The Arbor Outlook: Oscar, Felix and the Sound of Laughter

Felix Ungar: "I think I'm crazy."
Oscar Madison: "If it makes you feel any better, I think so too."
—from "The Odd Couple"

The sound of audiences laughing at his material provided the affirmation that his own childhood denied him. My favorite film adaptation is "The Odd Couple," released in 1968 and starring Walter Matthau and Jack Lemmon. Characters Oscar Madison and Felix Unger cohabit Madison's New York apartment while Unger and his wife endure a separation. Madison is a total slob who is driven insane by Felix and his obsessive neatness.

Mike Nichols won his second Tony Award for directing the Broadway version of the play. "Barefoot in the Park" made Robert Redford a star. And Burt Bacharach scored his musicals. His plays enjoyed 9,000 performances on Broadway in a 15-year period (1965 to 1980), with four running simultaneously in 1966. He wrote "Brighton Beach Memoirs," "Biloxi Blues," "Lost in Yonkers," "The Prisoner of Second Avenue," "Plaza Suite" and many more.

Neil Simon was born in the Bronx on July 4, 1927. His salesman father left and returned repeatedly. Eventually the family dissolved and Neil was shuffled off to live with relatives. Several of his plays, including "Lost in Yonkers," draw from his early life experiences. Simon was awarded a Tony and a Pulitzer Prize for that play.

After his discharge from the Air Force, he began writing comedy sketches for Phil Silvers and Sid Caesar. His first play, "Come Blow Your Horn," was written in 1961 and enjoyed 677 performances.

Simon wrote about middle class people, their foibles and funny mannerisms, and the struggles of families, marriage, and everyday living. After his first wife died of cancer in 1973, he married actress Marsha Mason and wrote what he considered his favorite play, "Chapter Two," based on their marital strife. "Biloxi Blues" was developed from Simon's own military experiences in Denver.

Simon died recently at age 91. From a relatively impoverished and dysfunctional upbringing, Neil Simon rose to the top of his profession as a playwright. He took the everyday agony and unhappiness surrounding him, and turned it into professional success through good humor, hard work and immense natural talent. Perhaps it is hyperbole, but one critic called him the most prolific playwright since Shakespeare.

There is a common misconception that rich, successful Americans inherit their place in society from their similarly wealthy parents. While exposure to handling financial issues can provide a leg up, a person must develop his or her own financial and career success, regardless of background. Many times, the desire to escape and deal with dysfunctionality or poverty can provide remarkable financial motivation to achieve.

Margaret R. McDowell, ChFC®, AIF®, author of the syndicated economic column “Arbor Outlook,” is the founder of Arbor Wealth Management, LLC, (850.608.6121 –, a “fee-only” registered investment advisory firm located near Sandestin.

The Arbor Outlook: First Downs, Autumn Saturdays and Steve Earle

“We got a pretty good team, good boys, strong boys; District champs the last three years.”
—from “No. 29,” as performed by Steve Earle

Two years ago on an autumn Saturday I lowered my home decorating magazine and said across the room, "What's a first down?" My husband stared in wonder and surprise. In 37 years, it was the first football-related question I had ever initiated.

We talked about basic strategies and rules. Things evolved from there, and last year we purchased tickets and attended my first major college game in decades. I actually loved it.

The finer points and nuances of the game itself are still beyond me, though I cheer for our team. The winning and losing isn't nearly as important to me as the quality of the evening. A spectacle under the lights on a college campus feels like autumn should. Maybe it reminds me of my own collegiate years. Regardless, it's an exhilarating and powerful experience: the sounds of pre-game and halftime band performances; the passion of the students and fans; the color and pageantry of the scene. It’s all captivating. And football means fall is around the corner.

It is typical of my timing that just when college football attendance is experiencing its first serious decline in decades I have jumped on the bandwagon. Perhaps my long association with investing has created a contrarian's approach to fandom. Investing is an activity that, by definition, rewards those who avoid following the crowd. If you buy a security when everyone else is doing the same, frequently it has been bid up and it's likely that you're paying too high a price for it. This is not always the case; sometimes large numbers of investors purchase a security and it continues to increase in value. But, as the late financial journalist Louis Rukeyser once said, “Trees don’t grow to the sky.”

