Crane Asset Management LLC
Chief Investment Officer
Crane Asset Management LLC is a full-service investment counseling firm providing investment management services to private individuals, retirement plans, endowments, and charitable foundations. All accounts are managed on a discretionary basis. John Frye founded the firm in 2003, with a partner who remains Chief Operating Officer. They work with all of their clients to formulate a long-term investment strategy that will meet their investment objectives while addressing their risk profiles. Understanding their clients in this way enables them to develop unique plans based upon each of their clients’ needs to help them achieve their financial goals.
Before co-founding Crane Asset Management LLC, John served as Executive Vice President and Portfolio Manager at Renberg & Associates in Beverly Hills. He began his career with E. F. Hutton & Company in New York and subsequently worked with Alex. Brown & Sons in Baltimore. He received his Bachelor of Arts in Politics from Princeton University in 1977 and his M.B.A. from Columbia University Graduate School of Business. John holds the Chartered Financial Analyst® designation and is a member of the CFA Society of Los Angeles.
BA, Politics, Princeton University
MBA, Finance, Columbia Graduate School of Business
Assets Under Management:
Crane Asset Management is registered with the State of California. A copy of Crane's Form ADV filing (Parts 2A and 2B) can be accessed here. In addition, Crane's Form ADV (Part 1) can be downloaded from the SEC's website. (Type in Crane's name in the field provided and follow the instructions on the site to download the information required.)
Introduction and Overview
Get as big a first mortgage as you can (more than $115,000 if possible; 70% LTV would get you $185,000). With over $7,000 in monthly pension income plus her salary, you should easily qualify. A HELOC is a good fallback but rates on HELOCs are higher so try for the first mortgage. A 30-year mortgage will have a much lower payment than a 15-year so go for the lowest payment. Don't touch your savings.
I am really writing to tell you to wait on collecting Social Security. You are much better off not taking the smaller payout at 62, and waiting until 66 for the bigger check. The difference is about 8% per year. Sell the land and live on the proceeds for the next four years.
If you do this, also invest the $70,000 ($155,000 if you sell the land) in something that pays a higher rate than your mortgage. You can do this with relatively low risk if you own REITs or a preferred-stock fund. Good luck.
Investing isn't surgery. You don't have to follow a set procedure. There is no one formula that measures the value in (or rules out the risk of) every potential investment. Every company is valuable for similar reasons but in different ways. Beware of screening techniques that reject good candidates for superficial reasons.
I look at free cash flow. Is a company generating a healthy return on its invested capital? I look past GAAP earnings because they are easy to manipulate and often contain items (such as noncash charges) that mask a company's real profitability or (such as one-time gains) that overstate it. Since the denominator of a P/E is unreliable (not only can it be manipulated but it is next year's estimate) I find P/Es to be less-than-useful.
Then, I use instinct. Is the market overly focused on a recent negative event? Is the growth sustainable? Is the company capable of a positive surprise? Or is perfection priced in? Do I trust management? (Are they buying or selling their own shares?) Is the dividend raised every year? How well do I know the industry this company competes in? All of these are intangibles and are essential considerations. If a company is doing the right thing its stock price is bound to follow eventually. Be patient -- and diversify. Stay fully invested, What you do in times of market volatility is a bigger determinant of success than stockpicking ability.
I am glad to see that you are being disciplined about saving for retirement, even though it may seem so far away. Your greatest advantage is time. Assuming you have 40 years to build your savings, you should ABSOLUTELY NOT put your money into a savings account that pays some nominal rate of interest that doesn't even exceed the rate of inflation. If you hold cash and earn, say, 1-1/2-2% per year, you are actually losing money thanks to erosion of purchasing power. Only keep enough cash on hand to meet emergencies -- no more than 1-2 months of living expenses, assuming your job is secure.
Instead, realize that you are able to take investment risk. Put your money into two or three equity index funds, preferably funds that track the broad market as well as a small-cap index. The value of your savings will fluctuate -- and will go through periods of decline. Don't worry. Stay fully invested, continue to deposit money every month as you are now (regardless of market conditions), and know that over time this is the best way to build a retirement nest egg. Remember that when the market declines it is an opportunity to buy good investments at great prices. Remember also that you cannot time the market and should never try. But stocks, over the long term, will give you superior returns and you should focus on holding them. If you do this it will make the difference between a modest (and insecure) retirement, and a comfortable one. Get going, and good luck.
Investing really isn't that confusing. Read up on it. Take courses at your local community college. Invest the time in learning what to do (and what not to do). You can't learn everything in one year. Like investing itself, it takes a lifetime. Devote the time to it.
Investopedia doesn't like one-word answers so I'll rattle on a bit. No portfolio should have fewer than 15 stocks and no position should be more than 10%. (Our clients hold portfolios of 20-30 stocks.) I grant you that Bill Gates and Mark Zuckerberg didn't get wealthy by diversifying but to cut down risk you should spread it across multiple investments.
If you are fortunate enough to have a large block of low-cost stock (maybe you sold your business, or have been accumulating it in an ESOP) you can cut risk by writing calls or investing in an exchange fund. However, if you are buying stocks in the open market don't buy too much of any one issue, no matter how much you might be attracted to its long-term prospects.
Oh -- and do your fundamental analysis, looking for companies with sound balance sheets, good free cash flow, revenue and earnings growth, and good prospects for a stable future. Good luck.
Sorry to be the bearer of bad news but your chance of profit will never be more than 50%. Options are priced efficiently (I can't go into the mathematical analysis here, but it involves probability distributions and the time value of money) so any situation where the odds were temporarily over 50% would attract buyers until the price rose accordingly. If your broker is making any guarantees, you should be wary.
The broker is willing to sell (write) you an option because his trading desk has hedged the risk. Either they have taken an opposing position in an option with a different strike price or expiration, or they have a holding in the underlying stock. They have locked in a small profit and are happy to give you the opportunity to make big money (or lose it all). Just know that you aren't getting any bargains. You might consider a hedging strategy yourself.