help you improve your returns and sometimes stabilize your portfolio. It all takes additional work, though, and it is rarely worth the cost of a high-priced advisor.

The only warning is to stay away from actively managed funds. They are a black hole of costs, losses and frustrations. You have a better chance of picking an outperforming stock than an outperforming fund. Their fee and turn headwinds are just too much for even brilliant people to overcome.

For me, though, I've never been able to get past one fundamental problem with indexed funds. In order to keep turn and costs low, they own equities by their capitalization. It is good logic, but it also means they are buying disproportionately more into overpriced equities (however that is defined) and disproportionately less into underpriced equities. Buy low, sell high would tell me to do the opposite of what indexes do by their nature. I have maintained that with a good dose of emotional control and a clear look at some companies, it is not that difficult to identify miss-priced stocks and outperform the indexes.

So over ten years ago, I started buying individual stocks. I still keep the majority of my equities in indexed ETFs but I have a significant investment in numerous companies in both the US and around the world. I assumed that with some work and following some key metrics, I could easily beat the market.

Here's what happened. For the first several years, my individual stocks (including internationals), beat the S&P 500 quite significantly and I felt pretty justified (all figures include dividends). But then the horrible years of overseas returns arrived and most of my gains were wiped out. And now after ten years, I have realized that it is not easy to outperform the indexes over the long haul. I have spent considerable time trying to analyze my stock returns and quite bluntly, I do not know if I am beating the S&P 500. For starters, Quicken gives me enough conflicting reporting information to question anything. Although I crushed the S&P 500 last year, it is true that over the past ten years, I would have done better in an S&P 500 fund. But that also comes after a stunning US bull market, a trend that will hardly continue indefinitely.

Charles Schwab, where I have most of my money, has some performance analysis tools. They suggest that all of my investments (stocks, bonds and funds) may somewhat outperform their benchmarks but at an outsized risk.

I have been able to see some great opportunities. I bought Ford at $2.71 and sold it less than two years later for six times that. But I also lost everything I spent on Peabody Coal, one of my "no-brainer" purchases.

Research suggests that individuals can't succeed picking stocks because most of gains come from just a few stocks. But my look at over 100 stocks that I have owned does not support this thesis. If I ignore the extremes, the middle stocks do about the same as the total. That is, the good and bad is widely spread.

If I look at the averages of annual returns over ten years, all of my equities (including stocks and funds) have lagged the S&P 500 by about two percentage points, largely because of my heavy foreign investments. My stocks have done slightly better than my funds but not as well as the S&P 500. One not surprising find is that the standard deviation of annual returns is considerably higher for my stocks than for the S&P 500.

Over these years, I've separately tracked the stocks I've sold to see how they went on to do after I left them. Some went bankrupt but many did outstandingly well, including Advanced Energy Industries (AEIS) that has gone up eight times since I sold it. There is not strong evidence that my sales were good calls.

So I'm back where I started. Your safest, easiest and smoothest route to retirement is with low-cost indexes broadly invested. But for those who seek some adventure and the real possibility of a significant windfall, you can purchase individual stocks and with some work, you are in no more danger than many other investment venues. If you buy individual stocks, here are my tips.

First, realize that this is work. Do not invest in anything - stock, bond, fund, property - that you do not understand. For stocks, that means an ability to follow the basic financials of a company and to have some familiarity with their business. The easiest way to get this is from their SEC reports (usually 10-K). I stay close with their numbers. For me, losses, poor cash flow, high debt, no dividend and high prices are troubling signs. And don't be afraid to look at many equities. The broader your search, the better chance you have of finding a win.

Recognize that humans are terrible forecasters, including you, advisors and other experts. Do not rely on your gut feelings and other emotions, company marketing materials, IPOs, hot tips, buy/sell recommendations or forward earnings. Develop some sort of rational process for selecting one stock over another using a broad set of facts, and then stick with it. Review your stocks occasionally to see if your original logic holds, and if it does not, consider selling it. Do not respond to the ongoing market noise or swings in prices. And remember that a lot of money is lost both holding a dying stock too long and selling a rising stock too early. My crime with Peabody was to buy into it two more times on its way into bankruptcy.

Spread your equities across market capitalizations, sectors and even countries. Establish some limits to keep yourself from overexposure to an individual stock or sector. This will help stabilize a portfolio.

Finally, only buy a stock because you financially value it as an organization. Do not day trade or buy stocks (or funds) because of market timing or technical analysis. These are zero sum games that will probably be losing bets. Buy a stock only as an investment that you may keep for years.

I plan to continue owning individual stocks. Today, I'm uncomfortable with the US market and expect internationals to continue to outperform the US. I'm especially bothered by the indexed US funds because a few large firms seem to be overpriced. But, my concerns aside, I know that I'm a terrible forecaster and market timing is a bad policy. So I will sit and watch. For another ten years.