The trick is to locate a good company, and then buy it during a downturn, or when other investors are selling it. In this sense, a good investor must understand the value of a company, and then trust that a decline in share price is temporary.

Market dynamics are changing, but many basic investing principles still apply. Simply stated, buy a good company, one which you’ll be glad to own three to five years from now as well as today. And buy it at a fair or advantageous price. To do so, you often must have the confidence to go against the grain and buy when others are selling. Then, during the next downturn, you must have the tenacity to hold when others are bailing.

Margaret R. McDowell, ChFC®, AIF®, author of the syndicated economic column “Arbor Outlook,” is the founder of Arbor Wealth Management, LLC, (850.608.6121 –, a “fee-only” registered investment advisory firm located near Sandestin.

The Arbor Outlook: Retirement Fears, Longevity and Old Friends

"Can you imagine us years from today? Sharing a park bench quietly ... How terribly strange to be 70. Old friends, memory brushes the same years; Silently sharing the same fears."
—from “Old Friends,” as performed by Simon and Garfunkel

A major annual retirement survey was released this summer. Among its findings are the nine biggest fears that Americans have regarding retirement.

The greatest fear, shared by over half of the respondents, is outliving one’s savings and investments. A larger number of those surveyed now see themselves living to age 90. A smaller but respectable percentage envisions themselves as future centenarians. Bottom line? Our money must last longer as life expectancy increases. If Paul Simon was writing “Old Friends” today, he’d change the age in the lyrics.

This is the overriding financial concern we all share in retirement. Of course, we need to begin addressing this issue decades prior to our actual retirement years. The survey did note that the average age that most Americans begin contributing to retirement accounts is 27. That’s not bad.

Almost half of those surveyed fear the demise of Social Security. My own opinion is that Social Security will be there for us, with some potential changes, throughout our lifetimes. The voting bloc represented by Boomers is awfully strong. The collapse of Social Security has been predicted annually since I began my practice over two decades ago. Nothing to be gained by worrying about this issue, anyway, since it’s beyond our control.

Three of the next four fears involve health related issues: declining health that requires long term care; lack of access to adequate and affordable health care; and fear of cognitive decline, dementia, and Alzheimer’s disease. Health issues are the financial wild card in retirement planning. People rightfully fear the price tag of escalating health problems. We are also scared of living at less than our best, living in pain, or becoming a shell of our former physical selves. In fact, according to many surveys, most of us fear being incapacitated or impaired more than we fear dying.

Folks often fear not one but a combination of these factors, even if they have amassed a significant nest egg and are enjoying a nice annual income. One of the biggest challenges in retirement is accepting that we are never going to be as financially secure as we’d like to be. Retirement means crossing the Rubicon from full-time employment to part-time work or none at all. Once we are there, things happen that we can’t control. But planning well and taking care of our health can lead us in the right direction.

Margaret R. McDowell, ChFC®, AIF®, author of the syndicated economic column “Arbor Outlook,” is the founder of Arbor Wealth Management, LLC, (850.608.6121 –, a “fee-only” registered investment advisory firm located near Sandestin.

The Arbor Outlook: Deflation, Price Makers and Coffee Beans

"I work sunup to sundown... Ain't too proud to sweep the floors."
—from "Cost of Livin’," as performed by Ronnie Dunn

Last week we talked about the combination of peace, prosperity, globalization and technology that’s driven down inflation consistently over the last half century. It may not seem like it, but on average, most goods are getting cheaper over time. Not everything is on sale, though. Prices for services, which represent a large and growing chunk of the economy, have been growing steadily for years.

So how to apply that knowledge to investing?

One strategy is to consider avoiding commodity-based businesses, which are “price takers," and invest instead in companies with built-in pricing power, or "price makers." Pricing power is a company's ability to raise prices consistently without having those profits siphoned off by rising costs.

Some companies have pricing power because a consumer doesn’t think there’s a worthy substitute for that brand. Some companies have pricing power because there really aren’t any substitutes. Some companies build pricing power into their contracts so that they get paid a little more every year. Companies that have any form of pricing power are golden in a deflationary world.

For example, high-end coffee chains buy coffee beans, roast them and then sell not just a latte but an experience that consumers are willing to pay up for. Coffee bean prices are close to decade lows, yet skinny vanilla lattes and Frappuccinos are dearer than ever. The input, coffee, has gotten cheaper over the last decade; yet the output, drinking that coffee in a stylish storefront or conveniently picking it up on your way to work, keeps getting more expensive. The company captures the difference.

Another example is a cable company that provides broadband internet. Has your internet bill ever gone down? Is it likely to? But in the face of price increases, most of us will sigh, resign ourselves to the fact that we need internet access to work and live, and pay the higher monthly fee. That’s another form of pricing power.

Companies involved in the production of oil and gas are the definition of price takers. They literally sell their end product at a price determined by the market, not the company. When oil is $120 a barrel, that's fine. At $50 a barrel, not so much. No pricing power.

Instead, why not own oil and gas pipeline companies? Some publicly traded pipeline operators have almost no exposure whatsoever to the price of oil or gas and have inflation “escalators” written into their long term service contracts. As long as their customers are using the pipes (which is likely), these pipeline operators get paid a little more every year regardless of the direction of energy prices.

Margaret R. McDowell, ChFC®, AIF®, author of the syndicated economic column “Arbor Outlook,” is the founder of Arbor Wealth Management, LLC, (850.608.6121 –, a “fee-only” registered investment advisory firm located near Sandestin.

The Arbor Outlook: Deflation, Baby Boomers and Alison Krauss

Editor's note: This is the first of a two-part series on deflation.

"Another day, another dollar, That's what I'm working for today, Another day, another dollar, Sure can't buy my blues away."
—from "Another Day, Another Dollar" as performed by Alison Krauss

My high school economics teacher once explained inflation by saying, "Money tends to be worth a little less every year." Interested in finance even back then, I asked her, “Why do things have to cost more every year just because?” She apparently wasn’t in the mood to take me on a journey through economic history because the answer I received was: “That’s just the way it is and has always been.”

I memorized what would be required for the test that week and moved on. But the answer never satisfied me. As I grew older and learned more about financial history, I realized why her answer bothered me. It wasn’t true.

Moderate-to-high inflation has been a feature of the world Baby Boomers grew up with and have experienced consistently throughout our lives, but history tells us that the formative era for Boomers was somewhat exceptional. According to a recent study by the Bank of England, the United Kingdom’s version of our Federal Reserve, over the past 700 years global inflation has only averaged 1.08 percent annually.

Back to the original question. Why don’t we have inflation all the time?

Let’s look back to the late 1800s, the last prolonged period of deflation outside of the Great Depression, for clues. The latter part of the 19th century was an age of global economic growth. It was also an era of technological innovation (internal combustion engine, electrification, indoor plumbing, etc.), communications advances (telegraph) and heavy globalization with expanded international trade. And it was a period of declining prices on most goods. Plug in the words “internet” and “iPhone” and it sounds a lot like the last 30 years, right?

If left undisturbed by war or plagues, over time, the dynamic duo of capitalism and technology tend to produce an abundance of cheap goods quite efficiently. Thankfully, there haven't been any multi-national, global wars in recent decades and the international order has been relatively sanguine. Thus we’ve been able to create an age of oversupply. In other words, with very few exceptions, if a company makes a physical product, then oftentimes someone, somewhere is likely willing to make it cheaper. And those willing-to-do-it cheaper competitors are easier than ever to find thanks to the telegraph of our day, the internet.

In many ways, low inflation or deflation reflects a successful society. Inflation accompanies scarcity. Deflation denotes abundance. It’s a good problem to have. It’s also one that’s likely to stay with us.

Next week: the investing implications of living in a low inflation world.

Margaret R. McDowell, ChFC®, AIF®, author of the syndicated economic column “Arbor Outlook,” is the founder of Arbor Wealth Management, LLC, (850.608.6121 –, a “fee-only” registered investment advisory firm located near Sandestin.